McDonald’s

Corporation in
the New
Millennium
Team 11
Presented by:
 OVERVIEW

• The Fast-Food Industry

• McDonald's Corporation
• Major Competitors in the Hamburger
Segment
• Major Competition in the Non-
Hamburger Segment
• McDonald's Future
The Fast-Food Industry
• Need for New Marketing Strategies:
– Flat sales and drying-up profits are compelling
fast-food chains to look for new marketing
strategies including discounting and offering
new products.
• Drive-Through Customers:
– All competitors are trying to increase the speed
of drive-through delivery by encouraging
employees to prepare and deliver food faster.
– Drive-through delivery has increased efficiency
of fast-food restaurants by 10% or $54,000. Its
annual average sales is about $560,000
The Fast-Food Industry
• The Non-Hamburger Segment:
– Major Players:
• Pizza Hut, KFC and Taco Bell
– Sales has grown faster than hamburger chains
mainly sandwiches prepared meals.
• The Heavy Users:
– They are working class single males, under
30, love music and don’t read much.
– They contribute 20% of the customers but
account for 60% of all visits
The Fast-Food Industry
• The Fast-Casual Sector:
– It offer sandwiches and meals that are more upscale and
faster than the traditional restaurants with comfortable
surroundings.
– This sector is showing growth of 15-20% while it is 2% in
the quick service- sector a year.
• The Changing Habits of American:
– Americans are eating less as compared to previous
years mainly due to recession.
– Younger Americans are serious about their health.
– There is growing dissatisfaction with the quality aspect of
McDonald's and Burger Kings.
– Baby boomers are looking for better alternatives.
 McDonald's Corporation
Description 2001 2000 1999 1998 1997
Systemwide Sales 40,630 40,180 38,491 35,979 33,638
Total Revenues 14,870 14,243 13,259 12,421 11,409
Net Income 1,637 1,977 1,948 1,550 1,642
Total restaurants 30,093 28,707 26,309 24,513 22,928

Total Systemwide Sales = $40 billion

Net Income (shrunk by 17%) = $1.64 billion

Market share above competitors but grew slowly

REVIVAL PLANS BY McDonald’s

• Introduction of “New Taste Manu”

items at the fore-front of its
offerings. Products include;
– a chicken sandwich “Chicken Select”
– Chicken-Honey biscuit
– Breakfast steak burrito
– McNuggets for kids
– McRib sandwish
REVIVAL PLANS BY McDonald’s

• Introduction of “New Taste Manu”

items at the fore-front of its
offerings. Products include;
– a chicken sandwich “Chicken Select”
– Chicken-Honey biscuit
– Breakfast steak burrito
– McNuggets for kids
– McRib sandwish
REVIVAL PLANS BY McDonald’s

• Change in the advertising campaign:

– The company focused on tasty and
nutritious food, friendly folks and fun;
– McDonald’s invested heavily in
advertising its products and improving
its public image;
• Charity Christmas Parade;
• Ronald McDonald House;
REVIVAL PLANS BY McDonald’s
• Openings of McCafe:
– The company opened its first domestic McCafe
with the expectation that gourmet coffee shop for
doubling its sales over the next decade.
– Menu includes;
• Drinks-Lattes, teas and fruit smoothies (Caramel Cream
Steamer, French Vanilla and Milky Way).
• High-End cakes, pastries, cookies and soft pretzels (Tiramisu,
Cheesecake).
• Coffee Shop environment.
– Lace curtain, mahogany accents, leather couch,
an antique mirror, wall sconces and fresh flowers.
 Major competitors in the
Hamburger segment
• McDonald’s major competitors in this
segment are;
– Burger King;
– Hardee’s; and
– Wendy’s
• Burger King and Wendy’s gained a
small market share while Hardee’s
lost its share.
Major competitors in the
Hamburger segment
• Burger King Corporation:
– To increase its sales and market shares, the
American No.2 Burger Chain offered a new
salad line and new products including “Chicken
Whopper”.
– The changed menu is part of a new strategy
engineered by BK’s Chairman and Chief
Executive, John Dasburg, who joined the chain
in 2000.
– A double digit same-store-sales growth was
witnessed after a transformation program
including extensive kitchen and drive-through
upgrades.
– BK’s is developing a more permanent market
strategy revolving around monthly changes in
menu items and the deals.
Major competitors in the
Hamburger segment
• Hardee’s:
– The fast food witnessed a 15% decline
in net income in the last quarter of 2001.
– To reverse the slowing but continuing
sales erosion at Hardee’s, the
management changed its format to “Star
Hardee’s”.
– This company also introduced new items
on the menu including mid-priced
sandwich for $2.99.
 Major competitors in the
Hamburger segment
• Wendy’s International:
– Wendy’s has the strongest same-store-sales gains as
compared to other fast food chains.
– Part of this growth is due to upscale salads called “Garden
Sensations”
– Key to their success lies in customers satisfaction,
innovation, and unit-level sales.
– Wendy’s product line includes four core menu items;
• Burgers;
• Chicken sandwiches;
• Value menu; and
• Garden sensations salads. This salad was expected to
contribute 5% to total Wendy’s sale
 Major competitors in the
Non-Hamburger segment
• There are three major competitors offering non-
hamburger fast foods i.e. Pizza Hut, Kentucky Fried
Chicken and Taco Bell.
• Pizza Hut:
– Pizza Hut dominates the pizza segment with 22%
of all restaurant pizza sales in America. Pizza Hut
is owned by Tricon Global Restaurants which
also owns KFC and Taco Bell.
– One industry analyst has observed that Pizza
Hut’s success lies in “a well executed,
differentiated, yet value oriented product that
would dived traffic and sales over the next
several periods”.
 Major competitors in the
Non-Hamburger segment
• KFC:
– This chain operates 11,000 global outlets of
which 5,400 are in the US.
– Its meal program strategy i.e. “kids Lap Top
Pack” attracted kids and their families.
– Previously launches of KFC includes crossword
puzzles, word searches and mazes.
– The company claims “this about brand building;
its not about building sales today”.
– KFC posted growth of 3% in the fiscal 2001.
 Major competitors in the
Non-Hamburger segment

• Taco Bell:
– The 19% increase in 2001 profit is due to
strategy shift to higher priced product like the
Grilled Stuff Burrito and Chicken Quesadilla.
– The Taco Bell planned to add more grilled
extensions with higher quality tortillas, beef and
beans, and sell them at non-discounted prices.
– Taco Bell would continue to experiment with
ingredients, such as fish and pork, that are
unique to fast food.
 McDonald’s Future
• Jack Greenberg recognized the difficult task
the company faced in trying to grow sales,
market share and profits in a fiercely
competitive industry. He recognized the
strengths of competitors in the burger
segment but also knew that other providers
of fast food and other meals were quick to
take advantage of changes in customer
preferences and tastes. He knew he had to
counter attack the “Big Mac Attack” and find
market opportunities for McDonald’s
Thank You

Team 11