Strategic Management- Term Report

FAST-FOOD INDUSTRY
Submitted to:
Sir Javaid Ahmed
Submitted by:
Rubab Ali (24095)
Amna Yousuf (24226)
Nida Mustafa (24724)
Yamna Usman (24015)
Hamna Najam (24205)
Affan Khan (24107)

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Table of Contents
Acknowledgement ........................................................................................................................................ 5
McDonald’s History:...................................................................................................................................... 6
Global Existence: ....................................................................................................................................... 6
McDonald’s in Pakistan: ............................................................................................................................ 6
Mission Statement: ....................................................................................................................................... 7
Vision Statement:.......................................................................................................................................... 7
Core Values: .................................................................................................................................................. 7
PORTER’s FIVE FORCES.................................................................................................................................. 8
.................................................................................................................................................................. 8
Bargaining Power of Suppliers: ................................................................................................................. 9
Bargaining Power of Buyers: ................................................................................................................... 10
Rivalry amongst the Competitors: .......................................................................................................... 12
Threat of New Substitute ........................................................................................................................ 13
Threat of New Entry ................................................................................................................................ 14
Macro Analysis ............................................................................................................................................ 15
................................................................................................................................................................ 15
Political factors........................................................................................................................................ 15
Economic Factors .................................................................................................................................... 16
Social factors ........................................................................................................................................... 17
Technological factors .............................................................................................................................. 17
Legal Factors ........................................................................................................................................... 18
Environmental factors............................................................................................................................. 19
Effect of pestle analysis on Porter's Five Forces: ........................................................................................ 19
Economic factors:.................................................................................................................................... 19
Social Factors: ......................................................................................................................................... 20
Technological Factors: ............................................................................................................................ 20
Legal Factors: .......................................................................................................................................... 20
External Factor Evaluation (EFE) ................................................................................................................. 21
Competitive Profile Matrix (CPM) ............................................................................................................... 23
Advertising: ............................................................................................................................................. 23
Market Penetration: ............................................................................................................................... 23
Customer Service: ................................................................................................................................... 24

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 Brand Image: ........................................................................................................................................... 24
R&D: ........................................................................................................................................................ 24
Product Quality ....................................................................................................................................... 24
Financial Profit: ....................................................................................................................................... 25
Customer Loyalty: ................................................................................................................................... 25
Market Share: ......................................................................................................................................... 25
Consistency: ............................................................................................................................................ 25
Cost Control: ........................................................................................................................................... 26
Affordability: ........................................................................................................................................... 26
Value Chain Analysis ................................................................................................................................... 26
Primary Activities: ................................................................................................................................... 28
1. Inbound Logistics: ....................................................................................................................... 28
2. Operations: ................................................................................................................................. 28
3. Outbound Logistics: .................................................................................................................... 29
4. Marketing and Sales:................................................................................................................... 29
5. Services: ...................................................................................................................................... 32
Secondary Activities: ............................................................................................................................... 33
1. Firm Infrastructure: ..................................................................................................................... 33
2. Human Resource Management: ................................................................................................. 33
3. Technology Development: .......................................................................................................... 33
4. Procurement: .............................................................................................................................. 34
Internal Factor Evaluation (IFE)................................................................................................................... 35
SWOT Matrix ............................................................................................................................................... 37
Threats: ................................................................................................................................................... 37
Opportunities: ......................................................................................................................................... 37
Strengths ................................................................................................................................................. 37
Weaknesses: ........................................................................................................................................... 38
SO STRATEGY: ......................................................................................................................................... 41
WO STRATEGY: ........................................................................................................................................ 41
SPACE Matrix............................................................................................................................................... 42
BCG Matrix .................................................................................................................................................. 45
STAR: Big Mac ........................................................................................................................................ 45
Question Mark: McCafe .......................................................................................................................... 45

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 Cash Cow: Happy Meal ........................................................................................................................... 46
Dog: Chicken Chapli ................................................................................................................................ 46
IE Matrix ...................................................................................................................................................... 46
Grand Strategy Matrix ................................................................................................................................ 47
QSPM Model ............................................................................................................................................... 48
Problems: ................................................................................................................................................ 48
Conclusion: .................................................................................................................................................. 52

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 Acknowledgement

We are thankful to our university, Institute of Business Management, for providing us this
opportunity to learn this course in BBA Program, which helped us in exploring a great deal of
concepts, through the course of six months, in Strategic Management.
We would really like to specify my inner most appreciation to all folks that furnished us with the
opportunity to finish this report. A unique gratitude we provide to our faculty, Sir Javaid,
whose contribution in stimulating tips and encouragement helped us to coordinate our
challenge specifically in writing up this report and understanding in-depth concepts of strategy
through the course Strategic Management.

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McDonald’s History:
In the 1940’s Dick and Mac McDonald started a research over the ways in which they can
improve their drive-in service in California, they also invented new service based upon quick
service, low prices and large volumes. By the mid 1950’s their business was double the size of
their previous business.

Global Existence:
McDonald’s is known to be world’s best fast-food company with more than 35,000 restaurants
in almost 120 countries. According to studies, McDonald’s is known to serve more than 65
million people per day all around the globe and has more than 4 million employees working in
the restaurants recording the largest share in fast-food industry of 17% in U.S. McDonald’s
offers a uniform menu while ensuring that it assists the international markets in every way.

McDonald’s in Pakistan:
McDonald’s Pakistan belongs to the Lakson Group of Companies, a leading business house in
Pakistan. Their first restaurant was established in Lahore in 1998, which managed to grow its
chain to Karachi in just a week after. There are 71 outlets of McDonalds all over Pakistan. In
September 2019, McDonald's and Chevron Pakistan announced a partnership, according to
which Chevron would provide the manufacturing requirements of lubricants and coolants for all
of McDonald's Pakistan restaurants. The chief executive Amin Lakhani stated that the standard
of food at McDonald's Pakistan and options provided almost align with McDonald's
international menu as people here eat chicken, beef, fish, and cheese products like everyone
else. However the food provided to McDonalds Pakistan is spicier, as compared to the ones
provided to McDonald’s franchises in other countries, as the Pakistani is more attracted to
spicier foods. McDonalds was awarded the Golden Arch Award in 2017, on account of hygiene,
brand quality and customer service.

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 Mission Statement:
McDonald's brand mission is “to be our customers' favorite place and way to eat and drink.”
McDonald's keep its customer as an upmost priority and value their opinions and choices. The
firm tries to fulfill the expectations of customers by providing best quality food with impeccable
taste. The company considers customers preference on top and this is why the customers find
their way back to this place. Since McDonald's satisfy the hunger of mass target, they don’t
hesitate to leave their mark in most places geographically which is why it is not difficult to find
this restaurant. McDonald's provide the best and comfortable domain to its customers and
employees with clean and organized environment where they can enjoy and work with
satisfaction.

Vision Statement:
McDonald’s vision is, “To thrive in serving our best food and services around the world along
with continuous improvement to do better.”

Core Values:
 Accountability: They take full responsibility for all their performance and face
consequences for all of their decisions and actions.
 Integrity: They have set the highest ethical standards inside their firm, demonstrating
respect, honesty and fairness in every action taken.
 Innovation: They are creative in anticipating change and capitalize on the many
opportunities that arise and deliver value to the customers.
 Teamwork: They promote and support a diverse yet unified team. They hire
experienced, qualified people who work together to meet common goal.

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PORTER’s FIVE FORCES
Porter's Five Forces is considerably a powerful plan that is simple yet affective in understanding
the competitiveness of the environment of your industry and for identifying the potential of
your strategy's profitability. This framework has proven to be very affective in deriving five
forces which can determine the competitive intensity and the attractiveness of an industry in
terms of its profitability and the suggested ways to build a strong foundation in your market.
This strategy has proven to be quite useful as when you understand these forces in regards with
your industry you can see all the possible ways in which it can affect your profitability and you'll
be able to adjust your strategy accordingly.

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Bargaining Power of Suppliers:

YES(+) M NO(-)

1 My input (material, labor, suppliers, services, etc.)

are standard rather than unique or differentiated.

2 I can switch between the suppliers quickly and

cheaply.

3 My suppliers would find it difficult to enter my

business or my customers would find it difficult to
perform my function in-house.

4 I can substitute inputs readily

5 I have many potential suppliers.

6 My business is important to my suppliers.

7 My cost of purchases has no significant influence on

my overall costs.

1________________________________________10
Low High
The bargaining power of suppliers is LOW.
Bargaining power refers to the degree up to which suppliers can exert pressure on the business
by raising prices. In case of fast-food industry, the bargaining power of supplier is low owing to
the ingredients used by all chains are standard and not differentiated. The availability of these
ingredients is with almost all suppliers which allows for them to switch easily between suppliers
and it’s cheaper for the businesses to do it. The availability of plenty of suppliers aligned with
the availability of the ingredients used in the fast-food products weakens supplier’s power on the
company.

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Bargaining Power of Buyers:

YES M NO(-)
(+)

1 Are there a large number of buyers relative to the

number of firms in the business?

