McDonalds

McDonalds

McDonald’s — Company History

In 1954, Ray Kroc, malted-milk mixing machine salesman, acquired the exclusive

franchising rights to a successful California-based hamburger chain from brothers Dick

and Maurice (Mac) McDonald. He had visited the brothers at their first restaurant in San

Bernardino, California, after hearing that their restaurant used eight multi-mixers – more

multi-mixers than any other similar size restaurant. Kroc bought out the McDonald

brothers’ interest in the business in 1961.

Raymond Albert Kroc 1902-1984:

He was the founder of McDonald's.Basically he was a salesman of multi-mixers.

Where it all began:

Ray Kroc opened the Des Plaines restaurant in 1955. First day's revenues-$366.12! No

longer a functioning restaurant, the Des Plaines building is now a museum containing

McDonald's memorabilia and artifacts, including the Multimixer!

In 1965 McDonald's went public with the company's first offering on the stock exchange.

A hundred shares of stock costing $2,250 dollars that day would have multiplied into

74,360 shares today, worth over $2.8 million on December 31, 1998.

Some Main Products

"Big Mac":

"Introduced systemwide in 1968, the Big Mac was the brainchild of Jim Delligatti, one of

Ray Kroc's earliest franchisees, who by the late 1960s operated a dozen stores in

Pittsburgh."

"Happy Meal":

Since 1979 the Happy Meal has been making kids visits that much more special. Children

are mostly interested to collect Happy Meals toys and boxes.

McDonald's website:

After 43 years of its opening McDonald's came on web page, which receives million of

hits every week.

U.S. Growth

By 1958, McDonald’s served its 100 millionth hamburger. In 1957, McDonald’s opened

its first drive-thru window to accommodate a more mobile society. The 200th restaurant

opened in 1960. McDonald’s celebrated its 10th anniversary in 1965 with its first offering

of stock to the public and a listing on the New York Stock Exchange.

Customer demand for convenience in the 1960’s led to the opening of the first

McDonald’s restaurants in non-traditional locations, such as airports, colleges, hospitals

and stadiums. The company expanded its menu from its original seven items to include

breakfast, salads, chicken and desserts. McDonald’s will continue to develop new

products and enhance existing ones as customer tastes and technology change.

Expansion

The first McDonald’s restaurant outside the United States opened in Canada in 1967. The

company’s international division was formed in 1969, and today McDonald’s has

expanded to 121 countries on six continents. McDonald’s largest market outside the U.S.

is Japan, where the first Golden Arches appeared in 1971. Today, there are more than

2,500 restaurants in Japan. Recent international expansion has included rapid growth for

McDonald’s in the Middle East and Central Europe. In 1997, international restaurants

contributed 60% of the company’s total revenue.

McDonald's Franchising

We Have Always Been A Franchising Company

McDonald's has always been a franchising Company and has relied on its franchisees to

play a major role in its success. McDonald's remains committed to franchising as a

predominant way of doing business. Approximately 70% of McDonald's worldwide

restaurant businesses are owned and operated by independent businessmen and women,

our franchisees.

A Recognized Premier Franchising Company

McDonald's continues to be recognized as a premier franchising company around the

world. Perhaps the fact that McDonald's management listens so carefully to its

franchisees has something to do with McDonald's being perennially named as

Entrepreneur Magazine's number one franchise.

A Partnering Relationship

McDonald’s franchising system is built on the premise that the Corporation can be

successful only if our franchisees are successful first. We believe in a partnering

relationship with our owner/ operators, suppliers and employees. Success for McDonald's

Corporation flows from the success of its business partners.

What McDonald is Looking For?

McDonald’s selection of prospective candidates is based on an assessment of overall

business experience and personal qualifications. We look for individuals with good

"common business sense", a demonstrated ability to effectively lead and develop people,

and a history of previous success in business and life endeavors. A restaurant background

is not necessary. We franchise only to individuals, not to corporations, partnerships, or

passive investors.

A strong desire to succeed, work hard and be part of a winning team.

Integrity and the ability to work well within a franchised organization.

A willingness to personally devote full-time efforts to the day-to-day

operations of the McDonald's restaurant.

A strong and successful background with emphasis on interpersonal skills.

Welcome to McDonald's Pakistan

McDonald's has 2-joint ventures in Pakistan:

First for the territory including the provinces of:

Sindh

Balochistan

Second for the territory including provinces of:

Punjab

N.W.F.P.

