ANALYSIS OF MCDONALDS

Submitted by: - Karan Mehta

Submitted to: - Davlin Tay
Student id: - 30120021
Submission date: - 9th June 2015

Table of Contents

Executive Summary
3
Introduction
4
FAST FOOD INDUSTRY ANALYSIS
4
KEY INDUSTRY EVOLTION (Stages of industry life cycle) 6
FACTORS IMPACTING FAST FOOD INDUSTRY
10
STAGE (industry life cycle) AT WHICH THE FAST FOOD INDUSTRY
IS CURRENTLY OPERATING IN AND REASONS TO CHOOSE

11
CURRENT STRATEGY OF MCDONALDS
SOME KEY DYNAMICS OF MCDONALDS/ KEY SUCCESS

FACTORS
SWOT analysis of McDonalds
Porters five forces analysis on McDonalds
PESTEL Analysis of McDonalds
MAXIMISING SUCCESS OF MCDONALDS AT ITS CURRENT

12
13
14
15
16

STAGE AND POSITIONING ITSELF AS IT ENTERS SUBSEQUENT

CHANGES
COMPETITIVE ANALYSIS
CONCLUSION
REFRENCES

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18
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EXECUTIVE SUMMARY

The fast food industry is called as the food industry which is prepared very
much easily and which can be served easily. Firstly been popular in the
United States of America in the 1950s. Fast food restaurants were primarily
started to aim the age sector between 15-30 who need to travel a lot or the
people who attend there. The fast food industry in United States was
reasonably 191 billion USD in 2013. It has been calculated that it will exceed
210 billion. The majority that is the 77.3% of large market is a combination of
fast food restaurants and drive-thru and the rest consists of take away, buffets
and cafeterias. The fast food industry has come up with lots of house hold
brand names, domestically and globally. Some of the fast food companies
around the world are McDonalds, KFC, and pizza hut, Dominos, Subway,
yum! Brands.
Todays time taste is one of the most important components when it comes to
restaurant. Health is not that much considered, as the nutrition quality of the
food does not leaves a healthy impact on the customers. Its has been said
that 80% consumers around the world dine at easy restaurants at least twice
a fortnight. (Facts, 2014)

INTRODUCTION
3

McDonalds Corporation is worlds largest chain of burgers, soft drinks, fast

food restaurants around the globe, serving more than 68 million customers
daily in 119 countries and having at least 35000 outlets. Headquartered in the
United States, this company began in 1940 as a barbeque restaurant
operated by Richard and Maurice McDonald. The companies total revenue in
2012 was $27.5 billion with profits of $5.5 billion. According to 2012 BBC
report, McDonalds is known as the second largest private employer after WalMart with 1.9 million employees, 1.5 million to whom work for franchisee.
McDonalds principally sells hamburgers, cheeseburgers, chicken nuggets,
French fries, breakfast meals, soft drinks, desserts and milkshakes. The
company has recently upgraded its menu log including salads, fish, wraps,
smoothies, fruit and seasoned fries.

FAST FOOD INDUSTRY ANALYSIS

The analysis of the fast food industry is generally a marketing based research
in which it has been shown that how companies compare with each other on
sales, profit and even products quality. The analysis of the fast food industry
cans also b done through secondary research, existing data that can be
purchased or by the primary research surveys including the phone interviews,
mail and online questions.
Significance
The second fast food industry analysis data can be purchased from
companies, which collect all the data about the fast food companies like NPD
group and A.C. Nielsen. The data includes the market share information and
units sold, currency used etc. Mostly all of these companies like to know
whether their customers purchased food inside or outside vs. the competitors

and like to know where most of the customers like to go for outing an their
they try to open their store as well.
Types
The fast food companies now a days are doing their own industry analysis by
primary and secondary research on their own and also by doing qualitative
and quantitative studies. The qualitative research can be called as when the
company compares their own new product to the competitive item and even in
terms of price. The quantitative research is done mainly by calling customers
and asking them or by rating the product on a scale of 1-10 in terms of quality,
price, location etc.
Identification
The fast food industry analysis can also e conducted by the ATU process i.e.
awareness, trial and usage. ATU is only made to measure brand and the
advertising awareness among all the food companies. As the customer is only
aware of the company that has more brand advertisements but ATU lets see
how a customer visits a restaurant on a weekly basis vs month vs all of the
other ones.
Function
This analysis measures the customer satisfaction among all other
competitors. The fast food companies are interested in knowing how good
they are when they deal with the customer vs. the competitors and in
hospitality, cleanliness, and even value for money.
Considerations
The fast food industry calculates the demographic comparisons among with
their key competitors such as in age, sex, size of each household, average
number of people living in one house. Other important aspect is the
educational qualification of the customer and their status and then accordingly
the company makes out the products and services. (Small Business Chron.com, 2015)

KEY INDUSTRY EVOLTION (Stages of industry life cycle)

The chart above shows that how in the four stages of industry life cycle of fast
Food industry in the world is. What is the level of demand, technology,
products, Manufacturing, trade competition and KSFs in all 4 stages.

