McDonalds Value Chain Analysis

Jeovani Zamarripa, Alicia Wylie, y Jason Flores, Conor Mullarkey

Mission Statement
McDonald's brand mission is to "be McDonald s be our customers' favorite place and way p to eat." Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an t i th fi b i f exceptional customer experience People, Products Place, People Products, Place Price and Promotion. We are committed to improving our operations and enhancing our customers' experience.

Company History
McDonald s McDonalds Bar-B-Que (1940) Worlds 1st McDonalds Founded by Dick and Mac McDonald San Bernadino, CA D i i & car hop service Drive-in h i McDonalds (1948) N Name F Formulates l Menu develops 15 Cent hamburger

Company Info
Corporate Headquarters: p q
McDonalds Corporation 2111 McDonald's Dr Oak Brook, IL 60523

Employees:
Approximately 400,000 McDonald s employees globally McDonalds 1.6 million people globally are employed through McDonalds restaurants and their franchises

Restaurants:
32,000 world-wide, 118 countries

2009 Revenue & U.S. Stocks k

(US only)

NYSE: 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% 3 3% 2009 Net Income (mil.)$4,551.001 Year Net Income Growth 5.5% Y N tI G th 5 5%

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 Resource Officer.

Culture
Forging new opportunities
Innovation from within p g g Empowered big thinking

Social responsibility
Community Focus Responsible Purchasing g Protecting Our Environment

Diversity
Employee Force

McDonald s McDonalds Production System

INPUT PROCESS OUTPUT

Employees Customers Restaurants Food

foods

Cook

and package

Satisfied

customers

meals to the customers order

Assemble

Customers Customers Provide

favorite place and way to eat a relaxed and fun environment to eat

Line

Prep/Assembly

Frozen foods (patties, fries, chicken nuggets, etc.) Produce Containers Company

image

Operational Strategic Performance Dimensions f i i

COST QUALITY SPEED FLEXIBILITY

COST
Make it cheap: Economies of scale
Allows McDs to pass the value to consumers McD s
McValue Dollar Menu Party Pack

Cost controls l

QUALITY
Make it consistent: Universal taste Core offerings globally Order Qualifier: Make it good: Taste appeal to its target market Healthy options

SPEED
Make it fast: 90 second service goal Order Qualifier: Make it dependable: Menu items available daily Hot & Fresh
Order Qualifier: New Product Development: R i Regional menu items l it Healthy menu options

FLEXIBILITY
Order Qualifier: Product design:
S/M/L/Super size Gender based kids meals Happy meals vs. Mighty kids meals Promotional packaging P l k

Order Qualifier: Product Mix:

Sandwich varieties Soft serve offerings (milkshakes, ice cream cones, sundaes) Salads

Order Qualifier: Production Volume:

Staffing based on consumer traffic and meal time ti 24 Hour restaurants and drive-thru

MD s MDs Value Chain Analysis

FIRM INFRASTRUCTURE HUMAN RESOURCES TECHNOLOGY

PROCUREMENT

INBOUND LOGISTICS

OPERATIONS

OUTBOUND LOGISTICS

MARKETING & SERVICES

SERVICE

Firm Infrastructure
Strengths: Brand recognition #1 in retail fast food industry Leadership Financial Strength Company image Intellectual property Franchising Weaknesses: Lawsuits Company image Culture insensitivities

MD s MDs Value Chain Analysis

Brand recognition #1 in retail fast food industry FIRM INFRASTRUCTURE Leadership Financial Strength Company image Intellectual property Franchising Lawsuits

Company image Culture insensitivities

HUMAN RESOURCES TECHNOLOGY PROCUREMENT

STRENGTH

WEAKNESS

INBOUND LOGISTICS

OUTBOUND OPERATIONS LOGISTICS

MARKETING & SERVICES

SERVICE

Inbound Logistics
Strengths:
Economies of scale
Pass value to customer (i.e. $1 menu)

Just-in-time o de & de ve y Just t e order delivery Sustainable packaging Renewable resources

P k i composition (82% renewable resources) Packaging ii bl ) Oil recycling (diesel oil)

Supply chain control y Quality control

Freight truck inspections Random audits

Weaknesses:
Media backlash

MD s MDs Value Chain Analysis

Brand recognition #1 in retail fast food industry FIRM INFRASTRUCTURE Leadership Financial Strength Company image Intellectual property Franchising Lawsuits

Company image Culture insensitivities

HUMAN RESOURCES TECHNOLOGY

Just-in-time order & delivery

PROCUREMENT

STRENGTH

Economies of scale l Sustainable packaging Renewable resources Supply chain control

Quality control Media/PR

WEAKNESS

INBOUND LOGISTICS

OUTBOUND OPERATIONS LOGISTICS

MARKETING & SERVICES

SERVICE

Operations
Strengths: O li & on-site ki k j b application On-line it kiosk job li ti systems 2nd 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 Corporate guidelines imposed on franchisees Franchisees must purchase supplies from McDs

Operations
Weaknesses: Hi h turn-over (more then 100%) High t ( th 90 second drive-thru rule (unsuccessful) Impersonal drive-thru greeters (telemarketer like, person is not in store)

MD s MDs Value Chain Analysis

Brand recognition #1 in retail fast food industry FIRM INFRASTRUCTURE Leadership Financial Strength Company image Intellectual property Franchising Lawsuits

Company image Culture insensitivities

HUMAN RESOURCES

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

TECHNOLOGY

Just-in-time Just in time order & delivery

Economies of scale Sustainable packaging Renewable resources Supply chain control Quality control Media/PR

Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice

PROCUREMENT

Franchsor purchase agreement

R&D based on consumer demands Corp guidelines for Franchisees 90 second drive-thru rule

STRENGTH

WEAKNESS

INBOUND LOGISTICS

OPERATIONS OUTBOUND LOGISTICS

MARKETING & SERVICES

SERVICE

Outbound Logistics
Distributor agreements g Quality control
Freight truck inspections random audits

Refrigerated trucks Reinforced Information Systems e o ced o at o Syste s

Cashier Assembly Line Order fulfillment

Just in time order and delivery

Ensuring freshness g Hot/Warm food

Packaging quality reinforces freshness

MD s MDs Value Chain Analysis

Brand recognition #1 in retail fast food industry FIRM INFRASTRUCTURE Leadership Financial Strength Company image Intellectual property Franchising Lawsuits

Company image Culture insensitivities

HUMAN RESOURCES

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

TECHNOLOGY

Just-in-time Just in time order & delivery

Economies of scale Sustainable packaging Renewable resources Supply chain control Quality control Media/PR

Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice

Refridgerated trucks Reinforced IT Just-in-time order & delivery Distributor agreements QC Packaging

PROCUREMENT

Franchsor purchase agreement

R&D based on consumer demands Corp guidelines for Franchisees 90 second drive-thru rule

STRENGTH

WEAKNESS

INBOUND LOGISTICS

OPERATIONS OUTBOUND LOGISTICS

MARKETING & SALES

SERVICE

Marketing & Sales

Strengths:
Product Health and wellness campaign & p p g product offerings Consumer and market research Pi Price McValue Dollar Menu Party pack Promotion y g Disney and Nickelodeon license agreements Coca-Cola endorsement Feeding the athletes Olympic sponsorship

Marketing & Sales

Strengths:
Place New upscale MDs p MDs goes green McCafe Wi-Fi McDonalds Play Place Ronald McDonald Community outreach

(cont d) (contd)

Marketing & Sales

Weakness:

(cont d) (contd)

Supersize Me movie Media/PR Adaptation to global culture and customs Product failures

MD s MDs Value Chain Analysis

Brand recognition

FIRM INFRASTRUCTURE

#1 in retail fast food industry Leadership Financial Strength Company image C i Intellectual property Franchising Lawsuits

Company image Culture insensitivities

Job appliation y systems 2nd largest U.S. employer High turn-over

HUMAN RESOURCES TECHNOLOGY

Just-in-time order & delivery

Economies of E i f scale Sustainable packaging Renewable resources Supply chain control Quality control Media/PR

Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice

Refridgerated trucks Reinforced IT Just-in-time order & delivery

Distributor agreements QC Packaging

PROCUREMENT

Franchsor purchase agreement

Consumer Research McValue Dollar Menu Party Packs Cartoon Affiliations Coke Olympic Sponsor Upscale MD's Going Green McCafe MC f Wi-Fi MD's Play Place Ronald McDonald
"Supersize Me" Media/PR Global expansion issues Product failures

STRENGTH

R&D b d on based consumer demands Corp guidelines for Franchisees 90 second drive-thru rule l

WEAKNESS

INBOUND LOGISTICS

OPERATIONS OUTBOUND LOGISTICS

MARKETING & SALES

SERVICE

Service
Strengths: Fast food service y Order accuracy Clean environment y Friendly customer service Weaknesses: Lack of customer service Employee apathy Dissatisfied customers

MD s MDs Value Chain Analysis

Brand recognition

FIRM INFRASTRUCTURE

#1 in retail fast food industry Leadership Financial Strength Company image C i Intellectual property Franchising Lawsuits

Company image Culture insensitivities

Job appliation y systems 2nd largest U.S. employer High turn-over

HUMAN RESOURCES TECHNOLOGY

Just-in-time order & delivery

Economies of E i f scale Sustainable packaging Renewable resources Supply chain control Quality control Media/PR

Reinforced IT systems Wireless headsets Wi-Fi Drive-thru voice

Refridgerated trucks Reinforced IT Just-in-time order & delivery

Distributor agreements QC Packaging

PROCUREMENT

Franchsor purchase agreement

Consumer Research McValue Dollar Menu Party Packs Cartoon Affiliations

Coke Olympic Sponsor Upscale MD's Going Green McCafe MC f Wi-Fi MD's Play Place Ronald McDonald
"Supersize Me" Media/PR Global expansion issues Product failures

R&D based on consumer demands

STRENGTH

Corp guidelines for Franchisees 90 second drive-thru rule

Fast food service Order accuracy Clean environment Friendly customer service Lack of customer service Employee apathy Dissatisfied customers

WEAKNESS

INBOUND LOGISTICS

OUTBOUND OPERATIONS LOGISTICS

MARKETING & SALES

SERVICE

Core Competence
McDonalds strength lies in the operations and firm infrastructure. i f McDonalds core competency is the production and delivery speed of affordable f d t a l d li d f ff d bl food to large number of b f customers to support a low cost, high speed, and consistent quality strategy McDonalds strategy is supported by its strong financial resources, brand image, market leadership, buyer supplier p relations, and product value.

Competitive Advantage
#1 Fast food restaurant in industry y Customers Value and affordable menu Convenience Franchisee base

Fun Facts Facts

Aprox.. 9 million p p pounds fries served daily 380 sesame seeds on a sesame bun Approx. 82% of consumer packaging is made from renewable materials C Convert oil i t bi di l f l t il into biodiesel fuel Logo differs between green locations and traditional locations (green background vs. red color) y Beer served in Germany McDonalds