MCDONALD'S INTRODUCTION

McDonald's fast food restaurant is one of the largest

franchises in the United States as well as aboard. Their top

menu items include: hamburgers, cheeseburgers, McNuggets,

and French fries. They are also known for one of their

popular desserts: the apple pie and their breakfast sandwich:

the Egg McMuffin.

There are more than 32,000 McDonald's restaurants serving in 117 countries.

More than 75% of McDonald's restaurants worldwide are owned and operated

by independent owners.

McDonald's has several ethical and social responsibility policies in place

throughout their solely owned and franchised companies. These policies include

placing the customer experience at the core of what they do, committing to their

employees by nurturing their talent and rewarding their achievements,

maintaining high standards regarding the conduct for business, and giving back

to the communities in which they are established. All of these values are

infiltrated through all levels of the company, which keeps McDonald's thriving

as a successful fast food chain restaurant.

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HISTORY

1966 – McDonald’s stocks split for the first time.

1967 - Big Mac invented

McDonald’s in Canada and Puerto Rico open

1971 - “MacDonald” (Japan)

1973 - Egg McMuffin invented

1974 - Ronald McDonald House opened

1979 - Happy Meals introduced

1979-present - Continued growth

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MC DONALD’S SPECIALITY

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EXISTING STRATEGIES

OPERATIONAL LEVEL STRATEGY

(A) Product Strategies

Menu

1) Big Mac

2) Filet-o-Fish

3) Quarter Pounder with Cheese

4) McChicken with Cheese

5) Beef Burger

6) Cheese Burger

7) Filet-o-Fish Meal

8) McChicken with Cheese Meal

9) Quarter Pounder with Cheese Meal

10) Big Mac Meal

11) Happy Meal

12) Fries5

13) Cold Drinks

14) Tea

15) Coffee

16) Hot Apple Pie

17) Milk Shakes

18) Cones

4- pillars for its success – QSCV – Quality, service, cleanliness and value.

No organization can deliver its products without quality even to a child who is a

potential customer or target client of that organization. It is consistency which

reigns supreme everywhere in the world.

a) QUICK SERVICE

Everybody serves quickly with a smile. There is less than a minute between the

time customer orders and the food served to him. If somebody has any problem,

it must be sorted before coming to the counter. It is the McDonald's culture that

customer is doing them a favor by being there and not the staff so he should be

received this feeling the same way.

b) CLEANLINESS

McDonald do provide cleanliness in all its products and services offering. So

they maintain cleanliness at all times. The restaurant is thoroughly cleaned and

sanitized after the closure. That’s why more customers are becoming loyal to

this organization as compared to the other organizations competing in the same

industry.

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c) QUALITY

All required supplies and raw materials are imported from abroad and

conformed according the strict rules and regulations regarding the requirement

and specifications of McDonald's, e.g., for Pakistani market, all McDonald

franchisees are importing Halal meat from South Africa, Dubai and Malaysia.

FUNCTIONAL AREA/ MARKETING STRATEGY

Market Strategy Products

Product Pricing Place Promotion

The important thing to remember when offering

menu items to potential customers is that there

is a huge amount of choice available to those

potential customers with regard to how and

where they spend their money.

Therefore McDonald’s places considerable emphasis on developing a menu

which customers want. Market research establishes exactly what this is.

However, customers’ requirements change over time. What is fashionable

and attractive today may be discarded tomorrow. Marketing continuously

monitors customers’ preferences. In order to meet these changes,

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McDonald’s has introduced new products and phased out old ones over

time, and will continue to do so.

Care is taken not to adversely affect the sales of an existing option by

introducing a new option which will cannibalise its sales (trade off).

McDonald’s knows that sales of products on its menu will vary at different

points in their life cycle as is illustrated on the graph to the right.

The type of marketing undertaken and the

resources invested will be different depending

on the stage a product has reached. For

example, the launch of a new product will

typically involve television and other

advertising support. At any time a company will have a portfolio of products,

each in a different stage of its cycle. Some of McDonald’s options are growing

in popularity while arguably the Big Mac is at the ‘maturity’ stage

Pricing Strategies

McDonald's main concern is to sell in volume and maintain it on long-term

basis. They are charging a price, which they think is a fair value to the

customer, and not on the basis of competition. McDonald's have MacIndex, and

they don’t increase prices even in crisis.

