INSTITUTE OF BUSINESS MANAGEMENT

MAN 405
April 2022

Under the instruction of Sir Javaid Ahmed

Aliza Nagori (20181-24366), Ifra Afaq (20181-24838), Ali Shahzaib

(20191-25952), Ameer Ali (20181-24737), Dhanesh Bhatia (20191-25800)

Strategic Management of McDonalds

Abstract
The case study involves in-depth analysis of the Fast Food Industry on its attractiveness alongside
devising strategies for McDonalds to grow and sustain its profitability. The Fast Food Industry is known
for its growth over the years by pooling in more capital, reallocating resources, improving technology,
intense market penetration, etc. Although the industry lacks in differentiation, it still has multiple entrants
trying to get the existing and potential market share through elevating efficiencies in their respective
value chains and evaluating the impact of the macro-environment on their entities. To be specific, the
analysis involves a comprehensive study on McDonald’s competency in the Fast Food Industry and how
further it can sustain and grow its position in the market through a strategic perspective. Multiple
competitive matching tools were used to understand the revolving environment. After evaluating the
industrial analysis, the internal analysis of McDonalds and conjoining factors of the two ends, we
extracted a strategy. The leadership of McDonalds can stay consistent and grow in the Fast Food Industry
if it takes the logistics operations in-house. Not only will this help them monitor the flow of raw materials
closely but also identify delivery gaps and take rightly measures that align with their just in time
production strategy.

Industry Structure of Fast Food Industry

Threat of New Entrants is one of the Porter’s 5 forces that play a significant role in determining
the potential of the new comers into the industry with the potential growth of the industry and
increase in the profit potential. According to the Corporate Finance Institute (2020) research, the
established firms will be facing risk of their competitive position in the industry when the threat
of new entrants gets high. The threat of new entrants depends upon the intensity of the barriers to
entry, so basically this force shows whether it’s easy to enter the fast food industry or not.
According to the Industry tool kit analysis of the threat of new entrants, the capital requirements
vary from the scope of the fast food business being operated by an individual. The requirements
could be as a small set up cost that includes renting a stall and using personal kitchen appliances
to progress with the business and can easily be operated by two people, or the fast food business
could be an established brand identity locally like Burger Lab or Internationally like McDonalds.
However, it’s not easy for small scale fast food businesses to attain economies of scale due to
their scope and their low market share, and they also have to initially keep their fixed costs high
(Corporate Finance Institute, 2020). From a global fast food industry perspective, the new
entrants can hardly compete against international fast food chains like McDonalds, Pizza Hut,
Burger King, etc. because of their brand legacy (MarketLine Industry Profile: Global Fast Food,
2012). The products in the fast food industry are not distinct, or unique, the fast food businesses
compete on brand identities, innovational operations to keep their quality of the fast food intact,
and the customer services on point so that’s why the companies with high market shares get
better cost and even performance advantages, due to which the new entrants might face
challenge to compete with the already excelling fast food industries. According to some previous
researchers, it has been determined that switching costs are low in the fast food industry which
leads to weak customer loyalty (Dwyer et al., 1987; Garcia-Acebron et al., 2010;Gremler and
Brown, 1996; Wang, 2010). Another research determines that customer loyalty in the fast food
industry is not done only on the basis of product satisfaction, the customer’s rely on the
relational approach which includes trust and commitment to drive the customer loyalty and
satisfaction.

This trust and commitment can be reached with the competitors have a legacy, like McDonalds
has been in the market as early as 1955 in the United States. Though, this relational approach can
also be done by a local fast food restaurant but it definitely takes time to attain that trust.
Accessing distribution channel depends upon the capital that the newcomer can bear and the
policies of that fast food company. For example, Burger King has majority of its outlets privately
owned rather than letting the brand get franchised. On the other hand McDonalds is known to
have 82% of its outlets as a franchise. Similarly, platforms like FoodPanda, Zomato work as a
third party to help engage and distribute the meals. Local fast food companies have an edge with
FoodPanda because it helps them easily register and distribute the prepared meals to the orders
placed, so it’s not difficult for the newcomer to access distribution channel if we talk about
online order placement. Another factor adding to the growth of the fast food industry brand
considerations is that positive response of food coupons on the consumers. Laroche et al. (2005)
drew out conclusions that there is a positive response of consumers when it comes to coupons in
terms of their intensions and attitudes towards the fast food brand. New comers can be on self-
employment to deal with their new fast food business, they can even have the family members
on the operations team to keep the human resource expense low, so they don’t need
qualifications, specific certifications, they just need the right skill. The supply of raw materials is
easily accessible to the local fast food restaurants; they can go to varied local vegetable and meet
markets to get the required material ordered. Although the local fast food restaurants do have the
advantage of knowing the local relevant markets for procuring their components but they still
lack obtaining economies of scale due to low bulk orders, low key brand image, etc. On the other
hand giants like McDonalds are clear examples of how fast food companies can cut costs with
experience. In the year 2016, according to Economic times, McDonalds cuts costs by 25% in
each of its outlets when it came to operating costs. They managed to do so by analyzing the
economic indicator, inflation. Since inflation was riding, other fast food restaurants focused on
providing discounts, but McDonalds preferred to stick with reinvesting in their business,
reevaluated their operations process and remodeled there business which resulted in the cost cuts.
Another thing to keep in loop was that they didn’t compromise on the customer experience or the
quality of the food. The social media is also a factor that positions the fast food restaurant in a
distinctive place in the market. A research conducted through regression analysis portrayed that
social media marketing has a positive impact on the brand equity and engagement of the
customers alongside retaining them. It has also been concluded that social media advertising
assists the brand in creating closer relationship with the customers while also broadening their
perception by creating a sustained positive image of the company and the brand. In this era, if a
fast food entrant doesn’t have presence on social media their business will not be able to access
the broader demand that doesn’t know of the fast food entrants’ existence in the industry (Riaz et
al., 2019).

Another factor determining the threat to new entrant is the retaliation that could be faced by the
new comer through the giants of the industry. Fast Food Industry giants like McDonalds and
KFC, are usually observed having strong marketing campaigns that help them attain the position
in the market. They usually keep their menus flexible to even replicate the meal that had been
launched by the other competitor. It has also been observed that there is a clear rivalry in the
billboard placements; one of the giants was also seen having their billboard attached above the
building that had the competitor’s outlet operating just below. For such aggressive marketing
campaigns and to sustain the brands image from such retaliation, the entrants would require
immense capital. Capital requirements can also be tough to obtain because of the increased
interest rates that can affect the entrants’ possibility to get the capital from financial institutions
and also to return it back. Although, the giants can provide a tough competition to the entrants,
but they need to stay careful of not overriding the antitrust laws where competition is supposed
to be encouraged. Due to these laws, the entrants can have an edge because cartels, price wars,
acquisitions can result the giants into lawsuits or legal issues. People are also conscious about the
food intake, hygiene factors that needs professional testing and awareness that the entrants may
lack in obtaining in their initial phase. The large chains like McDonalds also meet international
standards of food quality by having a Food Safety Advisory Council and they also have devised
a Global Food Safety Structure, again these calls for further capital investment. The industry
structure from the overall analysis of the threat of new entrants suggests that it’s from moderate
to high because of the capital with initial fixed costs is low (‘MarketLine Industry Profile: Global
Fast Food, 2012). The new entrants can enter the industry keeping in mind their financial
position, sustaining the performance and creating a stronger brand identity.
Fast Food Industry is one of the food segments that are getting popular other than that there are
other substitutes like continental food, traditional Pakistani Food, and Street food. People can
choose between variety meals with different price ranges to satisfy their taste buds. McDonald’s
and other high end Fast Food Outlets majority of the times target elite classes, whereas other
local fast food restaurants offer low price meals with more quantity so there are chances that the
popularity of such restaurants will slow. People have also started becoming health conscious and
so the demand for vegan food or diet meals is also increasing. Considering the fact that the threat
of substitute is high because people are attracting towards low price fast food, despite the quality
they prefer low price food. Brands offer high price fast food but they fails to justify it because
the quality or quantity either of them turns out low. Whereas low price fast food chain offers
great quantity with average quality of food which is why there is a high chance people will go for
substitutes. Cost will not incur if they switch into local substitute but there can be an issue of
quality and quantity. But, if they switch to Continental side so the only thing that will have an
effect on consumer would be of Taste buds because they are fast food people so they might
won’t like the continental cuisine. Other than that, Customer has substitute i.e. Burger king,
Burger lab, KFC, Burger O Clock and other fast food chain and Continental food i.e. Chinese,
Italian, Turkish and traditional i.e. Pakistani. Not only have this but costumers also become
health conscious which is one of the reasons that they can substitute to healthier food. If we talk
about McDonalds, people won’t substitute because of McDonald’s high brand image in the
market both domestic and international which stands it out than other fast food chains and
customer are brand loyal. But, if they continues to increase their prices of food so there is a
chance that customer would go for substitute not only this, but McDonalds also needs to work on
its quantity of food.
Rivalry among Existing Competitors in the fast-food industry increases due to several reasons
such as changing consumer behaviors, products, increasing numbers of competitors, rising prices
of commodities, and rising costs as well. For instance, we have Arabian, Chinese, American,
European among another restaurant in Pakistan. This shows that, competition is diversified rather
than specified. These restaurants have various levels of menu options, qualities of food, services,
cleanliness, standards in terms of records with health departments, values with reference to
prices, ambiance, and overall experiences customers get.
Despite this rivalry, the restaurant industry has managed to stay competitive and provide value to
customers and achieve economies of scale. The restaurants industry has implemented
management systems, which create differentiation in terms of achieving the above factors while
some are still working on the cost leadership.
Rivalry among competitors has taken a different turn with the social media. Most restaurants
have gone online to reach many consumers. Restaurants, which have an online presence, have
considerably reduced their marketing costs. This strategy has given such restaurants a
competitive advantage over their competitors. Therefore, restaurants can reduce their prices to
attract many customers. Consumers can review prices of different restaurants over the Internet
and choose the one with best services and products at relatively affordable rates. In addition, the
online presence also enables customers to identify restaurants within their localities easily.
 The Five Forces analysis model considers firm aggressiveness a factor that influences
competition. In this business case, most medium and large firms aggressively market their
products. This factor increases the intensity of competitive rivalry that Fast Food Corporation
experiences. In addition, low switching costs make it easy for consumers to transfer to other
restaurants, such as Wendy’s and Burger King. This external factor adds to the force of
competition. Also, the intermittent overcapacity due to various factor impact the Rivalry among
competitors.
This element of the Five Forces analysis deals with the influence and demands of consumers, and
how their decisions impact businesses. The following are the external factors that contribute to
the strong bargaining power of buyers:

• Low switching costs – Strong Force

• Large number of providers – Strong Force
• High availability of substitutes – Strong Force

