McDonald's vision is to provide outstanding quality, service, cleanliness, and value to customers worldwide. Its mission is to be customers' favorite place to eat and drink through an exceptional customer experience. McDonald's uses segmentation, targeting, and positioning in its marketing strategy. It faces competition but maintains competitive advantages through quality, health benefits, and focused strategies. McDonald's has a global presence, strong brand recognition, and works to improve operations, supply chain, and customer service.

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Report onMcDonald_Foods
Submitted by: MUHAMMAD RIZWAN
REGD NO: 2016-AG-1882
Degree: MBA (3.5Y)
Subject: Strategic Management
Submitted to: Madam Ambreen
Vision:
McDonald's vision is to be the world's best quick service restaurant experience. Being the best
means providing outstanding quality, service, cleanliness, and value, so that they make
every customer in every restaurant smile.
Mission:
“McDonald's brand mission is to be our customers' favorite place and way to eat and drink. Our
worldwide operations are aligned around a global strategy called the Plan to Win, which center
on an exceptional customer experience – People, Products, Place, Price and Promotion.
Evaluation of MissionStatement
• Customers:The aspect of customersisusedinthismissionstatementinthe words,“…..Entertaining
1.6millioncustomerseveryday….”
• Product or Services:The aspectof productsismentionedhere astheyare basicallyafood
manufacturingcompany,sotheyhave mentionedtheminthese word“McDonald'sis the largestand
bestknownglobal foodservice ……highqualityfood…”

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• Markets: McDonaldshave mentionedaboutthe marketsinwhichtheyoperate inwords:
“……entertaining1.6millioncustomerseverydayin121 countries”
 Technology:McDonalds istechnologicallyverysoundastheyhave mentioned:“……advanced
operational systems….”
 Concernfor survival,growth and profitability: Thisaspect hasbeenusedinthe mission
statementof McDonalds inthe followingwords:“We plantoexpandourleadershipposition
throughgreat testingfood,superiorservices,everydayvalue andconvenience.”
 Philosophy:Philosophyisincludedinthe missionstatementof McDonaldsinwords:“We want
to be the bestemployerforourpeople ineachcommunityaroundthe world.”
 Concernfor employees: McDonaldsisconcernedabouttheiremployeesforbettermanagement
of the organization.Theyhave mentioned:“We wanttobe the bestemployerforour
people……”
Market strategy:

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Competitive analysis in the Marketing strategy of McDonald's – Fast food companies are giving
head-on competition to McDonald's but due to its focused marketing strategies highlighting
quality, taste, menu, nutrition & several other health-related benefits company is able to create
sustainable competitive advantage.
Segmentation, targeting, positioning in the Marketing strategy of McDonald:
McDonald’s segmentation, targeting and positioning is one of the integral components of its
marketing strategy. Segmentation involves dividing population into groups according to certain
characteristics, whereas targeting implies choosing specific groups identified as a result of
segmentation to sell products. Positioning refers to the selection of the marketing mix the most
suitable for the target customer segment. McDonald’s uses adaptive type of product positioning
and accordingly, the company is engaged in periodical re-positioning of products and services
according to changes in the segment.
The following table illustrates McDonald’s segmentation, targeting and positioning:
Type of
segmentation
Segmentation
criteria McDonald’s targetsegment
Geographic
Region Domestic/international
Density Urban/rural
Demographic
Age 8–45
Gender Males & Females
Life-cycle stage
Bachelor Stage: young, single people not living athome
Newly Married Couples: young, no children
Full NestII: youngest child six orover
Income Low and middle
Occupation Students, employees, professionals

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Behavioral
Degree of loyalty ‘Hard core loyals’ and ‘Switchers’
Benefits sought Costbenefits, time efficiency
Personality Easygoing &careless
User status Potential and regular fast food eaters
Psychographic
Social class Lower, working and middle classes
Lifestyle
McDonald’s targets Resigned, Struggler and Mainstreamer
individuals according to CrossCultural Consumer Characterization
developed byYoung & Rubicon
Vision and mission Analysis:
The Porter's Five Forces analysis of McDonald's Corporation shows that competition creates a
strong force against the company and its business environment. The company's
corporate vision and mission statements are a direct response to the aggressive and innovative
strategies of competitors in the food service industry.
SWOT Analysis of McDonald:
Strengths:
 McDonald's has successfully rolled out new items like coffees, smoothies, and Angus burgers,
expanding the range of menu choices.
 With a strong product offering, the company has grown income throughout the recession,
notching strong increases in same-store sales.
 Operations are spread around the world, meaning the company is not exposed to just one
currency or economy.
 Even trading near its highs, McDonald's serves up sizzling dividend yields that top the 10-year
Treasury. The yield comes with a side order of annual dividend hikes dating back to 1976. The
annual dividend payment has gone from 55 cents per share in 2005 to $2.20 this year.
Weaknesses:

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 It will be harder and harder to find prime locations to build a set of golden arches. The U.S. is
saturated with its restaurants, so growth will have to occur internationally, posing potential
cultural challenges.
 While the annual dividend hikes are likely to continue, the dividend growth rate has been
slowing and will probably continue to slow or level off.
Opportunities:
 There are opportunities for new restaurants outside the United States, and McDonald's has been
taking advantage of them. China is a great opportunity for the company, as is much of Asia.
 Menu innovations are limited only by imagination.
 Low interest rates provide cheap capital for growth. In addition to dollar-denominated debt,
McDonald's recently became the first foreign company to issue yuan-denominated bonds in
Hong Kong.
Threats:
 Governments are considering regulations targeting fast food.
 McDonald's faces competition from strong peers such as recent 11 O'Clock Stock pick Yum!
Brands and Burger King.
 New product rollouts often have to go head-to-head with established players
like Starbucks coffee or Jamba smoothies,
 Commodity price increases could increase costs while a weak economy limits the ability to pass
the price hikes through to consumers.