The chart above focuses on the industry evolution of the

fast food companies, how they start their business and
how do they end up or start declining.
Industry life cycle
It generally includes the stages the product goes through after its
development in the market, as it starts from the introduction to the end of the
product thats is decline stage. Same as the children go through the age of
preschool, elementary school, teenage, and young adult and so on, the

products have the same life cycle of different stages. The ILC is a very much
beneficiary instrument that helps the dealers manage the products
recognition and success in the market place.
The industry life cycle can vary for different types of product categories. The
chart mentioned above illustrates how a products life cycle can move from
one stage to another and how much is the length of the stage varies. Some
products start from its early stage but due to bad market response they are
been taken away from the market there itself but some of the products start
from one stage and at every stage they spend a long time.
The Introduction Stage
This is the first stage where any fat food company starts with its development.
It is same as commercialization or the last stage of the new product
development process. The cost of marketing i.e. doing marketing research of
the market, branding, advertisement is quite higher than the other stages.
Communication (promotion) is a very important process used at this stage in
order to tell about the product to each and every customer to let him or her try
the product. For e.g. food companies like KFC, McDonalds, subway, dominos
have their outlets in almost all the countries around the globe with a different
marketing criteria and cultural norms according to the country itself.

The Growth Stage

Generally, the marketplace accepts all the fast food companies. However it
enters the growth stage of industry life cycle. The growth stage happens to be
when the company has increasing sales, has got more competitors, making
good amount of profit. For e.g. when dominos had a great success with their
pizzas they started selling other items like garlic breads, pasta etc. The
number of distributor outlets exploited to sell the product can also increase the
growth stage as the company tries to reach as much of the marketplace as
possible.
The Maturity Stage
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After the new competitors enter the market, the potential of getting new
customers decline and the sales of the product typically goes down. This thing
indicates that the product has reached the maturity stage. More consumer
products are at their maturity age if their buyers have repeated purchases
despite having new product launched by other company. For e.g. customers
of McDonalds tend to be with it even after launch of Hungry Jacks, which
gives the same food what McDonalds, offer. Modification of the target market
helps the food company invite different customers by obtaining new users,
putting different market divisions, finding new uses of the product In order to
appeal more number of customers.
The Decline Stage
When the sales drop and it continuous to drop to the lower level, that means
that product has entered the decline stage in the market. The decline can be
very easily reflected by the change in consumer preference, technological
advantages, and the alternatives that satisfy the same need of the consumer
and even in a better price and with good technology can lead to decrease in
demand for that product. As compared to fast food companies like
McDonalds, KFC, subway the other local fast food companies are operating in
their decline stage as they are the alternatives when a consumer dont find the
outlets of big food companies near to the place he lives in or when he is on
any vacations. Some of the company stops the promotion of that product or
decline the price of that specific product while some company still try to make
it competitive in the market and keep running it with profits even in the decline
stage. (2012books.lardbucket.org, 2015)

FACTORS IMPACTING FAST FOOD INDUSTRY

The fast food industry generates about $165 billion in revenue as based on
the market research done in 2011 by IBIS World. The research indicates that
more than 190k fast food companies operate in USA. Anyhow almost all the
restaurants have the same prices for their food but many consumers are
looking for having healthier and quality food and then they dont care much
about the money.
Some of the factors those impact fast food industries are:

Economic Downturns: - Fast food restaurants are better during any

economic downturn than the prices restaurants have. Many customers
who are on a tight budget in the bad economy often turn to fast food
like dominos, McDonalds, subway, etc. for their inexpensive and time

saving meals.
Mergers: - Fast food companies often merge with other big companies
during the time of recession to grab a bigger share of the market and
increasing profits at the same time. Arbys and Wendys merged in
2008 as unemployment in US was rising and only few consumers use
to eat outside of their homes. That merger expanded market share for
both of the food giants and thus, it was called as the third largest food

chain in US.
Economic Recovery: -The low cost meals are less of a concern for
some consumers as a slow economy being to reflect. QSR magazine
reported that in year 2011 McDonalds beat the companys 2009 sales
by $1.5 billion after the chain had included some smoothies, sundaes.
The consumer demand for healthier food is adding more fruits,
vegetables, and salads to its menu.