The ease of changing from one restaurant to another (low switching costs) enables consumers to
easily impose their demands which forces the restaurants in the fast food industry to provide a
unique, differentiated item. In the Five Forces analysis model, this external factor strengthens the
bargaining power of customers. In relation, because of market saturation, consumers can choose
from many fast food restaurants in the fast food industry. This condition makes the bargaining
power of buyers a strong force in affecting the company’s external environment. Moreover, the
availability of substitutes is relevant in this external analysis. In this case, the availability of
many substitutes adds to the bargaining power of customers. For example, Substitutes include
food kiosks and outlets, and artisanal bakeries, as well as microwave meals and foods that one
could cook at home.
The Bargaining Power of Suppliers is the one of the forces from the porter’s five forces of
industry analysis Framework. It shows how much the power own by the suppliers in the market
and this refers how the suppliers influence the companies to raise the product prices, low and up
the quality of the product and also the supply of the product is also influence by them because of
the raw material availability.
By refer with the exhibit 1, we can see there is no unique inputs for the fast food industry as we
all know that the spices are produces by the own companies by mixing the available spices and
the raw material is the product which is in our daily routine like the potato, bun, bread, and so
on. It is very easy to switch between the suppliers because we don’t need to check and be more
suspicious about the product because the raw material is the daily life goods so it is very easy to
inspect and get the cheaper and better quality product from the any supplier. It is not very easy
for the suppliers to take our customers because customers are more likely to go at some where he
finds a good taste and taste is in the species and sauces which has been produce by the
companies mostly. We can’t use the substitute product at the time of the production because
most of the time when we use the substitute product that will affect the taste and that can be
make our product less attractive and tasty so it is not easy to use the substitute product in the fast
food industry. There are many suppliers in the market who can offer the cheaper price with the
good quality in the market. The effect of the purchase has the more effect at our prices like if the
prices go higher of the raw material we have to increase our prices too.
So by concluding the above we have found the 3 sub-forces of the bargaining power of the
suppliers.
Large number of suppliers – Weak Force
Low forward vertical integration of suppliers – Weak Force
High overall supply – Weak Force
The large population of suppliers weakens the effect of individual suppliers of Fast Food
Industry. This weakness is partly based on the lack of strong regional and global alliances among
suppliers. In relation, most suppliers are not vertically integrated. This means that they do not
control the distribution network that transports their products to firms. In Porter’s Five Forces
analysis model, such low vertical integration weakens the bargaining power of suppliers. Also,
the relative abundance of materials like flour and meat reduces individual suppliers’ influence on
the company. Thus, this element of the Five Forces analysis shows that external factors combine
to create the weak supplier power, which is a minimal issue in strategic management.
The Opportunities Recognized from the porter’s 5 forces model include: Platforms like
FoodPanda providing easier order placement & distribution support O1. Coupons play a
significant role in determining the intentions and attitude of a customer towards considering a
brand O2. Cost effective Social Media provides access to greater audience, better customer
engagement, and enhances brand image O3. Food Industry can expand in different food
categories i.e. Traditional Pakistani, Continental, Chinese, Street, and Bakery foods O4. We can
offer healthy substitutes for Health conscious people, as it will attract them and that will help the
industry in growing O5. Low price with good quality can help increasing the sales, as people
nowadays prefer to eat low price food with good quantity and quality rather than high price and
less quantity O6. Equal Balanced Competition as there are companies which are equally
equipped and battle with each other for market leadership O7. High fixed costs create pressure
for all companies to fill capacity, thus leading to price cutting when there is excess capacity.
High storage costs push companies to decrease prices to ensure sales O8. Low Industry growth
as the market is saturated which make barrier to entry more intense O9. Buyers can get the food
items at cheaper prices O10.Buyers can get good quality items at lower prices if they have good
bargaining power. More customers can be attracted if it allows its customers to bargain and offer
them items at lower prices O11. It is very easy to switch the supplier in the fast food industry
because of the numbers of suppliers in the market O12. In this industry it is hard to grab the
customers from the supplier because in this industry taste is factor which is hard to copy for
suppliers O13. Because of the high numbers of small suppliers in the market they can’t force
companies to increase the raw material price O14.
On the other hand, the threats recognized from the analysis include: The products in the fast food
industry are not distinct or unique T1. High capital requirements for conducting marketing
campaigns and to comply with the international standards of the fast food industry T2. High
Interest rates undermining the possibility of financial support for startups T3. The biggest threat
is that consumer can switch to local substitute if the price of the food remains high and quantity
remains low T4. Consumer can switch to healthier options and might leave eating fast food T5.
Strong competition among the fast food chains i.e Burger King, Burger O Clock etc. T6. Local
fast food Chain can grow more than the bigger fast food chains, reason is that inflation has made
the consumer spend less on expensive fast food, so bigger fast food chain should come up with
an strategy to target not only the elite but middle class as well, that will help them grow T7.
Switching cost have a impact on the degree of rivalry among existing customers T8. If the two
brand are selling similar product such as Mc Donald and Burger King T9. Lack of
Differentiation is fast food industry as the brand is targeting the same market and same
customers. The products are similar also T10. Decrease in sales if buyers are allowed to have
higher bargaining power T11. Decrease in profits if buyers are allowed to have higher bargaining
power T12.
By keeping in mind the above mentioned opportunities and threats, my team has analyzed a few
strategies that include: For this purpose, the current score of 6.5 can be improved if McDonalds
could provide a platform to local fast food businesses that are growing by providing the same
segment as there’s, not acquisition, but just assist them in reaching the standards they are lacking
in by doing partnerships in particular projects so that the associated brand awareness could
increase and the entrant could grow alongside S1. The industry’s growth could also improve if
McDonalds could use their Food Safety Advisory Council for visits in local fast food companies,
educate and train them with the safety standards so that the trust of people in purchasing the fast
food increases and so does McDonalds social commitment with its customers S2. One of the
major component is pricing, if the product (fast food) price of subsititute is lower than your then
there is a high chance that consumer will shift towards them. The first strategy is to keep the
price market competitive and offer a good quality food so that consumer sticks to your
brand/company. The second strategy is to offer healthy food items in your menu, reason being
that people have become health conscious and they desire to eat those food that add positive
impact in their body. Thirdly, the quality of fast food speaks volume, it is the key features that
either attract the consumer or repel the consumer, the strategy should be to offer a high quality
fast food than your substitute. The fourth strategy is to maintain your fast food restaurants best
services, i.e don’t delay the orders, don’t keep the food uncooked, always give best attention to
your customer and ask them about their preferences S3. Differentiation in fast food industry is
very important and so in order to counter the similarity which is making switching cost easy, the
brands can work on better value creation and pricing so the customer can differentiate and easily
recognize the fast-food brands. The major problem which comes into the mind is the brands
offers similar product in fast food industry and only way to counter this is this way S4.
Saturation in the fast-food industry is positive for the existing brand but for the growth of the
industry the use of social media, better interaction with customer, better value and cost effective,
and differentiation can help the brand capture more market share, also increase the brand value
and growth of the industry S5. The growth of existing brand in the saturated fast food industry is
by value creation and customized and effective interaction with customer. Targeting the
customer through all the mediums is the priority S6. More effective communication with
customers both through the online and offline channels and promotion of products should be
done not just through social media but also through word of mouth so that the customers can get
to know more about what it offers and if a customer has better awareness of its items then he/she
will buy more S7. Buyers should be given some liberty to bargain but for some particular food
items which are not sold most often and which buyers actually find costly to purchase, so some
bargaining power should be given to the buyers when it comes to these type of products S8. We
need to find out those suppliers who give us the low cost with the quality because quality of the
food also matters S9. We should have to keep that chief along with us whose taste is more like
by the buyers S10.
Scales of 5 Porters Forces
Threat of New Entrants

Threat of Substitutes Products

Rivalry among Existing Competitors

Bargaining Power of Suppliers

Bargaining Power of Buyers

Macro-environmental analysis
PEST analysis is another tool to analyze the strategic external environment of an industry.
According to Allied Market Research (2020), it has been determined that by 2027 the Fast Food
Industry will grow by 4.6% which makes $931.7 billion.
The political factor in the PEST analysis evaluate how the industry is dealing with the political
environment which includes the regulations, policies set by the government of the particular
country. This also includes the antitrust laws, tax laws, employment laws, and even exemptions.
The Threat of New Entrants point numbers 8 and 9 get affected according to the analysis done
for the threat of new entrants, it has been observed that there could be antitrust factors affecting
the competition in the Fast Food Industry. Even though we speculate that the giants in the Fast
Food Industry like McDonalds, KFC, Pizza Hut, etc. would give a tough time to the new
entrants, but the entrants have an edge when it comes to legal perspectives. If the major players
of the fast food industry deal with any sort of price fixing, cartel, price wars, or try dealing with
acquisitions then they might get themselves in trouble with the lawsuits. For example,
McDonalds had recently faced a lawsuit where 3 operators had complained concerning the
royalties, rents, sale policies, and their investments claiming that McDonalds had violated the
agreement document. Antitrust Laws also include safety of food; here the emphasis is on how the
fast food companies protect the food from unhygienic factors. For this purpose this must obtain
licenses or certifications like Health/Trade license, Eating House License, Food Handler’s
permits, etc. to be able to operate with proper compliance with the standards established for the
fast food restaurants. This maybe a bit difficult for the new entrant to obtain because of the
lengthy procedures and investment into catering it but these are necessary steps that can help
them increase their demand by recognition. For example, McDonalds has its own food safety
advisory council, they use food quality assessment tools that are approved by BRC Global
Standards.
The economic environment in PEST emphasizes on the economic indicators that affect the
economic growth. The fast food industry as mentioned earlier will be growing at a rate of 4.6%
CAGR. This means that there is quite a scope in the industry’s growth.
The inflation rates refer to the increasing in prices over the period of time. This factor pressures
the fast food companies to pull down their prices in the form of discounts and other sales
promotions. The threat of new entrants point number 6 gets affected by this indicator. When
there was an economic downturn observed in the year 2016, majority of the players in the
industry, to meet the demand start providing different meal options to sustain their demand. On
the other hand McDonalds, with a legacy, used a different strategy. They instead of providing
offering any discounts, they reevaluated their operations in different stores and remodeled them
and cut around 25% of the operations cost in each store. Now, they stand at a distinct position
because if they cut their prices or offer any of sort of discounts, they won’t have to compromise
more than others because they have also lowered their costs without compromising their
performance in terms of food quality and customer satisfaction.
The threat of substitute increases due to people’s preference to buy low price fast food so they
look for substitutes that offers good or average quality fast food or continental food with
economical price. Substitutes are the cheaper option for customers, so they shift towards it as the
expenses has increased so they can’t afford to buy high price fast food.
An impact on the rivalry of existing competitors comes from the per capital income and GDP
trend create a large impact which decides that individuals in the lower, middle, and upper classes
all have enough to spend on luxuries — including fast food industry. As a result, the overall
revenue of the food industry is impacted which shows whether individuals cook less and eat out
more often. Labor incomes are growing for a reason: laborers are earning more money these
days. On the whole, the cost of hiring workers is increasing across all industries. This is caused
by not only a growing demand for employees. Similarly, fluctuating taxes on raw materials and
ingredients can result in high prices of products. Thus, affecting the prices on the menu. A slow-
growing or unstable economic growth is also a threat to the industry
The interest rate if we specifically talk about a country, Pakistan is offering 9.75% interest rate
which can make an entrant stand at a tough position when attaining capital for investment and
operation. The threat of new entrants point number 4 gets affected by this indicator. The interest
rate is an important economic indicator because it shows the cost that will be incurred on the
capital obtainer’s side from the financial institutions. The threat of new entrants will be lowered
because of the high interest rates as obtaining the capital will be tough for the new entrants. The
lower the interest rates the higher there would be chances for the industry to grow because there
will be more fast food entrants.
Rising the dollar rate means that the Pakistani rupee is diminishing day by day and as per the
current govt. instability It will go more higher because when the govt. is not stable foreign
investments takeout there investments from that country and that country has less reserves and
when we have the less reserves it will makes are rupee more unattractive.
So because of this supplies are getting the raw material in more higher rate and most of the
people are now finding the jobs and unemployment rate has also gone higher so that makes the
less suppliers in the market so it is the point of the worry too.
The labor Cost is also the one more factor which makes the suppliers margin higher like as per
the data unemployment rate has gone higher so it makes the labor cost lower people are ready to
work on the low wage too. So because of this thing we have the bargain ratio higher than the
usual from the suppliers.
Energy Availability Problem is everywhere in the Pakistan (except some places) and this
problem gives the organization higher cost than usual like is the fast food industry, people have
to store their products and that requires electricity and for maintaining the power failure they
have to go for the other resources which gives them the higher cost.
So it also effects the bargaining power of the supplier like if the supplier in small then he don’t
have much resource to store the product he will sell the product at the lower cost and even
sometimes he delivers the product and make the credit for the 3 to 6 months.
The social factor of the PEST analysis indicates the interests of the public and the environment.
It includes the values, cultures, customs, religious beliefs, demographics, and other similar
factors.
Environmentalism is an important part of the social factor. Environmentalism involves how the
business operations are being executed and the rate at which it is affecting the environment. The
green sustainability plays an important role in the business operations because it makes the
industry move towards efficient yet environmental friendly processes. The threat of new entrants
point numbers 1, 8, and 9 gets affected by this indicator. McDonalds is currently improving on
waste management by testing new packaging and recycling solutions that could help them
become more environmentally friendly. They claim to have 78% of their packaging materials to
be recyclable. From entrants point of view, to invest on R&D a find such solutions can be a
tough call because of the investment required this leads to a demotivating factor for the industry
to grow with more entrants. This is also another form of retaliation that could take place in the
fast food industry, the giants can now gain cost and performance advantage keeping aside the
undifferentiated products.
The threat of substitute has increased because nowadays, people have become more health
conscious especially after covid-19 pandemic, they make sure that whatever they are eating is
hygienic and is good for their health. So, now they prefer to avoid fast food and this is the reason
customers are opting for healthier substitutes. There are certain socio cultural factors which
affect the fast food industry like whether the customer's consumption of food items is aligned
with his/her culture, values or norms. It also depends on the regional shifts in the population-
to what extent people who like certain items are willing to consume those items in another region
and how their movement from one region to another affects their consumption pattern. These
factors also include lifestyle changes which is a vital point because how often does a consumer
consumes fast food items, whether his/her consumption of fast food items is becoming his/her
lifestyle or not and how is it affecting his/her life. There also certain religious factors involved
that which people are willing to consume fast food items and whether or not they are facing any
conflict with their religious beliefs when they are consuming fast food items. There also certain
status symbols involved in this like people tend to think that what status do they have if they are
consuming fast food items and to which social class do they actually belong like if they lie in the
upper middle class, middle class or lower middle class customers.
Technology is the factor in the PEST Analysis that can draw new pathways to efficient
operations and help the industry to grow. Technological factors include trade mark protection,
skill level workforce, internet availability, and automation improvements, and many other
factors.
The threat of entrants becomes weak because automation has become one of the renowned
components of the technological factors because it helps business improve their operations by
implementing it and making the flow of information, awareness, data accessibility, and making
of the products more efficient and can lead to cost reductions. The threat of new entrants point
number 6 gets affected by this indicator. For an entrant, purchasing advanced tech is not an easy
decision as they have budget constraints that make them stick to the old ways of operations.
McDonalds and other Fast Food giants have replaced the ordering of meals procedure into a
more machine interactive experience. Instead of the McDonald staff taking the meal order, the
customer is requested to try ordering through automated machines that list down the menu, take
the order, provide the billing and also allocate the table number for seating.
On the other hand, rivalry among existing competitors in terms of tech development includes
innovation, automation, technical awareness, and more influence the production, distribution,
and communication operations of a business come under the technological parameters.
Technological advancement such as accepting payments via smartphones, ordering food online,
and operating CCTV cameras from mobile phones has opened up, new revenues for the
restaurant industry. Automation is the future of the restaurant industry. The introduction of the
latest software to manage the accounts of companies can lead to fewer errors and more profit.
Technology has also given companies the scope to experiment with their promotion strategies to
reach more people quickly and leave a long-lasting impression. Internet availability is a
resource that helps the company stay engaged with customers instantly and help in data
accessibility anytime anywhere. The threat of new entrants point number 1 gets affected by this
indicator. In the case of the Fast Food Industry, online ordering and social media engagement
have become top tools to utilize if we talk about brand awareness. The entrants can use social
media to create their brand awareness and also engage with the audience to perform better in the
form of customer service and menu flexibility. Internet availability not only helps in operations
but also can help the new entrant gain fresh information concerning their competitor’s practices.

