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McDonalds Company History

In 1954, Ray Kroc, malted-milk mixing machine salesman, acquired the exclusive
franchising rights to a successful California-based hamburger chain from brothers Dick and
Maurice (Mac) McDonald. He had visited the brothers at their first restaurant in San
Bernardino, California, after hearing that their restaurant used eight multi-mixers more
multi-mixers than any other similar size restaurant. Kroc bought out the McDonald brothers
interest in the business in 1961.
Raymond Albert Kroc 1902-1984:
He was the founder of McDonald's. Basically he was a salesman of multi-mixers.
Where it all began:
Ray Kroc opened the Des Plaines restaurant in 1955. First day's revenues-$366.12! No longer
is a functioning restaurant, the Des Plaines building now a museum containing McDonald's
memorabilia and artifacts, including the Multimixer!
In 1965 McDonald's went public with the company's first offering on the stock exchange. A
hundred shares of stock costing $2,250 dollars that day would have multiplied into 74,360
shares today, worth over $2.8 million on December 31, 1998.
The business began in 1940, with a restaurant opened by brothers Richard and Maurice
McDonald at 1398 North E Street at West 14th Street in San Bernardino, California. Their
introduction of the "Speedee Service System" in 1948 furthered the principles of the
modern fast-food restaurant that the White Castle hamburger chain had already put into
practice more than two decades earlier. The original mascot of McDonald's was a man with a
chef's hat on top of a hamburger shaped head whose name was "Speedee". Speedee was
eventually replaced with Ronald McDonald by 1967 when the company first filed a U.S.
trademark on a clown shaped man having puffed out costume legs.
McDonald's first filed for a U.S. trademark on the name "McDonald's" on May 4, 1961, with
the description "Drive-In Restaurant Services", which continues to be renewed through the
end of December 2009. In the same year, on September 13, 1961, the company filed a logo
trademark on an overlapping, double arched "M" symbol. The overlapping double arched
"M" symbol logo was temporarily disfavoured by September 6, 1962, when a trademark was
filed for a single arch, shaped over many of the early McDonald's restaurants in the early
years. Although the "Golden Arches appeared in various forms, the present form as a letter

"M" did not appear until November 18, 1968, when the company applied for a U.S.
trademark.
The present corporation dates its founding to the opening of a franchised restaurant by Czech
American businessman Ray Kroc, in Des Plaines, Illinois, on April 15, 1955, the ninth
McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the
company and led its worldwide expansion, and the company became listed on the public
stock markets in 1965. Kroc was also noted for aggressive business practices, compelling the
McDonald brothers to leave the fast food industry. The McDonald brothers and Kroc feuded
over control of the business, as documented in both Kroc's autobiography and in the
McDonald brothers' autobiography. The San Bernardino store was demolished in 1976 (or
1971, according to Juan Pollo) and the site was sold to the Juan Pollo restaurant chain. It now
serves as headquarters for the Juan Pollo chain, as well as a McDonald's and Route 66
museum. With the expansion of McDonald's into many international markets, the company
has become a symbol of globalization and the spread of the American way of life. Its
prominence has also made it a frequent topic of public debates about obesity, corporate
ethics and consumer responsibility.

Some Main Products


"Big Mac"
Introduced system wide in 1968, the Big Mac was the brainchild of Jim Delligatti, one of Ray
Kroc's earliest franchisees, who by the late 1960s operated a dozen stores in Pittsburgh.
"Happy Meal"
Since 1979 the Happy Meal has been making kids visits that much more special. Children are
mostly interested to collect Happy Meals toys and boxes.

McDonalds Vision
McDonald's vision is to be the world's best quick service restaurant experience. Being the
best means providing outstanding quality, service, cleanliness and value, so that they make
every customer in every restaurant smile. To achieve their vision, they are focused on three
worldwide strategies:

1-Be the Best Employer:


Be the best employer for their people in each community around the world.
2-Deliver Operational Excellence:
Deliver operational excellence to their customers in each of their restaurants.
3-Achieve Enduring Profitable Growth:
Achieve enduring profitable growth by expanding the brand and leveraging the strengths of
the McDonald's system through innovation and technology.

