Retail Speech

The Point

We state the background of the Japanese food service industry and its problems at the introduction of the first chapter. To seize the situation of the fast-food industry including McDonald's and Mos-food-service, we describe the current scale of the Japanese food service industry market, the background and the problem of the situation of the Japanese food service industry. In the second chapter, we state the background of McDonald's and Mos-food-service comparing the founder, the history, the sales and the number of shops. In the third chapter we analyze the management strategy, the entrepreneurial spirit, the location, the form of the shops and the sales methods. In the fourth chapter, we analyze the management strategy of McDonald's and Mos-food-service using the graph of the growth rate and the rate of total capital profit and we state the difference between them. We also estimate the sales of McDonald's and Mos-food-service of this year, 2005, based on the result of the analysis and we also research their tendency. In the fifth chapter, we analyze the prerequisite which has kept McDonald's No.1 place in the food service industry in Japan using the questionnaire and the unit price of the customers. In the sixth chapter, we collect the results as the consideration by chapters which we analyze in chapter 3, 4, and 5, and finally we state the conclusion based on the result of our analysis.

First of All

Now food shops which we go to daily have become indispensable for daily life. However, if most of us were asked whether we deeply understand the food service industry which is very close to us, we wouldn't say yes. For that reason we reached the final decision to research McDonald's which is the most popular chain restaurant in the fast-food industry in Japan. McDonald's had been growing successively with its expansion of the shops, though as we researched, we noticed that the sales of McDonald's has gone down in 2002, and has remained in a tough situation since April 2005. Then how do they maintain good sales like they have always done?

The items mentioned above as the subject, we compared the two companies, McDonald's and Mos-food-service, by their sales, their transition of the number of the shops , their management strategy and so on. The reason we chose Mos-food-service is that Mos-food-service is the archenemy to McDonald's. And finally, we ourselves contrived the way McDonald's should go in future.

The First Chapter Introduction

The Background and The awareness of The Problem.

The food service industry indicates casual restaurants, eating and drinking at accommodation, providing meals for schoolchildren and employees, and exclusive restaurants. As you can see the figure 1-1,

source:Foodservice Industry Research Center HP http://www.gaishokusoken.jp/

Chapter 2 McDonald's and Mos Burger , comparisons

among those who establish it , sales, and number of stores

2-1 Those who establish it about McDonald's Japan

Fgeta Den establishes McDonald's Co., Japan. The first shop was opened in Ginza in 1971. The topic of the mass communication was just monopolized in the year when the pedestrian precinct started. Afterwards, it kept increasing both stores and sales in the food service industry field at a pace uncommonly seen, but after that, stagnation is shown seeing sales and the number of stores of Figure 2-1 and 2-2.

As of December 2004, it was top of the hamburger industry of direct-management shops and the FC shops together, it has 3774 stores, and enjoys sales of 308 billion yen per year.

Table 2-1McDonald's history chronology

1971 It opens in McDonald's Japan the first shop and Ginza.

February 2000 Half price campaign beginning on weekday.( 65 yen a hamburger, Excluding tax.)

September 2001 an outbreak of BSE in Japan.

February 2002 It raises the price to 80 yen a hamburger. (excluding tax)

August 2002 It cuts the price to 59 yen a hamburger. (excluding tax)

2002 Deficit falls after an interval of 29 years

July 2003 It raises the price to 80 yen (including tax) of the hamburger of 59 yen.

2010 Targets of 10,000 shops of number of stores and sales one trillion yen or more.

Figure2-1trend of net sales of McDonald's Japan(connection for period of December)

source:McDonald's Holdings Japan HP http://www.mcd-holdings.co.jp/

Figure2-2 Transition of number of stores of McDonald's Japan

source:McDonald's Holdings Japan HP http://www.mcd-holdings.co.jp/

Figure 2-3 Trend of income of McDonald's Japan.

source:McDonald's Holdings Japan HP http://www.mcd-holdings.co.jp

2-2 Those who established Mos Food Services

According to the MOS Food Services homepage Sakurada Satoshi established Mos Food services in 1972 to aim for a shop deeply loved by the customers in the region by serving a delicious commodity with sincerity that suited the preference of the Japanese. It has grown up from the first shop of only 2.8 tsubos March 1972 to 2nd place of the hamburger enterprise where sales of 1,472 stores nationwide(145 direct-management shops and 1327 FC shops) and earned 59.3 billion yen (including the period of March) in fiscal year 2004.