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Commodity Prices: - Low prices on meats, vegetables and other food

stuff help cut the meal prices without having losses. The cutting of
prices can be a boomerang when the reduction surpasses food and
product costs. (Small Business - Chron.com, 2015)

STAGE (industry life cycle) AT WHICH THE FAST FOOD

INDUSTRY IS CURRENTLY OPERATING IN AND REASONS
TO CHOOSE
The fast food industry is currently operating at its MATURITY STAGE of
industry life cycle. Fast food is a trend for the teenage till the adults to have
quick meals thats is why almost all the fast food chains have easy accessible
options like drive-thru, home delivery, take away etc. which keeps a customer
focused about that food which he can eat in few minutes. To illustrate more
about this, Burger King has come back to better designed organizations,
which rises the essential mechanism, reduces considerable operating cost
and thereby increases prospects for harmonization.
Big fast food chains like McDonalds, dominos, KFS, Subway, Hungry Jacks,
Burger King etc. are ruling around the globe and have got 70% of market
under their food addiction because it is very ease to eat and carry. However,
McDonalds have got several foodstuffs that grow popular according to its
demand in the marketplace.
McDonalds have got all basic needs and wants what a customer appeals for.
They always come u with new food products and lots of other entertaining
things. They also have got ample space for kids celebrating their birthday in
the McDonalds where they can have their separate party on any of their
special occasions. Almost al the fast food chains have got these facilities in
India, perhaps which makes the fast food industry more competent and strong
in the market. Anonyms (2015)

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CURRENT STRATEGY OF MCDONALDS

The current strategy of McDonalds is to get its customers satisfied with the
product they sell in comparison to their competitors
Some of the factors are:

Deliver quicker service

Technology functions
Consumer Observation reading
Consumer Satisfaction
Research Activities

Deliver quicker service: - The success of McDonalds is based upon their

quick service, which they provide to their customers. The Managers in
McDonalds are also offered a hospitality degree in order to be more kind,
effective with the customer from the McDonalds University accreditation
program. Better and quicker service is the aim of McDonalds in the Asian and
developing countries as McDonalds is working hard to get the customer in

those developing countries.

Technology functions: - In this age where technology is the key element the
company has provided many new technology changes. For e.g. any customer
if wants to buy and eat in his car itself can go through the drive- thru and can
order by looking at the menus available on screen and can even order over
there to the machine equipped there. This is the best way in which McDonalds
is taking advantage of the technology. More technological things are coming

up in accordance with the countries.

Consumer Observation reading: - In this case the McDonalds crewmember
is one who can deliver this service by communicating in an effective manner
with the customer head to head. McDonalds crewmember is been very much
enthusiastic and confident while attending the customers. The can read very
well what customer is actually after and even help the customer getting the
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food what hes after. They are been skilled and given weekly orientation on

how to deliver the customer in a kind manner. (MAIDMENT, 2015)

Consumer Satisfaction: - McDonalds has been always been satisfying
customer needs and wants. They are growing more to satisfy customer needs
as some of the customers need fast food at mid night, so for that many of the
McDonalds store are been opened at night that is 24/7 so as to satisfy

customer needs.
Research Activities: - Many research activities are been carried out in order to
satisfy the customer and compete over the competitors to whom the customer
can jump anytime. McDonalds main strategy is to know how the competitor is
adapting its prices and products and even taking away its customers by
delivering the same quality food and at the same cost at which McDonalds is
providing

SOME KEY DYNAMICS OF MCDONALDS/ KEY SUCCESS

FACTORS
Success in the fast food industry requires a level of perfection within the
market and in different parameters. Mostly customers go are looking for fast
food are mainly focusing on speed, predictability and easy to eat food rather
than a dining experience. Business who can understand these elements can
master the business and make huge profits as well. Some of the elements
are: 1. Branding: - McDonalds have great signs, logos which can be visible
from miles which makes the customer turn up there way towards it.
Early morning breakfast meals also attract the customers going for
early work or university.
2. Location: - Its all about convenience. Most McDonalds outlets are in
the busy areas of the town, which attracts more number of people.
3. Speed: - McDonalds crew and stores are very much fast. As is takes
just few minutes to order the food from the store or through the drive
way itself.

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4. Efficiency: - McDonalds runs on thin profit margins but at the same

time sells lot number of products which in total makes a huge profit and
because of customer getting more and more attracted towards the fast
food McDonalds is providing regular training to their staff so that they
can serve the customer in the best possible way.