Mission and Objectives

MCDONALD'S MISSION
McDonald's will be a unique multinational organization, that has grown from a
small shop in a U.S.A town to twenty Nine thousand stores in 121 countries, but
still do not have any stated mission.

OBJECTIVES
We are the worlds favourite restaurant because we give
customers what they want great food and great experience.
Michael Quinlan, Chairman McDonalds

McDonald's objective is to attain QSCV at all of its restaurants, where:

Q is Quality
S is Service
C is Cleanliness
V is Value

Quality
A quality standard regarding each and every aspect of food and service is
documented, to provide consistency and to achieve the high level of quality at all
the McDonald's restaurants.
It is due to documentation that a consumer will get the same taste from a
McDonald's whether he is in New York or Moscow or in Lahore.
The raw materials acquired are required to pass a stringent specification test
about factors from the freshness to vitamins contained in them. Then there is
documented recipe and cooking requirement regarding utensils to temperature.

Service
At McDonald's everyone serves quickly with a smile. There is less than a minute
the time the customer orders and the food served to him. If somebody has any
problem, it must be sorted before coming to the counter.
It is the McDonald's culture that the customer is doing them a favor by being
there and not the staff so he should be received and returned this feeling the
same way.

Cleanliness
McDonald's is cleanliness fanatic. There is even a joke that explains McDonald's
philosophy that, If there is the time to lean then there is time to clean.
The restaurant is thoroughly cleaned and sanitized after the closure, the cooking
utensils are disassembled every night for washing and then reassembled, and
the floors, washrooms, etc. are cleaned every half hourly during the restaurant
timing.

Value
McDonald's has an open-door culture; any employee can go to the Restaurant
Manager and can discuss any problem or new ideas for the improvement of the
restaurant. Nobody has any hang-ups; everybody does everything.
McDonald's also believes in value to the customer, that is, why prices are value
oriented as Amin Mohammad Lakhani put it in his word; nothing sells forever
unless it is value for money.

SWOT Analysis

On the basis of environmental analysis of McDonald's, the structural analysis of


fast food industry, and the assessment of internal resources of the company,
following strengths, weaknesses, opportunities and threats are there for
McDonald's:

STRENGTHS
McDonalds in Pakistan is inherited by a lot of strengths which includes:

A strong image well reputes organization.


No compromise on quality of products.
Self-service criteria save a lot of cost.
Different incentives and packages for children.
Quality raw material (ingredients) in all the products.
McDonald's strong financial position, growing cash flow, solid international presence

makes McDonald's one of the consumer products with a high growth rate.
Working environment in McDonald's is very friendly and all the employees of the

company are treated as members of McDonald's family.


McDonald's has menu, which has more breadth and depth than any other fast food

franchisee in Pakistan.
Well documented fair and strict criteria for recruitment of employees.
Updated training programs of employees.
Flexible workforce, which can work on more than one job at a time.
Skied and motivated workforce.
Sufficient funds to invest in marketing efforts.
Excellent relations between management employees.
Secured jobs.
Good working conditions.
Career opportunities for employees.
Care for the thoughts and moods of customers.
Celebrations of main events e.g. independence day etc.

WEAKNESSES
Along with a lot of strengths there are some weaknesses also by which McDonalds suffers:

Management of McDonalds does not consider other fast-food chains or outlets in

Lahore as its competitor e.g. KFC Pizza Hut & local burger market which are their
competitors in real sense.
With the passage of time the expenses of McDonalds are increasing. The reason is

the big part of fixed costs e.g. fixed overheads & fixed salaries of all the employees,
which increases directly with the decrease in production.
McDonalds main target market is a child. But McDonalds should also consider the

fact that birth rate in Pakistan has been decreased from about 2.3% to 2. % p. a. In
other words the population of children is decreasing gradually so McDonalds should
also attract the people who belong to aged class.
Dominant class in Pakistan is middle- income class for which it is difficult to afford

the menu items of McDonalds or at least middle-class cannot enjoy McDonalds


product more frequently.
McDonald's has product portfolio (menu) of greater width and depth; this broad array

of products allows attacks from niche players.