McDonald's worldwide has the same concept of giving food of high quality at

low prices. In England, the prices of their meals are the same for the last five

years. It’s simple Economics that when price is constant, the demand grows and

when the demand grows, their input price comes down and when input price

comes down, they can afford to maintain the price as the volume grows. Even

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the total cost may grow, but the volume is so much that the prices remain stable.

So selling on cheap price has a valid justification.

Place Strategies

The first restaurant of McDonald's started its

operations in Main Boulevard, Lahore on

September 19, 1998 and so in the following week,

the second restaurant started in North Nazimabad,

Karachi on September 26, 1998. The plan is to

have 20 restaurants in the country out of which

seven will be in Lahore and rest in Karachi. In Lahore, the expansion plan

included the branches at Jail Road, Fortress Stadium, Defense and at LDA

Plaza.

But why did he choose Main Boulevard, Gulberg, for opening? Ghous Akbar

said, “Lahore as a whole is a family city and Gulberg is a central area and Main

Boulevard is the single most artery of Lahore which is accessible to people of

all income levels. We also have customers who come from Faisalabad,

Gujranwala, Sialkot, etc. It is three thousand square yard. So the side corners

are also included. It’s diagonally opposite to Home Economics College and

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other academic institutions also surround it. We had 30,000 customers a day in

the beginning.”

It was a thoughtfully selected location as it is located near to offices, posh

shopping centers and the population of Gulberg, itself, is a good market for fast

food. On the other hand, Amin Lakhani, CEO McDonald's, Karachi too has

strong reasons and arguments about selecting the site of North Nazimabad. “It is

a strong, education and family oriented middle class area. Most of the families

living here have joint family system. I have not seen so many families hanging

around as I did in North Nazimabad at the launch of McDonald's. The area is

inhibited by several million peaceful people who want to take their children out,

but there aren’t so many places for the purpose. We are cleaning the area and

the people out there are very happy and the government functionaries are

cooperative with us.”

McDonald's does not offer home delivery as they are very much conscious

about the freshness of their burgers. Presently, Drive-Thru facility is available

only at the Main Boulevard Gulberg Branch, Lahore, but both GAM and Siza

groups have in their plans to have this facility in their new branches, which are

going to open in future.

Promotion Strategies

McDonald's Main Boulevard Gulberg Branch started its operations on

September 19, 1998, but quarter-page advertisement about its opening started

appearing in different newspapers in the second last week of August. But the

real strength of promotion of McDonald's was seen on its

opening day when it used almost all the media to tell people

that McDonald's was there with them to stay. Its opening. On

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that day, McDonald's also ran a grand program of twelve hours “McDonald's

Fun Day” on FM-100.

On the same day, a live road show was also conducted at the restaurant, in

which the leading Pakistani singers and groups participated. This show was

attended by a large number of people. Also a well-decorated float carrying

musical band, hundred children and Ronald McDonald, the official spokesman

to children, ran all the day on the roads of the city. The leaflets about the

opening of the restaurant were distributed in the whole city.

Major medium used by McDonald's is billboards, which are made by MMT to

promote their brand. It will be a matter of pride for Lahories that they have the

biggest “M” sign in their city (it is one of only five big “M” in the world). This

“M” is imported from Singapore and is made up of Pylone.

McDonald's around the world put much emphasis on Television commercials,

they have produced very expensive TV commercial with such bright stars of

show business and sports as Naomi Campbell and Ben Johnson. But presently

in Pakistan, McDonald's is not using television medium, as they don’t have

sufficient information about television viewers, also the cost of television

commercials is prohibitive in using this medium.

The advertising agency working for McDonald's in Pakistan is Manhattan

Communications (Pvt.) Ltd., which is a subsidiary of Manhattan Leo Burnnet,

USA. This company handles the promotion of McDonald's in all those countries

where its branches, subsidiaries or partnerships are present.

As a part of its public relations policy, McDonald's has constructed a beautiful

fountain at Jail Road in Lahore with a huge investment of one million rupees.

Similarly the company has spent huge sum of money in renovating public

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places, building green belts and placing dustbins to keep environment good

looking, healthy and clean.

BUSINESS LEVEL STRATEGY

Differentiation

McDonald’s has “Broad Target” and it wants to achieve competitive strategy

adopted by McDonald’s is “Differentiation” i.e. Mc Donald’s wants to a make

its products unique and highly differentiated.

