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Case study: McDonald’s
By Andrew Campbell

The story: By the late-1990s fast-food chain McDonald’s had enjoyed 40 years of exceptional performance. In 1997, for example, the company had registered 10 years of 20 per cent per annum growth. The challenge: That year, Jack Greenberg became the company’s fourth chief executive. His main concern was how to lead the business in less favourable market conditions. McDonald’s was facing concerns about fatty foods and about beef; competition was squeezing margins; and growth from international markets was slowing.
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the textbook advice – set a growth ambition. don’t set targets for growth outside the core. he focused on improving the core business. Then. having sold or closed its new ventures. leaders should be patient rather than energetic. launches initiatives. to be responsible for these new businesses. First. The main risk is that attention is distracted from the core. a Mexican food restaurant. this story is common. almost all of them were either sold or closed. . avoid launching a portfolio of initiatives. a retired McDonald’s executive. he also set a second priority: to find a new platform for growth. Second. try a portfolio of related ventures and invest heavily in the few successes at the same time as attending to the core – does not always work.    Case Study How an outsider institutes change Case Study If P&C’s improved staff performance Case Study Microsoft Lync’s bottom-up restructure Case Study How to build a low-cost brand IN Management     Prashant Ruia. what is the alternative? When the core business starts to mature. So. His first announcement was that McDonald’s had been trying to do too many things. What happened: Mr Greenberg found it difficult to dedicate enough attention to both priorities. and don’t set up a new business division or venturing unit. was asked to return as CEO. and 50 per cent of Pret A Manger. in spite of its continuing popularity. He shut down many of the organic initiatives and housed all the new businesses into a structure called McDonald’s Ventures. A company forecasts reduced growth in its core business. The result was that over the course of the next few years. group chief executive of Essar Hand model Facebook’s offices are too cool for women Samsung’s S4 heads for a Galaxy far. The core business continued to deteriorate and in 2001 McDonald’s announced its first quarterly loss and the resignation of Mr Greenberg. announcing it as his top priority. more organic initiatives led by his head of strategy. Therefore. The lessons: First. the UK sandwich chain – and he set up the Partner Brands Division. Mr Cantalupo instructed Mr Lederhausen to identify those businesses that could become significant for McDonald’s without distracting management from its core business and to sell or close the rest. and makes acquisitions – only to find a few years later. that it is back where it started. looks for new sources of revenue. With this audacious goal in mind. Mr Greenberg also opened the door to a number of other. Jim Cantalupo. far away The strategy: Mr Greenberg did what the textbooks suggest. Mats Lederhausen. he supported five acquisitions of related restaurant businesses – including Chipotle.

but with a tough screening process and the expectation that none will be suitable. Expect to use spare cash to buy back shares. the hamburger business is growing again. McDonald’s is still looking for other opportunities – but in a patient way. until a really good opportunity comes along. as is often the case with a strong core. look for people rather than projects – successful new growth outside the core nearly always comes from individuals or teams who happen to have a rare combination of both grassroots knowledge of a particular area and an understanding of how your company’s strengths can be used to succeed. What happened next: The company’s leaders have stuck to and revived the core. In fact.Do scan opportunities. partly because of the fast growth of emerging markets such as China. Above all. Andrew Campbell The writer is a director of Ashridge Business School and author of ‘The growth gamble: when leaders should bet big on new businesses and how to avoid expensive failures’ .

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