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Internal Audit Process (connected to procurement)
The mass-production process requires each restaurants chain to have a distribution network to
carry the food to every restaurant. Warehouses store enormous amounts of everything a
restaurant needs. Including foods, paper products and cleaning supplies.
McDonald’s is always keen to take the charge of crucial task of turning the company around to
meet customer demands. One of the first steps that it proposes has been to innovate the process
of manufacturing and logistics.
This had been done with the view to increase efficiency of the supply chain in terms of capacity,
technology selections, and buying policies.
control system: inside of McDonald's factory
key strengths of McDonald's
Organizational structure of McDonald's
McDonalds holds a very strong brand name worldwide.
They have large partnerships with other companies that provides them with their desired
products, this increases the goodwill of the company.
Socially responsible firms earn a good name in the market due to their projects they do to help
people, McDonalds is one the most reputed firms who are socially responsible.
It is said that McDonalds was the first food outlet to provide its customers with nutritional facts
Service.
“McDonald’s offering table-side service is an opportunity for the brand to differentiate itself
from other fast food competitors. The service offers an opportunity to connect with its customers
and make them feel special, something that should help with repeat business, as long as the
servers are trained properly.”
McDonald’s Infrastructure is modern and sophisticated, they using the advanced IT and yet they
are still maintaining the green activities.
Marketing and Sales: advertising

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McDonald’s has for decades maintained an extensive advertising campaign. In addition to the
usual media (television, radio, and newspaper), the company makes significant use of billboards
and signage, sponsors sporting events ranging from Little League to the Olympic Games, and
makes coolers of orange drink with its logo available for local events of all kinds.
Operations
The McDonald’s Brothers changed the design of restaurant kitchen. Instead of having lots of
different equipment’s and stations for preparing a wide of variety food. For example, the Speedy
kitchen which has a very large grill where one person could cook lots of burgers simultaneously,
A fryer where one person can make French fries
-The weakness that hits the list is the employee turnover rate. Every year many of their
employees are fired out of the restaurant
-Health conscious people seldom complain that they do not provide us with the organic and
healthy food. This becomes their weakness when they get in the complaints
Technology Development
It develops new products every year and makes specific food for target market.
Catering to new market, design particular products. McDonald’s will focus on modernizing
restaurants, evolving the menu and engineering value
“McDonald’s has practiced a backward vertical integration, by replacing most of its suppliers. It
has done so for two reasons,
1) To reduce costs
2) To ensure that its products are of top quality. These supplies include beef and milk to be used
in its products, which it gets from its farms.
McDonald’s Organizational Structure Analysis:
McDonald’s organizational structure was reformed in July 1, 2015 to improve the company’s
handling of its global operations. A firm’s organizational structure defines the system through
which organizational components coordinate to achieve business objectives. McDonald’s
organizational structure facilitates managing markets based on performance levels. As the largest
fast food restaurant chain in the world, McDonald’s keeps evolving to address current and
emerging market issues. The firm rolls out new products to maintain its performance in

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satisfying customers. These endeavors are supported through McDonald’s organizational
structure, which is designed to adapt to the changing business environment.
McDonald’s organizational structure establishes the arrangement or pattern of interactions
among various business areas. Through its corporate structure, McDonald’s succeeds in
managing efficiency and performance in its operations in the global fast food restaurant industry.
Features of McDonald’s Organizational Structure
McDonald’s has a divisional organizational structure. Each division handles a specific
operational area. The aim of this organizational structure is to support autonomy and
organizational flexibility. McDonald’s organizational structure has the following characteristics,
arranged according to significance:
1. Global hierarchy
2. Performance-based divisions
3. Function-based groups
Global Hierarchy:
McDonald’s has a global hierarchy to cover all its operations worldwide. This feature of the
organizational structure emphasizes corporate control. For example, McDonald’s CEO directs
the activities of all business areas. Mandates are passed from the CEO down to middle managers,
and to the restaurant managers and personnel. This characteristic of McDonald’s organizational
structure is typical of most global business organizations.
Performance-Based Divisions:
The performance-based divisions are the most distinct feature of McDonald’s organizational
structure. The company reorganized its structure on July 1, 2015. Before the reorganization, the
geographic divisions in McDonald’s organizational structure were (a) U.S., (b) Europe, (c)
Asia/Pacific, (d) Middle East and Africa (APMEA) and (e) Other Countries & Corporate (OCC)
including Canada, Latin America and Corporate. After the reorganization, McDonald’s used
performance as basis for the new divisions in its organizational structure: (a) U.S., (b)
International Lead Markets, (c) High Growth Markets, and (d) Foundational Markets and
Corporate. The U.S. accounts for more than 40% of McDonald’s revenues, and the lead markets
for 40%. The high-growth markets account for 10% of revenues.
Function-Based Groups:
McDonald’s maintains function-based groups in its organizational structure. For example, under
corporate operations, the company has a human resource management group, a supply chain and
franchising group, and a legal group. This characteristic of the organizational structure enables
McDonald’s to address the basic functions in its business.

