JOURNEY OF MCDONALDS 1973-2009

ARCHIES V/S VINTAGE

DHRUTI PATEL
KANIKA SHAH
MIRVA VAGHASIA
PRIYANKA MAHANT

INTRODUCTION

McDonald's is the world's largest chain of hamburger

fast food restaurants, serving around 68 million
customers daily in 119 countries across 35,000 outlets.
Founded in the United States in 1940, the company
began as a barbecue restaurant operated by Richard
and Maurice McDonald.

McDonald's restaurant is operated by either a

franchisee, an affiliate, or the corporation itself.

HISTORY
A small carhop drive in restaurant in California.
It has simplified menu that offered just hamburgers and
cheese burgers, French fries, milkshakes, apple pies and soft
drinks.
But in 1954 Ray Kroc a salesman who supplied the McDonald
brothers multi mixer milkshakes machines decided to buy the
right from the brothers to set up McDonalds franchises across
the country as he saw it has a very good business opportunity.

McDonald's grew from 14 restaurants in 1958

to 1000 restaurants in 1968.

Kroc followed a strategy of uniformity in all its

restaurants. But this did not stop the
franchises from being innovators. Eg: the
BIG MAC.

FOUNDATION STAGE

STRATEGY OF FRED TURNER(1973-1987)

Managemen
t science

Training

Managemen
t style

Supervising
franchises

Advertising

PROBLEMS FACED
During the tenure of turner McDonalds faced two major
problems:
1. Franchisee relations
2. Employee relations

FRANCHISEE RELATIONS

1. Contract for only 20 years

2. Opening new McDonalds outlets nearby the existing ones
To tackle this problem turner established a National Operating Advisory
Board.

EMPLOYEE RELATIONS

Turner has established a longstanding labor policy in order to keep

unions away.
He appointed John Cooke a labour management consultant who
trained the store managers to detect union threats and appointed
flying squads.

EXPANSION
STAGE

MICHEAL QUINLAN(1987-1998)

Customer
service

Cost cutting

International
expansion

CRISIS IN MCDONALDS

1. New products introduced by Quinlin such as

vegetable burger, pasta, fried chicken,
pizza etc. were withdrawn.
2. Franchisees in san diego complained that
the new outlets were cannablizing their
business.
3. Losing market share

CRISIS
STAGE

JACK GREENBERG(1998-2003)
New menu was prepared by him.
Acquisitions took place.
At this period mcdonalds faced various attacks from
several people.
Various issues like child obesity, undermining traditional
farming techniques etc were face by mcdonalds.
Mclibel trial had most damaged the reputation of
McDonalds.

FINANCIAL RESULTS
The introduction of new menu failed to increase the sales and the new
acquisitions produced disappointing results and the global attack turned
customers away.
The made for you menus was labour intensive and increased both
implementation and service cost.
The underperforming acquisitions were sold one by one in 6 years and
McDonalds decided to follow the divestiture strategy by selling of certain
business and focus on its hamburgers business.

 Under the Greenberg's direction the sales of many restaurants fell and
its US market share was growing at a slow rate(2.2%)
In 2002 McDonalds stock price was trading at a seven year low. Its
earning declined and Greenberg announced its resignation.

COMEBACK
STAGE

JIM SKINNER
McDonalds then formed a turnaround team which Included James
Cantalupo, Charles Bell And Jim Skinner.
How ever due to uncertain medical reason only skinner was left and
became the CEO.
Skinner formed a new strategy plan to win which has 2 principal goals:
1. Upgrading the existing customer service
2. Introduction of nutritional, healthful and higher food qualities.

Improving
store
operations

Answering
critics

Financial
results

IMPROVING STORE OPERATIONS

The existing stores were redecorated and remodeled.
Plastic chairs were replaced by large comfortable chairs and soft lights
were replaced by bright lights.
Store hours were extended and by 2009 34% of the stores in united
states were open 24 hours.
Another initiative was diversification into premium coffee drinks and
opened McCafes giving competition to Starbucks. By 2008 5700
McCafes were installed.