After evaluating the industrial structure with the macro environment and my team come to these
opportunities. Platforms like FoodPanda providing easier order placement & distribution support
O1. Cost effective Social Media provides access to greater audience, better customer
engagement, and enhances brand image O2. Automated Customer Experience decreasing
waiting time of the customers O3. Fast food chains can offer good quality food with economical
price O4. Coupons play a significant role in determining the intentions and attitude of a customer
towards considering a brand O5. Fast food chains can offer healthier food options, which can
attract the customers specially the health conscious ones O6. The development of digital
marketing trends can help build food industry of Pakistan online presence O7. Technology can
help brand build competitive advantage O8. People have become price conscious due to high
rate of inflation; customer are more attractive to cost leadership and look for cheap alternatives
with better value O9. Technology advancement and latest software help company manage
accounts easily and result in fewer errors O10. Research on different cultures can be done and
new food items can be introduced in the market targeting the particular market for which the new
item is introduced, in this way cultures and values of people can be assigned with their
consumption pattern and this will make them more happy and they would be willing to consume
more O11. Increased sales and profits if people are made more aware of its items and that can be
done through effective marketing campaigns where the fast food items in the overall food
industry are portrayed as lifestyle items not just as fast food items which will engage the
customers more and they would be willing to consume more of these O12. Offering the items at
affordable prices can help bring more and more customers, will help increase a company’s
market share will also help in reducing people's insecurities regarding social class differences
where people think that if they belong to a specific class then only they can consume fast food
items O13. Suppliers have the room for the margin if they have the cheap labor at their work
O14. Energy Crisis is one factor that may take the room of bargaining from the suppliers as the
most goods are partible in the food industry O15. Coupons play a significant role in determining
the intentions and attitude of a customer towards considering a brand O16.

On the other hand, the threats observed after the industrial and microenvironment analysis: The
products in the fast food industry are not distinct or unique T1. High capital requirements for
conducting marketing campaigns and to comply with the international standards of the fast food
industry T2. Fast food companies need large investment to manage the wastage of production in
shape of recycling T3. Consumer can switch to cheaper options, so there is a high chance that
they will substitute T4. Consumers prefer less to eat out and more to eat at home T5. In times of
recession and notable economic downturn, restaurant will find deterioration more noticeable that
other food industry related industries T6. Price uncertainties affect everyone within the food
industry from the supplier and producer right through to the restaurant owners and ultimately the
customer T7. Reduced sales and profits in the future if people think that the items the consume
conflict with their religion because some people think that fast food items provided by certain
restaurants are Halal and some people think that its haram so that can have an impact on its
overall profitability of the restaurants in the fast food industry T8. In times of recession the fast
food industry can face heavy losses as the purchasing power of people falls and people tend to
save more rather than spend T9. Unstable political situation of any country at any point affects
its citizen both mentally and financially so in this case he/she will be willing to spend less which
can lead to the industry facing heavy losses T10. Current situation of the economic and politics
are making the less suppliers with the higher rate in market so it can push the bargaining power
of the suppliers at back T11. The biggest threat is that consumer can switch to local substitute if
the price of the food remains high and quantity remains low T12. Consumer can switch to
healthier options and might leave eating fast food T5. Strong competition among the fast food
chains i.e Burger King, Burger O Clock etc. T13. Local fast food Chain can grow more than the
bigger fast food chains, reason is that inflation has made the consumer spend less on expensive
fast food, so bigger fast food chain should come up with an strategy to target not only the elite
but middle class as well, that will help them grow T14. Lack of Differentiation is fast food
industry as the brand is targeting the same market and same customers. The products are similar
also T15. High Interest rates undermining the possibility of financial support for startups T16.
Saturation in the industry is positive for small brands T17.
The strategies we extracted from the industry and macro environment analysis include: For this
purpose, the current score of 6.5 can be improved if McDonalds could provide a platform to local
fast food businesses that are growing by providing the same segment as there’s, not acquisition,
but just assist them in reaching the standards they are lacking in by doing partnerships in
particular projects so that the associated brand awareness could increase and the entrant could
grow alongside S1. The industry’s growth could also improve if McDonalds could use their Food
Safety Advisory Council for visits in local fast food companies, educate and train them with the
safety standards so that the trust of people in purchasing the fast food increases and so does
McDonalds social commitment with its customers S2. McDonalds can completely shift to online
ordering even while sitting in the outlet through Wi-Fi services so that the customers still don’t
have to wait against the machine ordering and create another queue. This will increase the
comfort of the customer and can also be followed by the fast food entrants with Wi-Fi services
S3. The strategy we can use to minimize the effects of PEST on threat of substitute is keep the
price economical, due to inflation expenses of people has become high, and many can’t afford to
dine out every day so they look for economical food that’s why keeping the price low or
moderate would attract the customers. The other strategy we can use is to offer healthy food, i.e
low calorie food for diet conscious people, Protein Shakes for those who want to gain weight and
things like these S4. The development of digital marketing trends can help in effective
communication between the brands and customers which can increase the affection of customers
to the brand. This can decrease switching of brands by customer and increase value creation S5.
Technology can counter rivalry among existing customer and help brand increase market shares
with better brand awareness of brand on social media S6. As people look for better alternative
due to pricing, this cause brand to compete on lower prices in food industry. Brand should move
toward give better economical prices so the customer doesn’t switch to other brands and the integrity and
value of company remains S7. Partnering with better delivery app and use Social Media Marketing for
better online presence can help against the saturation of the industry, which increase the brand image in
mind of customer and also decrease the switching of customer towards other brand because switching in
fast food industry is very common S8. Make future plans regarding if the country's economy faces
recession or any kind of economic downturn then what policies shall be followed in order to ensure its
market competitiveness and its market survival S9. Devise policies considering all social factors like
removing misconceptions about which social class can consume fast food items S10. Devise Policies
keeping in mind all the technological factors in mind like whether marketing of fast food items through
word of mouth is enough or whether it should be done through different social media platforms like
Facebook, Instagram, and YouTube Vlogs or whether digital marketing techniques should be used like
Mobile Marketing, Email Marketing etc. S11. Long-term plans should be made considering the financial,
economic and political situation of a country and the saturation in the fast food industry should also be
considered in that country which can affect the consumption pattern of fast food items S12. We can find
the suppliers who don’t have the business at the higher scale and have the better quality so that will be
stay happy with us in the long run and also he will provide the cheaper rate than the big one S13.

External Factor Evaluation

For opportunities we have used: O2, O6, O9, O10, O13, O1, O16, O3, and O11. Whereas for threats we
have used: T12, T13, T14, T7, T15, T2, T16, T17, T6, T3.
To highlight a few issues concerning the External Factor evaluation, my team has pointed out 4 major
issues that need to be addressed by McDonalds to have a better hold in the market. The analysis we did
was by utilizing the 5 porter’s forces the PEST analysis to scan the external environment of the Fast Food
Industry which ultimately portrayed a list of opportunities and threats. The opportunities focus main focus
is on how the entrants in this industry are moderately being preferred rather than purchasing frequently
from the big brands. Although, the Fast Food Industry is growing due to the moderate threat of new
entrants which is creating further opportunities in terms of tech savvy operations and digital marketing
campaigns. The main concern here is that it’s not tough for the entrant to cater a fast food market
especially due to inflation. People will move towards more economical fast food options unless the
McDonalds could add a separate economical meal base with affordable pricing.
Firstly, McDonalds needs to evaluate the strategy to set economical meals for its consumers so that its
consumers find it affordable to choose. Strategy 4 could be applied here where McDonalds could devise
meals with smaller quantities and lower pricing or could keep the menu flexible and price those meals
lower than the usual. McDonalds needs to do so because the brand has become expensive when compared
to the inflation which makes the consumer question their affordability to purchase it.
Another issue highlighted through EFE is the low utilization of McDonalds on BOGO, Vouch 365 type
digital coupons that can provide a hike in meals sold because it has a positive impact on the attitudes and
intensions towards brand considerations, as discussed in the report before. So, this is a straight up option
that needs to be utilized just like Food Panda being used by McDonalds. McDonalds can utilize Strategy
5 for this purpose. They should expand their digital marketing platforms and partner with digital coupon
companies that are widely known and can be a better pathway to McDonalds positioning and grasp in the
market.
The threats portrayed in the table highlight 2 major Threats that could affect the growth of McDonalds.
Again due to the inflation factor people are moving towards lower priced fast food an option which
clearly shows that there’s more scope for the local fast food restaurants with affordable pricings to grow
and this can be a threat to McDonald’s revenue. The strategy that they could be using here is the mixture
of Strategy 5&7. These strategies can help out McDonalds care for its customers by making their menus
flexible, affordable, and worth their experience.
However, there’s another factor highlighted that shows the lack of differentiation within the fast food
industry when it comes to their offerings. McDonalds is primarily known to provide happy meals
containing types of burgers coupled with fries. What they could do to stand out from the local chains like
Burger O Clock and Burger Lab is by offering healthier options alongside like Salads, Smoothies, and
Shakes, they can basically utilize strategy 4.