CORPORATE LEVEL STRATEGIES

Mc Donalds is horizontally integrating itself by increasing the number of

outlets. At current timing there are Nine outlets operating only at Lahore and

they have Twenty one outlets in all over Pakistan. They are also planning firstly

to go into the Metro Areas like Islamabad and Rawalpindi and then they will

look toward Multan.

Global diversification

McDonald is operating more than 121 countries which means it is following

global diversification strategy.

SOCIETAL LEVEL STRATEGIES

Community Service

McDonald's is firmly committed to give back to the community where we

operate. We are happy to become involved because we recognize that

organizations have a role to play in helping communities to work successfully.

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Even before we had sold a single Big Mac in Lahore, we had donated funds for

the construction of Chaman School, a project for under-privileged children. The

contribution we enjoy most is the experience of working together with others in

the community to achieve worthwhile benefits for those who need it most.

Social Responsibility and Welfare

McDonald's is actively involved in the welfare of the community, wherever it is

operating. In Lahore, McDonald's has granted one million rupees to the Mental

Hospital and gifted computers to Jinnah Foundation.

As a part of RMCCS (Ronald McDonald's Children Charities), they have plans

to introduce part-time jobs concept on daily basis and for summer holidays.

Ronald McDonald House Charities provides “homes-away-from-home” for

families of seriously ill children being treated at nearby hospitals. The first

Ronald McDonald House was established in Philadelphia in 1974. Today, the

program has nearly 200 Ronald McDonald Houses in 16 countries. More than

two million families have stayed at a Ronald McDonald House with nearly

100,000 families each year.

STRUCTURAL ANALYSIS

Structural analysis helps to analyze the competitive

process as well as the sources of competitive

pressure. In the structural analysis, certain

questions like what is the strength of these

competitive pressures:

What type of competition is prevailing?

What will be future competitive conditions are included?13

Generally there are five forces/factors, which affect the competitive position in

an industry and these forces are as follows:

Porter Structural Model

Competition between and among the inter organizations may be high or low, it

is based on the nature of industry. In fast food industry the competition is

concerned with the degree of rivalry among the various firms operating in this

field like KFC, Pizza hut, and McDonald. In this industry the competition is not

like head-to-head as it is prevailing in other industries because in this industry

the market size and market share is not equal for all the fast food firms so this

leads to less competition bust in certain circumstances the competition is very

high like in Karachi market, there are more numbers of branches of KFC and

PIZZA HUT than McDonald in Karachi so competition is really tough there.

A growing size of fast food market will help to

keep competition stable as each competitor

will experience growth and will get its share in

the market.

Yet another concern is the increasing capacity

of industry, with the opening of new branches in both major cities, will intensify

rivalry and increase the competition. Furthermore, KFC, McDonald, and Pizza

hut all are increasing their branches in other cities also like McDonald in

Faisalabad. All three organizations are trying to increase their number of

branches in other cities of our country.

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Buyer’s Power

Buyers don’t have power in this industry as compared to the other industries

because in this industry the customers purchase normally in small quantity and

they are also dispersed so they can not make a pool of them and can not get

maximum value from the McDonald. On the other hand there are very

minimum chances for the buyers to switch to any other brand because

McDonald has created its image in consumer minds through differentiation and

uniqueness in all of its products. Hence, the buyers don’t have bargaining

power.

Supplier’s Power

Supplier power is high in this industry because there is lesser number of

suppliers and customers can not switch to other brands because each brand has

created its own image in consumer minds, that’s why consumer can not switch

to other brands. On the other hand, McDonald has established long term

relations with its suppliers because it purchases in large volume, in this way the

supplier power is reduced and McDonald purchsses its supplies on the low price

basis and it avails the benefits of economies of scale. And the brand offered by

the supplier is not differentiated so it makes easy for McDonald to switch to

another supplier and decreases the supplier’s power. The only factor that gives

some power to supplier is the switching costs for McDonald's if it goes to any

new supplier it will have to abolish old arrangements and develop new ones.

Threat of New Entrants

Threat of new entrants will be high in fast food industries because the entry

barriers are very low in terms of low capital requirement and easy access to the

raw materials. No organization has any kind of exclusive control over resources.

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Another factor that increases the threat of new entries is the high profit margins

in the industry.