2 Do you have a large number of customers, each

with relative small purchases?

3 Does the customer face any significant costs in

switching suppliers?

4 Does the buyer needs a lot of important

information?

5 Is the buyer aware of the need for additional

information?

6 Is there anything that prevents your customer

from taking your function-in-house?

7 Your customers are not highly sensitive to price?

8 Your product is unique to some degree or has

accepted branding?

9 Your customer’s businesses are profitable?

10 You provide incentives to the decision makers?

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 1_____________________________________10
Low High

The bargaining power of buyers is HIGH

There are plenty of fast food chains in Pakistan besides McDonalds which suggests that there is
fairly very low switching cost for consumers to change from one fast-food chain to another
which makes it easier for consumers to influence the sales. In relation, because of market
saturation, consumers can easily choose from other options available. This makes the bargaining
power of buyers a strong force in affecting company’s profitability. Further, consumers have
different substitutes available besides McDonalds, like ready to cook home-made burgers,
microwave meals, or roadside cheap Kebab burgers etc. This greatly adds to the bargaining
power of consumers.
However, the brand reputation that McDonalds has in market amongst its loyal customers,
cannot be ignored, which moderates the bargaining power of its customers. The economic
recession due to global pandemic, has led to a decline in sales of almost all businesses, food
business being still affected less than other industries. There are quite a lot of incentives provided
to the customers is fairly a lot considering the deals and discounts that McDonalds offers on its
products.
Further, the nature of the product does not require for buyers to have additional information
about the product. McDonalds needs to look over for the prices and keep it aligned with the other
companies as customers can easily shift their purchases. Hence, keeping all these factors in view,
it would not be wrong to say that the bargaining power of buyers is strong.

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Rivalry amongst the Competitors:

YES MODE
RATE NO
1 A diversified range of competitors

2 It would not be hard to get out of

this business because there are no
specialized skills and facilities etc.
3 The customers would incur
significant costs in switching to a
competitor
4 Competitors are all of
approximately the same size as I
McDonald’s
5 The industry growth is low

6 High storage cost makes the

company decrease prices to
increase sales

1____________________________________10
Low High

The Rivalry amongst the Competitors is HIGH.

The fast food industry is extremely saturated, as there are low cost to entry, new firms are
entering the industry often, big or small and bring new changes in the industry for the customers.
The product of the competition is also not diversified, and almost the same, providing the same
quality at almost the same price, this results in lowering switching costs of the consumers, thus
making it very easy for the consumer to switch to another brand.
The main competitors such as KFC, Burger King, Mr. Burger, Burger Lab, etc are almost the
same size as McDonalds, in terms of number of franchise, price or brand image. Overall, the
rivalry amongst the competitors in the fast food industry is high, as the brand image and the
marketing of the firms’ play a huge role and the diverse range of competitors (especially foreign
competitors) have a strong image in the market. This increases the risk of losing customers
easily.

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Threat of New Substitute

YES MODERATE NO
1 Substitutes have performance limitations that do not
completely offset their lowest price. Or, their
performance is not justified by their higher price
2 The customer will incur costs in switching to a
substitute.

3 Your customer has no real substitute

4 Your customer is not likely to substitute.

1________________________________________10
Low High
The threat of substitute is HIGH.
The substitutes to the fast food industry are many, from the artisanal bakers, to readymade meals,
or frozen food, masala packets (Shan & National), homemade foods. The fast food industry also
faces the threat of substitute from the street food vendors, fries, bun kabab, shawarma, falafel,
etc., as well as the BBQ restaurants. The other high end restaurants or cafes can also serve the
same products as the fast food joints. So the number of substitutes for the fast food industry is
very high. The real reason why the number of substitutes for the fast food industry is high is
because of the lack of differentiation in the fast food industry.
Some of these products are not high pried, such as the street food vendors, or the masala packets,
the other products such as frozen foods, or the restaurants, are high priced, they are high priced,
and some argue that their price performance ratio is not justified, due to this reason, this aspect
only moderately affects the fast food industry.
The main threat form the substitutes come from the street vendors, homemade or frozen foods,
they are very low priced, thus not only do the customers not incur any switching cost, but they
actually have to pay less than before, when switching. If the customer substitute forms the fast
food industry, it will mostly be due to prices, otherwise the customer is most likely to buy fast
food products, if they want to consume fast food. So, overall, the threat of substitute would be
placed on 7.

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Threat of New Entry

YES MODERATE NO
1 Do large firms have a cost or performance advantage in your
segment of the industry?
2 Are there any proprietary product differences in your
industry?
3 Are there any established brand identities in your industry?

4 Do your customers incur any significant costs in switching

suppliers?
5 Is a lot of capital needed to enter your industry?

6 Is serviceable used equipment expensive?

7 Does the newcomer to your industry face difficulty in

accessing distribution channels?
8 Does experience help you to continuously lower costs?

9 Does the newcomer have any problems in obtaining the

necessary skilled people, materials or supplies?
10 Does your product or service have any proprietary features
that give you lower cost?
11 Are there any licenses, insurance or qualifications that are
difficult to obtain?
12 Can the newcomer expect strong retaliation on entering the
market?

1 10

The threat of new entrants is HIGH.

There are low barriers to entry, as the cost to enter the industry is majorly dependent on the scale, the
business is going to start from. It could be started from just a fast food truck, or just a takeaway shop,
and even as a restaurant. There is a lack of proprietary product in the industry(especially the kinds of
product that McDonalds sell), almost everyone sells the same product, with different names, that falls
under the category of brand identity, which is the only thing favorable for the giants of the industry,
(McDonalds, KFC). There is no shortage of skilled workers in the market, willing to work for the least
amount of money, thus another factor which is favorable for the new entrants and unfavorable for our
company. Although, there are licenses and qualification, that the new entrants must require, they are
not difficult to obtain. The new comers don’t face any retaliation while entering the market, the giants
especially McDonalds and Burger King, have marketing campaigns against one another, leaving the
newcomers alone.

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 Macro Analysis

Political factors
Government’s Stability is extremely crucial that the government remains stable so that there is
no chaos in the country and the industries can boost up their production. For example, during
the decade, 2005-2015, 19 major and violent riots took place against the increasing food prices.
These riots can cause outbreaks and strikes which leads to shutting down of restaurants and
hotels, resulting in low profitability. It is crucial that the government, while proposing budget
every year, must not burden the industries with too many taxes. For example, in the budget of
2020-2021, tax on local purchase of cooking oil or vegetable ghee by certain persons was
exempted.
Since few of the raw materials for the fast food industries are imported, it is important that
there are no trade restrictions. Employment laws are not a big threat to fast food industry in
Pakistan. Although there are more than 70 laws related to labor issues, which includes;
minimum wage, leave and maternity benefits, safety and security etc, but they are barely
monitored by the government.
If the corruption level rises in Pakistan, the economic growth will hinder. The cost of raw
materials will rise, which will lower down the profits of the industry. Corruption also lowers
down the image of the country and many restrictions are put on the state. These restrictions
sometimes forbade the countries to deal internationally. This will hamper the purchase of raw
material and the industry will experience losses. It is important that the leadership of the
government falls into the right hand. For example, if the government leader is a dictator or
oligarch, it might become difficult for many industries to earn good profit because of the stern

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and rigid policies of the government leader. Mostly, democratic leaders are preferred so that
there is no hindrance in the profitability or production of business.
Stability of neighbors: The government should maintain friendly and harmonious relationship
with its neighboring countries. It is important, because unfriendly relations always offer a threat
of dispute and war which results in an unstable economy in the country.

Economic Factors
Healthy products are more pricy, as compared to fast food or ready to make foods, and the
availability of readymade food, attracts the customers, as they no longer have to cook from
scratch. Due to these reason there has been such a great expansion in the fast food industry.
The state of the country, unemployment rates and consumers disposable income can affect the
food industry. In the Past, due to increasing income all around the world, people would usually
prefer to dine out more often and eat less home-made food, but owing to the current situation,
there has been a shift in this and since a lot of people lost jobs, this directly affected their
spending on fast food. Plus, restrictions on lock down all around the world, further reduced the
number of people eating out or spending on fast food.
The cost of hiring labour is increasing equally across all industries and likewise is impacting the
food industry too. The profits here are hence very less because a higher amount of money goes
to the labour cost. Although, the ingredients of the food industry are quite basic, and not too
costly, an increase in prices of raw material on a large scale could probably result in an increase
in prices of these ingredients too. This can majorly impact the profit margin. The decision
whether to import raw materials or buy them locally is one important factor; another is tax
rates. The amount of duties on imported raw materials will also impact the prices that company
will keep for its products, which will ultimately affect the fact whether consumers will buy the
burgers or not since they will get expensive and consumers will become price sensitive.
McDonalds brand image has faced turmoil, due to the increased mindset of health conscious
individuals. Many fast-food restaurants are however adding healthier options to their menu.
Economic factors could highly impact the sales of a business. Similar is the case for McDonald’s,
where a rise in inflation would directly affect the purchasing power of the buyers and also the
pricing of the food at McDonald’s. This might mean menu cost for McDonald’s and also loss of
potential customers owing to higher inflation. Other than that, taxes and duties might impact
the company’s profitability too if it imports its ingredients to the economy where duties are a
lot. A high inflation would also mean cost of living is high, hence resulting in further reduction in
spending. Not only this, but a lower GDP of economy would also not even allow for McDonald’s
to operate in that economy since all the factors stated would have an adverse effect on the
sales of the company.

