1. What is Business Strategy? An Action Plan for: – Attracting / satisfying customers – Earning profits – Anticipate the future Objective is to outperform firms targeting the same customers competitors – i.e., “Competitive Advantage”

2. Strategy – The Business Model Methods employed for satisfying customers and earning profits. Value proposition – deliver product at price considered reasonable by customers. Profit proposition – deliver product at cost that leaves earnings considered reasonable by owners.

3. Strategic Approaches Focus efforts on: 1.product that costs less than that offered by competitors 2.product with desirable differences from that provided by competitors 3.product with greater value per dollar cost to the customer than that provided by competitors 4.product that serves the needs of a special group of potential customers better than competitors 5.developing expertise / resources that competitors can’t match

4. Strategy – The Business Model Value proposition components: – Product – Customer – Value Profit proposition components: – Revenue generation – Cost structure – Profit margins

5. McDonalds – 2011 Middle of global economic recession 33,000 stores (half in U.S.) 64 million customers daily 119 countries 90% are franchises Revenues = $27 billion Earnings = $5.5 billion 35% return to investors The top performing company on Dow Jones Stock Market Index 4% sales growth 1 st qtr. 2012

6. McDonalds – 2011 – Action Focus Operations initiatives – Employee on-the-job training and also college-level courses at Hamburger University – 200 employees sent annually to McDonalds Leadership Institute – Leaders trained to monitor labor, food, utility costs Low pricing – Scrutinize operating costs – Renegotiated advertising contracts ($963 million)

7. McDonalds – 2011 – Action Focus Menu /beverage variety – Continue developing healthy choices – Added premium coffee/latte/cappuccino line Expansion of facilities – McCafes developed to draw non-meal-time customers (Starbucks) – 24 hr. drive-thru hours in many cities Reinvestment – Refurbish 90% pf interiors and 50% of exteriors by end of 2012 – Expanded number of units in China

8. McDonalds – 2011 – Questions Three Tests of Strategic Success Are McDonald’s actions well matched to industry and competitive conditions? Evidence? Do they enjoy a competitive advantage? Evidence? Is the company performing well? Evidence? Are McDonald’s actions aimed at: – low cost, distinctness, value, special customer group, building expertise?

9. McDonalds – 2011 – Questions Value proposition components: – Product? – Customer? – Value? Profit proposition components: – Revenue generation? – Cost structure? – Profit margins? What aspect of their strategy can lead to sustainable competitive advantage?

10. Strategic Success NYTimes Are they financially successful recently? Implications for shareholders and potential investors?