Industry Critical Success Factors and Competitor Analysis

McDonalds is one of the most Top Brand in the fast-food Industry, its comprehensive and very creative
approach to advertising and marketing has bring them on to. To communicate their product offering to
a large audience, the food and beverage company uses a combination of digital, and television ads.
Recently, they use an extremely unique technique to get the audience's attention, such as text marketing,
in which they randomly text everyone "Podina Le Aun," "Boss, yeh zyada hogaya hai," and "Tumse na ho
payega." This create a chaos on internet where a lot of Digital content creator started making contents on
it, and took advantage of these taglines to promote their brands as well.
McDonald's, the world's most well-known) fast-food company, spent around 654.7 million dollars on
global advertising in 2020, up from 447.3 million the previous year. In 2020, advertising cooperative
contributions totaled 325.5 million dollars, while production costs totaled 329.2 million dollars.
Comparing Burger King and KFC, we can say that KFC still has better advertisement than Burger king.
In order to grow Market Penetration, fast-food companies expand their businesses in different markets
Domestic as well as international. We have examples of Burger King, MacDonald’s, KFC, and Subway.
All these have Global presences but they are less successful than McDonalds. McDonalds offers different
products and services to their customer globally which attracts them. McDonalds has global presence
which makes it one of the leading fast-food restaurant. Not only this, The fact that McDonald's produced
roughly $7.84 billion revenue in the United States alone in 2019 demonstrates the efficiency of their
market penetration approach (Lock, 2021). Customer service plays a very important role, McDonalds
care about its customer’s satisfaction. McDonalds not only provide the best quality food but they also
make sure that their staff behave well with the customers, their tone, body language, behavior makes the
customer feel welcomed and valued. Hence, this satisfies the customer more. In comparison to this,
Burger King Customer doesn’t seem really to be satisfied keeping Pakistani market in mind. Whereas,
people love KFC and they are quite satisfied with its services but as per my personal experience, KFC’s
some outlet doesn’t offer “payment via card” which makes them lose the customers. Considering the
store location details, McDonalds has worldwide presence, it has 38,000 locations in almost 100
countries which stands it out and makes the world largest fast food restaurant. The local entrepreneurs are
owning 93% of the McDonalds restaurant worldwide. McDonalds keep fewer things in mind while
choosing the best location for its outlet i.e corner location to show the sign board which grabs people’s
attention, big parking area, Malls and Airports. R&D is critical for businesses because it delivers valuable
knowledge and insights, as well as enhancements to existing processes that increase efficiency while
lowering costs. McDonalds believe in constant innovation and satisfying its customers. McDonald's has
been swiftly expanding its tech skills to improve the customer experience and boost revenue. I.e Drive-
thru, and Ordering through iPads. In terms of revenue McDonalds is doing better than KFC and Burger
King. McDonald's annual revenue for 2021 was $23.223B, a 20.9% increase from 2020 Similarly,
McDonald's annual revenue for 2020 was $19.208B, a 10.09% decline from 2019.Whereas, considering
the brand value McDonalds’s brand value is $130.4 billion, KFC’s brand value is $17.2 billion and burger
king’s brand value is $7.1 billion. When it comes to any work Dedication plays an important part. Like
that, McDonalds motivate its employees by rewarding them and providing them with benefits. Every
month, all staff in the top 10% of restaurants, as determined by mystery shopper scores, earn a 50p
incentive for every hour worked over a two-week period. Not only this, "Hearts of Gold: A Campaign for
Kindness" is developed by McDonald's. The campaign's purpose was straightforward: to acknowledge
and reward employees for their dedication to the McDonald's brand, as well as to inspire them to continue
going above and beyond for their customers and coworkers. KFC also provide reward based programs for
its dedicated employees. McDonald's, the world's most well-known brand, made a net profit of around
4.73 billion dollars in 2020. In 2021, KFC's income was estimated to be at 2.79 billion dollars. This
represents a rise from the previous year's total of 2.27 billion dollars. Customer loyalty refers to a
customer's willingness to do business with a company or brand again. It is the outcome of customer
happiness, great customer experiences, and the overall value of the goods or services received by a
customer from a firm. McDonald's, a fast-food restaurant business located in the United States,
announced a 21 percent increase in system wide revenues to $112.5 billion in fiscal year 2021. Burger
King has 19,247 locations worldwide at the end of 2021, an increase of 622 restaurants. There are 7,105
in the United States (a net increase of 24) and 12,142 worldwide (net increase of 598). Sales across the
entire system grew to $23.45 billion in 2020, up from $20 million. In 2021, KFC's sales was estimated
to be at 2.79 billion dollars. McDonalds has the highest market share i.e 21.4%. McDonalds doesn’t
compromise in its product quality, and it delivers the best quality product to its consumers and that’s the
reason consumer are more attracted to its burgers and fries specifically. McDonalds uses 100% real beef
patties and 100% best quality whitefish in its fish O filet sandwiches. Its chicken nuggets are made of
white meat chicken. In comparison, Burger king claims to deliver fresh food rather than stock up food.
McDonalds Top Management team includes: Chris Kempczinski. President and Chief Executive Officer.
Katie Beirne Fallon. Executive Vice President and Chief Global Impact Officer. Mark Ostermann. Vice
President, Strategic Alignment and Chief of Staff, Office of the CEO
If we see the price competitiveness among the e brands, we can conclude that McDonalds offer high
price products but at the same time it has offered value meals for middle class customers. KFC is quite
affordable and Burger king is quite expensive.
Presently KFC is branched out in thirteen cities of Pakistan (Karachi, Lahore, Rawalpindi, Faisalabad,
Multan, Peshawar, Sialkot, Hyderabad, Islamabad, Gujranwala, Jhelum, sukkur and Murree) with 45
outlets nation-wide. KFC is one of the market leader in its industry. Serving delicious and hygienic food
in a relaxing environment made KFC everyone’s favorite. Since then, KFC has been constantly opening
new restaurants for its customers worldwide with same recipe with different products. In Pakistan totally
Chicken buy from Pakistani Poultry Forms, and also this Chicken is 100% Halal.
KFC have more effective advertisement as compare to McDonald and Burger King, so the brand target
mostly on young generation. KFC does not need aggressive marketing or advertising because Brand is
strong enough and also they spent only 2% of their profit on advertisement. KFC does both the primary
demand advertising (“Become a Chicken Fanatic”) and the selective demand advertising (e.g. “Zinger
Meal”). In its advertising it give informative messages like “Faryad: Keep the city Clean”.. When KFC
offers new products then it does product advertising. KFC’s ad’s shows that they uses pull strategy, which
mean their target is to bring customer to their outlets. The placement of their billboards plays one of the
important role, one of the example is bill board placement in the busiest areas of Pakistan like one of
Tariq Road Bill Board above the McDonald’s branch also KFC have joint sale promotions with different
companies like HP, Philips, Value Meals, Pepsi-Cola. And most recently with ARY Gold digital and
World Call Internet services. Also KFC Proud Partners are Del Monte, Culligan, Shan and Peek Freans
(EBM).
If we look from market penetration point of view worldwide, McDonalds have highest market share
while KFC lies behind Mc Donald’s and Starbucks. The main goal of KFC is to use intensive growth
strategy and the adoption of market penetration as a primary intensive growth strategy is linked with
KFC’s ability to differentiate its offerings besides attaining the cost leadership. The reason is KFC
follows the same recipe and flavor while Mc Donald develop their recipes and products according the
local demand of a country they are serving. KFC have a overall 2.-2.5 ratings of their service and it is
comparable with McDonald’s as the customer give average ratings of the performance of customer
representatives. They have well organized and time approximate customer service both online and on
call but it depends upon the franchise of locality. You’re more likely to get quicker service at KFC as well
as have friendlier staff, although McDonald’s has a better app and website that offers more customer
deals. The behavior and serving of staff in both of these restaurants are almost the same. According to the
survey, about 46% of McDonald’s staff is friendly while in comparison KFC more than 48% of the staff
KFC is friendly and serves better
According to KFC website their store locations, they have presently branched out in eighteen major
cities of Pakistan (Karachi, Lahore, Gujranwala, Sukkur & Murree) with more than 80 outlets nationwide.
As compare to 74 outlets of McDonald available national wide in 24 cities while internationally they have
more than 25,000 KFC restaurants in over 145 countries and territories around the world. McDonalds and
KFC aren’t that different when it comes to the prices of meals, but if you’re looking at purchasing items
individually, KFC is the cheaper option. The battle between McDonald’s Vs KFC is difficult, but KFC
comes out on top if you love chicken and want some flavorful fried chicken or a Burger. McDonald’s
offers more menu items and variety, and also has cheaper menu options compared to KFC. KFC have
more decent meal deals that’ll fill the customer up. The market share of KFC is 2.8% of worldwide fast
food chain which is much lower than Mc Donald’s, overall they have 3rd highest market share as compare
to all the food chains
McDonald’s does make more money than KFC and it’s not that close of a competition considering
McDonald’s annual revenue was $19.208 billion for the year 2020. On the other hand, KFC’s revenue
was $2.27 billion for the year 2020, while in Pakistan, KFC owns more selling in the market of Pakistan
rather than McDonald’s. KFC revenue increased annually in 2021 from $2.27 billion (2020) to $ 2.71
billion in 2021. The main reason for this change is the amendment in Top Management the appointment
of new CEO and changes in the management. KFC doesn’t have any specific requirement for
appointment but they require minimum level of High School/Intermediate. A survey in October 2019,
shows that in public opinion KFC and Pizza Hut are some of the more popular food brands in Pakistan.
But both KFC and McDonald’s are the most popular fast food brands in Pakistan among the public. If we
look from research and development point of view Mc Donald’s have more variety in Pakistan and
develop more products to mix with the locals, so according to the research and development point of view
KFC doesn’t perform well as they are established on their fried chicken. If we talk about employee
management, out of 789 KFC employee reviews, 72% were positive. The remaining 28% were
constructive reviews with the goal of helping KFC improve their work culture. The Sales team, with 81%
positive reviews, reports the best experience at KFC compared to all other departments at the company.
The Product team offered the most constructive feedback, with 43% of that department's reviews
constructive in nature. This shows KFC have better employee management as compare to competitors, the
problem is thar KFC provides many benefits to its employees but the does not enough for employee’s
satisfaction. The average level of job satisfaction shows that employee retention rate will decrease in KFC
and its performance will decrease day by day.
According to Statista data for Burger King Advertising spend; Burger King has now declined
expenditure on advertising in the year 2020 to 287 million dollars. If we look at the trend of advertising
spending of Burger King, it had been ranging between 341-375 million dollars. The lowest they had spent
on their advertising was back in 2014 with spending of 235 million dollars. In the year 2021 Burger King
received an award as a global advertising client, there focus at that time was to keep making social media
campaigns and high profile stunts for example they focused on ads like “Whopper Detour” or “Mouldy
Whopper”. The MarketingWeek in the year 2022 stated that the core focus of Burger king for advertising
stands at Whopper, Have it your way and Flame Grilling. This complete framework revolves around how
they can position the brand in a better way by defining and even redefining and creating relevance among
their audience a voice of distinction.
Burger King uses a combination of generic strategy and intensive growth strategy to increase its market
share in the market. When it comes to their intensive growth strategy their main focus is on Market
Penetration. The objective of the strategy is to increase revenues through Burger King’s existing
customers and to grow in markets where they are already having their operations. One of the
implementations of this strategy can been by Burger King when they open a restaurant where their current
market exists which is expected to get them a larger market share. They basically highlight the products
features to grow and even penetrate in the market and their intensive growth strategy also focuses on
spreading their franchising network.
Back in 2012 according to MaketingWeek there was a customer insight program carried out by Burger
King where their aim was to improve the quality of the service and enhance the customer experience.
Now, if we shift our focus from this initiative that was taken back then to the recent reviews of the
customers on the customer service scoreboard you will see how disappointing the rubrics have scored.
The overall score of Burger King in terms of customer service stands at 30.55 out of 200 and their rank
out of 999 companies is at 525. To get into a bit detail, there are around 1592 negative comments that
reflect our poor the issue resolution, the reachability, the cancellation of the order, friendliness of Burger
King, and Product Knowledge have scored. There are a pile of 108 positive reviews only.
The primary objective of burger king is to optimize their market reach within their current markets and so
they work on locations by focusing on the town centers and urban centers. We can notice how usually
McDonalds and Burger king stand side by side when it comes to store locations, although McDonalds is
a real estate business which makes it obvious for it to focus on the store location but the strong
competition also leads Burger King into the side by side location to capture more market share. The
locations of the restaurants are basically used by burger King as to evaluate the franchising proposals.
Their location strategy revolves around getting outlet space where there is high foot traffic and even a
good demographics structure. Burger King believes that by getting topnotch retail locations they can
significantly reduce their marketing budget as the retail outlets provide incidental advertising through
storefronts. The data at Statista shows that Burger King has 18625 outlets globally out of which only 52
come under the company’s hold.
The research and development department of Burger King is rigorous with focus on kitchen testings for
new product developments for the long term success of Burger King. They even evaluate the tools and
machines being used to process the food and to increase their efficiency even replace them with a better
one. They even got access to their facilities in China and the UK to test Burger King’s new products. The
Research team at Burger King believes that the development of new products play a significant role in
gauging the sales of Burger King. Burger King has a strong team of Research and Development that
begins its product innovation by an intensive research process to extract the potentials of the new menu,
evaluate it by testing it in the markets to understand the customers’ preference in taste and alongside also
focus on economic indicators like the cost of the food and the final price. Since the pandemic, they have
also started testing a loyalty program known as the Royalty Perks to retain customers by providing them a
quick service edge.
According to the MBA Knowledge Base website, Burger King is known to serve more than 11 million
customers and they serve more than 2.4 billion burgers each year globally. To manage these results and
keep the product quality intact Burger King has its own Supply Quality Assurance team. They use
controls that are overlapping and cover the quality details from every end to contain the food safety. They
also have a system namely Hazard Analysis Critical Control Point that manages the food safety standards
to ensure the menu of Burger King is being produced responsibly.
In the year 2020 according to Statista data, Burger King had earned revenue of 1.6 billion dollars which
shows a decline of 10% when compared to 2019’s financial year revenue that stood at 1.78 billion dollars.
Subsequently the net income of Burger king also showed a decline between the 2 years. In 2019 the net
income of Burger King stood at $994 million whereas, in the year 2020 it declined to $823 million. This
decrease has been evaluated and reasoned as the pandemic decrement. Due to coronavirus breakout and
the severe lockdowns, the revenue of Burger King got affected negatively.
Although Burger King was rewarded back in 2010 for being one of the 40 best companies in terms of
diversity, it still is questionable for the dedication of its employees. There are many employees on hiring
agency platforms like Indeed that get a chance to provide a honest insight to how they feel about the
working environment of all the companies. Out of 48000 reviews it can be deduced from Indeed that the
employees face biasness and lack of communication about the objectives. Although there are also people
stating that it’s a good place to start off with a working experience but certainly don’t give the assurance
to stick with the company for long.
Burger King takes innovative initiatives to increase its market share and visibility in the Fast Food
industry. Back in the year 2020, Burger King headed to social media where a new campaign begun to
encourage ordering from other fast food chains. Burger King focused on the pitching the emotions of its
customers which also showed a positive response from a survey that concluded that 90% of the customers
agreed to stay brand loyal to Burger King after this campaign took place. Now, for the year 2021
according to Forbes, there’s a new loyalty program ran by Burger King known as the Royalty Perks. This
initiative would help the loyal customer get multiple perks in terms of free items, up sizes, etc. in
exchange of every dollar they spend on the Burger King menu.
The value of Burger King stood at 6 billion dollars back in 2020. According to the Global chart of Fast
Food industry market size, Burger king has a share of 1.2% against the other giants of fast food chains.
This size back in 2019 stood at 1.16%. Although it’s quite low against its strong competitor McDonalds,
but when the industry is considered as on the Burger Industry, from that view, Burger King stands with a
second position competing against the Wendy’s. It has been observed that Burger King each day serves
15.5+ million customers.
The organizational structure of Burger King is mainly divided into 3 parts namely Global Centralization
that contains core team of management taking significant decisions. Then is the functional groups where
basic functions like the Human Resource Management or the IT executives. The last piece is the
geographic divisions; Burger King has 4 specific divisions namely North America, Europe, the Middle
East, and Africa, Latin America, and the Asian Pacific, each led by an executive vice president. The
descriptions and details concerning the top management is quite at medium level considering their
qualifications because for a managerial role all you require is a high school diploma, a bachelor’s degree
in business administration, alongside a 3 years’ experience in managing a restaurant. At times of Daniel
Schwartz in 2013 the top management of the Burger King got redesigned in such a manner that it was
built for the brand’s long term profits.
Burger King’s price competitiveness is mainly based on 2 strategies, it’s primarily a market oriented
pricing strategy and secondary to it is the bundle pricing strategy. When we talked about Market oriented
pricing strategy, we refer to the prevailing conditions of the market which means according to the demand
and supply. The secondary approach of bundle pricing is mainly to keep the menu affordable by
providing value meals. Though, for the year 2022, the parent company of Burger King has instructed to
increase the prices of the products because of the increasing expenses in the disruptions of its supply
chain. Not only this but the prices is expected to increase to the increasing labor costs, and even
commodity costs.