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McDonald’s Organizational Structure Advantages & Disadvantages
An advantage of the hierarchy in McDonald’s organizational structure is its support for
monitoring and control of global operations. Also, the performance-based divisions have the
advantage of enabling McDonald’s to implement strategies based on market performance
similarities. For example, the firm applies similar strategies for all lead markets. However, a
disadvantage of McDonald’s organizational structure is that it tends to generalize strategies for
the performance-based divisions. The company has limited flexibility because of this feature of
the organizational structure.
McDonald’s Management Functions
A franchise business that operates individually owned restaurants, comprise of planning,
organizing, controlling, and leading. Effective management process has contributed to the
company’s success over the past ten years. Today, the company is the leading food retailer with
over 32,000 restaurant branches in more than 100 countries. The management functions of the
company ensure that all restaurants work towards achievement of common goals and objectives
(Lussier 34). The reputation of the company is greatly associated with innovation and strong
customer relationships, which are maintained by management functions. The planning function
is used to develop the company objectives, while the controlling function measures and monitors
company resources. The organizing function assists in building a strong harmonious human
resource and the leading function organizes all activities to achieve efficient and effective results.
Therefore, these management functions greatly influence competitiveness and performance of
McDonald’s.
Panning
The planning function ensures that the organization identifies and selects appropriate goals and
measures for achieving the objectives. McDonald’s considers this a principal function of
management because it ensures that all restaurants share and work towards shared objectives.
The managers of the restaurants also benefit from this function by ensuring the resources
available are effectively utilized towards the achievement of set goals. According to Rai,
McDonald’s planning function assists in developing strategies to implement decisions made
regarding organizational goals that the company wishes to pursue (466). The company’s vision is
to be the best quick service restaurant in America and Europe. To achieve this, McDonald’s
carefully plans actions to take and attempts to maximize available resources.
Organizing
Organizing involves the establishment of the organizational structure of the company. Under this
function, emphasis is mainly on the division, coordination, and control of tasks and information
within the organization. Managers rely on this function to distribute or delegate authority to other
employees. Any successful organizational structure acknowledges that customers and employees
are the most important assets in the organization. McDonald’s has successfully built an
organizational culture, which improves employees’ creativity and motivation. Organization of
operations within the company promotes empowerment and delegation within the franchise,
enhancing its competitive advantage. The collaborative management approach used by

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McDonald’s ensures that all retail centers of the franchise located in different regions operate
smoothly and collaboratively. In addition, the company’s organizational structure has also been
enhanced by the existence of a common company name and consistent quality standards across
all retailers operating under the franchise (Lussier 12).
Coordinating:
Strategic plans and organizational structure have to be constantly monitored to ensure they assist
the company to meet its goals. Evaluation also ensures enhanced performance because strategies
and activities are frequently maintained and improved according to environmental changes
(DuBrin 9). Controlling at McDonald’s is maintained through various activities aimed at
ensuring workers are motivated and policies are clear. The line manager at each franchisee is in
charge of ensuring employees work according to the set standards. The franchisees are also
controlled by making sure that they abide by the set suppliers’ recommendations. In addition, the
company believes in training its employees at Hamburger University, a strategy that ensures
employees are aware of relevant benchmarks and ways to improve any shortcomings in their
performance. The control measures implemented by the company create and sustain a positive
brand image, as they prevent incidences of fraud and ethical malpractices in any of the retail
centers.
Leading:
Leading is the fourth function in management, which also contributes to achievement of
organizational goals. It entails the formation of a clear vision and an empowering organizational
culture to ensure every stakeholder of the organization understands how their individual roles
contribute towards the achievement of organizational objectives. McDonald’s company uses
power, influence, persuasion, and communication strategies to effectively implement this
function. The main activities under this function at McDonald’s include the coordination of
employee behavior to ensure all activities are in harmony and the maintenance of employee
motivation and commitment. To improve coordination and motivation, the company encourages
employees to work in groups and organizes events to facilitate interaction of employees in
different centers, especially for those located in the same regions. In addition, majority of
accounting and marketing documents are stored online to facilitate evaluation and correction by
company managers.
The four principal functions of management including planning, coordinating, organizing, and
leading can effectively assist an organization to select the right goals, maximize available
resources, and achieve set goals. McDonald’s has successfully managed to ensure effective and
efficient performance through the four principal functions. I agree with how the company current
implements the planning, controlling, and organizing activities because they help the company
improve employees’ motivation and customer satisfaction. The organization’s planning
strategies, which rely on a decentralized decision making system, encourages more people to
participate. This ensures that all franchisees are aware of the company goals and fully understand
them. I also believe it is easier for the company to ensure employees maintain the same quality
standards because organizing and controlling management functions focus on building an
effective organizational culture in all franchises.,. However, the company can improve its