SWOT analysis of McDonalds

Strength
Large market share
Nutritional information available on packaging
Strong brand name, image and reputation
Weaknesses

Unhealthy food image

Legal actions related to health issues, use of fat and beef oil.
Use of HCFC-22 to make polystyrene that is contributing to ozone
depletion

Opportunities

Growing healthy trends among consumers

Worldwide de-regulation
Low cost menu that will attract the customers

Threats

Anti American settlement

Global recession and fluctuating foreign currencies. (UKEssays, 2015)

Porters five forces analysis on McDonalds

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Industry Rivalry: - There is an extreme competition in the fast food industry.

Many new local fast food rivals have emerged up in every town, which are
slightly taking the customers away of McDonalds. The new opening of other
stores near to McDonalds store is also taking away the customers.
Bargaining power of suppliers: - It consists of number of suppliers available
all around the globe. McDonalds is considered as worlds largest restaurant
chain in terms of sales. Even the bargaining power of suppliers is high. Most
of them own the McDonalds on their own and even the power of suppliers is
low, lower the cost of raw materials supplied higher the total profit is.
Threat of substitutes: - The availability of the products that McDonalds sell
are now a days easily available at the local stores with lesser price. The
narrow threat of substitute due to introduction of local taste products.
Threat of New Entrants: - There is easy access market with low start up cost
in the market. The regulation power is in limit. Any new company can come up
with products what McDonalds sell and can easily take away the customers of
it.
Bargaining power of buyer: - Many buyers can even buy less quantity
products from McDonalds. There is no compulsion to buy quantity in large
from them. There is even very less chance of switching as it has very big
brand image through differentiation and uniqueness. (UKEssays, 2015)

PESTEL Analysis of McDonalds

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Political: - The international operation of McDonalds is highly prejudiced by

the distinct national strategies executed by each government
Economical:

Very high target market

Market leader
Low cost with more profit
McDonalds has the tendency to experience in problems in occurrences
where the economy of the particular states which is knockout by
inflation and changes in the currency rate

Social:

Work within many community units

Increase employments

Technological:

Advanced technology development

Quality standards

Environmental:

Quality packing
Local production using imported purchases

Legal:

Legislation for product

Sustained logo (UKEssays, 2015)

MAXIMISING SUCCESS OF MCDONALDS AT ITS

CURRENT STAGE AND POSITIONING ITSELF AS IT
ENTERS SUBSEQUENT CHANGES

16

The following factors can also lead McDonalds towards success while it is now in
its maturity stage

Product Differentiation
Low Price Strategy
Control cost
Maintain market share
Positioning of a follower
Repositioning of competition
Hence, these are some of the success maximizing tips for McDonalds to
adopt which can be very much helpful in the current maturity stage. (Small
Business - Chron.com, 2015)

COMPETITIVE ANALYSIS

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The above chart compares McDonalds with its four closest competitors in the
market in the fast food business. In the year 2013 McDonalds sales increased by
1.95% as compared to its competitors that experienced a decline in the market.
The competitors average sales declined by 9.18%. The (EBITDA) averaged to
28.2%. McDonalds margin of 36% was above the whole competitions average.
Thus, McDonalds is the market leader in all perspectives in the fast food sector
among its close competitors. (Marketrealist.com, 2015)

CONCLUSION

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The conclusion comes to an end that McDonald is the largest fast food
companies in the world. They continue their path for success in this industry
by winning hearts of all the customers around the globe. Still McDonalds is
the worlds largest fast food provider and they want be the same until the next
decade. The industry life cycle is one of the main focuses that we did in the
report where McDonalds is at its maturity and at the same time growing
subsequently. In many developed countries McDonald is at its growth level
but in many developed it has already reached the maturity level.

REFRENCES
19

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factorscanaffectfastfoodindustry36923.html

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v2.0/s1002managingnewproductstheprod.html

UKEssays,.(2015).PESTELanalysisofMcDonaldsandthefoodindustry.Retrieved9June
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foodindustrymarketingessay.php

(2015).Retrieved9June2015,from1.http://www.ukessays.com/essays/marketing/product
lifecycleofmcdonaldsmarketingessay.php

Maidment,N.(2015).McDonald'snewCEOhasamodernstrategytofixthebrand.Business
InsiderAustralia.Retrieved9June2015,fromhttp://www.businessinsider.com.au/rthe
burgerlovingbritmcdonaldsnewceotakesonsalesslump20152

SmallBusinessChron.com,.(2015).WhatStepsDoCompaniesTaketoMaximizeProfitor
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companiesmaximizeprofitminimizeloss41526.html

Marketrealist.com,.(2015).Mustknow:ComparingMcDonald'swithitscompetitionMarket
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mcdonaldswithcompetition/

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