Some of the products of the company are not competitively priced.
All the raw materials are imported from different countries; this increases their cost of
production.

OPPORTUNITIES
The marvellous growth in number of stores outlets all over the world in the result of
great opportunities granted to McDonalds.

McDonalds has the following opportunities:

Macdonalds can get a big market share by expanding its business to the other cities
included in its territory e.g. Peshawar, Mardan, Gujranwala, Multan,
Sargodha, Sialkot etc. because a big portion of their target market resides within these
areas.

McDonalds is the single international quality- burger chain operating in Pakistan, so


it has more profit potential in Pakistan uptil now.

By Increasing consciousness about low fatty foods which are being provided
McDonald's (using vegetable oil).

Increasing disposable income in upper and upper-middle social classes of urban areas,

which are target market of McDonald's.


By strengthening the marketing efforts, company can have more sales as compared to
existing sales.

THREATS

McDonalds people say that there is no threat for them and it can also be a big threat

for them.
Threat of new entrants is also working there because industry is growing at a rapid

speed and a lot of attraction is there for new- comers. Entry barriers are also low in
Pakistan so this threat really works for McDonalds.
Threat of substitutes is also working there for McDonalds. Substitutes for products of

McDonalds KFC, Pizza Hut products. A big domestic market can also break at least a
little market share of McDonalds.
Double digit inflation prevailing in the country, which in turn increases the cost of

production.
Continuous devaluation of rupee that has increased the import bill of raw materials.
Imposition of heavy taxes on fast food industry including Sales Tax and

Entertainment Tax.
Complex rules and regulations imposed by government.

McDonald's Franchising
We Have Always Been A Franchising Company
McDonald's has always been a franchising Company and has relied on its franchisees to play
a major role in its success. McDonald's remains committed to franchising as a predominant
way of doing business. Approximately 70% of McDonald's worldwide restaurant businesses
are owned and operated by independent businessmen and women, our franchisees.
A Recognized Premier Franchising Company
McDonald's continues to be recognized as a premier franchising company around the world.
Perhaps the fact that McDonald's management listens so carefully to its franchisees has
something to do with McDonald's being perennially named as Entrepreneur Magazine's
number one franchise.
A Partnering Relationship
McDonalds franchising system is built on the premise that the Corporation can be successful
only if our franchisees are successful first. We believe in a partnering relationship with our
owner/ operators, suppliers and employees. Success for McDonald's Corporation flows from
the success of its business partners.

McDonalds Pakistan
McDonald's has 2-joint ventures in Pakistan:
First for the territory including the provinces of:
Sindh
Baluchistan
Second for the territory including provinces of:
Punjab
N.W.F.P.
For second venture (for the territory of Punjab and NWFP), McDonald's has made franchisecontract with "Ghouse Akbar", who is now the president of McDonald's -Lahore.
Uptil now there are six stores of McDonald's, operating in Lahore. Currently McDonald'sLahore is planning to expand its business to other cities by following preferences:

Sialkot
Faisalabad
Gujranwala
Peshawar
Multan.

McDonald's Lahore is a joint venture between McDonald's Corporation U.S.A and GAM
Corp (Pvt.) Ltd. McDonald's made its debut in Pakistan on 19th September 1998 when its
Grand Country Opening was held in the provincial metropolis of Lahore. This made Pakistan
the 113th country on the globe where the world renowned Golden Arches were unfolded.
After Lahore, McDonald's made Golden Arches glitter in other cities of Pakistan, Faisalabad
is already open, soon to be followed by other cities.
McDonalds has set the ball rolling in Pakistan with two modern, state-of-the-art restaurants,
one in Lahore and Karachi each. The McDonald's Lahore Restaurant is located on Gulbergs
Main Boulevard while the one in Karachi is situated on the Main North Nazimabad
Road. The Lahore McDonald's has scored another first in Pakistan with its Drive-Thru a
modern customer service concept in quick service restaurants that has been introduced for the
first time in Pakistan. The customer simply drives into McDonald's, places the order and pays
at one window and collects the food within a minute at the next all without leaving the car.