INTERNAL RESOURCE AUDIT

Human Resources

Human resource is most important resource of

any business unit wherever in the world. The

strength of any organization is not the machine,

equipment or its cash flows; rather these are

employees that make an organization great and

competitive. More than one and a half million people work for McDonald's

worldwide. By the year 2003, McDonald's will employ two and a half million

people.

Presently all the staff of Lahore branch is local and currently 500 people are

employed and by the end of this years, Ghous Akbar is planning to employ

1000 people and by the next year, to employ 2,500 people.

McDonald's recognizes that employee satisfaction is a critical component in its

goal of achieving 100 percent customer satisfaction. Its employees are offered

world-class, award-winning training and the opportunity for career

development.

When McDonald's opens restaurants in a new country, the jobs it creates

stimulate the national economy and broaden the local tax base. Besides the new

jobs directly linked with McDonald's restaurants, the company indirectly

supports other segments of a country’s workforce by hiring local construction

firms and purchasing from local suppliers, local farmers and local distributors.

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Hiring Personnel

There is no criterion as such for the selection of employees, what is important is

integrity, motivation and some educational qualifications from Matric. To PhD.

In the workforce, qualities, which are sought, are anatomy, motivation and

ability to work late hours. While for manager the characteristics required are

leadership, energy and attraction.

Training

All McDonald's 29,000 outlets serve as training centers where day-to-day

coaching and shoulder-to-shoulder interaction between managers and crew are

emphasized. Training begins with one-on-one instruction before a crewperson

cooks the first French fries and for new entrants to the workforce, the company

offers an important foundation:

Teaching interpersonal and organization skills.

Crewmembers can also learn the importance of teamwork.

Discipline and responsibility.

Aspiring restaurant managers and franchisees progress through a development

program that includes a series of classes in operations and management training,

the program culminates in advanced training at one of six management-training

centers in the United States, Germany, England, Japan, Australia and Brazil

where instructions are given in more than 25 languages and after the training;

students are given Bachelors Degree in Hamburger logy.

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Motivation

All the staff and employees at McDonald's are given a handsome salary package

and attractive incentives in accordance with the level at which the person is

working. That’s why employees at McDonald’s Lahore are more satisfied and

motivated.

Promotion

The McDonald's management looks not only at financial performance on

monthly basis but also at service performance. Employees are given different

sales targets, and their performance is evaluated on the basis that whether or not

they achieve these targets.

Financial Resources

In October of 1985, McDonald's became one of thirty blue-chip companies

included in the Dow Jones Industrial Average. McDonald's was added to the

Tokyo Stock Exchange in 1986 and set a new record volume – 615,750 shares –

for opening day trading of a non-Japanese company. McDonald's stock is also

listed on the Frankfurt, Chicago, Munich, Paris and Swiss stock exchanges.

McDonald's in Pakistan is concerned, now information is available about its

financing activities. McDonald's in Pakistan is working with two foreign banks

namely SG and ABN Amro Bank. These two banks are taking care of any

financial activity for McDonald's inside and outside the country and also

provide short-term loans to the company.

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Physical Resources

The physical resources of the company include the main Head Office building

at Lahore and Karachi and three restaurants located at Main Boulevard,

Gulberg, LDA Plaza and North Nazimabad, with an average sitting capacity of

250 persons. These restaurants are equipped with the latest cooking and storing

equipment. Two restaurants have the facility of Play Place for children and one

has Drive-Thru facility.

Intangible Resources

McDonald's is world’s third most recognized brand. It is a big asset of the

organization. It not only pulls customers but also brings goodwill from

suppliers, government officials, general public and creditors.

SWOT Analysis

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On the basis of environmental analysis of McDonald's, the structural analysis of

fast food industry, and the assessment of internal resources of the company,

following strengths, weaknesses, opportunities and threats are there for

McDonald's:

Strengths

McDonald’s in Pakistan is inherited by a lot of strengths which includes:

A strong image well reputes organization.

No compromise on quality of products.

Self-service criteria save a lot of cost.

Different incentives and packages for children.

Quality raw material (ingredients) in all the products.

McDonald's strong financial position, growing cash flow, solid

international presence makes McDonald's one of the consumer products

with a high growth rate.

Working environment in McDonald's is very friendly and all the

employees of the company are treated as members of McDonald's

family.

McDonald's has menu, which has more breadth and depth than any

other fast food franchisee in Pakistan.