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strategies on leading to enhance its openness. Currently, the function emphasizes on ensuring the
employees follow the laid down policies and rules, which discourage creativity and lower
employee motivation. Therefore, I recommend that McDonald’s maintains its current policies on
planning, organizing, and controlling, but improve its policies on leading. This can be achieved
by making franchisees more independent, which will enhance the ability of the employees in
each franchise to come up with ways to meet needs and demand of respective markets.
Marketing Mix
Every business organization must develop an effective marketing strategy. The 7 P’s is used to
continually evaluate and reevaluate business activities. The seven Ps are product, price,
promotion, place, packaging, positioning, and people. The 7 P’s are used to ensure that the
company is on track and achieve maximum results.
Product
Predominantly sells Hamburgers and cheeseburgers which forms the part of the standard menu
worldwide
Also sells various types of chicken sandwiches and products, French fries, soft drinks,
breakfasts, and desserts.
They sell a variety of products during limited promotional time periods.
The company tests new products on an ongoing basis. Example: Chicken Nuggets in the year
1983
DIRECTION
People Focuses on Friendly and Prompt service which helps them to maintain their reputation
Employees have a standard uniform.
Statistics of staff composition
Restaurant staff Restaurant management Office staff Franchisees’ staff they have high
recruitment standards, employ local staff and proper training.
PATH
Process manufacturing process is transparent and visible to customers.
Customers are invited to check the ingredients used in the food.
Maintain high quality control standards.
Use of innovative ideas and having latest technologies installed.
Drive through facility

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Price
Have “Specials”, two dollar burgers
Competitors find it difficult to follow
Generally use a value-based approach to pricing,
Aim at giving consumers the best value for money
Promotions
Best methods to maintain high awareness and promote their image
Advertising through, Billboards, Television, Radio etc.
Sponsorships like Ronald House and local Basketball
Sales Promotion, Examples: Two dollar burger, Happy Meal
Direct Marketing through Birthday and Clubs
Publicity
Place
Placed extensively and easily accessible
Have driven through where customers can pick up food
M.C. Delivery offers options for home delivery
Holds a different place in the consumer’s mind
Fun place for children
Physical Evidence
Means looking for aspects customer uses to assess a product and evaluate its position
High quality standards are maintained
Emphasizes on clean and hygienic interiors of its outlets
High importance to the appearance of the staff and the service provided.

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ACTION
Current Marketing Strategy
McDonalds as a world Market Leader has certain goals which it strives to achieve 100%
customer satisfaction, increase its market share and optimize profitability by reducing costs.
On analyzing the company’s marketing position, the following are a part of the current strategy
in order to reach its customers:
Healthier foods
To handle the change of trend towards healthier food this McDonalds have changed the way the
food is prepared. It makes sure that 100% vegetable oil is used, low fat milk is used for
milkshakes and the amount of sodium has been cut down.
Food Quality and Nutrition
The quality and safety of food items are of paramount importance in McDonalds. This is
achieved through strict product standards, strict enforcement of operating procedures and work
in close relationship with the suppliers.
Larger Menus
McDonald’s aims at achieving the other important expectation from the consumers (“want for
choice”). To this McDonalds reacted by introducing the breakfast menu with a variety of food
products. Apart from this they have also introduced a lot of other products.
Restaurant Diversity
The restaurants in each location are customized and their menus are according to the needs and
demands of the customers in the location, the food on the menu would conform to the regional
and ethnic tastes.
Brand Positioning
McDonald’s Brand positioning is mainly carried out through sponsorship of events and sports. It
sponsors events like Dome’s community programme and learning experience and Child Safety
Week.
Industry Analysis
Industry analysis of an organization involves the analysis in the following categories:

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Customer Analysis
This refers to buyer force. The buyer has a great deal of selecting power due to the fact that if
they are dissatisfied with the food or service they can easily switch or purchase from an alternate
product. But it is undeniable that any organization cannot satisfy the needs of all the consumers.
Therefore organization divides the market into segments which display similar characteristics or
behavior is necessary. McDonald’s market segmentation is based on demographic variables Age
and Lifestyle. The primary target markets are seniors, adults and teenagers, but the most heavily
targeted segment is children.
The market segmentation of McDonalds can be visualized as follows:
Market Segments
Seniors
Adults
Teenagers
Children
Customers are those who pay money to acquire an organization’s goods or services. For many
years McDonald’s mostly targeted the young people, however this has changed in this decade;
McDonald’s has turned towards a more general market. By doing this McDonald’s concentrates
on the family, targeting a diverse market
Competitor Analysis
It was said that “the Fast Food industry is highly competitive” (“Data Warehousing Case Study:
Fast Food”, n. d.). McDonald’s major Competitors include that Burger King, Taco Bell, Subway,
and Panera Bread. Especially, KFC, which offers chicken nuggets and fries on its menu, operates
over an 11000 restaurants in more than 80 countries.
Fast food, especially fries, hamburger and so on, are thought as garbage-food because of high-
calorie. There are high possibilities of healthy substitutes posing a threat to these companies. Of
course, McDonalds is concentrating on the health side by introduction of healthy food items in
the menu.
The following are the findings of the competitive position of McDonalds based on the Porter’s
five forces:
Rivalry:
This involves how the company differentiates itself from its competitors. In case of McDonalds,
as discussed above the major rivals are Burger King, KFC and Wendy’s. Though McDonalds is

