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Anh Hoang

on 21 March 2013

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Transcript of McDonald's

Agenda Objective
IB Theory
Company Overview
Recommendation Objective Company Overview Advantages IB Theory Screenings Candidates Screening # 1 Who moves on? Screening # 2 Screening # 3 Final Screening Pricing and Margins Recommendation Anh
Patrick Elements of success McCafé 100% Freshly ground Expresso To determine the best international market for McDonald's to enter with the McCafé product line Europe
Netherlands Africa
Egypt Middle East
Saudi Arabia
United Arab Emirates South & East Asia
South Korea # of McDonald's Restaurants Consumer Preferences Competitive Landscape 1 2 3 The
X Factor 4 Recommen-dation # of McDonalds restaurants Revenue growth & profit "Market
Expansion" Assess current successful market
Identify potential untapped markets
Geocentric approach to minimize marketing costs European division leads McDonald`s sales despite fewer stores than in America 100% Arabica beans Real Milk Real whipped cream Real Fruit puree Smoother taste Enticing roma Premium roast Flavourful Where do the people drink their coffee? / Are they spending money on coffee? How much coffee do the people drink? Does the Country have a strong coffee culture? Things to Consider Cont. Middle Eastern countries use cafés as substitutes for bars/clubs.

The Dutch love coffee, but hate spending money on it in cafés.

Since recession, Irish people stopped spending on coffee.

Political unrest has significantly reduced coffee spending in Egypt Despite the Dutch drinking lots of coffee, their habits do no work with McCafé

Ireland and Egypt, while normally good coffee drinkers, currently have changed tastes Who Moves on? India’s numbers only seem low because the “Coffee Culture” is predominantly an urban trend.

European consumers are among the heaviest coffee drinkers in the world

The Middle East is still an emerging market, but growing fast Coffee Culture Drinking coffee or tea for all countries goes back generations

American “Coffee Culture” is trending in many parts of the worlds (Starbucks effect) Ability to leverage the retail space
Good geographic locations
Existing brand recognition
Lower overhead costs
Recover investment in McCafé within 3 years Consumer
Preferences Positioning Attracts new customers & enables cross-selling b/w McCafé & core menu

Grow the size of the average cheque

Another opportunity for consumers to incorporate McDonald's into their daily life Main
Products South Korea: Strong global presence, Starbucks leader in chained specialist coffee shops, 24% value share

UAE: Strong global presence, Starbucks/Costa Coffee 31%/26% value share

India: International players entered recently: Dunkin Donuts, Starbucks

Saudi Arabia: Global brands dominate "chained brands" markets, 90% of chained value share

Sweden/Norway: Almost no international presence in coffee shops Global Presence Global Presence South Korea: Heavily saturated with both global and rapidly growing domestic brands, grew to outnumber Starbucks outlets. "Coffee shop on every corner."

UAE: High fragmentation. Independent players accounted 73% value share, steady growth and volume. Many global brand outlets, focus on high traffic areas for max. exposure

India: Very fragmented with no key dominant player of majority market share, but many brands overall. Overall outlets growing at 3% for coming year. Market Saturation Competitive Power Market Saturation South Korea/UAE/India: All strong market presences aggressive in marketing and promotional campaigns at universities and through loyalty programs

Saudi Arabia: Global players competitive advantage over independents, can offer free WiFi

Sweden: Domestics advertise and promote through internet and social media.

Norway: Strong domestic players invest in promotional events to develop sophisticated cafe culture Competitive Power South Korea: Distinct pricing schemes between global/domestic, global charge almost twice the price.

UAE: Cost of coffee fairly low, similarly to McDonald's low pricing model.