S1

S2
Financial Profits:
Financial Stability is essential for any organization to stay in the market and also for every action we need
finance to achieve that goal So that’s why it has the highest weightage in the CPM (15%) and as we can
see McDonald has 1 rating in it which shows it very poor it is because from the 2013 to still it is going
downwards and after the corona mostly industries has also effected So we should look into seriously in it
So by the all we can say McDonald should control their costs and expending so it can make the company
again more profitable or can be stable in the trend.
S1. Company should control there expenditure to manage their cost and be more competitive in the
financial condition.

Customer Loyalty:
Customer Loyalty based on that how much the customers are going to pay again to the company for the
same service and how much they are going to create the word of mouth into the market and as we can see
with the data McDonald is not so good in maintaining the customer loyalty they are not making any
program and there competitor are doing for their customers because customer loyalty helps to stay in the
market and be more competitive in the So McDonald should come with such a Loyalty program for their
customers so they can retain their customers in the future and create more better word of mouth in the
market.
S2. Company should focus on the customer loyalty program.

The Internal Company Audit

 S1)Ambiance is welcoming and Friendly

S2)Outlets are creative and eye catchy

S1)Retaining employees that work hard by offering

them career development opportunities
W1) High recruitment costs (interviews + training)
S2)Due to brand name fresh employees give more
W2) Low dedication of employees to the company,
hours and work unpaid.
they have a short term strategy

S1) Dynamic Yield for impulsive purchasing

S2) Kiosk installed for quick service

S1)E-procurement enabling fast flow of information for

supplies across 27000 franchises

W1)Training costs since there’s high labor turnover.

S1) Instant
S1)Healthy feedback
S1)Minimized Wastage
meals for health actions
S1) Get essential and holding costs by S1)Multiple ordering conscious through
supplies from backward using Lean Strategy and and receiving choices people complement
vertical integration Just in Time for customers
ary items or
S2)Fast
S2)Ready for refunds
W1) Dependency on W1) Not a user friendly expansion of
3PL logistics partners customizations in meals experience for all McDonalds S2) Play area
that can delay their anytime customers, complexity Outlets for kids to
processes in order placement
W1)Uncertainty in raw attract
increased. S3)High
material deliverance children
W2)No direct control to Celebrity
immediately cater the Endorsements
W2)Buffer stocks are W1)
logistics needs and Creative
low which can result in McDonalds
Taglines Pakistan App
stock outs or delayed
orders downloads
W1) High prices
are low
of the product

W2) Loyalty
applications
don’t get used
often

Primary Activities

Inbound Logistics

The inbound logistics of McDonalds includes fixed suppliers that are responsible for providing those raw
materials like yeast, sugar, flour, basic ingredients needed to process the meals. The company has also
vertically integrated to get the benefit of reducing their costs. The backward vertical integration includes
milk, chicken, and beef requirements for the meals being fulfilled by their own farms. The soft drinks
supply in McDonalds in partnered with Coca Cola exclusively. (Fagansusanto, 2012). Some of their beef
is also imported by New Zealand and Australia (Zulkifli, 2017). The Logistics Website (2009) mentions
that the distribution and replenishment of the raw materials to the manufacturing facilities of McDonalds
is done by the Keystone Distribution. They not only serve in America, but they also serve in Asia and
Europe for McDonalds. In the UK it serves more than 1200 stores with all the basic materials from
Ketchups, Mops, anything that makes up the outlets maintenance to the menu of McDonalds. EdrawMax
(2021) states that the vegetables are also known to get purchased from their fixed suppliers and their
second option for back up is to get it from local vegetable stores.

The strengths on this primary activity for McDonald include having their own supply of essential
ingredients like chicken and beef meat to keep a close check on the quality of the meals being
manufactured. On the other hand, the weaknesses include their dependence on the distribution channel
and logistics that could end up with delays in raw material deliverance and there is a loss of control as
McDonalds can’t directly control the 3PL distributors.

Operations

According to the UKEssays (2021) published article, McDonalds main objective is to serve the customer
on time with low costs involved while dealing with the operations. They focus on a lean strategy
deployment by only processing the order when it has been placed by the customer. Another strategy that
they implement when processing the orders is the Just in Time that helps them minimize their costs and
even eliminate wastage. Basically they implement a Speedee System where instead of a pool of
employees working on catering all the functions of 1 meal preparation, they have divided each process to
keep it more sequential. There Speedee Kitchen is designed in such a way that 1 person stands responsible
for making many burgers on the large grill, and then comes the dressing section where same ingredients
are put in each of the meals, and then there’s also a fryer being operated by 1 person at a time to make
French fries. There are also fountain machines for filling sodas and making milkshakes and other
beverages on their menu. There is a counter that helps in taking the order of the customer and giving it to
the right customer with the right order number.

The strength of McDonalds when it comes to its operations is the minimized wastage and holding costs
of inventory. They don’t have to get into any sort of panic situation even when there is any add on or
specialty requested by the customer. Every order that they take and make is focused on giving good
quality and according to what customer wants.

The weakness on the other hand for McDonalds in operations is that this can create a tough call for the
raw material being supplied to them; it has to be on time and fresh. Any delay in providing the raw
material can end them into stock outs or even delays in orders.

Outbound Logistics

The 4 main factors kept in focus by McDonalds when it comes to their outbound logistics is quality
inspection of the meals, the freight truck inspection, timely delivery and freshness ensured (Zulkifli,
2017). If we talk specifically about Pakistan, the outbound logistics of McDonalds gets carried out either
by their own riders or they even use FoodPanda. The meal box is preserved and wrapped up with the bill
attached on it; the box bag gets carried by the rider to different locations of the orders and gets delivered
timely. McDonalds caters its customers in many ways. It has dined in facility, dine out facility, drive thru
facility, counter service in food courts, and through home delivery. Kowitt (2016) stated that the
customers walking in the McDonalds outlet get catered either by automated digital machines, kiosks for
self-service. These digital machines enabled the customers to quickly place their orders, pay for it, and get
an assigned table.

The strength of McDonalds when it comes to their outbound logistics is their diversified ways of catering
the customers. The customer has a choice whether to order and enjoy the meal at home, order through the
drive thru for the quick service or witness the innovational attractive outlets made by McDonalds to serve
different customers.

The weakness here is that too much innovation can lead to complexity of order placement. Customers
although need quick service but they also need a user friendly experience which is getting complicated at
McDonalds.

Marketing and Sales:

McDonald’s Marketing Strategy would be divided in 4pcs i.e Product, Price, Promotion and Placement.
McDonald’s product offer wide range of product from burger, fries, drinks to McCafe which includes
coffee, cakes, shakes etc. McDonalds while choosing its target audience make sure that they target the
right market as per the desires of locals. I.e McDonalds customize their product as per the demand of
locals. For example: In India, people are vegetarian, so for them McDonalds bring the wide range of
Vegetarian products .e Aloo Tikki and does its marketing in a way that attracted the customer. They
designed two separate kitchens for Vegetarian and no-vegetarian keeping the color theme of Red for non-
veg and Green for Veg. This grabs the attention of people and met the requirement of them. Not only this,
McDonalds also target the health conscious people and for them they have introduced juices, salads etc.
But the prices are getting higher day by day.

The weakness here is the high price of product, which can results in losing the customer as customer
aren’t really willing to pay high price for such a small burger. Another one is unhealthy brand image of
McDonalds which makes people feel like they are taking unhealthy food.

