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Will Unit Expansion and New Product Launches Drive Sales Growth for McDonald’s Corporation (MCD)?

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McDonald’s Corporation (NYSE:MCD) has focused on becoming one of the most trusted brands in the world, and the company will be moving ahead to make its brand even stronger with its “Plan to Win” framework. This framework is focused on five pillars of growth: People, Product, Place, Price and Promotion. The company has taken initiatives that will impact all these pillars of growth. Store expansions and remodeling will increase its store base and create a better store environment for its employees and customers. New product launches and value offerings have played a critical role in comparable sales growth and will continue to do so. It will also use advances in technology to improve its service through increased promotional tactics. Now let’s discuss these points in detail.

Store expansions and remodeling

McDonald's Corporation (NYSE:MCD)McDonald’s Corporation (NYSE:MCD) plans to expand its store base this year to generate incremental sales growth. It will invest around $3.2 billion in new store openings and store remodeling during the 2013 fiscal year. It is expected to open 1,500 to 1,600 stores, with the largest number of stores opening in the APMEA market. The company will open 300 new stores in China and double its 125 stores in India. It is also investing in store remodeling to modernize its current store base and to create a difference in local markets.

New product launches and value offerings

New product launches and value offerings have driven the same store sales in the recently-reported May comps. Its global comps were up by 2.4% in May, as compared to the consensus estimate of 2.1%. In the US, premium McWraps and Egg White Delight breakfast sandwiches were the main comp drivers and were spurred by national advertising. The company also launched new toppings for its classic Quarter Pounder burgers in June, giving customers a choice of Bacon Habanero Ranch, Deluxe and Bacon and Cheese versions of the sandwich. In the European market, France and Germany are experiencing good sales with the “Casse Croute” menu and sandwich/drink combos in the value segment. The Chinese market is also recovering and will be back on track soon after the effects of the avian flu.

Promotion and use of advanced technology

The company has focused on promotional initiatives and the use of advance technology to improve sales as well. In the US, a nationwide advertising campaign for its premium McWraps has helped them to perform well in the market. It has used couponing as well and recently promoted its new Quarter Pounder products using a national BOGO offer. It has also focused on improving efficiency with mobile ordering and delivery in the APMEA market and with self-ordering kiosks in Europe. Its global point-of-sale system rollout will help the company to deliver orders more quickly as well. It has focused on creating a strong brand with better accessibility and this technological advancement will help it to drive long-term growth.

Peer analysis

In the quick service restaurants segment, two other major players that compete with McDonald’s Corporation (NYSE:MCD) are Yum! Brands, Inc. (NYSE:YUM) and Burger King Worldwide Inc (NYSE:BKW).

Yum! Brands is moving ahead with strong store growth plans across its brands in emerging markets such as China and India. It has opened 380 stores in the first quarter, and 88% of this development is in the emerging markets. In China, it has acquired an additional 66% interest in Little Sheep, with a strategy of building a leading position across each category. It has plans to maintain its double-digit unit growth in the country. Taco Bell is the leading growth driver for the company in the U.S. market due to successful product launches such as the Doritos Locos Taco and the Cantina Bell Menu. It is expected to continue its sales growth with unit growth momentum and strong brand creation across multiple segments.

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