For second venture (for the territory of Punjab and NWFP), McDonald's has made

franchise- contract with "Ghouse Akbar", who is now the president of McDonald's -

Lahore.

Uptil now there are six stores of McDonald's, operating in Lahore. Currently

McDonald's-Lahore is planning to expand its business to other cities by following

preferences:

Sialkot

Faisalabad

Gujrawala

Peshawer

Multan.

McDonald's Lahore is a joint venture between McDonald's Corporation U.S.A and GAM

Corp (Pvt.) Ltd. McDonald's made its debut in Pakistan on 19th September 1998 when its

Grand Country Opening was held in the provincial metropolis of Lahore. This made

Pakistan the 113th country on the globe where the world renowned Golden Arches were

unfolded. After Lahore, McDonald's made Golden Arches glitter in other cities of

Pakistan, Faisalabad is already open, soon to be followed by other cities.

McDonald’s has set the ball rolling in Pakistan with two modern, state-of-the-art

restaurants, one in Lahore and Karachi each. The McDonald's Lahore Restaurant is

located on Gulberg’s Main Boulevard while the one in Karachi is situated on the Main

North Nazimabad Road. The Lahore McDonald's has scored another first in Pakistan with

its Drive-Thru – a modern customer service concept in quick service restaurants that has

been introduced for the first time in Pakistan. The customer simply drives into

McDonald's, places the order and pays at one window and collects the food within a

minute at the next – all without leaving the car.

ANALYSING COMPETITORS

1. Kentucky Fried Chicken (KFC)

Kentucky Fried Chicken, better known as KFC, is the largest chicken restaurant chain

worldwide with almost 10,000 outlets located in well over 70 countries. Headed by CEO,

David Rodgers, it is part of the Artal Group, which is a large multibillion-dollar food

conglomerate.

Said to be the second most famous and largest fast food franchise in the world is No. 1

brand in Asia with market leadership in Japan, China, Malaysia, Indonesia and Korea.

Historical Background Of KFC

In1952 Pete Harman in Salt Lake City becomes the first Kentucky Fried Chicken

franchisee.

1982 KFC becomes a subsidiary of R.J.Reynolds Industries when Heublein Inc. is

acquired by RJR (now RJR Nabisco, Inc.). 1986 KFC becomes a subsidiary of PepsiCo,

Inc. for $840 million. 1993 KFC adds non-fried chicken to menus in the U.S. and

Australia. 1994 KFC officially opens its 9,000th restaurant in the world- in Shanghai,

China- and announces a $200 million investment over the next four years for 200

restaurants in 48 Chinese cities.

KFC Arrives in Pakistan

In 1998, KFC entered the market under the banner of Artal, a European food

conglomerate that has invested heavily in the food sector in Pakistan. This unique step

was taken out of special concern for middle and lower-middle class income groups who

had so far being neglected by brand name franchises in their areas.

Entrance of KFC in food industry has resulted in numerous positive developments in

various areas. Each KFC restaurant employs roughly 50 local people, which would total

to about 500 direct employees in all – taking in all 10 restaurants in Pakistan.

Future Plans

Artal’s plan including opening a total of 20 outlets by the end of next year, which is

expected to increase to 30 by the year 1999, 45 outlets by the year 2000 and 65 outlets by

the year 2001 and another 40 outlets by 2003. The first of these outlets was opened in

Karachi during its first month attracted an average of 5,000 consumers per day, while the

second outlet was opened in the largest amusement park of the city in the month of April.

The third one was opened in Lahore in the middle of the year.

2. PIZZA HUT

It was started by two American brothers who were stationed in Italy and while there they

got to love Italian cooking particularly pizza. So they setup a small place, but after having

put the billboard and having painted the word ‘Pizza’ on it, they ran out of space and all

they could add was the Hut. So, we had Pizza Hut and the name just got on and it is now

known in 83 countries throughout the world as franchisee.