Analysing Competitors
As the McDonald has captured very large market in terms of fast food items it is due to its
large number of franchisees and better quality products and services to its potential
customers. At the same moment the competitors are also increasing their operations in either
way locally or joint venture with the foreign and local investors. Local investors are also
putting pressure on McDonald and they are also increasing their branches by offering low
cost products to the customers and thats why they are attracting the large number of
customers and it will lead to high competition in the market and everyone will be competing
on the low cost of offering. In this dynamic and uncertain environment McDonald is
sustaining its operations smoothly and effectively. McDonald major competitors are

1. KENTUCKY FRIED CHICKEN (KFC)


Kentucky Fried Chicken, better known as KFC, is the largest chicken restaurant
chain worldwide with almost 10,000 outlets located in well over 70
countries. Headed by CEO, David Rodgers, it is part of the Artal Group, which is a
large multibillion-dollar food conglomerate.
Said to be the second most famous and largest fast food franchise in the world is
No. 1 brand in Asia with market leadership in Japan, China, Malaysia, Indonesia
and Korea.

KFC Arrives in Pakistan


In 1998, KFC entered the market under the banner of Artal, a European food
conglomerate that has invested heavily in the food sector in Pakistan. This
unique step was taken out of special concern for middle and lower-middle class
income groups who had so far being neglected by brand name franchises in their
areas.
Entrance of KFC in food industry has resulted in numerous positive developments
in various areas. Each KFC restaurant employs roughly 50 local people, which
would total to about 500 direct employees in all taking in all 10 restaurants in
Pakistan.
2. PIZZA HUT
It was started by two American brothers who were stationed in Italy and while
there they got to love Italian cooking particularly pizza. So they setup a small

place, but after having put the billboard and having painted the word Pizza on
it, they ran out of space and all they could add was the Hut. So, we had Pizza Hut
and the name just got on and it is now known in 83 countries throughout the
world as franchisee.

Pizza Hut Arrives in Pakistan


1st foreign franchisee came to Pakistan and became regular business in our
country. It now has 4 branches in the city, Clifton, Tariq Road, I. I. Chundrigar
Road, and Gulshan, and 2 in Lahore, on the Mall, and in Gulberg. But be it
Karachi or Lahore two cities with distinctively different vibes, Pizza Hut pizza, and
tastes just the same, and costs the same too. Manzar Riaz who is one of the
three entrepreneurs responsible for bringing Pizza Hut to Pakistan under the
banner of MCR (Pvt.) Ltd., comments, Pakistan has great potential, we have a
huge market of young people and our spending power is growing. Now Pizza Hut
just took the plunge and others got on to the bandwagon.

Target Market
Target market of McDonalds
Do not buy market share Figure out how to earn it
Broad speaking McDonalds wants to attract as many customers as it can. But
the main targets of the efforts by McDonalds are following groups:
Children
Youngsters
High income groups
Families
Broadly speaking, McDonalds wants to attract the whole market. McDonalds
was targeting the high income social class uptil now but now McDonalds is
introducing some new products to penetrate into low income groups e.g.
McDonalds cone for Rs. 15/- is an effort to attract middle income class and lower
income class as well.

Currently, market of McDonalds is local market. So we can say that McDonalds


is involved in local marketing i.e. its marketing programs are being tailored to the
needs and wants of local customers groups.

