McDonalds was founded in 1940 in San Bernardino, California and was recognized as McDonald’s Corporation in 1955 in Illinois. Presently the corporation is serving more than 68 million customers on daily basis with 35000 stores in around 119 countries.
McDonalds works with the strategy of “Plan to win”. The product positioning map of McDonalds is in line with its Corporate Strategy. Since winning in the food industry means gaining large market shares, McDonalds is doing well in attracting customers and is a sustainable growth company. The company is better than its competitors in terms of speed of service, price and taste. However, the company is required to improve and do better than the past in the areas of quality and customer service in order to sustain in the competitive environment.
Product positioning Map:
The map represents the position or standing of the products and services in the market. The map consists of 2 lines (x and y axis). The products are positioned for various criteria like price, status, quality, and reliability.
The below product positioning map shows McDonalds and Burger King’s product position is based on providing high quality products to its customers at low price.
High Price Low Quality High Quality Low Price
The concentration of Burger King is on narrow product positioning. As per the taste test research, the grilled taste of the beef and condiments were the most the preferred by the customers. While McDonalds continue with its generalist advertising approach, Burger King has opted for aggressive tactical strategy.
EPS/ EBIT Analysis
EPS (Earnings per share): This is the part of income that is available for the common stock shareholders. The same can be received by them in the form of dividend or can be retained and reinvested or a combination of both.
EBIT (Earnings before Interest and Tax): The same is also referred to as Net operating income calculated by subtracting operating expenses from sales or after adding back Tax and Interest to profit after tax (reverse calculation).
EPS/ EBIT Analysis: The analysis in done in case we need to raise money and we have to decide among the various alternatives. EPS is calculated at different levels of EBIT for various alternatives. The one with highest EPS is selected.
For McDonalds:
Amount to be raised = $ 1 Billion
Option 1: All Stock
Option 2: 50-50 Debt and Equity
Option 3: All Debt
The EPS has been calculated over a range of EBIT under different options:
EBIT EPS Option 1 Option 2 Option 3
6.332 3.849 3.872 3.895
6.632 4.031 4.056 4.081
6.932 4.214 4.240 4.267
7.232 4.396 4.424 4.453
7.532 4.578 4.608 4.639
7.832 4.761 4.792 4.825
8.132 4.943 4.977 5.011
8.432 5.125 5.161 5.197
8.732 5.308 5.345 5.383
9.000 5.471 5.509 5.549 From the above analysis we can conclude that Option 3 (raising funds using debt) is the best option for funding the strategies. The EPS at all levels of EBIT is the highest in case of debt financing, and ranges from 3.895 to 5.549, depending upon the economic scenario, i.e., boom, normal or recession. Higher EPS will increase the savings of the company and will help in further expansion and growth.
McDonalds continues to attain customer satisfaction by providing high quality products at an acceptable price. The company’s financial position is sound and will be able to achieve growth and the introduction of new items and venues will add to customer traffic and growth.
References
David, F.R. (2011). Strategic management: Concepts and cases (13th ed.). Upper Saddle River, NJ: Prentice Hall.
Lim, Christopher. Burger Wars: A Promotion Opportunity Analysis (http://apharock.blogspot.in/2010/08/burger-wars-promotions-opportunity.html)