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the Market Leader currently, with the capacity of the rivals growing the competition seems
intense. The rivals are trying to increase their sales by concentrating on the health factors.
New Entrants:
With so many popular fast food companies in the industry new entrants are not much if a threat
when seen globally. McDonalds has an edge over its competitors as it is globally spread.
Buyers:
With reasonable prices and quick service provided by McDonalds, there is less scope for
customers to move to competitors for the products. With the introduction of the wireless facility
in the some of the outlets has added to the attraction.
Suppliers:
Except for the cold drink from Coca Cola, the company does not have a single supplier at a
global level. For meat it has its own farm and other raw materials are from local store
Substitutes:
There are high possibilities of healthy substitutes posing a threat to the company. Though
McDonalds is concentrating on the health side by introduction of healthy food items in the menu,
it might still be posed with the challenge of substitutes.
Supplier Analysis
Supplier is an organization that provides resources for other organizations. In McDonalds three
legged stool philosophy the third leg is supplier partners. McDonald’s has practiced a backward
vertical integration, by replacing most of its suppliers. It has done so for two reasons,
To reduce costs, and
To ensure that its products are of top quality.
These supplies include beef and milk to be used in its products, which it gets from its farms.
Other suppliers include local grocery stores that supply McDonald’s with fresh vegetables. Soft
drinks are supplied exclusively by Coca-Cola, which is also its ally. McDonald’s supplies also
include raw material such as flour, sugar, yeast, etc.
.
MACRO ENVIRONMENTAL ANALYSIS
Companies always operate in a larger macro environment of forces and trends that shape
opportunities and post threats. These forces represent “non-controllable” forces, which the
company must monitor and respond to. In most cases, we identify macro environmental factors
by an acronym, PESTEL.
P: Political System of the country.

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E : Economical Factors
S : Social / Cultural factors
T : Technological factors
E : Ecological factors
L : Legal factors
POLITICAL FACTORS
McDonald’s employees and job applicants are selected, trained, promoted and treated on the
basis of their relevant skills, talents and performance and without reference to race, color,
nationality, ethnic origin, gender, marital status or disability. In support of this, McDonald’s also
has a policy on Sexual and Racial Harassment. All McDonald’s restaurants work to standards
which meet the highest’ best practice’ guidelines for Building and Health and Safety regulations.
ENVIRONMENTAL / ECOLOGICAL FACTORS
McDonalds is analyzing every aspect of its business in terms of its impact on the environment
and is committed to waste minimization with a target of a 50% volume reduction. McDonalds
works only in partnership with suppliers with sound environmental practices. It also has a
manager responsible for environmental affairs.
A revolutionary new static waste compactor is now in 60 restaurants, which reduces waste
volumes by an average of 40-50%. McDonald’s is committed to using recycled materials
wherever possible in its packaging and business in general. Waste oil makes up 10% of a
restaurant’s waste and is recycled via local collectors at regional refineries, into animal feedstock
and other byproducts.
In April 1988, McDonald’s switched to non-CFC foam packaging which carries the CFC-Free
message. McDonald’s is playing an active role in global efforts to develop more environmentally
friendly refrigerants.
SOCIO- CULTURAL FACTORS
McDonald’s feels that it address public concern regarding nutrition through a combination of
stringent product standards, strictly enforced restaurant operating procedures, and close working
relationships with suppliers to assure that McDonald’s food is safe and of the highest quality. It
also discloses nutritional and ingredient information regarding its menu items through in-store
posters and brochures distributed upon request. In the early 1990’s, international expansion into
new cultures and corresponding eating habits resulted in new product introductions in several
locations. McDonald’s new items generally receive no advertising and little sales promotion
during the test period.

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TECHNOLOGICAL FACTORS
McDonald’s corporation has built a whole range of systems such as intranets, wireless
applications or innovative kiosk systems, all based on Day’s Communiqué. In their most recent
initiative, the company migrated their global internet presence mcdonalds.com to our platform.
An important component of McDonald’s operational strategy is to anticipate customer traffic
patterns and food selection based on a detailed analysis of sales history and trends. Restaurants
use this information to prepare menu items in the right quantities and at the right times to have
the food ready for customers when they arrive. To ensure freshness, all food not served within 10
minutes must be discarded.
ECONOMIC FACTORS
During the late 1990’s and the beginning of the new millennium, McDonald’s found itself in a
regression, the first one since its conception in 1955. The Gold Arches weren’t shining like they
once did, however there are in the process of being polished, figuratively speaking. In 2003
McDonald’s ranked eighth out of 100 brands in the Global Brand Scoreboard assembled by
Interbred Corporation and Business Week, proving that McDonald’s is one of the world’s best
known and most valuable brands. However, that wasn’t the case during 2001 and 2002.
LEGAL FACTORS
The legal framework includes that any company in the Food and Beverages industry must not
transport commodities that are hazardous to life and property or that are contraband in nature.
Example: illegal drugs and unlicensed arms and ammunition. McDonald’s serves 100% beef,
100% chicken, and Grade A eggs. McDonald’s food comes only from certified suppliers who are
audited and inspected on a regular basis. More than 2,000 safety, quality and inspection checks
surround McDonald’s food as it moves from the farms to our restaurants. McDonald’s requires
that 72 safety protocols are conducted every single day in McDonald’s restaurants.
Work force Diversity:
McDonald’s is committed to fostering diversity among its three “legs”—employees, franchisees
and suppliers, Harris said. The company has earned recognition for diversity successes from
groups representing Asians, Latinos, blacks, people with disabilities and women. But while
receiving an award from Catalyst for its efforts to promote women’s interests in business, CEO
Jim Skinner said, “Our work is just beginning,” a statement that Harris appreciated; it means that
McDonald’s isn’t going to rest on its laurels but will continue to foster even broader diversity
programs, she said.
Most recently the company launched its Global Women’s Initiative to help women excel around
the world. Supported by development plans created within each of five regions of the globe, new
female managing directors have risen in markets where Harris said she’d never imagined such a
thing possible—including India, Turkey and Malaysia.

