McDonald's Case Study

McDonald’s, the long-time leader in the fast-food wars, faced a crossroads in the early 1990s. Domestically, sales and revenues were flattening as competitors encroached on its domain. In addition to its traditional rivals—Burger King, Wendy’s, and Taco Bell—the firm encountered new challenges. Sonic and Rally’s competed using a back-to-basics approach of quickly serving up burgers, just burgers, for time-pressed consumers. On the higher end, Olive Garden and Chili’s had become potent competitors in the quick service field, taking dollars away from McDonald’s, which was firmly entrenched in the fastfood arena and hadn’t done anything with its dinner menus to accommodate families looking for a more upscale dining experience. While these competitive wars were being fought, McDonald’s was gathering flak from environmentalists who decried all the litter and solid waste its restaurants generated each day. To counter some of the criticism, McDonald’s partnered with the Environmental Defense Fund (EDF) to explore new ways to make its operations more friendly to the environment.

McDonald’s roots go back to the early 1940s when two brothers opened a burger restaurant that relied on standardized preparation to maintain quality—the Speedee Service System. So impressed was Ray Kroc with the brothers’ approach that he became their national franchise agent, relying on the company’s proven operating system to maintain quality and consistency. Over the next few decades, McDonald’s used controlled experimentation to maintain the McDonald’s experience, all the while expanding the menu to appeal to a broader range of consumers. For example, in June 1976, McDonald’s introduced a breakfast menu as a way to more fully utilize the physical plant. In 1980, the company rolled out Chicken McNuggets. Despite these innovations, McDonald’s tremendous growth could only continue for so long. Its average annual return on equity was 25.2% between 1965 and 1991. But the company found its sales per unit slowing between 1990 and 1991. In addition, McDonald’s share of the quick service market fell from 18.7% in 1985 to 16.6% in 1991. Plus growth in the quick service market was projected to only keep pace with inflation in the 1990s. McDonald’s faced heightening competition on several fronts. First, its traditional rivals— Burger King, Wendy’s, and Taco Bell—were eating into its margins through promotions and value pricing strategies. Taking a leaf from McDonald’s own playbook, Sonic and

it stood a greater chance of finding solutions with broad applicability than if it had tried to pursue a one-size-fits-all approach from the outset. 53% of respondents in one survey revealed that they had not bought a product because they didn’t know what effect the packaging would have on the environment. in 1989. even while striving to achieve consistency in the operation of its many outlets. It’s no surprise. Some of the environmentally inspired solutions that came out of the collaboration with EDF were the:  Introduction of brown paper bags with a considerable percentage of recycled content. and the McLean Deluxe sandwich were all examples of how the company tried to appeal to a wider range of consumers. The company gave its franchisees much autonomy in finding ways to eliminate environmental blight. stores. and paper to keep food warm and prevent leakage. a 1990 study showed that each McDonald’s generated 238 pounds of on-premise solid waste per day. Chicken McNuggets. a leading organization devoted to protecting the environment. For example. Chili’s and Olive Garden were appealing to diners looking for something a little more enticing that the familiar Golden Arches for their families. The company has also made convenience its watchword. McDonald’s began recognizing the importance of maintaining an ecologically correct posture with the public. then. Plus McDonald’s is tucking restaurants into schools.  Abandonment of polystyrene clamshell containers to hold sandwiches in favor of new paper-based wraps that combined tissue. its breakfast menu. For example. EDF and McDonald’s considered its impact on a wide range of stakeholders— customers. Closer to home. . Beginning in 1989. salads. In the late 1980s. not only through how fast it serves customers. Together. franchisees. and the environment. and more. Freestanding restaurants are positioned so that you are never more than a few minutes away by foot in the city or by car in the suburbs. but also in the location of its outlets. it partnered with the Environmental Defense Fund. Analysis McDonald’s Sustained Prosperity The secret of McDonald’s success is its willingness to innovate. The company’s hope was that from these divergent approaches. to seek ways to ease the company’s environmental burden on the landscape.  Solicitation of suppliers to produce corrugated boxes with more recycled content. that McDonald’s sought a way to reduce its solid waste while providing a more environmentally acceptable face to the public. polyethylene. which was becoming more concerned about the environment.Rally’s were using a very limited menu approach to attract time-strapped consumers. which had the twin effect of reducing solid waste and building a market for recycled products. suppliers. Finally.