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Social factors
Over the last decade, consumers have grown more health conscious and are continuously
growing. The consumption of fast food has directly been linked to the increasing rate of obesity.
People have started to avoid junk food, this led to a decline in the sales of the fast food chains,
but the industry responded quite well, they introduced more healthy products, and the
restaurants have introduced low calorie foods, organic and whole foods, some restaurants have
even put up the nutritional details of the meal on the menu. They also serve fruit bowls as well
as juices, which counter the avoidance of junk food, but rather encourages health conscious
individuals to consume at their chains.
Age is an important factor, which determines, whether they consume fast food or not.
According to (Maze, 2018), men of ages between 20-39, more often consume fast food, rather
than females, or individuals of any other age group.
Every region has different cultures and people who follow many different religions, some does
not allow consumption of pork, while some does not allow people to consume meat, regions
like this, may have negative effects on the fast food industry. Some fast food chains, leading the
race is McDonalds, have adapted to this problem, and have introduced, veggie burgers as well,
(Environmental factors affecting McDonald's management functions, 1970).
Bad news travels like wildfire, treatment of the company towards the customers or its
employees, if negative can lead to a drastic decrease. Treatment of animals, have also started
playing a crucial part. The company must not treat the animals cruelly, or inject them with
hormones, although legal, it is not socially unacceptable.
Another factor that affects the fast food industry is the fast paced life the individuals lead, their
busy life, does not allow them to waste their time in making food, or sitting at a high end
restaurants, thus they prefer consuming fast food, as it is convenient for them, especially the
young individuals. (Maze, 2018) quotes that about 43% of consumers, eat during the lunch
time, which corresponds, with their busy schedule.
A study revealed, the carbon footprint of around 1 million cars in a year equals the carbon
footprint of the fast food industry.
Sustainability is also a factor that greatly impacts the fast food industry, the materials they use,
the packaging they serve in, how much they recycle etc. Overall, the focus of the industry has
moved from what they can provide, to what the customer wants.

Technological factors
Fast food industry has recently upgraded their menus with tv screens attached with the ceiling
behind their cashiers. The screens allow the customers to choose from different deals and
offers by comparing the prices and quantity. These screens also present the picture of the food
which help the customers to easily choose whatever catches their attention. For example,
McDonald's present whole menu on screens along with the pictures which easily attracts the

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customer. You have the option to order your food online, allowing you to stroll in and grab your
meal without waiting in line. Most of the restaurants now take orders online and they offer
takeaway option too. This facilitates the customer to grab the meal without waiting for too long
or enjoy his food just by sitting at home and ordering online. For example, McDonald's operate
a separate website where customers can place order by selecting food from menu. McDonald's
also offers an app to ease its customer and provides free delivery.
These industries are also using their website to showcase nutritional information. Since a lot of
people are now diet conscious, it is important to give full information about nutrition and carbs
to its customer. For example, McDonald's deal with teenagers mostly and teenager these days
are very conscious about their calorie intake so to deal with that, McDonald's provide
nutritional information about the food. They have also renovated their stores to rebrand their
image by having new furniture and paint to match their fancy flat screen menu displays. When
we step in a restaurant, we mostly notice the furniture matching with the theme of the brand.
For example, KFC has a red and white theme with the same color furniture. Same goes for
McDonald's that consist of yellow and white theme with white furniture.
They provide free Wi-Fi at their stores for the customers to sign up and use it. This strategy
helps the restaurant to make the customer stay a bit longer and enjoy their food. For example,
McDonald's ask the customers to sign up to get access to their Wi-Fi. This is the reason why
people spend more time sitting there and working, talking, etc. Fast food industry is also active
on social media. They use Facebook and Instagram to attract their customers’ attention with
their new and catchy offers. Social media is an upmost priority of the businesses to promote
their product since they can target their audience easily. A lot of restaurants these days make
their own page on Instagram and Facebook to upload offers and deals so that the target
audience and see and avail it.

Legal Factors
The legal aspects of this fast-food chain have kept changing throughout the years. As
McDonalds spreads out through the globe, the pressure because of the diverse legal
requirements keeps rising. The quality of food, it’s packaging and nutritional value holds the
major level of impact over the fast-food business. McDonalds has always kept the safety and
hygiene of their customers as the first and utmost priority. Despite being so conscious of the
health, they have managed to keep their food close to their standard mouthwatering taste.
McDonalds being a wildly spread chain throughout the globe has to work according to the laws
and regulations of each country. Operating across 120 markets and in over 37000 locations,
McDonalds has to keep in account all the consumer laws, hygiene standards, laws of each
country and work accordingly.
Nowadays people are more concerned about their health when it is related to food. People
prefer to eat something that will not harm them. For example people with diabetes and high
blood pressure started to avoid fast food because of their high sugar and oil level so companies
started making food which had less oil and sugar levels. When it comes to organization there
are number of people who try to associate themselves with good organizations most. For

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example in India now people are fond of eating outside and have included this in their lifestyle
so fast food companies started to make their visit memorable.

Environmental factors
Any environmental disasters, such as floods, etc can, affect the production of the fast food
industry, as the raw materials, would be scarce.
As the environment has some effects on the fast food industry, the opposite is also quite
normal. The fast food industry causes, deforestation, as they acquire their meat from the farms,
which cut down forests to make up space. The use of plastic, although it has decreased (in the
fast food industry) still is quite a lot, which creates a negative impact on the environment, and
thus the fast food industry.
(Filters, 2017) Food carbon footprint
Cooking fast food releases greenhouse gasses, which are extremely detrimental to the
environment. Not only is this, but the meat being exposed to the fumes, which seems
mouthwatering actually harmful for humans, because of presence of polycyclic aromatic
hydrocarbons.
According to (New EIA Report Reveals Multinational Fast Food Chains Ignoring Easy Mitigation
Opportunity in India, 2017), fast food companies, are responsible for emitting the same amount
of greenhouse gasses, as 1.5 million cars would in a period of one year.

Effect of pestle analysis on Porter's Five Forces:

Economic factors:
The threat of substitute increases: as the inflation increases, the income of people decrease, they tend
to switch to the substitutes, which are cheaper.

There is no effect on supplier's bargaining power

The threat of new entrance is low because a lot of capital is required to start a new venture. Since
everything is already expensive, due to the rising inflation, it will cost a lot to open a new business,
which can act as a barrier to entry.

The bargaining power increases, as income becomes low, the buyer switches to different substitutes
with lower prices.

The competition remains same, as the factors that cause problems for McDonalds, will have the same
effect on McDonald’s competition.

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Social Factors:
The threat of substitute has increase, because people have become more health conscious and tend to
avoid fast food now, thus opting for healthier substitutes.

There's no effect on supplier's bargaining power

The threat of new entrance is low because people are becoming more health conscious so there's no
use of opening a new venture when you know the sales will decrease

Bargaining power is high, as the threat of substitute increases; therefore the bargaining power of buyers
will increase as well.

The competition is high, as all the factors that increase for McDonalds also increase for the competition,
thus the competition also increases.

Technological Factors:
The threat of substitute is low

There's no effect on supplier's bargaining power.

The threat of new entrance is low since a lot of capital is required to acquire a new technology

Bargaining power of buyers is low. The technology will fasten the rate of production, this way the buyers
will be served within a short span of time. Consequently, the switching power will lower

Competition increases

Legal Factors:
No effect on threat of substitute

No effect on supplier's bargaining power

The threat of new entrance is high since patents and licenses for opening a new venture is easily
accessible

There is no effect on purchasing power of buyer

No effect on competition.

FORCE Bargaining Bargaining Threat of new Threat of Rivalry

Power of Power of Entrants Substitutes Amongst
Suppliers Buyers Competitors
EFFECT No Effect Increases Increases Low Increase

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External Factor Evaluation (EFE)

Threats Weight Rating Weighted

Score

1 As the market is highly saturated, the 0.09 3 0.27

competition is very high, which results in a
diversified range of competitors and lowers the
market share.
2 The new entrants don’t face any barriers, this 0.07 2 0.14
raises the already high competition.
3 The social effect of moving towards healthier 0.05 3 0.15
substitutes, can have a negative effect on
McDonalds. (Even though, they have introduced
healthy products, they are the face of increasing
obesity).
4 McDonald’s might face some cultural threat, as 0.03 4 0.12
they have to adapt according to every region,
this might result in them losing their standard,
or the McDonald’s taste.
5 They continually face criticism, for procuring 0.02 1 0.02
their beef from private farms, which are
responsible for large scale deforestation.
6 Switching cost is too low, in respect to 0.07 1 0.07
substitutes.
7 Some of the competitors offer the same 0.05 1 0.05
products for lower price, decreases their sales.
8 Due to the pandemic, the dine-ins were 0.02 2 0.04
closed, which decreased their sales.
9 Due to the rising inflation rates, their cost 0.08 2 0.16
increases, while their revenue decreases.
10 Duties imposed on the raw material 0.07 2 0.14
(imported), increases the cost of production.