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The goal of the diversity efforts at McDonald’s, Harris said, is to “move from awareness to
action, see our differences as strengths, respecting and valuing all cultures on both sides of the
counter around the globe.” The diversity vision and mission focus on cultivating relationship
accountability, respect and the opportunity to succeed.
There are three factors that have led to success for McDonald’s diversity efforts, Harris said:
1. Leadership supper and accountability:
McDonald’s business leaders “get” diversity, according to Harris, who quoted Skinner as
saying, “If everyone in the room with you looks like you and thinks like you, you’re not
getting good advice.” Diversity and inclusion team members work shoulder to shoulder
with other business managers and leaders to accomplish business goals. Everything the
diversity department does must support the business, she said. “If it doesn’t, don’t do it,”
she said Skinner has told her. Diversity is part of the agenda for each segment of the
business, to the point where she said she doesn’t have to sit in on meetings to make sure
that managers are including diversity objectives. “Each department owns it and does it,”
she said.
2. Diversity education:
Internally, her department provides coaching, mentoring and education; collects
demographics; and provides analysis. McDonald's leaders say they can connect their
success directly to lessons learned through the company’s black and Latino career
development programs, Harris said. “We teach them things they can’t learn from an
operations manual.” Externally, diversity team members make sure that the company’s
community outreach efforts align with diversity and business goals. “We're not just
writing checks; we’re supporting the brand, too,” Harris said.
3. Employee business networks.
McDonald’s supports more than 120 employee networks in the United States and around
the world for ethnic groups, Gay and lesbian employees, working mothers, young
professionals and many more. The concept for such groups has been around for a long
time, Harris said, and some business professionals ask why the company still supports the
groups. “We’re still doing it because they have value” to the employees.
Management Information System in McDonalds
MIS system is used to produce periodic reports such as a daily list of employees and
the hours they work, or a monthly report of expenses. McDonalds uses MIS to provide
profitability and information to help managers and staff to plan its future direction.

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Organizational Structure

20. 20 | P a g e
Cost benefit Analysis of MC donald
I am going to run you through how I calculated the intrinsic value of MC donald using a method called
discounted cash flow or DCF. A discounted cash flow (DCF) analysis represents the net present value
(NPV) of projected cash flows to a stock.
The calculation
Note the numbers here are in millions apart from the per share values.

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5-year cash flow forecast
2017 2018 2019 2020 2021
Levered FCF (USD, Millions) $15,356.65 $13,913.89 $14,615.00 $15,135.80 $16,540.00
Source Analystx11Analyst x9 Analyst x7 Analyst x5 Analyst x2
PresentValue Discounted @ 8.49% $14,154.38 $11,820.53 $11,444.10 $10,924.02 $11,002.89
Present value of next 5 years cash flows: $69,346
We now need to calculate the Terminal Value, which accounts for all the future cash flows after
the 5 years. For a number of reasons a very conservative rate is used that cannot exceed that of
the GDP. In this case I have used the 10 year government bond rate (2.5%). In the same way as
with the 5 year ‘growth’ period we discount this to today’s value.
Terminal Value
Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)
Terminal Value = $16,540 × (1 + 2.5%) ÷ (8.5% – 2.5%)
Terminal value based on the Perpetuity Method where growth (g) = 2.5%: $281,350
Present value of terminal value: $187,162
So the total value is the sum of the next 5 years cash flows and the terminal value discounted to
today, this is known as the Equity Value.
Equity Value
Equity Value (Total value) = Present value of next 5 years cash flows + terminal value = $59,346
+ $187,162 = $246,508
The last step is to then divide the equity value by the number of shares outstanding. If the stock
is a depositary receipt (represents a specified number of shares in a foreign corporation) then we
use the equivalent number.
Value = Total value / Shares Outstanding ($246,508.36 / 2,987.20)
To finish off with if we compare the intrinsic value of $82.52 to the current share price of $86.4
we see Wal-Mart Stores (NYSE:WMT) is fair value, maybe slightly overvalued at the time of
writing.
Annual Income Statement (values in 000's)

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Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Total Revenue $22,820,400 $24,621,900 $25,413,000 $27,441,300
Cost of Revenue $12,199,600 $14,417,200 $15,623,800 $16,985,600
Gross Profit $10,620,800 $10,204,700 $9,789,200 $10,455,700
Operating Expenses
Researchand Development $0 $0 $0 $0
Sales, General and Admin. $1,068,100 $2,460,200 $2,643,700 $2,506,500
Non-Recurring Items $0 $0 $0 $0
Other Operating Items $0 $0 $0 $0
Operating Income $9,552,700 $7,744,500 $7,145,500 $7,949,200
Add'l income/expense items ($57,900) $6,300 $48,500 ($800)
Earnings Before Interest and Tax $8,573,500 $6,866,000 $6,555,700 $7,372,000
Interest Expense $0 $0 $0 $0
Earnings Before Tax $8,573,500 $6,866,000 $6,555,700 $7,372,000
Income Tax $3,381,200 $2,179,500 $2,026,400 $2,614,200
Minority Interest $0 $0 $0 $0
Equity Earnings/Loss Unconsolidated
Subsidiary
$0 $0 $0 $0

