Macdonalds Business Analysis
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Historically McDonalds has been a successful company, evaluate the strategies it developed in the recent past and compare its performance with that of its major competitors & Using theoretical models such as BCG or GEC matrices to illustrate your answer analyse the current position of the firm.
McDonalds, one of the largest food service companies in the world, and also one of the major players in the UK food retailing industry, officially known as McDonalds Restaurants LTD (UK). The company is wholly owned by the McDonalds Corporation based in the USA, dominating the market via their brand image with quality food, value for money and fast service. In the early 1990s McDonalds, the long-time leader in the fast food wars faced a crossroads situation. Domestically, sales and revenues were flattening as competitors influenced the market. McDonalds encountered new challenges, in addition to its traditional competitors – Burger King, Taco Bell & Wendys.
Going back to the early 1940s, where Ray Kroc was so impressed by 2 brothers, who had opened a burger restaurant that relied on standardised preparation to maintain quality – The Speedee Service System. McDonalds used controlled experimentation to maintain the McDonalds experience, simultaneously expanding the menu appeal to a broader range of consumers. E.g. 1976 McDonalds introduced a breakfast menu as a way to more fully utilize the physical plant, then in 1980, rolled out the chicken McNuggets. Despite these innovations, McDonalds tremendous growth could only continue for so long.
McDonalds faced tough and heightening competition on several fronts. Traditional rivals such as Burger King & Taco Bell were eating into margins via promotions and value priority strategies. But McDonalds has always sustained prosperity due to willingness to innovate, even while striving to achieve consistency in the operations of its many outlets e.g. McSalads, chicken McNuggets & McLean Deluxe Sandwich, are examples of how they tried to appeal to a wider range of consumers.
At the end of 2000, McDonalds has 1,116 restaurants in the UK. Their main products are hamburgers, chicken sandwiches, French fries and beverages, but they have expanded their product portfolio to cover breakfast items & desserts. McDonalds retain their popularity through the concept of branding, the Big Mac is their flagship product but McDonalds also have collectable items with the children meals which appeals to the young cliental. With strong advertising campaigns to back up the brand image, McDonalds have an instantly recognisable logo.
McDonalds usually bases its television commercials around new products offered over a limited period of time, often coinciding with major sporting events. E.g. McDonalds was the official restaurant of 2000 Summer Olympics and launched an Australian menu, which included novelties such as boomerang shaped dippers. McDonalds memorabilia has become an even more collectable commodity with people bartering for items which were originally free.
Two main competitors in the UK, Burger King & KFC are also consistently launching new campaigns. KFC launched a number of advertising initiatives in 2001, which may help explain the renewed popularity of KFC. A Ј645 000 poster campaign was undertaken for popcorn chicken kids promotions included Pink Panther & Digimon giveaways. The company thus returned to Colonel Saunders icon to cartoon format to promote new line, such as Twister & Popcorn Chicken, having been replaced in recent years by well-known faces such as Tara Palmer Tomkinson. New TV campaigns for 2002 have once again ditched the Colonel and feature celebrity voices, starting with Samuel. L. Jackson, urging viewers to Give in to the chicken
TV adverting for Burger King tends to be concentrated on their flagship – Whooper burger along with their flame-grilled technique. Burger King also gave away CD-ROMS in its children meals for its summer promotion, Pop:BK. Cinema tie-ins have recently included Rugrats in Paris The Movie and the Lord of The Rings: The Fellowship of The Ring. Burger King also promoted BBC TVs award winning Walking with Dinosaurs series.
The burger chain was chosen by the BBC as it had a more wholesome image the McDonalds
Jossie Sekulin, Brand Manager of Walking with Dinosaurs
RESTAURANT COMPANIES RANKED BY SALES
Company
Symbol
Price
Change
Market Cap
MCDONALDS CORP
31.65
-0.41%
39.79B
20.04
YUM! BRANDS INC
45.86
-0.09%
13.43B
19.48
DARDEN REST
28.11
1.44%
4.42B
20.01
STARBUCKS CORP
SBUX
58.06
-1.01%
23.22B
60.92
Whitbread Group PLC
Private – View Profile
BRINKER INTL
33.83
0.03%
2.92B
26.27
WENDYS INTL
36.21
-0.44%
4.13B
16.25
KFC Corporation
Private – View Profile
The following statistics show how well McDonalds is doing at present:
Direct Competitor Comparison
INDUSTRY
Market Cap:
32.86B
10.51B
41.14M
Employ¬ees:
418,000
32,0001
71,550
2.11K
Rev. Growth (ttm):
11.30%
8.00%
5.60%
Revenue (ttm):
17.74B
1.12B1
500.00M2
8.55B
108.14M
Gross Margin (ttm):
30.75%
24.47%
18.82%
EBITDA (ttm):
4.17B
1.49B
5.27M
Oper. Margins (ttm):
17.00%
12.69%
3.37%
Net Income (ttm):
1.66B
642.00M
-11.00K
Pvt1 = Burger King Corporation (privately held)
Pvt2 = Doctors Associates Inc. (privately held)
YUM = Yum! Brands Inc
Industry = Restaurants
1 = As of