Pizza Hut’s International History

1958 The first Pizza Hut® restaurant opens in Wichita, Kansas, started by two college-

aged brothers who borrowed $600 from their mother. 1965 "Putt-Putt to Pizza Hut"

musical jingle developed for Pizza Hut's first television commercial. PRIVATE

"TYPE=PICT;ALT=movie reel"1967 a restaurant

was built in five days by franchisees at the Oklahoma State Fair. 1968 International

market entered with opening of Pizza Hut restaurant in Canada. Pizza Hut serves a

million people a week at its 310 locations. 1971 Pizza Hut became the number one pizza

restaurant chain in the world in both sales and number of restaurants. 1976 The 100th

international Pizza Hut restaurant is opened in Australia. Pizza Hut opens its 3,000th unit

in Arlington, Texas. 1979 Units open in Kuwait and Abu Dhabi.

Two Customer Satisfaction programs initiated: a 1-800 Customer Satisfaction Hotline

and a Customer Call-Back Program, which takes the pulse of 50,000 customers per week.

The Deliver Me Home™ program is created by Pizza Hut and the National Center for

Missing and Exploited Children and is tested at the Dallas/Fort Worth International

Airport. 1996 Pizza Hut delivers 30% of the 12 million pizzas delivered on Super Bowl

Sunday. On May 30, Pizza Hut introduces two varieties of chicken-topped pizza... Italian

Chicken and Chicken Supreme.

Pizza Hut Arrives in Pakistan

1st foreign franchisee came to Pakistan and became regular business in our country. It

now has 4 branches in the city, Clifton, Tariq Road, I. I. Chundrigar Road, and Gulshan,

and 2 in Lahore, on the Mall, and in Gulberg. But be it Karachi or Lahore two cities with

distinctively different vibes, Pizza Hut pizza, tastes just the same, and costs the same too.

Manzar Riaz who is one of the three entrepreneurs responsible for bringing Pizza Hut to

Pakistan under the banner of MCR (Pvt.) Ltd., comments, “Pakistan has great potential,

we have a huge market of young people and our spending power is growing. Now Pizza

Hut just took the plunge and others got on to the bandwagon.

Future Plans

Pizza Hut plans to have 40 restaurants in Pakistan by year 2003, a significant jump from

its 10 restaurants which are currently operating. They will also be opening up restaurants

in Hyderabad, Multan, Faisalabad and Islamabad.

slogans seem primitive, many people still remember them today.

Mcdonald’s Organization

Structure

In Pakistan, there are two setups. First is for Punjab and NWFP, and this is headed by Mr.

Ghous Akbar (CEO), while the second region is Sindh and Baluchistan and CEO for this

region is Mr. Amin Muhammad Lakhani.

There is General Manager at Headquarters level and under the General Manager, above

mentioned departments work. This is setup at Headquarter level. In Pakistan, some

departments are missing, i.e., R&D; research and development is done at corporate level

only. In McDonald's this function is performed by Hamburger University in Illinois

(USA), which delivers the degree of Bachelor of Hamburgerology. This university is also

an excellent site of high quality research.

Restaurant Structure

The hierarchical structure for the restaurant for Main Boulevard Branch, Lahore is:

The above three levels in the structure, i.e., up to Second Assistant level, are from

management side, while lower three levels in the hierarchy are filled from the crew.

Functions at the Restaurant

Raw Materials Acquisition

All the inputs are imported from different countries like Saudi Arabia, South Africa,

UAE and Malaysia; only the buns used in burgers are procured locally from Dawn Bread.

Ordering Raw Materi

Based on the demand forecast by the Restaurant Manager, the First Assistant orders the

Venus Distributors on daily basis. Venus Distributors is independent to acquire the raw

material from wherever it desires but it remains limited only by the strict specifications of

materials by McDonald's. Venus Distributors stores all the raw materials, in its own cold

stores and delivers only one-day material to the restaurant.

Storing Raw Materials

Main Boulevard Branch has its own cold storage facility, which is used to store the daily-

procured raw material, so that the raw materials remain fresh and nutritious Uptill they

are delivered in the form of finished goods (burgers, french fries, ice cream, etc.) to the

customers.

Cooking

The cooking procedure and recipe is documented so that the products become

standardized and customers get the similar taste, quantity and quality to whichever

restaurant they go. It is the policy of McDonald's to throw away any burger if they remain

on heated grill for 15 minutes.

Restaurant Maintenance

All the utensils and equipment used in cooking are washed at the closing of restaurant

every night, with anti-microbial fluid. Kitchen, floor, washrooms and all other restaurant

areas are cleaned after every half an hour.

