McDonald’s Case Analysis

Edi Georg

Kristin Poleski

Julie Smith

Agenda

Edi Georg

Edi Georg

Julie Smith

Kristin Poleski

Russian Profile Economic Crisis Industry Analysis Mission Problems & Issues

Alternatives Plan of Action Timetable Accountability

Pro Forma Performance Measures Risk Analysis Conclusion

Edi Georg

Russian Profile

Economic Crisis

Industry Analysis

Mission Problems & Issues

Russian Profile

Edi Georg

Economic Crisis

Edi Georg

Consumer/Retail Industry

•$257.13 MIL•Multi-genre industry

–Not just restaurants, includes all retail

•McDonalds- approx. 20% Market Share•Current trend: w/high inflation: consumers are spending less money on non-essential goods/services•Major Competition:

–Russloe Bistro–Rostik’s–Various Mom/Pop Restaurants–Cooking at Home

Edi Georg

Mission

• WHO– Solo Adults– Youth

• WHAT– Connect with Russian People– Familiarize brand

• HOW– Marketing, pricing, franchising, menu growth

Edi Georg

Groups

Families 55%

48.2%

320.6%

244.5%

Alone 22.6%

Problems & Issues

• Remain sustainable in volatile economic conditions– Instability of ruble– Political situation

• Long-term growth– Pricing– Menu

Edi Georg

Summary

Edi Georg

Kristin Poleski

Alternatives

Plan of Action

Timeline Accountability

Structure

Alternative Action Plans

• Connect with Russian people– Affordable prices, menu expansion,

franchising, new markets

• Focus on profitability– Raise prices, closes stores, target

profitable market segment

• Push products, not brand– Don’t promote McDonald’s, promote

product being sold

Kristin Poleski

Plan of Action

• Step 1: Keep prices affordable

Kristin Poleski

Plan of Action

• Step 2: Russian Exclusives menu– Soup – Salad – Grilled cheese – Pierogies

Kristin Poleski

Plan of Action

• Step 3: Franchise new locations– Russians willing to spend to bring

aspects of Western culture to their country

– Commitment to Russia– Growth– Education potential

Kristin Poleski

Plan of Action

• Step 4: Target new markets– Educate

• Menu• Brand • Status Symbol• Charities

– Television• Flight 910• Cartoons• Commercials

Kristin Poleski

Visits

Once/ week or more 32.4%

2-3/ month13.1%Once/ month

16.9%

Once/ 2-3 months7.4%

Less often4.3%

First time25.8%

Plan of Action

Kristin Poleski

Affordable Prices

Expand Menu

Franchising

New Markets

Timetable

Kristin Poleski

12 months: Begin franchising new locations, air TV shows

1 month: Hire appropriate staff

3 months: Introduce Russian food to market with promotional pricing 6 months: Evaluate success

of new menu items, end promotional pricing, begin airing commercials

2 months: Start developing commercials, TV shows

18 months: Determine franchising sustainability, outlook for future24 months: Evaluate

financial stability, make decision for future endeavors

Accountability Structure

Kristin Poleski

Chairman &

President

Finance Marketing

Food Operatio

ns

Franchising

Other Advertisi

ng

Television

Commercials

TV Shows

Russian Food

Summary

• 4-step POA– Affordable prices– Introduce Russian food– Franchising– Target new markets

• Timeline• Accountability

Kristin Poleski

Julie Smith

Pro Forma Performance

Evaluation

Risk Analysis

Conclusion

Pro Forma Analysis

Julie Smith

1999 Pro Forma Statement in $Millions

Low (no change)

Medium (15%) High (23%) 2000 (4%) 2001 (3%) 2002 (2%)

Sales 8.2866 9.52959 10.192518 10.35152128 10.3515213 10.513005Cost of Sales (75%/67%) 6.21495 7.1471925 7.6443885 6.935519258 6.93551926 7.0437134

Total (25%/33%) 2.07165 2.3823975 2.5481295 3.416002023 3.41600202 3.4692917

Costs

Administration 0.51 0.51 0.51 0.52 0.53 0.54

Marketing 1 1 1 1 1 1

Depreciation 1 1.05 1.08 1.06 1.07 1.08

total: -0.43835 -0.1776025 -0.0418705 0.836002023 0.81600202 0.8492917

Before taxes -0.43835 -0.1776025 -0.0418705 0.836002023 0.81600202 0.8492917After tax rate of 24% -0.333146 -0.1349779 -0.03182158 0.635361537 0.62016154 0.6454617

Cash Flow 0.666854 0.9150221 1.04817842 1.695361537 1.69016154 1.7254617

Performance Evaluation

• What to measure– Popularity

• Russian menu items• Franchising

– Customer base– Brand Awareness– Sales

• How to measure– Consumer surveys– Russian food sales– TV viewers– Coupon use– Franchises open &

successful– Financial

statements

Julie Smith

Risk Assessment

• Economic instability – ruble recovery• Negative image of foreign companies

– Leaving Russia due to financial concerns

• New menu items flop– It’s just not home-cooking

• No viewers for shows• Franchising unpopular• Obesity problem• Politics/people factor

Julie Smith

Summary

• Pro Forma– 15% increase for 1999– 9% increase over next 3 years

• Performance Evaluation by– Financial statements, feedback, coupon

usage, franchise success rate

• Risk– Ruble, People factor, Menu Items not

working

Julie Smith

Conclusion

• Plan of Action1. Education 2. Pricing3. Menu4. Franchising

• Edge out the competition• Stabilize sales during

despite economic instability

• 24% Sales increase over next 4 years:

Julie Smith

The Future

Questions?