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 Opportunities Weight Rating Weighted
Score

1 Bigger expansion towards the beverage industry. 0.09 2 0.18

Coffee.
2 The company can produce new products, related to 0.05 1 0.05
healthy products. Rebuild their brand image as
healthy, offering products like sandwiches, should
be their priority.
3 Rebuild their image towards being more customers 0.01 3 0.03
centric.

4 Target the age group 20-39, as studies suggest they 0.01 1 0.01
are the largest age group that consumes fast food.

5 Bring more innovation in the product line for kids. 0.05 3 0.15

6 Fast food industry, being the most convenient 0.05 2 0.1

option for the individuals with busy lifestyles,
increases the sales.
7 Can offer more discounts during special occasions, 0.05 2 0.1
for example, EID, Independence day, Christmas.
9 Increase focus on sustainability. 0.05 1 0.05

10 Using the technological advancements, they could 0.09 3 0.27

greatly decrease their cost and the time of
production.
Total 1.00 2.1

The total for the EFE matrix is recorded to be 2.1.

This means that the company is not doing as good and is externally weak.
The company is weak due to a highly saturated market, and the lack of differentiation in the
products. The effect of social factors can be seen as well.
The company should move towards rebranding their image as a customer centric by bringing in
more healthy products. They could also expand more towards the beverage industry, especially
coffee, as this is a gap in the Pakistani market, moreover they need to bring in more
technological advancement and reduce the cost of time and production.

22 | P a g e
Competitive Profile Matrix (CPM)

You Burger King KFC

Critical Success Factors Weight Rating Score Rating Score Rating Score
Advertising 0.08 4 0.32 2 0.16 3 0.24

Market Penetration 0.1 3 0.3 2 0.2 3 0.3

Customer Service 0.08 3 0.24 2 0.16 3 0.24

Brand Image 0.07 3 0.21 3 0.21 4 0.28

R&D 0.07 3 0.21 2 0.14 3 0.21

Product Quality 0.08 3 0.24 3 0.24 3 0.24

Financial Profit 0.1 4 0.4 2 0.2 3 0.3

Customer Loyalty 0.07 3 0.21 2 0.14 4 0.28

Market Share 0.1 4 0.4 2 0.2 3 0.3

Consistency 0.09 4 0.36 3 0.27 3 0.27

Cost control 0.06 4 0.24 2 0.12 3 0.18

Affordability 0.1 3 0.3 2 0.2 3 0.3

Total 1.00 3.43 2.24 3.14

Advertising:
In general, McDonalds in pioneer in the fast-food industry and is doing quite well in managing
these crucial factors with only little effort needed to respond to them better. McDonalds
advertising is quite extensive in terms of its competitors, where its smart ways of advertising its
burgers tend to attract a great amount of audience. While KFC’s advertising is also quite
extensive, it is not so creative as compare to McDonalds, while Burger King is seen not spending
a lot on advertising, which has also led to poor sales for the company.

Market Penetration:
It is important for companies especially fast food and retail businesses to expand their
operations into different markets to have a higher growth potential. Sticking to 1 market will not
allow for the company to grow, since things like food products are a necessary and who does not
like having junk food. Owing to McDonalds market penetration, it would not be wrong to say
that McDonald’s is doing well since it has more than 80 percent stores globally, which
determines how well its presence is in the market. Therefore, we gave McDonalds and KFC a
higher rating since both fast-food restaurants are doing quite great in terms of penetrating into

23 | P a g e
more markets. While Burger King is slow in its expansion and failed to capture Pakistani
markets too.

Customer Service:
The top priority of McDonalds is keeping its customers satisfied, with its food quality and
freshness, coupled with innovation in menu, it has won the heart of its customers in almost all
product lines. While this is also a very important factor in the industry since only if customers
are satisfied with the service and the quality of the food, they are likely to repeatedly consume
fast food. However, again KFC and McDonalds both are doing great due to which they wee
given a higher rating, while Burger King’s closure in markets explain that its customers are not
satisfied due to which we gave it a lower rating.

Brand Image:
Positive brand image is an important factor for the fast-food industry since, a few negative
feedbacks could result in companies losing their potential customers. In the era of strong impact
of word of mouth, companies need to focus on strategies to portray its positive brand image.
McDonalds brand image is quite great, but less than its competitors owing to recent complaints
that its customers had about high prices, food quality which resulted in impacting company’s
brand image negatively. Hence, this is why we gave it a lesser rating as compare to KFC.

R&D:
Investing in R&D to stay ahead of competitors is very important. Similarly, in fast food industry
keeping up with consumers preferences of food, and knowing more about availability of different
product lines to expand to requires great amount of R&D. McDonald’s constant investment in
research and development, to bring innovation in its products and to be the best fast-food chain
in the market, has benefitted the company in terms of higher profits and more customers. Its
recent technology innovation has attracted a lot of customers since it saves a lot of time while
ordering. Its constant effort to keep investing in R&D to understand market trends and stay intact
with customers’ requirements, has led to it serving the customers wisely and with the best
burgers. A higher rating of McDonalds and KFC in this factor is justifiable since these
companies spend large amounts in R&D to keep updated with customers’ demand.

Product Quality:
If the ingredients used by the fast-food chains are not fresh or are of a very local brand and
spices used are not up to customers expectations, it would suggest that the food quality is not that
great. This might also have a negative impact on customers. This factor is also important for the
industry, All the chains equally have managed to maintain their product quality; however, the
flavor and spices of McDonalds is what attracts most of its customers to keep consuming
McDonalds whenever they are in mood of eating burgers. Its uniqueness in fries (with potatoes
extracted from its own farms), and freshness in burgers is what enables us to give it a high rating
than its competitors. The company is doing well in maintaining its products quality.

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Financial Profit:
The Financial profit of a company determines how well the company is controlling its cost and
increasing its revenue. The financial data of the three company shows that McDonalds has the
highest net income in both the years, followed by KFC and then Burger King.
The financial reports revealed the following net profits for 2018 and 2019:

McDonald’s KFC Burger King

2018 5,924 1,763 1,143
2019 6,025 1,563 1,109
* All the figures are in million.
** These figures are global

Customer Loyalty:
There are many ways of measuring customer loyalty but the best way to determine it, is by
looking at the sales of the business. If the total sales are increasing every year, it means that the
brand has loyal customers.
The following financial data shows that in terms of customer loyalty, KFC is on top, followed by
McDonald’s and then Burger King. Although KFC’s revenue decreased in 2019, and
McDonald’s revenues increased, KFC still has the highest revenue amongst the three.

McDonald’s KFC Burger King

2018 21,025 25,716 1,650
2019 21,077 24,674 1,780
*All the figures are in million.
**These figures are global

Market Share:
Market share represents the total sales of the company in the market, as compared to the
competitor’s sales. The latest global market share of 2018 reveals the following shares:

McDonalds: 21.4%
KFC: 2.8%
Burger King: 1.2%

Consistency:

Consistency refers to how consistent the taste and quality of the products are, not only across the
city but across the countries too. McDonald’s takes standard controls to make sure that their taste

25 | P a g e
remains same and hence they import many of their standard spices too. KFC and Burger King
also maintain proper check and balance.

Cost Control:

This factor refers to how good the company is, in controlling its cost. McDonald’s by acquiring
different technology companies has lowered down its cost. However, KFC and Burger King still
has high costs.

The financial reports shows the costs incurred by the three companies in 2018 and 2019

McDonald’s KFC Burger King

2018 12,202 23,142 775

2019 12,007 22,436 839

* All the figures are in million.
** These figures are global

Affordability:

This factor refers to how affordable the product is. KFC and McDonald’s both have a rating of 3
as they are both affordable and rarely change their prices, while burger king has a rating of 2
since its prices are relatively higher than both of its competitors.

Value Chain Analysis

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Firm Infrastructure:

Strengths: Attract customers by giving them the infrastructure they desire, modern and
sophisticated

Human Resource Management:

Weakness: High Staff Turnover including Top management

Technology Development:

Strengths: Introduced Kiosks, a self-service ordering technology, it allows the customers of

McDonalds to place their orders without any hassle thus avoiding longer lines at the
ordering time.