Self Service

When customers enter the restaurant, they go to the counter, give their order, which they

are served within a single minute. Now customers take away the tray in which the order

is served, and take their seats themselves, in the big hall with a sitting capacity of 200

persons.

Drive-Thru

The McDonald's Main Boulevard, Lahore is one of the few McDonald's restaurants,

which are having the facility of Drive-Thru, i.e., you will go to the counter, here you will

order, pay for that, and get the token while sitting in your car. Now driving your car, you

will go to next counter, give token and pick up the food you have ordered.

Play Place

With its state-of-the-art design, the Play Place offers kids a real thrilling time. This

should come as good news for parents who can enjoy their delicious McDonald's meal

while the kids have fun! In terms of an eating-out experience, McDonald's means

different things to different people. For some, it’s a family outing, for others it may be a

place to grab a bite in very little time. For children, it’s a great place to visit for meals and

to play.

While talking about children, RAZA ALI said, “The idea is to provide with a Play Place

– a secure state-of-the-art design offering kids thrill and fun without any extra charges.

The young girls who are trained in Singapore look after the children who come to play

there. We give our children gifts besides the happy meals, which at present include

mighty dinos – classy high quality stuff.”

Target Market

Target market of McDonald’s:

“Do not buy market share Figure out how to earn it”

Broad speaking McDonald’s wants to attract as many customers as it can. But the main

targets of the efforts by McDonald’s are following groups:

Children

Youngsters

High –income groups

Families

Broadly speaking, McDonald’s want’s to attract the whole market. McDonald’s was

targeting the high –income social class uptil now but now McDonald’s is introducing

some new product’s to penetrate into low income groups e.g. McDonald’s cone for Rs.

15/- is an effort to attract middle income class and lower –income class as well.

Currently, market of McDonald’s is local market of Lahore. So we can say that

McDonald’s is involved in local marketing i.e. its marketing programs are being tailored

to the needs and wants of local customers groups.

McDonald's Vision

McDonald's vision is to be the world's best quick service restaurant experience. Being the

best means providing outstanding quality, service, cleanliness and value, so that they

make every customer in every restaurant smile. To achieve their vision, they are focused

on three worldwide strategies:

1-Be the Best Employer:

Be the best employer for their people in each community around the world.

2-Deliver Operational Excellence:

Deliver operational excellence to their customers in each of their restaurants.

3-Achieve Enduring Profitable Growth:

Achieve enduring profitable growth by expanding the brand and leveraging the strengths

of the McDonald's system through innovation and technology.

Mission and Objectives

McDonald's Mission

McDonald's will be a unique multinational organization, that has grown from a small

shop in a U.S.A town to twenty Nine thousand stores in 121 countries, but still do not

have any stated mission.

Objectives

“We are the world’s favorite restaurant because we give

customers what they want — great food and great experience.”

Michael Quinlan, Chairman McDonald’s

McDonald's objective is to attain QSCV at all of its restaurants, where:

Q is Quality

S is Service

C is Cleanliness

V is Value

Quality

Quality standards regarding each and every aspect of food and service is documented, to

provide consistency and to achieve the high level of quality at all the McDonald's

restaurants.

It is due to documentation that a consumer will get the same taste from a McDonald's

whether he is in New York or Moscow or in Lahore.

The raw materials acquired are required to pass a stringent specification test about factors

from the freshness to vitamins contained in them. Then there is documented recipe and

cooking requirement regarding utensils to temperature.

Service

At McDonald's everyone serves quickly with a smile. There is less than a minute the

time the 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 the customer is doing them a favor by being there and

not the staff so he should be received and returned this feeling the same way.

Cleanliness

McDonald's is cleanliness fanatic. There is even a joke that explains McDonald's

philosophy that, “If there is the time to lean then there is time to clean.”

The restaurant is thoroughly cleaned and sanitized after the closure, the cooking utensils

are disassembled every night for washing and then reassembled, and the floors,

washrooms, etc. are cleaned every half hourly during the restaurant timing.

Value

McDonald's has an open-door culture; any employee can go to the Restaurant Manager

and can discuss any problem or new ideas for the improvement of the restaurant. Nobody

has any hang-ups; everybody does everything.

McDonald's also believes in value to the customer, that is, why prices are value oriented

as Amin Mohammad Lakhani put it in his word; “… nothing sells forever unless it is

value for money.”

