1.0 EXECUTIVE SUMMARY
McDonald’s delivered strong performance and returns to shareholders in 2007. We have
continued to build on our success as a trusted global consumer brand and grow our business
by creating outstanding restaurant experiences for our customers. We have designed our
executive compensation program to attract and retain excellent management and to motivate
our executives and reward them for superior performance. We believe that our compensation
program has played an important role in the Company’s success.
The strength of the alignment among the Company, its franchisees and suppliers (collectively
referred to as the “System”) has been key to McDonald’s success. By leveraging our System,
we are able to identify, implement and scale ideas that meet customers’ changing needs and
preferences. In addition, our business model enables McDonald’s to consistently deliver
locally-relevant restaurant experiences to customers and be an integral part of the
communities we serve.
McDonald’s customer-focused Plan to Win (“Plan”) provides a common framework that
aligns our global business and allows for local adaptation. We continue to focus on our three
global growth priorities of optimizing our menu, modernizing the customer experience, and
broadening accessibility to Brand McDonald’s within the framework of our Plan. Our
initiatives support these priorities, and are executed with a focus on the Plan’s five pillars –
People, Products, Place, Price and Promotion – to enhance our customers’ experience and
build shareholder value over the long term. We believe these priorities align with our
customers’ evolving needs, and – combined with our competitive advantages of convenience,
menu variety, geographic diversification and System alignment – will drive long-term
sustainable growth.
A significant proportion of our executive compensation is performance-based. We use a mix
of different performance-based elements of compensation that reward different aspects of
both Company and individual performance. Our annual bonus plan, TIP, pays out awards
based primarily on annual increases in operating income. Our long-term cash incentive plan,
CPUP, rewards a combination of long-term operating income growth, disciplined capital
allocation and total returns to McDonald’s shareholders. Stock options and RSUs connect the
amount of compensation our executives earn to the performance of McDonald’s stock. RSUs
for our executives also include a performance-based vesting condition that rewards growth in
EPS.
2.0 SITUATION ANALYSIS
2.1 Market Summary
There are a limited number of customers in the market. To build long-term business, it is
essential to retain people once they have become customers. Customers are not all the same.
Target Markets
Young children
Teenagers
Seniors
Families
Business Customers
And people who like to eat healthy food.
2.1.1 Market Demographics
The profile for the typical McDonald’s customer consists of the following geographic,
demographic factors:
Geographic
Any consumers that live in the country or within a few miles from a McDonalds.
Demographics
Ages 3-10
Young children; both girls and boys
All different social class structures but more focused on the middle to lower class
Teenagers, especially Wi-Fi users
Seniors (having gatherings and reunions)
2.2 S.W.O.T. Analysis