Existing Strategies

OPERATIONAL LEVEL STRATEGY


Product Strategies
Menu
1. Big Mac
2. Filet-o-Fish
3. Quarter Pounder with Cheese
4. McChicken with Cheese
5. Beef Burger
6. Cheese Burger
7. Filet-o-Fish Meal
8. McChicken with Cheese Meal
9. Quarter Pounder with Cheese Meal
10. Big Mac Meal
11. Happy Meal
12. Fries
13. Cold Drinks
14. Tea
15. Coffee
16. Hot Apple Pie
17. Milk Shakes
18. Cones
19. Sundaes

Pillars For Its Success QSCV


Quality, Service, Cleanliness And Value.

No organization can deliver its products without quality even to a child who is a
potential customer or target client of that organization. It is consistency which
which reigns supreme everywhere in the world.
a) QUICK SERVICE
Everybody serves quickly with a smile. There is less than a minute between the
time customer orders and the food served to him. If somebody has any problem,
it must be sorted before coming to the counter. It is the McDonald's culture that
customer is doing them a favor by being there and not the staff so he should be
received this feeling the same way.
b) CLEANLINESS
McDonald do provide cleanliness in all its products and services offering. So they
maintain cleanliness at all times. The restaurant is thoroughly cleaned and
sanitized after the closure. Thats why more customers are becoming loyal to this
organization as compared to the other organizations competing in the same
industry.
c) QUALITY
All required supplies and raw materials are imported from abroad and conformed
according the strict rules and regulations regarding the requirement and
specifications of McDonald's, e.g., for Pakistani market, all McDonald franchisees
are importing Halal meat from South Africa, Dubai and Malaysia.
d) VALUE
The customers receive the same value from McDonalds wherever they go in this
world. A customer gets the same taste of burger and similar level of service,
wherever he goes. Thanks to documentation from recipe of burger to the heating
temperature that McDonald's is able to deliver the same taste throughout the
world. This is not in the case of local fast food restaurants because they lose a lot
of customers due to change in food taste.

Functional Area / Marketing Strategy

PRICING STRATEGIES
McDonald's main concern is to sell in volume and maintain it on long-term
basis. They are charging a price, which they think is a fair value to the customer,
and not on the basis of competition. McDonald's have MacIndex, and they dont
increase prices even in crisis.
McDonald's worldwide has the same concept of giving food of high quality at low
prices. In England, the prices of their meals are the same for the last five
years. Its simple Economics that when price is constant, the demand grows and
when the demand grows, their input price comes down and when input price
comes down, they can afford to maintain the price as the volume grows. Even
the total cost may grow, but the volume is so much that the prices remain
stable. So selling on cheap price has a valid justification.
McDonald's has a strict policy of selling at the same price to whoever purchases
and whatever quantity he buys, and they just dont give any kind of discount.

PLACE STRATEGIES
The first restaurant of McDonald's started its operations in Main Boulevard,
Lahore on September 19, 1998 and so in the following week, the second
restaurant started in North Nazimabad, Karachi on September 26, 1998. The plan
is to have 20 restaurants in the country out of which seven will be in Lahore and
rest in Karachi. In Lahore, the expansion plan included the branches at Jail Road,
Fortress Stadium, Defence and at LDA Plaza.
But why did he choose Main Boulevard, Gulberg, for opening? Ghous Akbar said,
Lahore as a whole is a family city and Gulberg is a central area and Main
Boulevard is the single most artery of Lahore which is accessible to people of all
income levels. We also have customers who come from Faisalabad, Gujranwala,
Sialkot, etc. It is three thousand square yard. So the side corners are
also included. Its diagonally opposite to Home Economics College and other
academic institutions also surround it. We had 30,000 customers a day in the
beginning.
It was a thoughtfully selected location as it is located near to offices, posh
shopping centres and the population of Gulberg, itself, is a good market for fast
food.
On the other hand, Amin Lakhani, CEO McDonald's, Karachi too has strong
reasons and arguments about selecting the site of North Nazimabad. It is a
strong, education and family oriented middle class area. Most of the families

living here have joint family system. I have not seen so many families hanging
around as I did in North Nazimabad at the launch of McDonald's. The area is
inhibited by several million peaceful people who want to take their children out,
but there arent so many places for the purpose. We are cleaning the area and
the people out there are very happy and the government functionaries are
cooperative with us.
McDonald's does not offer home delivery as they are very much conscious about
the freshness of their burgers. Presently, Drive-Thru facility is available only at
the Main Boulevard Gulberg Branch, Lahore, but both GAM and Size groups have
in their plans to have this facility in their new branches, which are going to open
in future.