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Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Net Income-Cont. Operations $5,192,300 $4,686,500 $4,529,300 $4,757,800
Net Income $5,192,300 $4,686,500 $4,529,300 $4,757,800
Net Income Applicable to Common
Shareholders
$5,192,300 $4,686,500 $4,529,300 $4,757,800
Balance sheet (values in 000's)
Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Current Assets
Cash and Cash Equivalents $2,463,800 $1,223,400 $7,685,500 $2,077,900
Short-Term Investments $0 $0 $0 $0
Net Receivables $1,976,200 $1,474,100 $1,298,700 $1,214,400
Inventory $58,800 $58,900 $100,100 $110,000
Other Current Assets $828,400 $2,092,200 $558,700 $783,200
Total Current Assets $5,327,200 $4,848,600 $9,643,000 $4,185,500
Long-Term Assets
Long-Term Investments $1,085,700 $725,900 $792,700 $1,004,500
Fixed Assets $22,448,300 $21,257,600 $23,117,600 $24,557,500

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Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Goodwill $2,379,700 $2,336,500 $2,516,300 $2,735,300
Intangible Assets $0 $0 $0 $0
Other Assets $2,562,800 $1,855,300 $1,869,100 $1,744,600
Deferred Asset Charges $0 $0 $0 $0
Total Assets $33,803,700 $31,023,900 $37,938,700 $34,227,400
Current Liabilities
Accounts Payable $2,890,600 $2,696,300 $2,950,400 $2,747,900
Short-Term Debt / Current Portion
of Long-Term Debt
$0 $77,200 $0 $0
Other Current Liabilities $0 $694,800 $0 $0
Total Current Liabilities $2,890,600 $3,468,300 $2,950,400 $2,747,900
Long-Term Debt $29,536,400 $25,878,500 $24,122,100 $14,935,700
Other Liabilities $3,525,300 $2,064,300 $2,074,000 $2,065,900
Deferred Liability Charges $1,119,400 $1,817,100 $1,704,300 $1,624,500
Misc. Stocks $0 $0 $0 $0
Minority Interest $0 $0 $0 $0
Total Liabilities $37,071,700 $33,228,200 $30,850,800 $21,374,000

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Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Stock Holders Equity
Common Stocks $16,600 $16,600 $16,600 $16,600
Capital Surplus $7,072,400 $6,757,900 $6,533,400 $6,239,100
Retained Earnings $48,325,800 $46,222,700 $44,594,500 $43,294,500
Treasury Stock ($56,504,400) ($52,108,600) ($41,176,800) ($35,177,100)
Other Equity ($2,178,400) ($3,092,900) ($2,879,800) ($1,519,700)
Total Equity ($3,268,000) ($2,204,300) $7,087,900 $12,853,400
Total Liabilities & Equity $33,803,700 $31,023,900 $37,938,700 $34,227,400
Cash flow statement (values in 000's)
Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Net Income $5,192,300 $4,686,500 $4,529,300 $4,757,800
Cash Flows-Operating Activities
Depreciation $1,363,400 $1,516,500 $1,555,700 $1,644,500
Net Income Adjustments ($24,000) ($310,400) $286,200 $391,600
Changes in Operating Activities
Accounts Receivable ($340,700) ($159,000) ($180,600) $27,000

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Period Ending: Trend 12/31/2017 12/31/2016 12/31/2015 12/31/2014
Changes in Inventories ($37,300) $28,100 $44,900 ($4,900)
Other Operating Activities $0 $0 $0 $0
Liabilities ($602,500) $297,900 $303,600 ($85,700)
Net Cash Flow-Operating $5,551,200 $6,059,600 $6,539,100 $6,730,300
Cash Flows-Investing Activities
Capital Expenditures ($1,853,700) ($1,821,100) ($1,813,900) ($2,583,400)
Investments $0 $0 $0 $0
Other Investing Activities $2,415,700 $839,500 $393,900 $278,500
Net Cash Flows-Investing $562,000 ($981,600) ($1,420,000) ($2,304,900)
Cash Flows-Financing Activities
Sale and Purchase of Stock ($4,228,900) ($10,871,600) ($5,782,000) ($2,963,200)
Net Borrowings $2,027,800 $2,670,400 $9,755,200 $1,502,900
Other Financing Activities ($20,500) ($3,000) ($58,700) ($12,800)
Net Cash Flows-Financing ($5,310,800) ($11,262,400) $735,300 ($4,618,300)
Effect of Exchange Rate $264,000 ($103,700) ($246,800) ($527,900)
Net Cash Flow $1,066,400 ($6,288,100) $5,607,600 ($720,800)