Operations: Out Bound Marketing Services:

Logistics: and Sales:
Strengths: Weaknesses:
Inbound Strengths: Strengths:
McDonalds have Their
Logistics:
now introduced Customer Increased services
Strengths: “Stock Control satisfaction innovation in (delivery) are
Data Base remains the not available
the product
Strict control System”, which same, as the in every
over allows the line keeps the
taste remains area.
maintaining operational standard customers
its quality, managers to avoid despite intrigued and They are not
because of ordering different attracts new located in
control on its unnecessary or franchises ones. prime areas
supply chain additional stock, of the fast
which also helps Drive thru gives Strong food industry,
them keep the cost them an edge to
offer more relationship for example,
low.
specialized with Disney near offices
High efficiency services to the and coca cola, and
fryer takes less customers. brings more universities.
time to fry, take customers
Weakness:
less time and Carbon footprint Weaknesses:
increase is extremely
productivity high, because of Owing to
HCFC-22 use. constant
Increasing their
increase in
sustainability, by
prices, they
using low watt
could lose their
bulbs, and
potential
sustainable
customers.
packaging
Unhealthy
food image,
face of
obesity.
27 | P a g e
Primary Activities:

1. Inbound Logistics:
Analysing inbound logistics requires company to focus on every process; from raw
material (ingredients) to delivering the finished products. The suppliers here play a very
important role for McDonald’s because it entirely depends on their support for
McDonald’s to satisfy its customers. Without their support, the important aspect of the
value chain, inbound logistics of McDonald’s would be at risk. McDonald’s also has its
own farms from where it tends to get its dairy products and beef. This is to ensure that
its products are of top quality since this way McDonald’s can have control over its
supplies and also to ensure that cost is kept minimum. Other supplies include raw
material such as flour, yeast, sugar etc. However, it purchases the vegetables from local
grocery stores and soft drinks supply is Coca cola, which is also McDonald’s ally. It has a
strong control over its supply chain, which allows for it to have strict control over
maintaining its quality and achieve economies of scale. Due to the backwards
integration done by McDonalds, they don’t need to depend highly on the suppliers, the
cost is kept low and they have a control over the quality of the raw materials, they
receive.

2. Operations:
Technically, it refers to that stage where the raw materials and goods are converted or
manufactured to the final goods. It includes operational activities such as machining,
assembling, packaging, testing, etc. Analysis of these activities helps in increasing
productivity and profitability of the company. It also comes up with ideas that can
reduce the costs and increase customer margin. Following are some of the cost reducing
techniques used by McDonalds:
 McDonalds has a very smooth operation management system. With the advancement
of technology, McDonalds have now introduced “Stock Control Data Base System”,
which allows the operational managers to avoid ordering unnecessary or additional
stock. This can save them from the loss of rotting of raw materials (especially vegetables
used in salads)
 McDonalds uses fluorescent lighting in their kitchens, which consumes very low amount
of voltage. Studies show that every restaurant saves almost 11,000kWh of electricity
annually. This cuts down a major cost of operational activity.
 McDonalds has invested in capital equipment such as high efficiency fryers. They
consume less energy, take less time to fry and increase productivity
 McDonalds also practice cost cutting by buying vegetables directly from the farmers.
This helps them buy fresh vegetables and it keeps them safe from price fluctuations.

28 | P a g e
  In order to increase profitability, there must be more customers at McDonalds and they
must be served in time. To ensure this, McDonalds have hired trained staff. Every
member is assigned a particular task in the kitchen. The products are usually in ready to
serve form and it takes maximum 5 minutes to serve a customer. This increases
customer satisfaction and the profitability of the company

3. Outbound Logistics:
Outbound logistics includes different procedures like storing, carrying and shipping.
When a customer places an order, the product is then processed to get dispatched and
then shipped to desired address. The main goal of McDonald's is to provide high quality
food that also satisfies the taste of the customer. McDonald's serve its customers
through dine-in, drive-thru, ski-thru (at some locations) and delivery. In dine-in format,
customers have a choice if they want to choose self-service by going to the counter and
placing order themselves or if they want waiters to serve them. In drive-thru, customers
have to pick up the food themselves by arriving at the restaurant. Delivery service
provides customer to get food just by sitting at home and placing an order through their
website or phone.
They are considered as the pioneer of drive-thru and ski-thru.
They have a strict check on quality control, so that, everyone is satisfied, and the taste
remains standard as well.
Although they have been trying to stay to conserve energy in their operations, (high
efficiency fryers, low watt bulbs, etc.), and use sustainable packaging of the food items,
but still their carbon footprint is extremely high, as mentioned in the environmental
analysis.

4. Marketing and Sales:

PRODUCT:
McDonalds has an extensive product line, from non-veg, such as Big Mac, to veg,
Mc.Aloo Tikki. From beverages, Coke, Milo, coffee, to deserts, Mc.Flurry and soft serve
cone. McDonalds also serves healthy products, moving with the growing health
concerns, such as salads, fruit bowls, and juices.
McDonalds has adapted to every region they enter in. They do their homework, i.e, they
do a market research, related to the product that the region they want to serve, and
launch new products according to that, this results in the success of the product.
McAloo Tikki was introduced in India to cater to the vegetarian community, Bun Kabab
was introduced in Pakistan. Not only this but they are known as Macca’s burger in
Australia, (a nickname), or their burgers are known as Mc.ozzie.

29 | P a g e
 A
p
a
Apart from this, in accordance with the growing health concerns, they have also cut salt,
and fat content from their burgers. They have launched a health campaign; McDonalds
have introduced a happy meal for adults, which come with a step counter, and
advertisement which pulls the healthier options into focus.

PRICE
McDonalds uses a bundling strategy, as well as psychological pricing strategy, but
focuses primarily on bundle pricing.
For example, if one buys a burger (Rs.160), fries (Rs. 155), and a drink (Rs.130) combines
a total of Rs. 445, while a happy meal, consisting of all these and a book or a toy, is
priced at Rs. 295. This also shows that McDonalds uses psychological pricing as well.
There are other value meals offered by McDonald’s. Apart from this the headquarters
decide a price range, while the franchises get to keep the price in the defined range.

30 | P a g e
 PROMOTION
McDonald’s uses above the line promotion strategies; they target the mass media, using
billboards, television, social media, and celebrity endorsements. Not only this, but the
open house also served as a promotion strategy, gaining the public’s trust. They sponsor
events, such as the Olympic sponsorship, and other sporting events, such as NFL, FIFA,
EUFA, virtual laliga sports and others.
Apart from sporting events they have a partnership with Disney, where they have the
license to turn the Disney characters into toys for happy meals. Another aspect that
works in their favor, is the Coca-Cola endorsement they have, diehard fans of coke
prefer to consume McDonalds rather than KFC.

PLACEMENT
McDonalds belong to the QSR (Quick Service Restaurant), most of the franchises of
McDonalds are private. McDonalds own the name, the trademark, and the franchise
owners can use their marketing strategies to attract customers. The franchise owners
have to pay a hefty amount in order to use their brand name.
McDelivery is a website from where consumers can order without human interaction.
Recently, there have been few upscale franchises introduced by the corporation, which
attracts the upper scale consumers, who want a much more peaceful environment, than
the normal franchise. Almost every franchise has a play place, which attracts kids, to
dine in. Another venture introduced by the corporation is the McCafe, where snacks and
hot beverages are offered.
Over time, multiple campaigns have tried to place the image of McDonalds as healthy
and sustainable, but has failed again and again. They are still the face of rising obesity,
especially in America.

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 5. Services:
The best part of the services McDonald’s provides is complimentary Wi-Fi. It gives
convenient options to the customer to get some work done for free and have a nice
peaceful time as well with their favorite meals. It gives the accessibility of free Wi-Fi at
all the restaurants around the globe to its customers. McDonald’s promises the best and
quickest service to its customers and provide them with outstanding quality service and
cleanliness.
McDonald’s have built PlayStations in every outlet so that the people bringing in their
kids can have some moments of relaxations whilst their children can play there so that
they can give a stress free environment to you and a super fun environment to kids.
Their idea of a PlayStation is, “You bring the kids, and we’ll make the party.” McDonald’s
also gives the option to arrange special birthday parties for the kids as there is a
specified brand image in the minds of children as a place where they can have fun and
have a joker for their entertainment which is McDonald’s major identification.
McDonald’s services also include McDelivery and Mobile order and pay.

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Secondary Activities:

1. Firm Infrastructure:
Infrastructure determines a range of activities, such as management, finances,
accounting etc. Effective management of infrastructure will ensure that McDonalds has
quite a great control over its value chain if all things are managed properly. The
company should ensure that it is effectively controlling the infrastructure activities, in
order to better manage its overhead costs & to ensure that it strengthens its
competitive positioning in the market.
McDonald’s infrastructure is modern and sophisticated and tends to provide the
environment that customers look for. Customers feel secure and relaxed when coming
to dine in at McDonald’s. They also work towards proving eco-friendly workplace and
restaurants, hence are also involved in sustainability. The company’s image as the
leading brand in the fast food industry allows for it to better manage infrastructure.

2. Human Resource Management:

Although, many employees turn to a job at McDonalds, due to lack of offers from
elsewhere, they get lots of benefits. Once they have undergone the vigorous training
(specialized training for the managers), they are treated as part of the team, this creates
loyalty in the employees, apart from this the other benefits include working part time,
and a flexible schedule, that allows the employees to pursue other things, or their
education. Although, the corporation focuses on employees, there is still high turnover,
as the employees leave the job as it’s not their first priority, and as soon as they get a
better offer.
Some of the main strengths that come along are; Special training for the managers,
result in better customer relations, adaptability of taste to regions, a successful product
line, targets both kids and adults, affordable range of value meals.
The possible weaknesses that can be affect the work process are; High employee
turnover, even though they have introduced many healthier options, their brand image
is still that of fast food, unhealthy or the ones that cause obesity, franchises selling their
business, as their fees keeps increasing with the business.