Well documented fair and strict criteria for recruitment of employees.

Updated training programs of employees.

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Flexible workforce, which can work on more than one jobs at a time.

Skied and motivated workforce.

Sufficient funds to invest in marketing efforts.

Excellent relations between management employees.

Secured jobs.

Care for the thoughts and moods of customers.

Celebrations of main events e.g. independence day etc.

Weaknesses

Along with a lot of strengths there are some weaknesses also by which

McDonald’s suffers:

Management of McDonald’s does not consider other fast-food chains or

outlets in Lahore as its competitor e.g. KFC Pizza Hut & local burger

market which are their competitors in real sense.

With the passage of time the expenses of McDonald’s are increasing.

The reason is the big part of fixed costs e.g. fixed overheads & fixed

salaries of all the employees, which increases directly with the decrease

in “production.”

McDonald’s main target market is a child. But McDonald’s should also

consider the fact that birth rate in Pakistan has been decreased from

about 2.3% to 2. % p. a. In other words the population of children is

decreasing gradually so McDonald’s should also attract the people who

belong to aged class.

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Dominant class in Pakistan is middle- income class for which it is

difficult to afford the menu – items of McDonald’s or at least middle-

class cannot enjoy McDonald’s product more frequently.

McDonald's has product portfolio (menu) of greater width and depth;

this broad array of products allows attacks from niche players.

Opportunities

The marvelous growth in # of stores outlets all over the world in the result of

great opportunities granted to McDonalds.

As for as McDonalds-Lahore is concerned it has following opportunities:

McDonald’s can get a big market share by expanding its business to the other

cities included in its territory e.g Peshawar, Mardan. Gujranwala, Multan,

Sargodha, Sialkot etc. Because a big portion of there target market resides

within these areas.

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Revenues & Profitability: McDonald's Corporation

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Profit Margin

McDonald’s is the single international quality- burger chain operating in

Pakistan, so it has more profit potential in Pakistan uptil now.

by Increasing consciousness about low fatty foods which are being provided

McDonald's (using vegetable oil). Increasing disposable income in upper and

upper-middle social classes of urban areas, which are target market of

McDonald's.By strengthening the marketing efforts, company can have more

sales as compared to existing sales.

Threats

McDonald’s people say that there is no threat for them and it can also be

a big threat for them.

Threat of new entrants is also working there because industry is growing

at a rapid speed and a lot of attraction is there for new- comers. Entry

barriers are also low in Pakistan so this threat really works for

McDonald’s.

Threat of substitutes is also working there for McDonalds. Substitutes for

products of McDonald’s KFC, Pizza Hut products. A big domestic

market can also break at least a little market share of McDonald’s.

Double digit inflation prevailing in the country, which in turn increases

the cost of production.

Continuous devaluation of rupee that has increased the import bill of raw

materials.

Imposition of heavy taxes on fast food industry including Sales Tax and

Entertainment Tax.

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Complex rules and regulations imposed by government.

COMPETITION

Top

– Burger King – 14%

– Wendy’s – 13%

Other strong competitors

– Sonic – 6%

Jack in the Box – 4%

– Hardee’s – 3%

White Castle – 1%

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COMPETITORS

As the McDonald has captured very large market in terms of

fast food items it is due to its large number of franchisees and

better quality products and services to its potential customers.

At the same moment the competitors are also increasing their

operations in either way locally or joint venture with the

foreign and local investors.

Local investors are also putting pressure on McDonald and they are also

increasing their branches by offering low cost products to the customers and

that’s why they are attracting the large number of customers and it will lead to

high competition in the market and every one will be competing on the low cost

of offering. In this dynamic and uncertain environment McDonald is sustaining

its operations smoothly and effectively.

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MANAGEMENT IN MCDONALD’S

Ray Kroc

“The quality of a leader is reflected in the standards they set for themselves” We take the

hamburger business more seriously than anyone else” “You're only as good as the people you

hire” “If there is time to lean there is time to clean” Being the best means providing

outstanding quality, service, cleanliness, and value, so that we make every customer in every

restaurant smile. And by doing this we are our customers' favorite place and way to eat."