ChapterÇR

source: FujikeizaiÅwFoodservice Industry marketing handbook 2004Åx Fujikeizai

source:FujikeizaiÅwFoodservice Industry marketing handbook 2004Åx Fujikeizai

source:McDonald's Japan HP http://www.mcdonalds.co.jp/

Mos Food Service HPhttp://www.mos.co.jp/

FujikeizaiÅwFoodservice Industry marketing handbook 2004Åx Fujikeizai

The Fourth Chapter A Comparitive Management Analysis of McDonald's Japan Co. and Mos Food Services Co.

This chapter concretely verifies financial stability etc. of McDonald's Japan Co. by doing the management analysis. At first, we analyzed the growth and financial affairs stability based on their securities report. Next, we calculated Sales this term.

Please look at Figure 3-2.The hamburger market in Japan, sales and the number of stores show the decreasing tendencies on the boundary of 2000.

So, we can see the scale of hamburger industry in Japan is on the decrease little by little.

Sales and the number of stores were upper right and tendencies from 1971 to 2001 in McDonald's Japan Co. as understood from figure2-1, 2-2 compared with it.

However, sales have decreased suddenly in 2002.

This time, we analyzed the management in the past three years, from 2002 to 2004. We would like to see the growth of McDonald's Japan Co. and to what degree the brief financial stability is solid or not.

First, we made the growth comparison graph to show the corporate growth easily.

It shows the sales, the ordinary profit, the gross capital, and the number of employees.

You can say that the balance of these four increases and the decrease will show the solid and unsolid nature of the growth of the enterprise or downsizing.

REWRITE FROM HEREÅiWhen the closing of accounts in December next year was assumed to be 100 because of material because McDonald's shop opening to the public was 2001, it examined this time what percentage it was.Mos Food Services Co.in the second place in industry was quoted for the comparison. The source is securities report. Moreover, Mos Food Services Co. used the annual turnover.ÅjTO HERE

We can see the ordinary profit recovered greatly since McDonald's Japan co. reduced the deficit after an interval of 29 years from 2002 to 2004.

By selling their commodity by introducing the new items and through limited time campaigns, McDonald's Japan co. faces the achievement recovery under the "I'm lovin' it" slogan that is part of a global strategy from 2004. However, this figure was compared with the last year and the year before last when the achievement was bad. There was actually only 2.36% ordinary profit margin on the sales. So, we can say that there is an imbalance of sales and the profit.

Next, we want to see the revenue in McDonald's Japan co. It is important how much profit to have obtained by the fund to see the profitability. This rule means rate of the capital profit.

Rate of the capital profitÅÅ ?100

The capital means not the article but the amount of money by accounting. Generally, the stockholder and the creditor have put out the capital of the company. The capital that the stockholder put out is said, "Equity capital" or "Stockholders' equity". And, the capital that the creditor put out is described as "Borrowed capital".

The amount of money in which the borrowed capital and the equity capital are totaled is called an aggregate capital. This amount accords with the gross capital. Because, this amount of money is equal to all the properties that the company has. McDonald Japan Co. used the capital of 190.9 billion yen and the profit of 7.2 billion yen was raised in 2004.

Short-term financial stability

Next, we want to see the Current ratio and the quick ratio to see Short-term financial stability.

McDonald Japan Co.'s current ratio and quick ratio are seen from the above-mentioned point again. Then, the current ratio is 51%, and the quick ratio is 45%.

We cannot help saying that a short-term debt repayment ability is considerably bad from this numerical value.

We can say that McDonald's Japan Co. is better than Mos Burger from tables 4-1, 4-2.

