McDonalds Value Chain Analysis

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McDonald’s Value Chain

Analysis

Jeovani Zamarripa, Alicia Wylie,

Jason Flores, Conor Mullarkeyy

(2)

Mission Statement

“McDonald's brand mission is to "be

McDonald s brand mission is to be

our customers' favorite place and way

to eat." Our worldwide operations

p

have been aligned around a global

strategy called the Plan to Win

t i th fi b i f

centering on the five basics of an

exceptional customer experience –

People Products Place Price and

People, Products, Place, Price and

Promotion. We are committed to

improving our operations and

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Company History

McDonald’s Bar-B-Que (1940) McDonald s Bar-B-Que (1940)

• World’s 1st _McDonald’s

• Founded by Dick and Mac McDonald • Founded by Dick and Mac McDonald • San Bernadino, CA

D i i & h i

• Drive-in & car hop service McDonald’s (1948)

N F l

• Name Formulates • Menu develops

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Company Info

• Corporate Headquarters:p q – McDonald’s Corporation 2111 McDonald's Dr Oak Brook, IL 60523 • Employees:

– Approximately 400,000 McDonald’s employees globallyApproximately 400,000 McDonald s employees globally – 1.6 million people globally are employed through

McDonald’s restaurants and their franchises

• Restaurants:

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2009 Revenue &

k

U.S. Stocks

(US only)

• NYSE: MCDNYSE: MCD

– Current Price: $64.74

– Change: $0.26 +g

(As of 2/16/2010)

• 2009 Revenue (mil.)$22,744.701 • Year Revenue Growth 3 3%

• Year Revenue Growth -3.3%

• 2009 Net Income (mil.)$4,551.001

Y N t I G th 5 5%

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Leadership

James Skinner Vice Chairman, CEO

Left to Right: Jose Armario, Group President Canada & Latin America; Janice Fulds, US Chief Operations Officer; James Skinner, Vice Chairman and CEO; Donald Thompson, President U.S.A; Jeffrey Stratton,

Chief Restaurant Officer; Mary Dillion, Global Chief Marketing Officer; Timothy Fenton, President Asia/Pacific Middle East & Africa; Peter Bensen, Chief Financial Officer; Dennis Henequen. President Europe; (at table) Gloria Santona, General Counsel & Corporate Secretary; Richard Floersch, Chief Human

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Culture

• Forging new opportunities

Forging new opportunities

– Innovation from within

– Empowered “big thinking”p g g

• Social responsibility

– Community FocusCommunity Focus

– Responsible Purchasing

– Protecting Our Environmentg

• Diversity

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McDonald’s Production System

McDonald s Production System

INPUT PROCESS OUTPUT

Employees Customers

Cook and package

foods Satisfied customers

Customers’ favorite Customers

Restaurants

Food Prep/Assembly

Line

Assemble meals to the

customers order

Customers favorite

place and way to eat

Provide a relaxed and

fun environment to eat Line

Frozen foods (patties, fries, chicken nuggets, etc.)

ProduceProduce Containers

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Operational Strategic

f

i

Performance Dimensions

COST

QUALITY

SPEED

FLEXIBILITY

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COST

Make it cheap: Make it cheap:

• Economies of scale

– Allows McD’s to pass the value to consumersAllows McD s to pass the value to consumers

• McValue Dollar Menu • Party Pack

l • Cost controls

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QUALITY

Make it consistent: Make it consistent: • Universal taste

• Core offerings globallyCore offerings globally

Order Qualifier: Make it good: Order Qualifier: Make it good:

• Taste appeal to its target market • Healthy options

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SPEED

Make it fast: Make it fast:

• 90 second service goal

Order Qualifier: Make it dependable: • Menu items available daily

• Menu items available daily • Hot & Fresh

Order Qualifier: New Product Development:

• R i l it

• Regional menu items • Healthy menu options

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FLEXIBILITY

Order Qualifier: Product design:

• S/M/L/Super size • S/M/L/Super size

• Gender based kids meals

• Happy meals vs. Mighty kids meals

P l k

• Promotional packaging

Order Qualifier: Product Mix:

• Sandwich varietiesSandwich varieties

• Soft serve offerings (milkshakes, ice cream cones, sundaes)

• Salads • Salads

Order Qualifier: Production Volume:

• Staffing based on consumer traffic and meal ti

time

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM INFRASTRUCTURE FIRM INFRASTRUCTURE HUMAN RESOURCES TECHNOLOGY HUMAN RESOURCES TECHNOLOGY PROCUREMENT PROCUREMENT INBOUND

LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING & SERVICES SERVICE INBOUND

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Firm Infrastructure

Strengths:

• Brand recognition • Brand recognition

• #1 in retail fast food industry

• LeadershipLeadership • Financial Strength • Company image • Intellectual property • Franchising Weaknesses: • LawsuitsLawsuits • Company image • Culture insensitivities

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM

INFRASTRUCTURE

Brand recognition

#1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities HUMAN RESOURCES TECHNOLOGY PROCUREMENT STRENGTH WEAKNESS INBOUND

LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING & SERVICES SERVICE WEAKNESS

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Inbound Logistics

Strengths:

• Economies of scale

– Pass value to customer (i.e. $1 menu)

• Just-in-time order & deliveryJust t e o de & de ve y • Sustainable packaging

• Renewable resources

P k i i i (82% bl )

– Packaging composition (82% renewable resources) – Oil recycling (diesel oil)

• Supply chain controly • Quality control

– Freight truck inspections – Random auditsRandom audits

Weaknesses:

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM

INFRASTRUCTURE

Brand recognition

#1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities HUMAN RESOURCES TECHNOLOGY PROCUREMENT Economies of l Just-in-time order & delivery PROCUREMENT STRENGTH scale Sustainable packaging Renewable resources Supply chain Supply chain control Quality control Media/PR INBOUND

LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING & SERVICES SERVICE

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Operations

Strengths:

O li & it ki k j b li ti

• On-line & on-site kiosk job application systems

• 2_{2 largest employer in the U.S.}nd _{largest employer in the U.S.}

• Reinforced information systems • Wireless headsets

• Wi-Fi offered in all locations

• R&D in target consumer demands and trends

trends

• Corporate guidelines imposed on franchisees

• Franchisees must purchase supplies from McD’s

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Operations

Weaknesses:

Hi h t ( th 100%)

• High turn-over (more then 100%)

• 90 second drive-thru rule (unsuccessful) • Impersonal drive-thru greeters

• Impersonal drive-thru greeters

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM

INFRASTRUCTURE

Brand recognition

#1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities HUMAN RESOURCES

Just in time order

Job appliation systems 2nd largest U.S. employer High turn-over Reinforced IT systems TECHNOLOGY

PROCUREMENT Economies of _scale

Sustainable Just-in-time order & delivery Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice Franchsor purchase agreement STRENGTH Sustainable packaging Renewable resources Supply chain control R&D based on consumer demands Corp guidelines for Franchisees

90 second drive-thru rule

INBOUND

LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING & SERVICES SERVICE

WEAKNESS

Quality control Media/PR

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Outbound Logistics

• Distributor agreementsg

• Quality control

– Freight truck inspections random audits

– random audits

• Refrigerated trucks

• Reinforced Information Systemse o ced o at o Syste s

– Cashier

– Assembly Line Order fulfillment – Order fulfillment

• Just in time order and delivery

– Ensuring freshnessg

• Packaging quality reinforces freshness

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM

INFRASTRUCTURE

Brand recognition

#1 in retail fast food industry Leadership Financial Strength Financial Strength Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities HUMAN RESOURCES

Just in time order

Job appliation systems

2nd largest U.S. employer High turn-over

Reinforced IT systems Refridgerated trucks

TECHNOLOGY

PROCUREMENT Economies of _scale

Sustainable Just-in-time order & delivery Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice Franchsor purchase agreement Refridgerated trucks Reinforced IT Just-in-time order & delivery Distributor agreements QC STRENGTH Sustainable packaging Renewable resources Supply chain control R&D based on consumer demands Corp guidelines for Franchisees 90 second drive-thru rule QC Packaging INBOUND

LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING & SALES SERVICE

WEAKNESS

Quality control Media/PR

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Marketing & Sales

Strengths: Strengths:

• Product

– Health and wellness campaign & product p g p offerings

– Consumer and market research P i

• Price

– McValue Dollar Menu Party pack

– Party pack • Promotion

– Disney and Nickelodeon license agreementsy g – Coca-Cola endorsement

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Marketing & Sales

(cont’d)

Marketing & Sales

(cont d)

Strengths: Strengths: • Place – New upscale MD’sp – MD’s goes “green” – McCafe – Wi-Fi

– McDonald’s Play Place • Ronald McDonald

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Marketing & Sales

(cont’d)

Marketing & Sales

(cont d)

Weakness: Weakness:

• “Supersize Me” movie • Media/PR

• Adaptation to global culture and customs • Product failures

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM

INFRASTRUCTURE

Brand recognition

#1 in retail fast food industry Leadership Financial Strength C i HUMAN Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities Job appliation systems HUMAN RESOURCES TECHNOLOGY E i f y 2nd largest U.S. employer High turn-over Just-in-time order & delivery Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice Refridgerated trucks Reinforced IT Just-in-time order & delivery

Consumer Research McValue Dollar Menu Party Packs PROCUREMENT Economies of scale Sustainable packaging Renewable resources Supply chain control Quality control Media/PR Franchsor purchase agreement R&D b d Distributor agreements QC Packaging Party Packs Cartoon Affiliations Coke Olympic Sponsor Upscale MD's Going Green M C f STRENGTH R&D based on consumer demands Corp guidelines for Franchisees 90 second drive-thru l McCafe Wi-Fi MD's Play Place Ronald McDonald "Supersize Me" Media/PR INBOUND

WEAKNESS

rule Global expansion issues Product failures

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Service

Strengths:

• Fast food service • Order accuracyy

• Clean environment

• Friendly customer servicey

Weaknesses: Weaknesses:

• Lack of customer service

• Employee apathyEmployee apathy

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MD’s Value Chain Analysis

MD s Value Chain Analysis

FIRM

INFRASTRUCTURE

Brand recognition

#1 in retail fast food industry Leadership Financial Strength C i HUMAN Company image Intellectual property Franchising Lawsuits Company image Culture insensitivities Job appliation systems HUMAN RESOURCES TECHNOLOGY E i f y 2nd largest U.S. employer High turn-over Just-in-time order & delivery Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice Refridgerated trucks Reinforced IT Just-in-time order & delivery

Consumer Research McValue Dollar Menu Party Packs PROCUREMENT Economies of scale Sustainable packaging Renewable resources Supply chain control Quality control Media/PR Franchsor purchase agreement R&D based on Distributor agreements QC Packaging Party Packs Cartoon Affiliations Coke Olympic Sponsor Upscale MD's Going Green

M C f Fast food service

STRENGTH

R&D based on consumer demands Corp guidelines for Franchisees 90 second drive-thru rule McCafe Wi-Fi MD's Play Place Ronald McDonald "Supersize Me" Media/PR Order accuracy Clean environment Friendly customer service Lack of customer service INBOUND

WEAKNESS

Global expansion issues

Product failures Employee apathy_Dissatisfied

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Core Competence

• McDonald’s strength lies in the operations and firm i f

infrastructure.

• McDonald’s core competency is the production and

d li d f ff d bl f d t l b f

delivery speed of affordable food to a large number of customers to support a low cost, high speed, and

consistent quality strategy

• McDonald’s strategy is supported by its strong financial resources, brand image, market leadership, buyer supplier relations, and product value. p

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Competitive Advantage

• #1 Fast food restaurant in industryy • Customers

• Value and affordable menu • Convenience

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Fun Facts

Fun Facts…

• Aprox.. 9 million pounds fries served p 9 p

daily

• 380 sesame seeds on a sesame bun

• Approx. 82% of consumer packaging is made from renewable materials

C t il i t bi di l f l

• Convert oil into biodiesel fuel

• Logo differs between “green” locations and traditional locations (green

and traditional locations (green background vs. red color)

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