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Net Present Value Criterion
The Net Present Value (NPV) criterion is the principal government investment project evaluation
criterion. The cash flows consist of a mixture of costs and benefits occurring over time. Net present
value ismerelythe algebraicdifferencebetweendiscountedbenefitsanddiscountedcostsasthey occur
over time. (You must think of the terms Anet present value@ and Anet present benefits@ as being
interchangeable.) The formula for NPV is:
Where: NPV, t = year, B = benefits, C = cost, i=discount rate.
Two sample problem:
Example) MC Donald repair project; 5 yrs.; i = 4% (real discount rates, constant dollars)
year = 1 2 3 4 5
Benefits $0 1200 1200 1200 1200
- Cost $2500 0 0 500 0
B-C $-3000 1200 1200 700 1200
Disc. Factor 1.04^1=1.04 1.04^2=
1.082
1.04^3=
1.125
1.04^4=
1.169
1.04^5=
1.217
Disc. Annual
Cash Flows
-$2884.61 1109.06 1066.67 601.89 986.03
Sum NPV = $879.04. Q: Go or no go? A: a single project with a positive NPV is a Ago.@
Net Benefits of MC Donald (2017-2018)

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According to BCG Matrix McDonald’s is a star. The reason for this is its high market growth
and high market share in the Pakistani market. On the other hand KFC and Pizza Hut are the
cash cows because of their low growth rate and high market share. During past some years KFC
and Pizza Hut have lost their market growth because of the fact that they lost their standard war
to their competitor i.e. McDonald’s. Another direct competitor of McDonald’s is Subway.
According to BCG Matrix it is a dog. Some of the reasons that are responsible for its low market
share and low market growth are the less expansion strategies being followed by the company.
Secondly they are not focusing at all on all the major cities, rather they are only focused on the
target segments of Lahore and Karachi.
BCG matrix for the products of McDonaldsis as follows;

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30. 30 | P a g e

31. 31 | P a g e

32. 32 | P a g e

33. 33 | P a g e
Recommendations
1. Reduction of employee training spending (lowering employee turnover).
In order to reduce of employee training spending and to lower turnover, we would like to
suggest:
longer. In this way, company reduces training spending, new employees are trained by the
employees and always take care about their expectations. It can be money premiums for
good working in the end of the month (or year), some employees parties, ‟‟Employee of the
week (month)‟‟ competition.
for their customers. If it is going more popular than usual menu food, it is more worth to make
all food in organic way, even it is more expensive. First of all, people like what is natural, and
then they are interested in the price.
popular in such way. Many people loves McDonald‟s food, so it has an authority and can show
good example of necessity of organic food in people life and compare how organic and usual
McDonald‟s food effect customers‟ health and all the nature about them.
2. Advantage of human health problems (improvement of products)
McDonald‟s is big food supplying company, and all of us know, how food affects our health. It
is one of the main factors, what built our body and strength our brains. Knowing that,
McDonald‟s should:
Suggest just high quality, improved products, which is full of vitamins and minerals. So, it
means that the company must improve their products, all the food must be certificated and fit for
all healthy food standards. Be in a contact with suppliers, who supply products for McDonald‟s
food and always check if the products is natural, high standard and healthy for all of age
customers. Contact with doctors, scientist and improve their products to fit for all of age
customers, even they have some problems with their stomach. It means to make measures and
find what the best is for all possible customers.
CONCLUSIONS
McDonalds is operating in Pakistan as very profitable organization. In this project we struggled
to study the management behaviour of McDonalds starting from its history to its vision and

34. 34 | P a g e
mission statements in which explained the historical of McDonalds of how it entered Pakistan’s
market and the expansion of its business in various cities. Moreover we also explained about its
and services which are offered in Pakistan by McDonalds as their revenue generating products
and services. I addition to that we researched all their product line.
We also explained the organizational structure of McDonalds. In that we explained the hierarchal
structure of McDonalds. As a gigantic organization of the world need to build their strong
organizational structure so does McDonalds. Its works on the basis of vertical and horizontal
coordination. All the executives from up to the lower management on making it a successful
organization
REFERENCES
1. Analyzing resources and capabilities [online], Available from the Internet:
http://www.blackwellpublishing.com/grant/files/CSAC05.pdf
2. Issues of McDonald‟s [online], Available from the Internet
http://www.mcspotlight.org/issues/intro.html
3. Key Ingredients of the McDonald's Experience [online], Available from the Internet:
http://www.meettheboss.tv/Article/11/Key-Ingredients-of-the-McDonald's-Experience/
4. Our company [online]. Available from the Internet:
http://www.aboutmcdonalds.com/mcd/our_company/bios.html>
5. PESTEL analysis of the macro-environment [online]. Available from the Internet:
<http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm>
6. PESTLE analysis to explain company‟s international strategy of McDonalds
[online].Available from the Internet:
http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-ofmcdonalds.html>
7. Manager [online]. Available from the Internet:
http://management.about.com/od/policiesandprocedures/g/manager1.htm
McDonald's
46
8. McDonald‟s FAQ [online]. Available from the Internet:
http://www.aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html
9. MC. DONALDS SWOT ANALYSIS [online] . Available from the Internet:
http://www.scribd.com/doc/3972375/MC-DONALDS-SWOT

35. 35 | P a g e
10. McDonald‟s website [online]. Available from the Internet:
http://www.mcdonalds.com/us/en/home.html
11. Resource of organization‟s history, managers, mission, vision, values, main products
and markets [online]. Available from the Internet:
http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html?DCSext.destinati
on=http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html
12. Social Analysis In Macro Environment: 2009 [online]. Available from the Internet:
< http://www.koellay.com/2009/05/social-analysis-in-macro-environment.html>
13. SWOT Analysis McDonald's [online]. Available from the Internet:
<http://www.marketingteacher.com/swot/mcdonalds-swot.html>