3. Technology Development:
Development in technology helps a business diversify. McDonald’s has always used
technology in different stages of the value chain analysis to gain an advantage over their
competitors by increasing the efficiency during the process of production or reducing
their budget cost and investments over the production. The research and development
department of McDonald’s are classified into product development and technology
development. They work to stay updated on the changing trends and demands in the

33 | P a g e
 market so that they can keep up with the flow and maintain their image in the food-
industry as the best fast-food brand around the globe.
The president of McDonalds said that they would focus on modernizing the restaurants,
bringing diversification in the menu. All the technological advancements that
McDonald’s have brought through the years have worked tremendously in increasing
the sales and gaining market share. He believed so that if they modernize the customer
experience by introducing new technologically advanced features to their store and
introduce more products in their menu that are nutrition based, they can prove that
they are capable of scaling products on a higher level and on an accelerated pace.
However, too much technological advancement also adds to the cost of the business.

4. Procurement:
It is the process through which McDonald’s finds the resources and materials for a
product and how they are sourced and supplied to the firm. Their aim is to find the best
quality supplies within their fixed budget. The E-Procurement System of McDonald’s has
been the main reason for the success of the McDonald’s supply chain. McDonald’s uses
this E-procurement System. Emac Digital Company is E-Procurement website which is
partly owned by McDonalds and Accel-KKR Internet Co. which is a procurement hub that
was launched in 2001 which permits all the McDonald’s outlets around the globe to
purchase everything needed to run the restaurants.
It provides the resources not only to the entire logistics department but it also aids
McDonald’s entire supply chain. Moreover, the procurement site also gives businesses
an option to procure materials at a discount, which helped in reducing the costs by
cutting it down by 85% as stated by its supply chief Edwards.

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Internal Factor Evaluation (IFE)

Strengths Weight Rating Weighted Score

1 Strict control over maintaining its quality, because of 0.05 4 0.2

control on its supply chain
2 McDonalds have now introduced “Stock Control Data 0.05 3 0.15
Base System”, which allows the operational managers
to avoid ordering unnecessary or additional stock,
which also helps them keep the cost low.
3 High efficiency fryer takes less time to fry, take less 0.05 3 0.15
time and increase productivity
4 Increased customer satisfaction, due to highly trained 0.03 3 0.09
staff
5 Customer satisfaction remains the same, as the taste 0.1 4 0.4
remains standard despite different franchises
6 Drive thru gives them an edge to offer more 0.08 4 0.32
specialized services to the customers
7 Increasing their sustainability, by using efficiency 0.03 3 0.09
fryers, low watt bulbs, and sustainable packaging
8 Increased innovation in the product line keeps the 0.09 3 0.27
customers intrigued and attracts new ones
9 Their strong relationship with Disney and coca cola, 0.03 3 0.09
brings them more customers (loyal to these brands)
10 Attract customers by giving them the infrastructure 0.03 3 0.09
they desire, modern and sophisticated
11 Introduced Kiosks, a self-service ordering technology, 0.04 4 0.16
has allowed for customers of McDonalds to place
their orders without any hassle thus avoiding longer
lines at the ordering time.
12 Stay updated on the changing trends and demands 0.03 3 0.09

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 Weaknesses Weight Rating Weighted Score

1 High Staff Turnover even in the top management. 0.07 1 0.07

2 Carbon footprint is extremely high, because of HCFC- 0.04 1 0.04

22 use.

3 High pricing, Owing to constant increase in prices, they 0.09 1 0.09

could lose their potential customers.

4 Unhealthy food image, face of obesity. 0.04 2 0.08

5 Their services (delivery) are not available in every 0.08 2 0.16

area.

6 They are not located in prime areas of the fast food 0.07 2 0.14
industry, for example, near offices and universities.

Total IFE Score 1.00 2.68

McDonalds overall weighted ranking is 2.68, suggesting that it is better at playing with its strength, while
trying it suppress its weaknesses but still the rating of 2.68 tells us that it is not doing that good, and it
needs to focus on increasing its strengths, they can use some of the opportunities and weakness and
turn them into strengths.

The main attribute of McDonald’s strength is the use of technology, using. technology, such as kiosk,
high efficiency fryers, stock control data base system, etc., they reduce their cost, while decreasing the
time taken to prepare and serve the food, which in turn leads to increased customer satisfaction. With
the use of technology, the high staff turnover does not hurt them as much either, as they no longer
require many employees.

However, the image of McDonalds in the minds of consumer might hurt them a lot, as they have a huge
carbon footprint, as well as being the face of rising obesity. More than that, the constant increase in
prices, might force the customers to switch to either competitors or substitutes. Another weakness is
that they do not deliver everywhere, thus forcing customers to turn to competitors.

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 SWOT Matrix

Threats:
1. As the market is highly saturated, the competition is very high, which results in a diversified
range of competitors and lowers the market share.
2. The new entrants don’t face any barriers, this raises the already high competition.
3. The social effect of moving towards healthier substitutes, can have a negative effect on
McDonalds. (Even though, they have introduced healthy products, they are the face of
increasing obesity).
4. McDonald’s might face some cultural threat, as they have to adapt according to every region,
this might result in them losing their standard, or the McDonald’s taste.
5. They continually face criticism, for procuring their beef from private farms, which are
responsible for large scale deforestation.
6. Switching cost is too low, in respect to substitutes.
7. Some of the competitors offer the same products for lower price, decreases their sales.
8. Due to the pandemic, the dine-ins were closed, which decreased their sales.
9. Due to the rising inflation rates, their cost increases, while their revenue decreases.
10. Duties imposed on the raw material (imported), increases the cost of production.

Opportunities:
1. Bigger expansion towards the beverage industry.
2. The company can produce new products, related to healthy products. Rebuild their brand image
as healthy, offering products like sandwiches, should be their priority.
3. Rebuild their image towards being more customers centric.
4. Target the age group 20-39, as studies suggest they are the largest age group that consumes fast
food.
5. Bring more innovation in the product line for kids.
6. Fast food industry, being the most convenient option for the individuals with busy lifestyles,
increases the sales.
7. Can offer more discounts during special occasions, for example, EID, Independence day,
Christmas.
8. Increase focus on sustainability.
9. Using the technological advancements, they could greatly decrease their cost and the time of
production.

Strengths:
1. Strict control over maintaining its quality, because of control on its supply chain.
2. McDonalds have now introduced “Stock Control Data Base System”, which allows the
operational managers to avoid ordering unnecessary or additional stock, which also
helps them keep the cost low.
3. High efficiency fryer takes less time to fry, take less time and increase productivity.
4. Increased customer satisfaction, due to highly trained staff

37 | P a g e
 5. Customer satisfaction remains the same, as the taste remains standard despite different
franchises
6. Drive thru gives them an edge to offer more specialized services to the customers
7. Increasing their sustainability, by using efficiency fryers, low watt bulbs, and sustainable
packaging
8. Increased innovation in the product line keeps the customers intrigued and attracts new
ones
9. Their strong relationship with Disney and coca cola, brings them more customers (loyal
to these brands)
10. Attract customers by giving them the infrastructure they desire, modern and
sophisticated
11. Introduced Kiosks, a self-service ordering technology, has allowed for customers of
McDonalds to place their orders without any hassle thus avoiding longer lines at the
ordering time.
12. Stay updated on the changing trends and demands

Weaknesses:
1. High Staff Turnover including Top management.
2. Carbon footprint is extremely high, because of HCFC-22 use.
3. High pricing, Owing to constant increase in prices, they could lose their potential customers.
4. Unhealthy food image, face of obesity.
5. Their services (delivery) are not available in every area.
6. They are not located in prime areas of the fast food industry, for example, near offices and
universities.