Problem Statement

McDonald is currently importing all its input from abroad like south Africa, UAE, Saudi

Arabia, Malaysia that makes their production cost so high and also take some time due to

which their operation can be affected directly.

Environmental Analysis of Fast

food Industry

Before starting analysis of an industry we should keep in mind the following two things

that are more relevant and appropriate for the managers:

First simple & complex, and second stable & dynamic. The environment for

McDonald's is not stable as all the major competitors (KFC, Pizza Hut, Subway, etc.) are

planning to open new restaurants in near future, i.e., there is a lot of change in

environment. Also there are lots of variables involved, e.g.,

Number of direct competitors

Local fast food

Continental food restaurants

All this makes the environment complex. So we have to see all the factors prevailing in

the market and these forces are crucial for the effective performance of the McDonalds.

Following are the major environment forces important in this context:

1- Economic Environment

Many fast food chains and franchisees have come to market attracted by large size and

buying power of market, so it shows a lot of scope in the existing market. Also, all raw

materials except buns are imported. This will become expensive with successive

devaluation and decreasing value of rupee so we can say that the exchange rate directly

affects the industry. The interest rate for short-term loans is high, this makes it difficult

for any organization to use short-term financing in its operations.

2- Socio-Cultural Environment

The demand for foreign food items is increasing at faster rate in Pakistan because now

people are more conscious about their health especially upper middle and middle class,

they avoid local foods full of fats. McDonald food is offered by USA and people have the

perception about their brands as pure and hygienic. But on the other hand most of the

people hate America because of religious grounds and other factors like the beef used in

McDonald foods. So McDonald has to offer those things that are according to the Islamic

culture. So at all the times they have to offer such type of products because it is an

Islamic nation.

3- Political and Legal Factors

In Pakistan political instability is very common and it is too much because sometimes the

Govt. changes over a night, new rules and regulations, the new Govt introduces policies

and procdures. It makes difficult for the foreign as well as local investors to run their

operations effectively. Sometimes it leads to poor investment in this industry and existing

investors try to withdraw all their investment. In this way the economic growth of the

country declines, because the economic activity is reduced. Another cause of the poor

law and political situation also is the result of terrorism in Karachi. So this sector requires

a lot of Govt. support to run its operations as wanted by the investors.

4- 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.

5- Technological factors:

Food processing technology is very much important in fast-food industry. So any

improvement in this technology can give competitive to any fast-food business.

McDonald’s also uses updated & latest food processing technology, so as to complete at

international level.

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?

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

industry and these forces are as follows:

Porter Structural Model

Competitive Rivalry

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.

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 Substitutes

Substitutes are the products, which can perform the same function as the original product

can perform. People go to McDonald's for eating, and entertainment. This makes the list

of substitute products quite long, mainly consisting of local and continental food, e.g.,

Karahi, Tikka, Kabab, Burger, etc.

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. Another factor that

increases the threat of new entries is the high profit margins in the industry. Any how

some entry barriers exist in terms of product differentiation and economies of scale and

McDonald luckily holds these barriers over the others.

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.

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.

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.

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

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.

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.

Good working conditions.

Career opportunities for employees.

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.

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.

Some of the products of the company are not competitively priced.

All the raw materials are imported from different countries; this increases their cost

of production.

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.

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.

Complex rules and regulations imposed by government.

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) Fries

13) Cold Drinks

14) Tea

15) Coffee

16) Hot Apple Pie

17) Milk Shakes

18) Cones

19) Sundaes

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 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.

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.

d) VALUE

The customers receive the same value from McDonald’s wherever they go in this world.

A customer gets the same taste of burger and similar level of service, wherever he goes.

Thanks to documentation from recipe of burger to the heating temperature that

McDonald's is able to deliver the same taste throughout the world. This is not in the case

of local fast food restaurants because they loose a lot of customers due to change in food

taste.

McDonald’s Innovation

Development of New Products

McDonald’s –Lahore is continuously working to develop new products i.e. the

products which are new to customers. Some new products include.

Apple –pie (to be launched in this year)

Extra value meal((to be launched in this year)

New Product Strate

The company goal is to strengthen a reputation as an innovator, while introducing new

product into the market especially in Lahore.