Mos Food Services is every 2.36% compared with McDonald 4.41% at the sales current profit rate for table 4-3, 4-4. As for the current ratio, the quick ratio, and the fixed asset to net worth ratio in which financial stability is seen, we understood that Mos Burger is steadier than McDonald's Japan Co. (Table 4-9~15) In this way, We have understood the repayment capacity of the profitability, the financial position, and the debt is low from the result of analysis for McDonald's Japan Co. management

McDonald and sales forecast of Mos Burger in fiscal year 2005

McDonald's Japan Co. and Mos Food Service Co. sales in fiscal year 2005 decided to be requested by using the minimum mean square method (single regression analysis).This method can guess the next sales by mathematically processing the same data.

When you use a single regression analysis for the forecasting of profit, Sales (induced variable) are on the Y axis and the autonomous variable are on the X axis to show the passage of time taken. A simple model named y=a+bx shows the relation between sales and the period. A shows the cut of the spindle (sales of the first period), and B shows the tendency (inclination).

To request the value of a and b from y=a+bx, the simultaneous equations of the following Table 4-16 will only have to be solved.

Table4-16 Simultaneous equations

Next table 4-17 is a graph of the past five years for McDonald's Japan Co. Table 4 -18 shows a calculation table necessary to apply the minimum mean square method based on this numerical value.

ChapterÇT

McDonald and Mos Burger's ideas of offering the guest the commodity are fundamentally different. As for the share of gross proceeds, McDonald's and Mos Burger matched two, REWRITE FROM HERE it accounted for 82.7%, and the number of stores built up overwhelming power of 79.1% of 56.7% and each 22.4%. TO HERE In the drop of McDonald's of the share by the number of stores, and extending of Mos Burger the share oppositely, McDonald's is evidence that sales per store are high. To go shopping by first-class site (station and station building, etc.) and cars, McDonald's constructed a drive-through store as shown in Table 3-3. Stores of Mos Burger are fewer and exist in the back of the alley in the downtown areas. Mos Burger established the back alley Commercial Code that opened a store on third class ground. REWRITE FROM HERE McDonald abolished the making putting in the marketing method, and it came to be able to offer the commodity of setting up it was possible to do by introducing MFY. On the other hand, Mos Burger is taking the marketing method made spending time after the order is received after it establishes. TO HERE. When growth potential and financial stability of the sales are seen, the figure never has been a good one in the first place in hamburger industry by McDonald's Co., Japan. It can be understood that it is not steady by seeing the current ratio, the quick ratio, and the fixed asset to net worth ratio of short-term financial stability compared with Mos Food Services. Why do sales happen and why has this happened to McDonald's in the first place in industry though this causes lower profitability, financial stability, and debt repayment ability?

McDonald's Co., Japan's balance of the amount of current liability to current assets is large, REWRITE FROM HERE and 1 nor 2: balance of the equity capital to fixed assets first become couples 1 TO HERE and the ratio of the debt to the property is obviously large. It is necessary to improve the profit to sales still to solve this. It seems that you should improve the policy in consideration of the labor cost and the customer transaction, etc. for that. The policy of a 100 yen Mac is being executed now. The labor cost increase and price decrease might continue because the 100 yen Mac and financial stability may collapse further.

Conclusion,

It would be no exaggeration even if it were said that McDonald's Co., Japan built up the food service industry in Japan. McDonald's landed from the United States, and built the base of the fast food "It was early, cheap, and delicious" in Japan. After that, sales kept rising along with store expansion and customers increasing. Other fast food shops also aim at the store expansion in shape to chase McDonald's, and competition has intensified. The number of McDonald's stores reached 3,891 stores in 2002. However, it has decreased after that peak.

Moreover, the hamburger market scale in 2001 became 657.6 billion yen 97.4% in comparison with the previous year. Till then, McDonald's has increased sales by a positive branch shop and diversifying the menu.