McDonalds Digital Marketing has used the best digital marketing strategy to grab the attention of
consumer. Beginning with the most recent campaign that they started to run on social media and text
messages. Sending text message to everyone by using creative informal language i.e “Podina Le ao”
which affected the whole social media and people. Majority of the people were talking about it and it
became the hot topic and talk of the town. Later on, Mcdonalds discovered that they have introduced their
new “Mint Wraps”.

In UK, in order to attract the kids and target them, Mcdonalds opened a small play zone for them where
they can play and enjoy food both at one place. The play zone had images projected on the floor with the
use of tracking cameras and infrared technologies.

McDonalds with respect to its prices tries its best to provide value meals, combo and family deals to
attract the middle class consumer. But, we are seeing a sudden rise in the prices of the products i.e The
introduction of “Hot n Crispy burger” which costs around Rs. 275 is quite expensive if we compare it
with KFC’s Krunch burger which is of Rs.195.Not only this but Grand chicken spicy is of Rs. 704 which
is way too expensive. McDonalds can lose its customer if it keep rising the prices of its product.

The weakness again here as well is the high prices of products offered by mcdonalds. Whereas the
strength is that they offer value meals which are quite affordable.

McDonalds Placement has over 38,000 locations in more than 100 countries. It recently launched
approximately 1,000 new restaurants throughout the world and renovated another 900 in the United
States. McDonalds is making the life of people easy by offering Online orders, Drive-in facility and
collaborating with food panda. This way customer can enjoy their desired cuisine at a specific time and
location, allowing them to have a better overall experience.

The strength is that the fast expansion of McDonalds outlet throughout the world whereas the weakness
lies in the Mac Application which isn’t being used by customers.

McDonald does its promotion by giving discounts, and deals to its customers. They always use the
billboards and add up creative taglines in it. They also use social media platform, text marketing, and
advertisement to attract the customers. With that Mcdonalds does Celebrity endorsement and they spend a
huge among on it. Example: Mcdonald does the celebrity endorsement of Travisscot, a rapper!

Travis Scott grew up eating McDonald's, so when the opportunity to make a Travis Scott Meal came
itself, he jumped at it.Mcdonalds introduced a meal of “Travisscot Meal” which got popular to the point
that there came a time when mcdonalds ran out of ingredients.

The strength lies here is discounted deals, the use of outstanding taglines i.e “podina le aun”. Another
one is celebrity endorsement which has positively affected McDonald’s sales.

Services:

McDonalds cares about its customer’s experience, so they ensure the best quality service. McDonalds
offers Gift cards, play area, free Wi-Fi access to the entire customer. McDonalds also provide the online
order facility so that customer can order online easily and get the food delivered at their doorstep without
any hassle. McDonalds has developed its own App for its consumer so that can place order via App and
enjoy discounts and many more offers.

The strength here is that they retain its customer by offering them gift card, it’s the key point because it
attracts customers a lot. When it comes to kids, they always like to be in a place where they can play and
enjoy along with good food, so McDonalds made itself the go-to place of kids. Another strength is that by
giving online order services its helping the customer to not worry to wait longer in line or visit any outlet
just simply slide through the website, pick their favorite food and order it.

Whereas, the major weakness here is that customer don’t use McDonalds Application too much. Looks
like it doesn’t attract them anymore. As per my research, the rating on AppStore of McDonalds App is 2.3
which is extremely low. Another weakness is that customer downloads the app redeem their product and
then delete the app. So McDonalds should work on its application strategy to keep the customer engaged.

Supporting Activities
Human Resource Management

According to Fagansusanto (2012), the Human Resource Management at McDonalds is quite weak. The
human resource management influence on the companies objectives through direct and bureaucratic
controls over the employee management. The managers at McDonalds are expected to be committed to
their work with acceptance to tough routines and are flexible enough to take on the challenges. The young
managers at McDonalds are even persuaded to deal with long hours of work without even being paid for
it and then against it those managers get career development opportunities and even promotions to attain
their loyalty and commitment with McDonalds. The result is indicated by the high labor turnover that the
company has. The issue is that the people working there are those who can’t find job anywhere else so
they end up taking place to work at McDonalds for a short period. They are certainly not committed to the
company’s objectives.

Since this is one of the supporting activities that drives the efficiency of the primary activities, we can
confidently state that this has adversely affected them. From and inbound logistics perspective the
employees working in managing raw material, placing orders for replenishment of the inventory, and then
in the operations section grilling and assembling the meals to providing it to the customer, getting the
sales and marketing done to finally providing them a positive customer service will all be poorly managed
when the turnover is high, there is inconsistency of efforts and there’s a short term strategy mindset in the
employees mind. The instant changes in management and employees in general for the company can lead
to delayed order processing and delivery.

The strength of the current Human Resource Management is that they are positive in providing career
development pathways to the employees, and an experience being a renowned company to the fresher’s in
the market.

The weaknesses include high employee turnover rates that result in high recruitment costs for the
company. They have to repeatedly train the employees to give them a clear view of what’s expected from
them. There is also a loss of competence in the team and the management which results in low morale and
demotivation.

Procurement

According to the article Value Chain and Competitive advantage of McDonald’s (2012), McDonalds
caters its procurement need by utilizing its E-Procurement facility that is partnered with Accel-KKR
Internet Co.. The Emac Digital Company, the McDonalds E-Procurement base helps the franchises of
McDonalds to operate in a synchronized manner. This means that all the supplies that they require need to
be simply placed on that platform and their orders get registered with their fixed suppliers. This way the
procurement team can conveniently place the orders and keep the supply chain halt free from the
particular supplies needed. Not only does this website help them procure the items needed but also
permits the top management to get the items at discounted prices which reduced their cost of supplies.
According to the Supply Chief of McDonalds, e-procurement helps them to cut costs by 85%. The
website for e-procurement is designed to facilitate around 27000 franchises around the globe.

Having such an effective system to fulfill the needs of supply communication will not only help the
inbound logistics to work promptly and align with the operations strategy but will also help them deliver
the valuable meals with the right quality, in the right time, and for the right customer. If the procurement
stays instant it can also help cater any sort of complaints or feedbacks being registered by the customer
service. Even the marketing and sales department bringing in the traffic can easily be catered when the
flow of the supply chain is discrepancy free.
The strength of the procurement department at McDonalds includes efficient e-procurement system
catering supply needs. Not only has this but it also helped them cut costs in procuring the supplies.

The weakness includes training costs since their turnover of labor is high they will have to train their
employees over and over concerning the user interface ease and operating skills development.

Firm Infrastructure

McDonald's infrastructure is cutting-edge and intelligent, and it caters to the needs of its customers. When
customers visit McDonald's for a meal, they feel safe and calm. They also work to provide
environmentally friendly workplaces and restaurants, thereby contributing to sustainability. Because of
the company's reputation as the leading fast food brand, it is able to effectively manage infrastructure.

The strength associated with these supportive activities is that McDonalds make its customer feel safe
and meets the desire of customer. They also work on the sustainability by providing environmental
friendly restaurant. McDonald’s infrastructure catches the attention of customer because it provides the
best one and the one customer desires for.

Technology

McDonalds tries its best to stay on top in technological advancement. For that they have introduced
Dynamic Yield, an Israel-based digital business that specialises in personalisation software, was recently
acquired by the global fast-food giant. McDonald's wants to implement Dynamic Yield's solutions across
the board, from customers to suppliers. For instance, Menus will be able to update dynamically when a
consumer places an order, this is because of the technology. When you order a burger, the system will
recommend a meal upgrade. If you order a salad, it will come with a complementary product, such as a
bottle of water. Drive-thru menus will be able to suggest various selections based on environmental
parameters such as the time of day, traffic volumes, and weather conditions, such as hot chocolate on a
cold day.

Apart from it, Mcdonald has introduced online orders services, developed their own Application and
bring up the huge ipads from where customer can place order easily without waiting long in the lines.

The strength lies in that they have invested a huge chunk on Kiosiks. The reason was that to improve
technology, increase the sales and making it easier for customer to place an order. Another strength is the
use to dynamic yield which helps them pitching and motivating the customer to buy more food as per the
time and mood of the customer. Another one is the introduction of McDelivery Application.

Financial Ratios of McDonalds Overview

Activity Ratios: The inventory turnover ratio of McDonalds in the year 2015 stood at 156.08 times. As
the years went by, in 2019 it stood at 202.88 times. This shows that the company improved with time with
respect to the increasing turnover rate of the inventory against the cost though in 2020 it stood at a
slightly low turnover that was 185.04. This shows that the sales did slow down due to which the inventory
Turnover also got lowered. Their receivables turnover over the past 5 years has showed and overall
decline till 2018 standing at 8.7 but in the year 2019 they went towards betterment in collection of their
receivables and stood at 9.6 and in 2020 a slight decline to 9.1. The company needs to provide discounts
to encourage their debtors to pay them back early.
Profitability Ratios: According to the data of the previous 5 years for the gross margin of McDonalds has
been showing an increasing trend from 2015-2019 38.52% to 52.32%, but in 2020 it showed a shrink to
50.77%. This means that the gross margin declined for McDonalds after 4years increasing trend, this can
be a red flag for them. Subsequently the net profit margin also showed the same trend with an increasing
trend from 2015 at 17.82% to 2019 at 28.2%. Yet there was a decline to be noted in 2020 24.62%. To
keep in mind the macroeconomic indicators that could be affecting the profitability, in 2020 the globe was
going through massive lockdowns due to the pandemic. This is probably the reason why their revenues
show a downturn in 2020. McDonalds Return on Investment shows a positive growth from 14.51% back
in 2015 to an sharp increase to approximately 23% in 2019. Though in 2020 it showed a sharp decline to
approximately 17% which is alarming for the company since this information is quite important to
evaluate the performance of the company yearly.

Solvency Ratios: The performance of the debt to equity ratio at first look gives an alarming extract with
negative figures indicating that the liabilities are more than the equity in the company. This means that the
company is more focused on getting its financial requirements fulfilled by taking debts. In 2020 it stands
at -4.16 which is comparatively better than approximately -11.9 back in 2015. Long-term Debt to Capital
Ratio of McDonalds shows an increasing trend which is a high risk indicator making the company stand
near to insolvency. In 2020 the company stood at 1.3 and back in 2015 it was at 0.77. This particularly
means that the company is more leveraged and focuses on getting long term debts that getting the
investment from stockholders.

Liquidity Ratios: According to the data of the past 5 years, there has been a declining trend from 2015 at
3.26 to 2019 0.98. In the year 2020 it stood at 1.01. Although, it relatively did improve if compared to the
previous year, but the continuous decline and inconsistency to attain the ratio stability shows that
McDonald's might face issues in paying back their current liabilities.

Internal Factor Evaluation

Refer to Strengths in the Value Chain noted for the IFE Strengths table: S1 HRM, S1 Procurement, S2
Firm Infrastructure, S2 Tech Development, S1 Tech Development, S1 Inbound Logistics, S1 Operations,
S1 Sales & Marketing, S3 Sales & Marketing, and S1 Services.
Refer to Weaknesses in the Value Chain noted for the IFE Weaknesses table: W1 HRM, W1 Inbound
Logistics, W2 Operations, W1 Outbound Logistics, W1 Sales & Marketing, and W1 Services.
According to the Strengths and Weaknesses mentioned in the table, we found 5 main issues that needed to
be addressed by McDonalds. The first issue is basically the Kiosks installed in the outlets. Although, it is
a good initiative taken by McDonalds to serve their customers quickly but the limited number of those
machines will end up making more waiting lines and chaos in the outlet. So, for this purpose we propose
our strategy 1 that is that they focus on bringing in more tablets/ipads, as they now only have 2 to 3 or
max 4 tablets/ipads, according to my visit. They should make more tablets available so that customers do
not have to wait in line.
Another issue apparent here is the high labor turnover in the company. Due to this issue McDonalds has
to keep investing time and money in order to train the professionals. For this purpose we propose our
strategy 2 that is to create a formal agreement with the employee to stick with their employment until the
agreement expires.
The third major issue identified from the internal factor evaluation is McDonald’s dependency on 3PL
logistics. strategy 3 will help them overcome this dependency by either overtaking the logistics company
so that they have a complete streamlined backward integration from procuring to outbound logistics.
When the logistics team will be owned by McDonalds then they can adjust and control the logistics
system according to their procuring, manufacturing, and serving strategies.
Another issue arising is the tech complexity at McDonalds, people want a user friendly experience and
too complicated websites, outlets can get them uncomfortable and so strategy 4 will take another option
in to make quick service even more flexible. They should bring in their menu; customer stands for too
long in line waiting for their turn, then wasting time in deciding what they want to order. So, to skip this
part McDonalds should implement this "scan the menu on the table" way so that customer can easily scan
the menu while sitting peacefully on the table and deciding what they want to order.