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 Internal
Factors
Strengths
External
Factors
 With the decrease in the time of
Opportunities production, McDonalds can reduce
the time taken to serve the
customers, thus increasing
customer satisfaction and in turn
customer loyalty. (O9,S3)
 Keeping in mind the consumer
perception of fast food industry as
unhealthy, they can introduce
sandwiches without the fried
items, thus giving the customer the
organic food. They need to
rebrand their image.(O2, S12)
 Seeing as the play place and a
happy meal is already a factor that
attracts kids, McDonalds can offer
more products to attract kids, for
example nachos, mac and cheese, a
variety of juices. (O5, S8)
 With the increased focus of the
consumers on environmental
impact our company has,
McDonalds can find some more
ways to increase the sustainability,
for example, sell reusable straws.
(O8, S7)
 Nothing brings the customers back
to your shop, then them feeling
special. McDonalds using their
highly trained staff. Like the staff
can remember the regular
customer’s name, or take their
data and send a voucher for their
birthdays. (O3, S4)
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Weaknesses
 By bringing in more sustainable
technology, the company can reduce
their carbon footprint, and be more
sustainably responsible. (W2, O8)
 McDonalds can rebrand their image
as an outlet that provides both fast
food and healthy food in an equal
ratio. They can reduce the fat content
and offer more healthy product, just
like McCafe, they can have an outlet
that serves smoothies and shakes.
(W4, O2)
 Keeping in mind the busy lifestyle of
many individuals, McDonalds can
open more outlets near locations like
main Shah-re-faisal or near 2 talwar.
(W6, O6)
 By offering more discounts during
special festivals or time, McDonalds
can attract the consumers that are
lost due to high prices, give them the
best quality food, and increase
customer satisfaction, to make them
regular customers. (W3, O7)
 For a fast food chain, it is very
difficult to retain staff, (they leave as
they have better prospect), but with
the increased use of technology,
McDonalds can reduce their
dependency on the staff. (W1, O9)
  Need to rebrand their image from a
fast food corporation, to a health  McDonalds need to offer healthier
Threats
oriented company. (T3, S12) products, and rebrand itself as
 The company needs to keep a healthy. (W4, T3)
standard taste, all over the world  With increasing the radius for their
and the company, some minor delivery services, they can retain the
changes can change according to customers, that are being taken by
the region being served, keeping in the competitors as they offer delivery
mind the standard taste. (T4, S5) services, ( W5, T8)
 In Pakistan, McDonalds is the only  By decreasing their prices, even by a
company, that serves through a lower margin, can greatly increase
drive thru, (which gives them an their sales. (W3, T9)
edge in providing differentiated  Many customers are being lost to the
service), the company needs to new entrants as they offer the same
come up with more ideas related to products for lower price. McDonalds
differentiated services, for can lower their price a little bit, this
example, a high end McDonald affect coupled with the brand image,
outlet, or a rooftop outlet, which is can increase their sales. (W3, T7)
rare for fast food companies. (T1,  By opening in more location, their
S6) brand image, the “M” can serve as a
 Many companies in the fast food barrier to entry, and reduce the
industry offer undifferentiated competition. (W6, T2)
services. McDonalds should
introduce more unique products,
for example following their
introduction of bunkabab, they can
offer shawarma or falafel, or more
products that resonate with the
Pakistani people. (T7,S8)
 With their cost reducing
technology, they can reduce the
sales price, as due to inflation
almost everyone sells at almost the
same price, this would give them
an edge with the competitors and
increase their sales. (T6, S2)

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 SO Strategies
Keeping in mind the
consumer perception of fast
food industry as unhealthy,
they can introduce
sandwiches without the fried
items, thus giving the
customer the organic food.
They need to rebrand their
image. (O2, S12)
Nothing brings the customers
back to your shop, then them
feeling special. McDonalds
using their highly trained
staff, can look for more
creative ways to make
customers feel more special.
Like the staff can remember
the regular customer’s name,
or take their data and send a
voucher for their birthdays.
(O3, S4)
WO Strategies
Keeping in mind the busy
lifestyle of many
individuals, McDonalds
can open more outlets
near locations like main
Shah-re-faisal or near 2
talwar. (W6, O6)
For a fast food chain, it is
very difficult to retain
staff, (they leave as they
have better prospect),
but with the increased
use of technology,
McDonalds can reduce
their dependency on the
staff. (W1, O9)
ST Strategies WO Strategies
In Pakistan, McDonalds is Many customers are being
the only company, that lost to the new entrants as
serves through a drive they offer the same
thru, (which gives them an products for lower price.
edge in providing McDonalds can lower
differentiated service), the their price a little bit, this
company needs to come affect coupled with the
up with more ideas brand image, can increase
related to differentiated their sales. (W3, T7)
services, for example, a
high end McDonald outlet,
or a rooftop outlet, which
By opening in more
is rare for fast food
location, their brand
companies. (T1, S6)
image, the “M” can serve
as a barrier to entry, and
reduce the competition.
With their cost reducing (W6, T2)
technology, they can
reduce the sales price, as
due to inflation almost
everyone sells at almost
the same price, this would
give them an edge with
the competitors and
increase their sales. (T6,
S2)

SO STRATEGY:
Keeping in mind the consumer perception of fast food industry as unhealthy, they can
introduce sandwiches without the fried items, thus giving the customer the organic food. They
need to rebrand their image. (O2, S12)

WO STRATEGY:
By opening in more location, their brand image, the “M” can serve as a barrier to entry, and
reduce the competition, resulting in an increased market share. (W6, T2)

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 SPACE Matrix

Financial position (FP) Rating Industry position (IP) Rating

Return on investment 5 Growth potential 6

Leverage 4 Financial stability 5

Liquidity 5 Ease of entry into market 7

Working capital 6 Resource utilization 4

Cash flow 4 Profit potential 3

Competitive position (CP) Rating Stability position (SP) Rating

Market share -2 Rate of inflation -2

Product quality -1 Technological changes -3

Customer loyalty -2 Price elasticity of demand -3

Technological know-how -1 Competitive pressure -2

Control over suppliers -3 Barriers to entry into -5

and distributors market

Firms x axis 3.2

Firms y axis 1.8

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Competitor 1(Burger Competitor 2 (Burger
King) O’Clock)

Estimated FP 5 Estimated FP 4

Estimated IP 4 Estimated IP 5

Estimated CP -2 Estimated CP -4

Estimated SP -3 Estimated SP -3

Competitor 1’s x-axis 2 Competitor 2’s x-axis 1

Competitor 1’s y-axis 2 Competitor 2’s y-axis 1

FP
Aggressive
Conservative

7.0

5.0

3.0
Competitor 1
CP IP
1.0 Competitor 2
IP
-7.0 -5.0 -3.0 -1.0
-1.0 1.0 3.0 5.0 7.0

-3.0

-5.0

-7.0
Defensive Competitive
SP

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Internal Analysis: External
Analysis:
Financial Position (FP) Stability Position (SP)
Return on Investment (ROI) 5 Rate of Inflation 0
Leverage 4 Technological Changes -3
Liquidity 5 Price Elasticity of Demand -3
Working Capital 6 Competitive Pressure -2
Cash Flow 4 Barriers to Entry into Market -5
Financial Position (FP) Average 4.8 Stability Position (SP) Average -2.6
Internal Analysis: External
Analysis:
Competitive Position (CP) Industry Position (IP)
Market Share -2 Growth Potential 6
Product Quality -1 Financial Stability 5
Customer Loyalty -2 Ease of Entry into Market 7
Technological know-how -1 Resource Utilization 4
Control over Suppliers and Distributors -3 Profit Potential 3
Competitive Position (CP) Average -1.8 Industry Position (IP) Average 5.0

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 BCG Matrix

High
Industry Sales Growth Rate

?
McCafe
Big Mac

Happy Meal Chicken Chapli

Low
High Low
Relative Market Share Position

STAR: Big Mac

Stars are the products that have the highest market share and high growth rate. McDonalds Pakistan’s
star product is the Big Mac burger. The burger is not just in demand in Pakistan but all over the world. It
is estimated that around 17 Big Macs are sold, all around the world, every second.

Question Mark: McCafe

Question marks are the products that have relatively lower market share but comparatively a higher
growth rate. McCafe is a sub brand of McDonalds, they serve a wide range of caffeine related
beverages. In Pakistan, McCafe is not that popular, but is slowly gaining more recognition, as McDonalds
have added the logo on almost all of their franchises. More people are slowly being attracted towards
the brand, thus resulting in a high growth rate.

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Cash Cow: Happy Meal
Cash cows are products with lower growth rate, but high market share. The cash cow for McDonalds
Pakistan is the Happy Meal, as it is a value deal, it has a variety of products, and we have the liberty to
change the products within the happy meal. The deal also has toys in it, which furthermore attracts kids
and adults alike to the value deal. However, the growth rate for Happy Meal is low, as there has been no
change in the contents of the deal for a while.

Dog: Chicken Chapli

Dogs are the products with low market share and low grow rate. Chicken Chapli is the dog product of
McDonalds Pakistan. The companies introduced the product to target the desi audience, but were
unsuccessful; the customer feedback was extremely negative.

IE Matrix
McDonalds EFE Score= 2.1

McDonalds IFE Score= 2.68

The IE matrix which is based on the analysis of EFE and IFE suggests that the company falls in
fifth quadrant. McDonalds fall under the medium position, since its score falls under the 2.0-
2.99 range for McDonalds. If the company could slightly improve its EFE and IFE score it could
fall under 1st, 2nd or 4th quadrant, which is the growth and build strategy and can be achieved by
entering into new markets, since that is where market development, product development and
market penetration is strong.

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 Since McDonalds fall in fifth quadrant, it works with the "hold and maintain strategy". this
strategy explains the concept of expansion and growing of business more in the market but not
on an extensive level. The market penetration strategy could be applied at this level where
McDonalds enter the existing market and capture the market share. Along with this, McDonalds
can also modify and make changes in some of its other products along with bringing new
products in the market to satisfy its customers. McDonalds can observe the working of its
competitor and create its place in the existing market easily since it is a well-known brand
already. Because of this, the market penetration strategy is a low risk for McDonalds. Other
than this, it can also launch digital market campaign to attract new customers and increase
their market share.