However, these strategies did not pass because of the dining out recession caused by the economic stagnation in recent years. We think the reason it is caused is that sales of the entire market decreased because of the fear of BSE (Bovine Spongiform Encephalopathy and mad cow disease) and that new shops cannot be covered with a sales decrease in the established stores. The hamburger market scale is 657.6 billion yen (97. 4%) compared with the previous year. The way MacDonald's has increased sales is diversification of menu and aggressive branch shop. However, these strategies did not succeed due to the decrease in dining out from the economic stagnation in recent years. McDonald executed the plan of the sales promotion such as the half the price burgers for a limited time from April '98. A half-price "Weekday smile" sales campaign was finally started on February 14, 2000 on the weekday throughout the year. The price of the hamburger before the weekday smile was 130 yen a piece, and the cheeseburger was 160 yen a piece. They were 65 yen, and 80 yen respectively after the weekday smile. This becomes a popular word at that time and this became a vogue word of those days and so gave a strong impact to lower the consumer price index.

According to Mr. Fujita who is the founder, the common sense that a retail price should be three times the cost price collapsed and consumers will not buy something unless it is retailed at just twice the cost price, he said. However, this low-priced competition has strengthened an image of "the hamburger being junk food". It was that " image of a cheap hamburger" that infiltrated consumer conciousness not to "spend so much money for a hamburger" and has tied up the hand of price policy.

Then, in 2003, the discount strategy was reviewed, and it started strengthening on the quality side. A high-level burger of 270 yen was offered in April, and the commodity strategy that was wholly devoted to low-price - was reviewed. 59 yen hamburger that was the pronoun of the dining out deflation in July returned to 80 yen. As a result, McDonald accomplished a V character recovery then though it was temporary.

The number of McDonald's stores has decreased from years 02 to 03. REWRITE FROM HERE This opens shops of McDonald how many in the same area in the current aggressive branch shop, and has competed as a result. It has stayed in only one store for 04 years when a new shop was opened closing the established store in the same area and increasing sales. TO HERE

Sales decreased compared with the first half of 2004 however, the "Bottom line" REWRITE FROM HERE(The one that the in-house adjustment calculation was added to this becomes an operating profit and loss in peculiar account headings to McDonald's Japan) decreased for 4.3 billion yen in the first half of 2005 though 8.9 billion Emma and the profit increased for 2.4 billion yen. TO HERE The great profit decrease was greatly influenced by an increase in the labor cost and the marketing cost. REWRITE FROM HERE The customer transaction has decreased oppositely though turning on especially 100 yen menu led to an increase in the number of those who come to a store. TO HERE. The cause was that, against the expectation of this company, people bought only the 100 yen menu items, with the result of keeping them from buying the higher value sets, the purchase of the potato fries and the drinks as single items.

We have described that the hamburger market is expected to continue a decline from figure 3-2. Of course, this is an expectation and may not actually happen. However the context remains difficult due to factors such as: intensified competition from other fast food shops, combinations, family restaurants and coffee stores, consumer preference diversification, a decreased market from an aging population.These factors make it certain that McDonald's surrounding environment is unlikely to return to the good situation previously described. The final purpose of our main discourse is thinking what is necessary for McDonald's to grow up in the future. Hereafter, the power of McDonald's and Mos Burger will continue for a while. But, McDonald's achievement has not been fragrant fin the past several years. Especially, figures since April 2005 might make parties concerned want to avert their eyes.

McDonald's challenge in the future is to increase the buyer layer and the number of customers. Therefore, the following matters are given as a method of increasing the buyer layer and the number of transactions.

Because aging is advanced, the menu should be developed not only for the young person's taste but also to suit the senior citizen and the equipment inside the stores should be enhanced for the barrier-free society.

á@Encouragement of female guest who currently dislike hamburger shops through low-calorie menu items.

áAThe branch shop offensive at only 21 university stores should be done to catch the young consumers.

áB the acknowledged improvement of the special menu in morning.

áCThe development of a menu that uses vegetables in abundance while healthy trends rise.

Moreover, the following matters are given as a method of increasing the customer transaction.

á@The voucher is enhanced, and the buying intention of the set menu is stirred up.

áADevelopment of side menu items that make consumers want to buy not only single goods but also set menus.

We worked out the above strategy for the growth of McDonald's. However it might be over-optimistic for McDonald's Japan to set their expansion target for the number of stores to reach 10,000 shops by 2010 and sales to be adjusted to one trillion yen.

Thank you very much for your attention. Are there any questions?