FINANCIAL HEALTH

• We looked at 4 major aspects of financial health of McDonald’s and

their competitors

– Liquidity

– Leverage

– Rates of Return

– Stock Market Ratios

• We also took Altman’s Z-Score into account to see how healthy these

companies were during the recession.26

Liquidity

• The ability to meet current obligations

• We took into account the Current Ratio and the Quick Ratio.

• Current Ratio = Current Assets/Current Liabilities.

• Quick Ratio = (cash + marketable securities + net receivables) /

Current Liabilities

Leverage

• The ratios between debt and equity which provides

• information about bankruptcy.

• We will look at the Debt-to Asset Ratio and the Debt-to-Equity

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Ratio

• Debt-to-Asset = Total Liabilities/Total Assets

• Debt-to-Equity = Long-term Debt/Shareholder’s

Return on Assets

• This shows that if MacDonald’s net income was generated from their

total value of assets, the return would be right around 15 cents per

dollar. It is also a great indicator of how efficient MacDonald’s is at

using their assets to generate income.

• On the other side however, Wendy’s would show a lose of 10 cents on

the dollar if their net income is based off their total value of assets.

Sonic would have a gain of 10 cents on the dollar while both Burger

King and Jack in the Box would have 7 cents gain on the dollar.

Return on Equity

The amount of net income returned as a percentage of shareholders

equity.

Return on equity measures a corporation's profitability by showing

how such profit a company makes with the money shareholders

have invested.

ROE is expressed as a percentage and calculated by dividing net

income by shareholders' equity.

ROE is useful for comparing the profitability of a company to that

of other firms in the same industry.

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MCDONALD’S RATIO

• McDonald’s has a current P/E ratio of 15.1. However, the

company’s P/E ratio for fiscal year end 2008 was 28.0.

• either the stock is overvalued or the company's earnings have

increased since the last earnings figure was published

Sonic Co. P/E Ratio

• Sonic Corporation has a current P/E ratio of 12.2. The company’s

P/E ratio for fiscal year 2008 was 22.5

• An end of year P/E ratio between 17-25 will usually indicate a

growth stock, with earnings expected to increase substantially in

the near future

Earnings Per Share (EPS)

• Earnings per share are the earnings which are returned on the

• Initial investment amount. This is calculated by:

EPS = (net income - preferred dividends) /common shares

outstanding

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Fast Food Industry’s EPS

Company Date Actual EPS Last AVG Estimate

McDonald’s Dec. 2008 3.76 3.63

Sonic Aug. 2008 0.97 0.98

Burger King Jun. 2008 1.38 1.35

Wendy’s/Arby’s Dec. 2008 -0.75 0.13

Jack in the Box Sep. 2008 2.01 2.00

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What Does This Mean?

McDonald’s has reported an average annual Increase in its EPS since

1998 This makes McDonald’s more appealing to an investor because the

basis of the EPS ratio is the earnings which are returned on the initial

investment

GET THE KIDS AND THE PARENTS WILL FOLLOW

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PROBLEMS

Customer ServiceMcDonald’s is currently ranked last amongst its top

competitors in the FFHR subsector. #1 – Burger King #2 – Wendy’s #3 –

McDonald’s This may not sound bad at first glance, but when you look at the

fact that these three competitors hold 73% of the FFHR market, it puts it into

perspective.

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RECOMMENDED STRATEGIES FOR McDONALS

Market Development

As we know there is increasing trend in fast food industry and people are more

conscious about their health. Similarly McDonald international should open as

many branches in other cities of Pakistan like Multan, Gujranwala, Hyderabad,

and other cities like these. Because this step will not only reduce their business

risk but also improvement in their profitability. In the said cities there is a lot of

potential for the fresh investment in the fast food industry. So it should develop

the market for its products, only in this way it can maintain its competitive

advantage over its competitors like KFC and Pizza Hut.

Diversification

Currently McDonald is importing Potatoes from abroad, this makes the product

cost so high, so it becomes very difficult for it to capture the middle-income

people. By diversification we suggest that McDonald should go for backward

integration because Pakistan is an agricultural country and it also exports

potatoes to other countries of the world.

By growing potatoes in Pakistan McDonald’s can maintain the same quality at

lower cost of operations. Similarly McDonald’s should go for its own cattle

farm in Pakistan so it will reduce its input cost and it will lead to lower market

price of its products as compared to its competitors. By this type of

diversification McDonald’s can also save its time and other energies that can be

better utilized in customer service. And can improve the quality because if the

inputs are fresh, they can have more quality products. By doing this backward

integration McDonald’s can avoid the problems like Govt. heavy duties on

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inputs imported from other countries and similarly it can avoid the problems of

continuous devaluation and exchange rate etc.