McDonald provides traditional menu of beef burgers, French fries, shakes and soft drinks

to new markets and in all new locations. People everywhere are enthusiastic about

McDonald's food whether the native dish is fish and rice, fish and chips, with the

traditional menu in some countries; McDonald's international restaurants satisfy local

tastes and customs by offering unique products, services and other items to the menu.

Customers in Norway can order McLaks – a fresh grilled salmon sandwich with dill

sauce on a whole-grain bun. McDonald's fans in the Netherlands can have vegetable

burger and in Italy and Greece customers can help themselves at a fresh salad bar.

In Uruguay and Latin American countries, McDonald's customers may choose a

McHuevo a hamburger with a poached egg on top, or a McQueso – a toasted sandwich

made of two slices of cheese on white bread.

Canadians have been able to order McPizza. McPizza is assembled by hand and cooked

in five minutes in specially designed McDonald's ovens. Two sizes of McPizza are on the

menu – a family size pizza and a six-inch personal-size pizza. To illustrate its market

power, when McDonald's Canada introduced pizza on its menu, they became the biggest

pizza retailer in the country overnight.

Singapore people order McDonald land ice cream for dessert. The ice cream, specifically

developed to suit the taste of the Singapore market, is made of vanilla with a blend of

chocolate and strawberry swirl. It is served in containers designed as McDonald land

characters.

Functional Area / Marketing Strategy

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 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.

McDonald's has a strict policy of selling at the same price to whoever purchases

and whatever quantity he buys, and they just don’t give any kind of discount.

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 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. On its inauguration day, full page advertisements appeared in The

News, The Dawn, announcing its opening. On 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 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.

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.

Recommended Strategies for McDonalds

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. In this way the sales of McDonald can be increased by at least 50% of

current sales volume. 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 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.

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, in this way it can create

competitive edge over its competitors.

Table of contents

TOC \o "1-3" \h \z

McDonald’s Company HistoryPAGEREF _Toc389013729 \h

McDonald's Franchising 3

Competitor’s Analysis ................................................................................................. 5

Historical Background Of KFC PAGEREF _Toc389013732 \h

KFC Arrives in Pakistan PAGEREF _Toc389013733 \h

Pizza Hut’s International History PAGEREF _Toc389013735 \h

Pizza Hut Arrives in Pakistan PAGEREF _Toc389013736 \h

McDonalds Organizational Strucutre ............................................................................. 8

Restaurant Structure PAGEREF _Toc389013738 \h

Target Market PAGEREF _Toc389013740 \h

McDonalds Vision: PAGEREF _Toc389013741 \h

Mission and Objectives PAGEREF _Toc389013744 \h

McDonald's Mission PAGEREF _Toc389013745 \h

Problem Statement PAGEREF _Toc389013745 \h 5

Environmental Analysis of Fast food Industry PAGEREF _Toc389013751 \h

1- Economic Environment PAGEREF _Toc389013752 \h

2- Socio-Cultural Environment PAGEREF _Toc389013753 \h

3- Political and Legal Factors PAGEREF _Toc389013754 \h

4- Competitors PAGEREF _Toc389013755 \h

Structural Analysis PAGEREF _Toc389013756 \h

Buyer’s Power PAGEREF _Toc389013757 \h

Supplier’s Power PAGEREF _Toc389013758 \h

Threat of Substitutes PAGEREF _Toc389013759 \h

Threat of New Entrants PAGEREF _Toc389013760 \h

Internal Resource Audit PAGEREF _Toc389013761 \h

Human Resources PAGEREF _Toc389013762 \h

Hiring Personnel PAGEREF _Toc389013763 \h

Training PAGEREF _Toc389013764 \h

Motivation PAGEREF _Toc389013765 \h

Promotion PAGEREF _Toc389013766 \h

Financial Resources PAGEREF _Toc389013767 \h

Physical Resources PAGEREF _Toc389013768 \h

Intangible Resources PAGEREF _Toc389013769 \h

SWOT Analysis PAGEREF _Toc389013770 \h

Existing Strategies PAGEREF _Toc389013775 \h

OPERATIONAL LEVEL STRATEGY PAGEREF _Toc389013776 \h

Marketing Strategies PAGEREF _Toc389013783 \h

Business Level Srategy PAGEREF _Toc389013785 \h 3

Corporate Level Strategy ............................................................................................. 33

Societal Level Strategy ................................................................................................. 33

Recommended Strategies for McDonalds PAGEREF _Toc389013786 \h

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