Generic Strategy Mapping

McDonald's:
McDonald's tends to use a cost leadership strategy and this is due to a number of reasons. Firstly, it has a
32% profit margin which means that it 32% of its revenues represents its profit which indicates that it
keeps its costs low, and with maintaining the same prices or by lowering down the prices it makes a
higher profit. McDonald's also has a 21.2% market share which shows that it keeps its costs low, which
leads to lower price so consumers tend to buy more from it which has lead to its increased market share.
Secondly, it minimizes its wastage and holding costs by using lean strategy which focuses on producing
more with less input which tends to eliminate waste throughout the manufacturing process as different
work cells prepare various components there is an assembly area , there is a supply chain coupled with
customer support i.e. the sales clerk, they are prepared for any order on the menu. McDonald's also uses
just in time strategy which is used for inventory management in which goods are received from suppliers
only as they are needed and McDonald's uses this strategy in a way that it doesn't begin to cook(reheat
and assemble) its orders until the order is being placed because previously it used to preheat a batch of
hamburgers and they put them under the heat lamps for as long as possible and the burgers that were not
sold were discarded eventually.
KFC:
KFC tends to use the broad differentiation strategy and this is because the recipe of the items their offer is
very unique and has never been imitated. KFC tend to innovate in a way that it cares for its customer's
dietary needs for which it offers low fat dressings for its salads, it offers different type of salads which
tend to attract more and more customers and it provides more nutritional information about on the items it
offers to its customers so they get to know better about what they are being offered and how can it fulfil
their dietary needs. KFC has differentiated from its competitors through this years by using the finest
products and it has successfully developed itself into a premium brand, like its famous for its jingle 'finger
licking good' which has created an impact on the mind of the customers by informing them that what
product are they selling. This jingle and slogan of KFC is unique and it actually represents their brand in
terms of what the offer and it also helps attract more customers as they jingle is quite catchy as customers
often tend to think that what makes it 'finger licking good' which forces them to try it more often.
Burger King:
Burger King uses both cost leadership and broad differentiation strategies. It applies cost leadership
through standardization of processes to minimize costs based on economies of scale and error prevention.
Burger King tends to keep its operating costs low by operating in the franchised model for physical
presence and it also promotes online sales by offering discounts to customers in order to increase the
customer satisfaction level by offering convenience. The franchised model it uses in which the parent
company permits other outlets to operate under its trademark in exchange for royalties, this model has
helped Burger King to run effective operations on an international scale and has helped it reduce its cost
of operations. Currently 90% of Burger King stores operate as franchises , with approximately 44% of the
restaurants serving in the US. Burger King uses the broad differentiation strategy through its advertising
and brand representation. Its slogan 'Be Your Way' helps its customers know that the chain offers flexible
options to choose from. It also offers its products in a unique way like it has a fine way of grilling its
burger patties and offering its drink refills. They have differentiated themselves from their competitors by
delivering excellent customer service and they do this by making customer experience a key and core
element of all their strategic options, they use customer service as key selection criteria to make sure that
all their strategic options improve the customer experience and give them a competitive edge in the
industry.

After evaluating the industry analysis as well as the company’s internal analysis, several inferences were
made which have been used to determine that which generic strategy should be adopted by McDonald’s.
By keeping the pros and cons in the mind it has been decided that McDonald’s is already using the most
appropriate strategy as it has more comparative advantages as compare to other generic strategies.
McDonald’s can amend its weakness by making some changes. The McDonald’s long-term target
outlines its growth and increased performance intents within a specified time. The company has a variety
of corporate-level strategies to assist its continued growth, the only challenge is how to sustain this
achievement in the long-term and it can be done by effective cost leadership. They already have the
highest revenue, market share and have the high profit margin comparatively other restaurant chains.
Other than that, they focus on minimizing wastage and holding costs by using Lean Strategy as an
internal strength which plays huge role in their cost leadership.
One of the things they are working on is technology advancement by introducing Dynamic Yield which
provides personalized customer experience by varying outdoor digital Drive Thru menu displays to show
food based on time of day, weather, current restaurant traffic and trending menu items which plays
important role in providing personalized experience to the customers. Secondly McDonald’s installed
self-order Kiosk is another step toward self-managed technology which provide immediately recognizable
contact point from store to store. McDonald’s is one of the first company to adopt this service which
shows that they are focused on cost leadership as it will decrease number of employees in their outlets.
Considering that McDonald’s is already adapted cost leadership strategy on full scale this will further cut
their costing as the number of employees will decrease in McDonalds through the technology driven
strategy. These are not the step to digitalize McDonald’s but a catalyst to evolve it.

Mc Donald one of the problems in high costing and decrease in annual revenue is high employee
turnover, this result in high recruitment fees as Mc Donald’s provides training and career development
path ways. The reason for this long work hours without wages which results into low morale and
demotivation of employees. As they have to repeatedly train employees to give them clear view of what
to expect from them this result. McDonald’s should address this issue and change their policy regarding
employee management and resolve it, as it is one of the factors increasing their cost.
E-procurement enabling fast flow of information for supplies across 27000 franchises shows their
effective communication and using this technology reduces their procurement cost. McDonalds works on
lean strategy to serve its customers as McDonald’s doesn’t begin to cook its orders until a customer has
placed a specific order. They stay on JIT strategy which helps them to reduce or sometimes eliminate
waste and efficiency within purpose of minimum cost. Benefit associated with this is the higher quality
customer service; even placing special order does not bring McDonalds into panic situation that can cause
delays. Also holding cost of burgers is fairly high so JIT strategy helps them to reduce the spoilage cost.
This is one of the examples how effectively McDonald’s managing supply chain which is one of the
factors which shows they are cost leader in the industry One factor they should work on is 3PL logistics
as they can’t directly control it which can result into delay in procuring, manufacturing and serving which
can result in high cost and potential threats from suppliers. They should also look for buffer stock to
counter emergency situation and also, they should have accurate timing in delivery (close call).
McDonald should own a logistics company so they can easily manage their operation and logistics and
fill the communication gap to become effective cost leader.

McDonald marketing strategies shows that how they focus on cost leadership their combo services and
psychological marketing strategy give them the attention of customers. Similarly using play areas and
good customer care services and mixing their recipes with the local taste help them in gaining confidence
of customers and it is one of the reasons why they have highest market share. The one of the reason of
decrease in revenue of McDonald’s is high pricing of the product as compare to the competitors, the
brand should reconsider its pricing. On the other hand, their services plays an important role in cost
leadership, the development of Mc Delivery app and Loyalty application to counter International food
delivery apps is to show that how focused is McDonald is toward cost leadership. They should focus on
creating awareness of Mc Delivery app as their downloads are low and responses are moderate and
secondly they should be relevant and value based coupon so they don’t get wasted, this will help Mc
Donald is solve the problem of McDonald's to become effective cost leader.
Cost Leadership has a favourable impact on McDonald's gaining a competitive edge over its competitors
as it tends to manipulate its production costs, by charging lower prices to increase market share.
McDonald's tends to keep its costs low which positions it as a low cost alternative, which helps it in
increasing its sales and enhance the company's profile which helps it compete with its rivals in the market
and when it increases its sales then it tends to improve its performance too. Cost leaders focus their
attention on increasing the efficiency of production processes to lower production costs. When
McDonald's uses the cost leadership strategy so low cost enables low prices so the buyers would be happy
with this as they would have the opportunity to buy the items from McDonald's at a lower price which
will increase customer loyalty, enhance its brand image and help McDonald's increase its market share to
a greater extent. When McDonald's uses the cost leadership strategy then it would tend to give more
power to its suppliers in terms of that suppliers will be encouraged to improve the quality of the product
because as it will be producing at a lower cost so suppliers would know that the profits made would
increase so this will make him improve the quality of the products. Cost Leadership strategy is also useful
when it comes to defending McDonald's items against its substitutes because when it focuses on reducing
the cost so it leads to it lowering the prices so customers would tend to buy more from it as compared to
buying other substitutes so this would increase McDonald's sales, profits and this would also increase
customer satisfaction. By using cost leadership strategy McDonald's can also cut prices in order to deter
potential entrants in the market. The barriers that cost leadership could offer is economies of scale, so
when McDonald's will already dominate the market by reducing its cost, then it will be difficult for other
new entrants to compete with it because McDonald's would have developed that much customer loyalty
till then and as McDonald's is already a established player in the market so lowering its cost would also
enhance its ability to sell more items which could help increase its profits too.

SWOT Analysis
 SWOT Analysis Strengths
Opportunities S2E-procurement enabling fast
flow of information for supplies
across 27000 franchises +
O4Technology advancement and
latest software help company
manage accounts easily and
result in fewer errors SO1=
Strategy 1- Use E-procurement
facility to eliminate errors in
demand forecasts.
Weaknesses
O7 Promotions like buy 1 get 1
deals through BOGO and Vouch
365 can engage and attract more
customers +
W5 High prices of the product
WO1=
Strategy 1-Partner with digital
coupon companies like Bogo &
Vouch 365 to lower prices.

S4Kiosks installed for quick

service +
O8Automated Customer
Experience decreasing waiting
time of the customers SO2=

Strategy 2- Use scans the menu

tech to eliminate the waiting line.

Threats S8Healthy meals for health W5High prices of the product +

conscious people + T3Local fast food Chain can
T2Consumer can switch to grow more than the bigger fast
healthier options and might leave food chains due to inflation
eating fast food ST1= WT1=

Strategy 1- Offer Salads as a Strategy 1- Offer Digital

Starter on the menu whether in Coupons and use Digital
the outlet, or online. Marketing for awareness of
discounts on McDonalds App
downloads.

The first quadrant, which has Strength & Opportunity. We got two strategies; the first strategy explains
the strength number 2 which is of E-Procurement & the opportunity number 4 that discuss about the
Technological Advancement. When we work on them together we come up with a strategy that by using
current procurement technology in such a way that like since it provides the supply details, all the 7000
franchise’s supply details are recorded in that system and that gets procured. Now, they need to take
advantage of the connection of E-Procurement demand that’s upcoming so according to that they can
even have a buffer stop with them and they won’t have to suffer with the inventory issues as well.
Now, the Strength number 4 & Opportunity number 8. In this quadrant, I will be talking about the Kiosks
, Although McDonald's has this self-order kiosk, they need to focus on the issue that they only have 2 to
3 or max 4 tablets/iPads, according to my visit. Customer waste a lot of their time in standing in lines or
waiting for other person to get done with the order so that they can place an order. To eliminate this
problem, McDonalds should implement this "scan the menu on the table" way. so that customer can easily
scan the menu while sitting peacefully on the table and deciding what they want to order.
Now, the weakness and Opportunity, the purpose of this is to minimize the weakness so that the
opportunity can come up. We are going to use opportunity number 7 to overcome the weakness of
weakness number 5. So, the opportunity is basically like the promotion of BOGO & VOUCH360, if
customer starting using these Apps, the weakness of high price of product will get reduced basically
customer will feel like that eventually that. It’s not necessary that you will have to reduced the face value
but you can collaborate with these Apps so that they can help you in increasing sales by having
McDonalds on BOGO and Vouch360.
The next strength 8 and threat 2 basically using the strength that can decrease the intensity of the threat.
So, the strength is healthy meals for health conscious people, the strategy is that McDonalds can also
offer salads as a starter on the menu whether in an outlet or online, They should first do the proper
marketing and promotion of it. Salads can be bean salad, Russian salads etc. So, that people can go for
such options as well and our market doesn’t get hurt too.
Lastly, I will be discussing about the weakness and threat, we matched weakness 5 with threat number 3,
in which weakness 5 is high prices and threat 3 is due to inflation there can be rise of local fast-foods
compare to brands, so we condemned them and state that we are going to offer coupons and will use
digital marketing for the awareness of the discounts on McDonalds App. This way we will reduce the
weakness and threat.