India: Most cafes positioned as upscale, and medium price range. However, still extremely low at under $1

Saudi Arabia: Global players charge relatively high prices, >$4, due to distribution of wealth

Sweden and Norway: Prices extremely high in cafes, at $5 and $7 respectively. Pricing and Margins Pricing and Margins South Korea: Due to extreme
competition and saturation of market, as well as large existing presence of strong brands, is not expected to be

UAE: Existing brands have already captured extremely large portion of market in high traffic areas, and profit margin opportunities are not the best So Who Moves On? India has the biggest market in terms sales by a large margin
The second biggest country by sales is Norway, which also has the smallest population How is the coffee market changing in these countries? X Factors Saudi Arabia is the fastest growing coffee market, followed by a distant Sweden How is the coffee market changing in these countries? X Factors Private consumption is growing in all economies, but fastest in India X Factors Maximum Future Growth Potential for ROI

Emerging markets

Favourable consumer tastes and habits Saudi Arabia India Which countries should you invest in tomorrow? Highest per capita consumption and spending on coffee

Favourable competitive environment

Favourable consumer tastes and habits Norway Sweden Which countries should you have invested in yesterday? Recommendation Expectation of positive profit!
(Looking to maximize profits) McDonald's Corporation Leading global foodservice retailer
Over 33,000 restaurants in 119 countries
Serve 69 million daily (1% of world. pop.) Business Success Founded in 1940
Consistently profitable (except 2003!)
Publicly traded (NYSE:MCD) Factors:
Pop. density
Higher prices
Competitive env.
Product line acceptance Staples at McDonald`s worldwide are items from the "American menu"
French fries, Hamburger, Coke

Product line has gradually expanded to capture wider group of consumers
Salads and other healthy alternatives
McCafé Around the world Aims for consistent quality and branding worldwide (Geocentric approach) Some products are tailored to specific markets (Polycentric approach) Corporate Structure Decision Making McCafé Expansion Map Saudi Arabia: Very fragmented. Most of the market run by independent owners, represent 75% of the market.

Sweden: Not segmented, alloffer the same basic store structure, pricing strategies, and menu offerings. Market dominated by 3 domestic players, account for 71% of chained value sales

Norway: Very fragmented, vast number of independent outlets in the country. Leading chained company only represents 2% of value sales, but 84% of specialist coffee chained sales. Global Presence Market Saturation Cont. Competitive Power High in Return to Scale Culture? Cont. How is private consumption changing? References Recommendation McCafé Headquartered in Illinois, USA
Organized by region
USA, Europe, Asia/Pacific, and Mid. East & Africa
Decentralized Structure
Each country will decide what products their restaurants will carry outside the core menu
80% franchise owned, remainder are corporate A word from the wise... Countries decide what to carry based on the return on investment

Investment will be smaller in those countries that have an established market already McDonald's India Euromonitor International. Cafes/Bars in South Korea
Euromonitor International. Consumer Lifestyles in South Korea
Euromonitor International. Cafes/Bars in Norway
Euromonitor International. Consumer Lifestyles in Norway
Euromonitor International. Consumer Lifestyles in Kuwait
Euromonitor International. Coffee shops fill vital, growing niche in Middle East
Euromonitor International. Consumer Lifestyles in India
Euromonitor International. Cafes/Bars in India
Euromonitor International. Cafes/Bars in the Netherlands
Euromonitor International. Consumer Lifestyles in the Netherlands Euromonitor International. Cafes/Bars in Egypt
Euromonitor International. Cafes/Bars in Ireland
Economist Intelligence Unit India
http://www.nytimes.com/2003/01/24/business/mcdonald-s-posts-its-first-loss-and-lowers-outlook-for-growth.html Euromonitor International. Cafes/Bars in the United Arab Emirates
Euromonitor International. Coffee in the United Arab Emirates
Euromonitor International. Consumer Lifestyles in the United Arab Emirates
Euromonitor International. Cafes/Bars in Saudi Arabia
Euromonitor International. Coffee in Saudi Arabia
Euromonitor International. Consumer Lifestyles in Saudi Arabia
Euromonitor International. Cafes/Bars in Sweden
Euromonitor International. Coffee in Sweden Simpson
Economist Intelligence Unit Saudi Arabia
Economist Intelligence Unit Sweden
Economist Intelligence Unit Norway
http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Investors/Investors%202012/2011%20Annual%20Report%20Final.pdf http://www.aboutmcdonalds.com/mcd/investors/financial_highlights.html 
http://www.aboutmcdonalds.com/mcd/investors/financial_highlights.html #ExpandMcCafé
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