ANSWERING CRITICS
Skinner discontinued the super size me menu and substituted it with
healthier choice like milk and fruits instead of French fries and soft drinks
in kids meals.
In 2005-2006 it launched a balanced life style and fitness program.
It reduced its salt content in French fries and chicken nuggets by 25-30%.
It replaced it cooking oil by blend of canola, corn and soybean oils.
Also a shift from beef to chicken

FINANCIAL RESULTS
Skinners turnaround efforts did not got un noticed and his tenure as CEO
was the best financial results ever
Store sales increased by 10% and McDonalds market value doubled and
during depression when all companies were loosing its stock value
McDonalds stake increased by 6%.
Global revenue increased by 5% and its net income tripled and rate of
return on sales by 18%
Thus skinner further expansed by opening new outlets.

ARCHIES VS VINTAGEAre we in the business of

greetings?

BACKGROUND
Case talks about two companies Archies and
Vintage who are mainly in the card segments they
started in 1980 and 1983 respectively.
There has been steep decline of sales of both the
companies and especially in the cards segment
and infact doing well in the gifts segment.

ARCHIES
Archies Greetings and Gift Ltd.(AGGL), is Indias largest
manufacturer and distributor of greeting cards, posters, soft
toys, gift items, cassettes or CDs and stationery items.
The card business started in 1980
The first Archies Gallery was set up in by Mr. Anil in the
year 1987 in the heart of the Delhi University campus.
Core Business- Greetings Card
Complementary Business- Gifts and Perfume.

SITUATIONAL ANALYSIS
Archies mission is being in the Business of emotions and their
vision is to see An Archies card in every hand
They have diversified and made strategical tie-up's with other
organization and expansion of flagship, premium stores and
adopting the Franchise model. Some of the distributors were
converted into C&F agents because margins were higher, and also
since the consumers and retailers directly chose the products,
Archies had a better grip on demand forecasting
They have expanded in new horizon of business such as gifts,
perfume, women fashion jewellery, toys and designer cards, etc.,
They have also supported different NGO such as HelpAge and
Child Relief and You which reflects their mission Business of
emotions
They have strategically expanded their business as per the Mission
and were successful when compared to Vintage cards

SITUATIONAL ANALYSIS

Regional language Cards were launched along with Occasion Cards

Archies made their cards available online by strategically making a tie
up with Yahoo! E-tail
However when they found that there is a drop in sales in cards category
because of customer sending online greetings which is free of cost, they
made a strategical move by making Archies online greeting subsidiary
business into a subscription model by providing various discounts at
online space and also discount card that allowed discount shopping at
Archies and Planet M
The quick response and strategical move by Archies made them to
restore the business without damaging the customer delight and
emotions

Archies - Segment Wise Break-up of Sales (%)

90
80
70
60
50
40
30
20
10
0
2000

2001

2002

2003
Greetings

Gifts

2004

2005

2006

Stationery

As the graph show there is a slump in greeting market after

2000 and Archies made a right decision to strategically
diversify its product line which prevented them from further
fall in the business in terms of sales with reasonable profit
margins

STRATEGIES FOLLOWED

Introducing the first gallery

Innovation of products

Special offer and promotional schemes.

Entering into corporate social responsibility

Occasion cards.

Complementary businesses
Alliance with cadbury india & taneja mines
Perfume business, gift articles, kids stationery.
Jewellery , fashion products through the
Tie up with normak.

STRATEGIES FOLLOWED

Promotions
Tie-up with Walt Disney.
Use of props in feature films like Maine Pyar Kiya, etc.

Expansions
Domestic; more than 450 franchisee stores.
Foreign; 425 franchisee stores across 6 countries.
Importance to C&F agents.
Introduction of archiesonline.com.