BCG Matrix

According to the details revealed concerning McDonalds BCG Matrix, we have considered the business
divisions of the company. Here we are basically pointing out the success rate of McDonalds business
units against the competitors in the market. The csimarket (2020) states the information of McDonalds
latest quarter business details. The franchising business of McDonalds has revenues of 2332.2 million
dollars and the company operated business in comparison has revenues of 4282.9 million dollars.
McDonalds has worldwide 38000 outlets operating, 5814 approximately are franchises and 32186
approximately are company operating businesses.
The state of BCG Matrix shows that the two business units are not exactly measured to stick with 1
quadrant. The franchised restaurants have a major chunk of Cash Cows and a minor chunk of Star
whereas the company operating restaurants have somewhat a relatively bigger chunk of cash cows than it
has of the dogs. Basically these quadrants represent how well the business units are performing against
the competition they are receiving.
It can be deduced that although the franchising companies are small in number but they have the potential
to move towards a greater industrial growth rate and relative market share. The company operated
business contains a relatively bigger business and has a bigger portion of the market share but it is yet
lower to scale on the industries sales growth rate.
The opportunity here for McDonalds is that through remodeling their business and shifting towards more
franchised operating restaurants, they can improve their business division and revenue constructs in the
Market.

SPACE Matrix:

Financial Position:
ROI:
Company ROI is up after the pandemic which comes from 17% to 24% which is very good if we see as
the investment point of view like McDonald has a very good capability to come up again with their
strategy and if we see the older trend it as slightly increasing from the Exhibit2. Like after the 2017 they
increase their self to 23% from 20% but because of pandemic it was down to 17% in 2020.
Leverage:
It is derived from the Debt to Equity Ratio it seems that the company took the major loans to make their
company up as we have seen in the ROI it is increasing from the 2016 and in 2016 Debt/Equity Ratio was
increase to -12% means that for increasing the ROI company take the loan but good thing is that they
have the plan to fulfill then like as we have seen when they increase their ROI they have paid a good
status of Leverage because their return were greater and that makes the leverage -4% in 2019 but in 2021
for coming back they took the loan back and their current ratio is -8%.
Cash Flow:
They are not good in the cash flow like it has again decreased in the 2021 and if we see with the industry
According to the Investing website they are at the half of the industry points.
Working Capital and Liquidity:
There working Capital 11.85B$ on Sep 2021 with the ratio of 1.32% which shows the short term
company liquidity position.
Industry Position:
The Fast Food Industry has a very much potential to grow like fast food restaurant sector will grow at a
compound annual growth rate of 4.6% reaching $931.7 billion by 2027 according to the
ResearchandMarket.com and this market has a very good stability because people can’t stop eating
because it is a need of a human. It is very easy to come up in the industry if you have a good taste in your
hand you come in the market very easily and be the competitive with the good strategies. It uses the raw
and very cheap products like bread, chicken, floor, egg, and, so on like this so its resources are easily
available and it

By analyzing the space matrix we have seen that the McDonald is playing the aggressive strategy and
they are going towards market development and this thing we have seen in their balance sheet that they
are taking loans much to make their-self bigger in the market and they are making the ROI better and in
the against as their competitors they are playing defensive they are not investing much in the market and
they are not going towards in new product and so on but they are managing their capital in good way to
stay in the market.
S1. They are the aggressive player in the market but there employees are not very happy with then so they
should Pay Employees a Living Wage.

QSPM Matrix
 Offer Digital Coupons
and use Digital
Increase Backward
Marketing for
Integration by
awareness of
owning a Logistics
discounts on
company.
McDonalds App
downloads
Strengths Weight AS TAS AS TAS
Retaining employees that work hard by offering them career 0.03 0.00 0.00
1 development opportunities
E-procurement enabling fast flow of information for supplies 0.10 2 0.20 4 0.40
2 across 27000 franchises
3 Outlets are creative and eye catchy 0.01 0.00 0.00
4 Kiosks installed for quick service 0.03 0.00 0.00
5 Dynamic Yield for impulsive purchasing 0.02 0.00 0.00
Having own essential raw material supplies through backward 0.08 2 0.16 4 0.32
6 vertical integration
Minimized Wastage and holding costs by using Lean Strategy and 0.06 2 0.12 3 0.18
7 Just in Time
8 Healthy meals for health conscious people 0.03 0.00 0.00
9 High Celebrity Endorsements and Creative Taglines 0.09 0.00 0.00

0.05 0.00 0.00

10 Instant feedback actions through complementary items or refunds

Offer Digital Coupons

and use Digital
Increase Backward
Marketing for
Integration by
awareness of
owning a Logistics
discounts on
company.
McDonalds App
downloads
Weaknesses Weight AS TAS AS TAS
1 High recruitment costs (interviews+training) 0.12 0.00 0.00
Dependency on 3PL logistics partners that can delay their 0.10 1 0.10 4 0.40
2 processes
Buffer stocks are low which can result in stock outs or delayed 0.20 2 0.40 3 0.60
3 orders
Not a user friendly experience for all customers, complexity in 0.05 0.00 0.00
4 order placement increased.
5 High prices of the product 0.02 4 0.08 3 0.06
6 Loyalty applications don’t get used often 0.01 0.00 0.00

Offer Digital Coupons

and use Digital
Increase Backward
Marketing for
Integration by
awareness of
owning a Logistics
discounts on
company.
McDonalds App
downloads
 Opportunities Weight AS TAS AS TAS
1 Cost effective social media provides access to greater audience, 0.04 0.00 0.00
customer engagement, and enchancing brand image.
2 Offering healthy substitutes for health conscious people will 0.05 0.00 0.00
attract the customers and help in industry growth
3 Customer's are more interested in cost leadership brands 0.06 3 0.18 2 0.12
4
Technology advancement and latest software help company 0.04 0.00 0.00
manage accounts easily and result in fewer errors.
5 Customers get attracted to brands that have a separate menu for 0.07 0.28 0.07
economical meals
6
Platforms like FoodPanda providing easier order placement & 0.07 0.00 0.00
distribution support
7
Promotions like buy 1 get 1 deals through BOGO and Vouch 365 0.07 0.00 0.00
can engage and attract more customers.
8 Automated Customer Experience decreasing waiting time of the 0.06 0.00 0.00
customers
9 Keeping Menus flexible for perticular country norms & culture 0.08 0.00 0.00
can retain customer demand
10 0 0.00 0.00 0.00

Offer Digital Coupons

and use Digital
Increase Backward
Marketing for
Integration by
awareness of
owning a Logistics
discounts on
company.
McDonalds App
downloads
Threats Weight AS TAS AS TAS

0.03 3 0.09 2 0.06

The biggest threat is that consumer can switch to local substitute if
1 the price of the food remains high and quantity remains low

Consumer can switch to healthier options and might leave eating 0.04 0.00 0.00
2 fast food

Local fast food Chain can grow more than the bigger fast food 0.09 0.00 0.00
3 chains due to inflation

Price uncertainties affect everyone within the food industry from 0.02 4 0.08 3 0.06
the supplier and producer right through to the restaurant owners
4 and ultimately the customer
 Lack of Differentiation in fast food industry weakens the brand 0.07 0.00 0.00
5 identities and targets same customers
High capital requirements for conducting marketing campaigns
and to comply with the international standards of the fast food 0.05 0.00 0.00
6 industry

High Interest rates undermining the possibility of financial support 0.04 0.00 0.00
7 for start ups.

Saturation in the fast food industry is positive for existing brands 0.04 3 0.12 1 0.04
8 but for the upcoming brands it can be a strong threat.
In times of recession and notable economic downturn, restaurant
will find deterioration more noticeable than other food related 0.05 3 0.15 2 0.10
9 industries.
10 Wastage Management requires higher investment 0.03 0.00 0.00
TOTALS 1.50 2.22

McDonald's can offer digital coupons and use digital marketing for awareness of discounts through
McDonald's App. These digital coupons will help in engaging more and more customers as they would
get to avail more discounts through these digital coupons which will force them to buy from McDonald's
more often. Use of digital marketing by McDonald's can help it lower its cost because a well targeted and
planned digital marketing campaign will help reach the right customers at a much lower cost as compared
to traditional marketing methods, digital marketing will also help reach out more customers globally and
will also promote the McDonald's app in a better way so that the customers get the correct information
regarding the deals and offers McDonald's has to offer. Digital marketing can also help to precisely target
certain customers based on their previous buying patterns like first McDonald's will gather the data about
which customers tend to buy more and which ones buy less then after doing this they can used Mobile
marketing or email marketing where they can send personalized emails and personalized messages
directly to their customers in which they would tell about what new item they are offering and which
deals are they offering currently. They can also use digital marketing in a way that they can promote their
app using their different social media handles like Facebook, Instagram etc where they could tell the
specification of their app and how the app can help the customers in placing a order easily from the
comfort of their home.
McDonald's can take over a 3PL Logistics company so that they have a complete streamlined backward
integration from procuring to outbound logistics. So here when McDonald's will own the logistics
company and they will be looking after the logistics team so they can control and adjust the logistics
according to their procuring, manufacturing and serving strategies. Owning logistics company would help
McDonald's to scale space, labor and transportation according to current inventory, it can also help ease
transition between seasonal periods and industry fluctuation and when expanding into new markets and
also can help McDonald's aid growth in new regions. Owning a logistics company does not only increase
visibility, reduce overhead but also increase customer experience, this will not only benefit in supply
chain but also increase efficiency of 7R of logistics. It can help in Labelling, packaging into smaller units,
organization and warehousing, Inventory management for production or distribution, demand planning,
order fulfilment and transport.
Decision
Mc Donald should use strategy Increase Backward Integration by owning a Logistics company as per
QSPM Matrix because this strategy attractive towards the majority of the S, W, O and T. This strategy
will take burden off the supplier and assure reliable supply. Our research shows that by owning a logistics
company will not only make effective supply but will have a positive impact on cost management. E
Procurement, Demand Forecasting, Holding Cost management, Enterprise Relation Software will all
become efficient while implementing the software which will further cut down the cost and make
McDonald better cost leader with greater margin. Secondly it will play huge role in pricing management
which is one of the problems faced by McDonald which is one of the reasons of decrease in revenue of
McDonald’s and by applying this strategy of backward integration it will cut down the cost and remove
the problem related to bargaining with supplier. One other thing is by implementation of this is strategy
outlet will be managed effectively as the communication will be increased by e procurement and problem
of bulking will be also be solved. This strategy will also have effect on the Discount strategy as backward
integration will cut down cost McDonald will be able to give better discounts.

McDonald’s: Balance Scorecard

STRATEGIC KEY INITIATIVES
OBJECTIVES PERFORMANCE
INDICATORS
FINANCIAL 1) Minimizing 1) Trend projection Reallocate the
forecasted demand 2) Real time tracking financial resources
fluctuations through 3) Return on Assets from technology
forecasted demand. investment into
2) Encouraging sales logistical
by decreasing delay of development to have
order delivery and efficient flow of
avoiding stock outs. operations and
3) Reallocate uninterrupted sales.
resources from tech
complexity to
logistical
development.
CUSTOMER 1) Gaining customer's 1) Customer Gain customer
confidence by Confidence Index confidence by
providing the right 2) Net Promoter score repeating customer
meal at the right time 3) Post service order to provide the
with the right quality. customer surveys. order requirements
2) Cater to the assurance and get
customer's thorough feedback.
requirements and
assist the customer
accordingly.
 3) Proactive customer
service.
INTERNAL 1)Identify ideal 1) Market and Local Focus on international
PROCESSES locations for environment factors operated markets to
warehousing closest 2) Evaluate the identify the ideal
to regions with most transportation cost locations and feasible
sales and number by transportation
2)Evaluate the focusing on distance facilities.
number of reefer per mile and weight
containers required per container
for moving essential 3) Evaluate quarterly
raw material from the demand trends.
supplier to the
warehouse
3) Focus on the
quarterly demand to
have an idea of the
forecasted demand to
minimize stock out
errors

LEARNING 1)Experienced 1) Employee Monthly and Annual

logistics professionals experience surveys training programs to
2)Give Extrinsic and 2) Conduct employee ensure employees get
Intrinsic rewards to satisfaction survey a hold of the new
employees 3)Evaluate the input strategy and discuss
3)Two way from the employees any issues they are
communication facing in
should be encouraged understanding the
strategy.
APPENDIX
Annexure:
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