PROMOTION STRATEGIES
McDonald's Main Boulevard Gulberg Branch started its operations on September
19, 1998, but quarter-page advertisement about its opening started appearing in
different newspapers in the second last week of August.
But the real strength of promotion of McDonald's was seen on its opening day
when it used almost all the media to tell people that McDonald's was there with
them to stay. On its inauguration day, full page advertisements appeared in The
News, The Dawn, announcing its opening. On that day, McDonald's also ran a
grand program of twelve hours McDonald's Fun Day on FM-100.
On the same day, a live road show was also conducted at the restaurant, in
which the leading Pakistani singers and groups participated. This show was
attended by a large number of people. Also a well-decorated float carrying
musical band, hundred children and Ronald McDonald, the official spokesman to
children, ran all the day on the roads of the city. The leaflets about the opening
of the restaurant were distributed in the whole city.
Major medium used by McDonald's is billboards, which are made by MMT to
promote their brand. It will be a matter of pride for Lahories that they have the
biggest M sign in their city (it is one of only five big M in the world). This M
is imported from Singapore and is made up of Pylone.
McDonald's around the world put much emphasis on Television commercials,
they have produced very expensive TV commercial with such bright stars of
show business and sports as Naomi Campbell and Ben Johnson. But presently in
Pakistan, McDonald's is not using television medium, as they dont have
sufficient information about television viewers, also the cost of television
commercials is prohibitive in using this medium.

The advertising agency working for McDonald's in Pakistan is Manhattan


Communications (Pvt.) Ltd., which is a subsidiary of Manhattan Leo Burnnet,
USA. This company handles the promotion of McDonald's in all those countries
where its branches, subsidiaries or partnerships are present.
As a part of its public relations policy, McDonald's has constructed a beautiful
fountain at Jail Road in Lahore with a huge investment of one million
rupees. Similarly the company has spent huge sum of money in renovating
public places, building green belts and placing dustbins to keep environment
good looking, healthy and clean.

Business level Strategy


Differentiation
McDonalds has Broad Target and it wants to achieve competitive strategy adopted by
McDonalds is Differentiation i.e. Mc Donalds wants to a make its products unique
and highly differentiated.

Corporate level Strategies


McDonald is horizontally integrating itself by increasing the number of outlets. At current
timing there are nine outlets operating only at Lahore and they have Twenty one outlets in all
over Pakistan. They are also planning firstly to go into the Metro Areas like Islamabad and
Rawalpindi and then they will look toward Multan.
Global diversification
McDonald is operating more than 121 countries which mean it is following global
diversification strategy.

Societal Level Strategies


Community Service
McDonald's is firmly committed to give back to the community where we operate. We are
happy to become involved because we recognize that organizations have a role to play in
helping communities to work successfully.
Social Responsibility and Welfare

McDonald's is actively involved in the welfare of the community, wherever


it is operating. In Lahore, McDonald's has granted one million rupees to
the Mental Hospital and gifted computers to Jinnah Foundation.

As a part of RMCCS (Ronald McDonald's Children Charities), they have


plans to introduce part-time jobs concept on daily basis and for summer
holidays.

Ronald McDonald House Charities provides homes-away-from-home for


families of seriously ill children being treated at nearby hospitals. The first
Ronald McDonald House was established in Philadelphia in 1974. Today,
the program has nearly 200 Ronald McDonald Houses in 16
countries. More than two million families have stayed at a Ronald
McDonald House with nearly 100,000 families each year.