Grand Strategy Matrix

RAPID MARKET GROWTH

Quadrant II Quadrant I
1. Market development 1. Market development
2. Market penetration 2. Market penetration
3. Product development 3. Product
4. Horizontal integration development
5. Divestiture 4. Forward integration
5. Backward
6. Liquidation
integration
WEAK 6. Horizontal STRONG
integration
COMPETITIVE COMPETITIVE

POSITION POSITION
Quadrant III Quadrant IV
1. Retrenchment 1. Concentric diversification
2. Concentric diversification 2. Horizontal diversification
3. Horizontal diversification 3. Conglomerate diversification
4. Conglomerate diversification 4. Joint ventures
5. Liquidation

SLOW MARKET GROWTH

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McDonalds have a very strong competitive footprint in the market, where its major competitor is
KFC, and both the chains are fiercely competing in terms of prices, marketing, placement etc.
But the current market growth is slow for McDonalds, since due to a lot of economic reasons
there is not a lot of potential for fast food chains to grow in the market. The poor market growth
is because there has not been any diversification in the market, related or unrelated, due to which
we placed McDonalds in the 4th quadrant. This suggests that the company should adopt some
diversification strategies, like entering the beverages industry, smoothies, juices etc or unrelated
diversification like entering hotel industry. Currently, McDonalds is focusing only on
maintaining its strong competitive position by concentrating its products to only offering the fast
foods. However, if it were to diversify and enter more product lines, there is a high chance it
could have benefitted in terms of spreading its risk over more products rather than only a few.
Although that would help it gain market share, loyal customers, and to be profitable, in the
longer run it would not have options to diversify its risk to.

QSPM Model
Problems:
As the rivals in fast food increase, it can lead to a decline in the market share of McDonalds, globally it
has already started declining.

Their product life cycle is on a decline. In order to gain more market share McDonalds’ needs to
come up with new business strategies. We have come up with two potential approaches for
McDonalds to make its image and sales better in the market.
The first strategy focuses on the decrease in the time of production.
With the added use of technology, McDonalds can reduce the time of production and thus the
time taken to serve the customers and increase their services, which would increase customer
satisfaction and in turn customer loyalty which would help in increasing the market revenue.
The second strategy focuses on increasing their market penetration.
The second strategy highlights the issue about the lack of services being offered in different
localities of the country. By opening their franchise in more locations, their brand image, the
“M” can serve as a barrier to entry, and reduce the competition as they would be serving more
people with the best quality food.
This can help strengthen company’s position in the market. The EFE matrix and IFE matrix were
used to identify key strategic factors for the QSPM matrix. Afterwards, the SWOT analysis, CPM
matrix, Space matrix and BCG matrix can be used to formulate the strategy.

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 Strategy 1 Strategy 2
With the decrease in the time of production, By opening in more location, their brand image,
McDonalds can reduce the time taken to serve the “M” can serve as a barrier to entry, and
the customers, thus increasing customer reduce the competition.
satisfaction and in turn customer loyalty.

QSPM Model Strategy 1 Strategy 2

Key Internal Factors Weight AS TAS AS TAS

Strengths
Strict control over maintaining its 0.05 2 0.1 3 0.15
quality, because of control on its
supply chain
McDonalds have now introduced 0.05 2 0.1 2 0.1
“Stock Control Data Base System”,
which allows the operational
managers to avoid ordering
unnecessary or additional stock,
which also helps them keep the cost
low.
High efficiency fryer takes less time 0.05 4 0.2 3 0.15
to fry, take less time and increase
productivity
Increased customer satisfaction, 0.03 4 0.12 4 0.12
due to highly trained staff
Customer satisfaction remains the 0.1 3 0.3 4 0.4
same, as the taste remains standard
despite different franchises
Drive thru gives them an edge to 0.08 2 0.16 3 0.24
offer more specialized services to
the customers
Increasing their sustainability, by 0.03 1 0.03 1 0.03
using efficiency fryers, low watt
bulbs, and sustainable packaging
Increased innovation in the product 0.09 2 0.18 2 0.18
line keeps the customers intrigued
and attracts new ones

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Their strong relationship with 0.03 1 0.03 2 0.06
Disney and coca cola, brings them
more customers (loyal to these
brands)
Attract customers by giving them 0.03 1 0.03 3 0.09
the infrastructure they desire,
modern and sophisticated
Introduced Kiosks, a self-service 0.04 4 0.16 4 0.16
ordering technology, has allowed
for customers of McDonalds to
place their orders without any
hassle thus avoiding longer lines at
the ordering time.
Stay updated on the changing 0.03 2 0.06 3 0.06
trends and demands
Weaknesses
High Staff Turnover including Top 0.07 3 0.21 2 0.14
management,
Carbon footprint is extremely high, 0.04 1 0.04 1 0.04
because of HCFC-22 use.
High pricing, owing to constant 0.09 3 0.27 3 0.27
increase in prices, they could lose
their potential customers.
Unhealthy food image, face of 0.04 1 0.04 3 0.12
obesity.
Their services (delivery) are not 0.08 2 0.16 4 0.32
available in every area.
They are not located in prime areas of 0.07 2 0.14 4 0.28
the fast-food industry, for example,
near offices and universities.
Opportunities
Bigger expansion towards the beverage 0.09 2 0. 3 0.2
industry. 18 7
Coffee.
The company can produce new 0.05 2 0.1 3 0.15
products, related to healthy products.
Rebuild their brand image as healthy,
offering products like sandwiches,
should be their priority.
Rebuild their image towards being 0.01 3 0.03 3 0.03
more customers centric.

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Target the age group 20-39, as studies 0.01 2 0.02 3 0.03
suggest they are the largest age group
that consumes fast food.
Bring more innovation in the product 0.05 2 0.1 3 0.15
line for kids.
Fast food industry, being the most 0.05 4 0.2 3 0.15
convenient option for the individuals
with busy lifestyles, increases the sales.
Can offer more discounts during special 0.05 2 0.1 2 0.1
occasions, for example, EID,
Independence Day, Christmas.
Increase focus on sustainability. 0.05 1 0.05 2 0.1

Using the technological advancements, 0.09 4 0.36 3 0.27

they could greatly decrease their cost
and the time of production.

Threats
As the market is highly saturated, the 0.09 3 0.27 2 0.18
competition is very high, which results
in a diversified range of competitors
and lowers the market share.
The new entrants don’t face any 0.07 2 0.14 4 0.28
barriers, this raises the already high
competition.
The social effect of moving towards 0.05 1 0.05 2 0.1
healthier substitutes, can have a
negative effect on McDonalds. (Even
though, they have introduced healthy
products, they are the face of
increasing obesity).
McDonald’s might face some cultural 0.03 1 0.03 2 0.06
threat, as they have to adapt according
to every region, this might result in
them losing their standard, or the
McDonald’s taste.
They continually face criticism, for 0.02 1 0.02 1 0.02
procuring their beef from private
farms, which are responsible for large
scale deforestation.
Switching cost is too low, in respect to 0.07 2 0.14 2 0.14
substitutes.
Some of the competitors offer the 0.05 3 0.15 2 0.1
same products for lower price,
decreases their sales.

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Due to the pandemic, the dine-ins 0.02 2 0.04 2 0.04
were closed, which decreased their
sales.
Due to the rising inflation rates, 0.08 1 0.08 1 0.08
their cost increases, while their
revenue decreases.
Duties imposed on the raw 0.07 1 0.07 1 0.07
material (imported), increases the
cost of production.
Sum total
attractiveness score 4.46 5.23

Conclusion:
McDonald’s approaches are aimed to support balanced and active lifestyles which differ
according to the nature of the countries around the world. Its main goal remaining the same
and continuing to fulfill the wishes and demands of its customers by offering even more options
and a wider range of menu choices, providing access to user-friendly nutrition education and
information and promoting sustainability. McDonalds represents the homogenization of the
world by being successful over time in increasing its reach across the globe. McDonalds has
been a source of providing millions of employment opportunities throughout the world and
reducing unemployment, they actively participated in programs to improve the community.
Every customer is a valued customers of McDonalds, but it specifically targets children and
families and therefore it will continue to work hard to earn and keep their trust with
responsible communication and quality food by applying new strategies and doing all that is
possible to make their brand image stronger. Moreover, by decreasing the time of production
they fulfill their desire to serve the customers by every way they can, as the reduced time of
production means that the customers will receive their orders quickly, thus increasing their
satisfaction, and forming loyal customers. This would be greatly beneficial to the company, as it
would increase the customer satisfaction and also attracts customers of the competitors.
However, with weightage of 5.23, the strategy of opening more franchises in location would be
even more profitable, as it would turn their weakness into a strength (their services are not
available in some areas), thus not only retaining their consumers, but also attracting potential
customers by increasing their market penetration. Especially if they choose their location
strategically, especially where the competitors are not present, they will attract the customers
of that area, or steal the consumers of the competitors.

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