SWOT ANALYSIS OF ARCHIES

Strengths
Few Competitors in
organized sector
Good Brand Image
Developed Stronger
Corporate Image Due to its
Initiatives with different
NGOs

Weaknesses
Cheaper alternatives
available
Lower margins in case of
gifts due to outsourcing

Opportunities
New Product category
( Mobile
Phones/Cakes/Dresses)
Marketing via Social media
(e.g. Orkut)

Threats
Fluctuating demand
Unorganised sector
Very low margins(in some
cases) will make it difficult
in the long run

VINTAGE
A partnership firm founded by Anil Kapur and Rajesh
Vaishnav in the year 1983 for manufacturing and
marketing greeting cards.
By 1992, Vintage had a collection of 3000 designs,
26 distributors and 3000 independent retail outlets.
To meet its future gorwth requirments , the company
entered into agreement with Hallmark , one of the
worlds largest greeting card manufacturer based in
united states in1992 to use its brand and intellectual
property .

Situation Analysis
Vintage tied up with Hallmark Cards to distribute cards in India
Focused only on Local nearby customers
Agreement with Walt Disney to use their products Like Mickey,

Minnie, Donald Duck for use in Greetings

Tied up with Barbie Brand
Affiliated with Cancer Patients Association
Company had Consolidated losses to the tune of Rs. 9.5 crores
The greeting card industry was dying and being replaced by
SMS, MMS and e-greetings

33

Strategies Followed
Agreement with Hallmark cards.
Focused more on local customers.
Agreement with Walt Disney, to use their
products like Mickey, Minnie, Donald Duck for
use in greetings, posters, etc.
Agreement with Barbie Brand.
Tie-up with Cancer Patients & Associations.

SWOT Analysis of Vintage

35

Strength
Tie Up with Hallmark
Huge sales Driven by
after tie up with Walt
Disney

Weakness
Over Dependency on
Hallmark
Excess Inventory
Huge Operating Loss

Opportunities
Adopt new technology
to drive sales
Target customers
across the world by
online sales

Threats
Huge threat from
Archies
Change in trends
made it difficult for the
company to drive
sales.

Recommendations For Vintage

Vintage should not focus on only greeting cards and diversify

into other industries (Gifts, Toys etc) too

They should not tie up only with Hallmark, because if
Hallmark fails, it will directly have a negative impact on them
They should evolve with changing times and introduce egreetings and other services over the internet

36

FINANCIALS OF VINTAGE AND ARCHIES

Profitability of the companies

VINTAGE
Ratios

2005

2009

2010

2011

Returns On Capital
Employed

(36.96)

(87.30)

(78.93)

(69.45)

Returns On Assets

6.41

1.15

(1.13)

(1.19)

Ratios

2005

2009

2010

2011

Returns On Capital
Employed

17.22

10.81

15.83

16.94

Returns On Assets

77.78

117.93

128.62

28.85

ARCHIES

Liquidity Ratios of the companies

VINTAGE
Ratios

2005

2009

2010

2011

Current ratio

1.05

1.02

0.95

1.38

Quick ratio

1.58

0.31

0.29

0.44

Ratios

2005

2009

2010

2011

Current ratio

1.81

2.39

1.85

1.46

Quick ratio

1.15

1.11

1.01

0.83

ARCHIES

Trading Position Of the Companies

VINTAGE
Ratios

2005

2009

2010

2011

Operating Profit
Margin

(86.13)

(15.35)

(148.08)

(1549.21)

Ratios

2005

2009

2010

2011

Operating Profit
Margin

15.77

9.36

12.07

11.69

ARCHIES

EARNINGS PER SHARE OF THE COMPANIES

Company

Ratios

2005

2009

2010

2011

VINTAGE

EPS

(6.03)

(4.29)

(2.28)

(0.06)

ARCHIES

EPS

9.28

(1.61)

3.21

13.03

ARCHIES
Ratios

2013

2014

2015

ROCE

11.11

8.56

8.09

ROA

32.77

33.81

31.99

EPS

2.07

1.55

1.22

12

EPS

ROCE

10

2.5

1.5

0.5

0
1

ROA

0
1

34

33.5
33
32.5
32
31.5
31
1

THANKYOU