Product Development

The natives of Pakistan are more concerned with the taste of the products rather

than the other things, so McDonald’s should consider the changes in the

customer mind about its products and services. So it is highly essential for the

McDonald Pakistan to think about it and serve as the changes are taking place in

the customer minds. Because the near future period will be a different from

today, so it is crucial for McDonald’s, it should introduce all the time new

products that make it differentiated and it must sustain it so that no other

competitor can copy their products and there should be lesser chances of

product imitation. If product imitation is possible then it should keep on

introducing new products. For this it may altogether change the whole product

and can bring a new product or sometimes any major modification in the

existing products. So we recommend that McDonald should apply the Product

Development at all times whenever the need arises

Market Development

In spite of making a cluster in a single city, McDonald's should open new

restaurants in other cities too. There is potential in other cities like Hyderabad,

Rawalpindi and Islamabad. It will be of importance to mention that KFC is

planning to open its branches in Hyderabad and Islamabad. It will add to the

image of being ‘Nationwide’ company as well it will create more customers.

This will eventually reduce the risk, which in other case lies in creating cluster

in a single city.

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Strategic Alliances

McDonald’s international should go fro strategic alliances with other firms

operating in all other countries, in this way it should develop alliances with the

petrol pumps owners.

It will enable the customers to get their cars filled with petrol along with the

purchase of lunch boxes and other lunching and dinner facilities to the

community. We think that it should develop alliances with the petrol pumps on

our Motor Way. As McDonald’s international is doing this in other countries.

Likewise the other McDonald’s franchisees in Pakistan must do this in order to

create extra uniqueness

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CURRENT POSITION OF MC DONALD'S

McDonald’sprofit declined in the second consecutive quarter, the first time in more than three

years that the world’s largest restaurant chain experienced such a fall. This turn of events for

McDonald’s, once praised for its ability to grow in times and in places where others could

not, reflects growing competition in the U.S. fast-food market and the poor health of the

consumer worldwide.

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FUTURE PLAN

Recently, McDonald’s was the target of a San Francisco City law which

required the fast food companies to meet certain nutritional standards before

they could be promoted with free toys. The U.S. Congress is also contemplating

passing a law that would limit the classes of antibiotics used in animal

agriculture. In fact, a recent study revealed thata whopping 75% of Americans

want legislation passed to restrict the use of antibiotics at animal farms.

With increased healthcare under the Federal government now, it wouldn’t be

surprising to see new laws aimed at fast food companies which are viewed as

promoting obesity and related diseases. At the same time, companies meeting

certain nutritional standards might get tax benefits.

The last few years have also seen consumers showing a predilection for

healthier products. All of these steps might force the company to change its

basic structure. Structural changes can be potentially damaging for the company

as it include introducing new, healthier products which may not be as popular or

profitable. Moreover as McDonald’s expands its food selection domestically

and looks to expand internationally, its supply chain will become more difficult

to manage and could be prone to shocks such as cost inflation that may be hard

to offset among value oriented customers domestically and price sensitive

developing markets internationally.

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CONCLUSION

McDonald's is one of the largest fast food

companies in the world. They continue their

path for success by keeping their consumers in

mind regarding their product selection as well

as their prices. They encourage their

employees to do a good job, usually promotes

from within, and offers several scholarships to

encourage education. Though McDonald's is a

centralized, "wait and see" company they find

ways to use technological products that will increase their productivity, service,

and sales, everywhere from using the Nintendo DS to train staff to using New

POS touch screen registers. McDonald's will certainly be around for plenty

more years to come.

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BIBLIOGRAPHY

Love, John . McDonalds: Behind the Golden Arches. Boston: Bantam, 1995.

" McDonald's History - About McDonald's ." About McDonald's.

http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html (accessed

April 1, 2011).

Kroc, Ray, and Robert Anderson. Grinding it out: the making of McDonald's.

Chicago: H. Regnery, 1977.

Watson, James L. Golden Arches East: McDonald's in East Asia. Stanford, CA:

Stanford UP, 2006. Print.

"About Us" Slow Food International. Accessed March 26, 2011.

Http://slowfood.com/international/1/about-us

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