McDonalds Corporation in the New Millennium

Team 11

Presented by:
Adil Saeed Atif Ali Mohib Furqan Fazal Amin Shah

OVERVIEW
The Fast-Food Industry McDonald's Corporation Major Competitors in the Hamburger Segment Major Competition in the NonHamburger 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 dont 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 Systemwide Sales Total Revenues Net Income Total restaurants 2001 40,630 14,870 1,637 30,093 2000 40,180 14,243 1,977 28,707 1999 38,491 13,259 1,948 26,309 1998 35,979 12,421 1,550 24,513 1997 33,638 11,409 1,642 22,928

Total Systemwide Sales

Net Income (shrunk by 17%) =

$40 billion
$1.64 billion

Market share above competitors but grew slowly

REVIVAL PLANS BY McDonalds

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 McDonalds

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 McDonalds

Change in the advertising campaign:
The company focused on tasty and nutritious food, friendly folks and fun; McDonalds invested heavily in advertising its products and improving its public image;
Charity Christmas Parade; Ronald McDonald House;

REVIVAL PLANS BY McDonalds

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

McDonalds major competitors in this segment are;
Burger King; Hardees; and Wendys

Burger King and Wendys gained a small market share while Hardees 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 BKs 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. BKs is developing a more permanent market strategy revolving around monthly changes in menu items and the deals.

Major competitors in the Hamburger segment

Hardees:
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 Hardees, the management changed its format to Star Hardees. This company also introduced new items on the menu including mid-priced sandwich for $2.99.

Major competitors in the Hamburger segment

Wendys International: Wendys 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. Wendys 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 Wendys sale

Major competitors in the Non-Hamburger segment

There are three major competitors offering nonhamburger 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 Huts 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.

McDonalds 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 McDonalds

Thank You

Team 11