And as Baby Boomers age and become more affluent. It has a long history of such experimentation. Responding to Burger King’s October 1 Announcement The October 1 announcement from Burger King that it would begin offering table service is not much of a threat at all. Most of McDonald’s most popular fare probably in some small way contributes to the increasing incidence of cancer. But I feel the key threat to McDonald’s continued success is its very ubiquity. These chains have the added advantage of serving highermargin alcoholic drinks. McDonald’s does not need to respond to every competitor’s initiative. The market is well saturated. Some later turn out to be duds like the McLean Deluxe. has to continually battle Burger King and Wendy’s. Because McDonald’s are everywhere. Even alliances with toy manufacturers. Promoting Flexibility Through Its Operating Strategy The key thing that McDonald’s operations strategy has to support is experimentation. which leads to an erosion of margins for everyone. the dining experience is never special. and it would difficult to achieve double-digit growth. Indeed. and diabetes among the population. doing so would have the effect of making McDonald’s look reactive and less like a leader. McDonald’s best course is to ignore this development as irrelevant. You can try to dress up fast food. heart disease. But again. As the market leader. meanwhile. Bennigans. McDonald’s. which has resulted in some new profit centers like Chicken McNuggets and the breakfast menu. . do little for the bottom line because the cost to run these promotions can be quite expensive. If Burger King’s initiative does prove popular with consumers—as evidenced by expanding sales and market share—McDonald’s would be forced into catch-up mode. McDonald’s needs a breakthrough that will provide new avenues of growth. The advantage of not responding to Burger King’s initiative is that the company can preserve its resources for other marketing thrusts that may provide a bigger payoff. The disadvantage of not responding to Burger King’s initiative is that you allow the firm to establish itself in a unique way in the minds of consumers—that of a fast-food restaurant that provides sit-down service. But I think that this is a risk that the company should be willing to take. Other concerns are a newfound emphasis on healthier eating. it is likely that they will leave behind their fastfood ways. is this inherent contradiction of fast-food fare and upscale dining experience likely to resonate with consumers? I would say no. while popular with consumers. if only to step up to moderately priced restaurants like Olive Garden. but inevitably experimentation in limited outlets offers McDonald’s a way to retain its key strengths—quality and consistency— while continuing to evolve for new palates and pocket books. I couldn’t imagine this being a potent draw for consumers. but it’s still fast food.Key Threats The key threats to McDonald’s domestically are the lack of growth opportunities. Now somewhat long in the tooth. and Pizzeria Uno.

a new critical success factor may be emerging: the need to create a rich. and the collaboration with EDF goes a long way in making that happen. convenient service is no longer enough to distinguish the firm. Perhaps the best way to do that is by rotating in a couple highly promoted new menu items. This would have the effect of enlivening the product menu. fast. it’s time to ease up. Dealing With the Product Range Explosion McDonald’s had done well with a fairly limited product range. Ideally environmental initiatives should pay for themselves by reducing other kinds of costs. If environmental efforts start to be a drag on the company’s future profits. This slackening of per unit sales might also indicate that McDonald’s critical success factors have changed. which may even provide a halo effect to mitigate any other PR troubles.McDonald’s and the Environmental Defense Fund In some ways. McDonald’s should continue its partnership with EDF. With competitors gaining ground on McDonald’s. it may indicate a need to refresh its product line. McDonald’s would do well to stay in the vanguard of corporations who have become environmentally aware. How far should McDonald’s go on environmental issues? There is definitely a public relations benefit in being seen as an environmental leader. But if it does manage to come up with some breakthroughs through its collaboration with EDF. Any successes. But falling per unit sales is a danger sign for the firm. It also provided a primetime venue for EDF to make a difference. partnering with the Environmental Defense Fund was a masterstroke. At this time. It also pays off in the bottom line by reducing shipping costs for supplies as well as garbage removal fees. it can foresee a public relations nightmare in the making. Perhaps in the new environment. With ecology a growing concern among consumers. Still McDonald’s has had a lot of success in giving its franchises some latitude in developing new solutions. satisfying experience for dinner consumers. it makes sense to be a good corporate citizen and get all the public relations accolades that go along with such an alliance. The bottom line is that environmental efforts can’t detract the company from its primary mission of providing consistent quality to consumers. It brought both respectability and valued expertise to its environmental efforts. . If it tries to shirk its responsibilities. it can score a tremendous amount of goodwill with the public. without the need to go head to head with competitors on price. would have major ramifications because of the sheer size of McDonald’s operations. even if only incremental improvements. The line in the sand in determining how far McDonald’s should go with its environmental efforts is determined by the cost of the initiative relative to the hard-dollar benefits and harder-to-quantify public relations buzz it gets from being in the forefront on environmental issues.

McDonald’s is known for fast food. Imagine. Key to its future success will be maintaining its core strengths—an unwavering focus on quality and consistency—while carefully experimenting with new options. market. while making sure the staff is fully trained in how to execute these products successfully. McDonald’s has the opportunity to apply its core competencies—scrupulous adherence to quality standards and continual promotion of experimentation—in new venues. This approach will let the firm identify which items are likely to prove popular with consumers while ensuring that the company can deliver new products with consistent quality nationwide. it holds the potential to unleash new areas of growth in a maturing market. The company could also look into expanding more aggressively abroad where the prospects for significant growth are greater. if you will. should not overshadow its marketing initiatives. After all. then the task of maintaining quality becomes exponentially harder. it’s only real opportunities for growth lie abroad. I feel that McDonald’s has reached the point of diminishing returns with the McDonald’s brand and now needs to roll out new types of restaurants. Conclusion McDonald’s faces some difficult challenges. But its fastidious approach to operations would ensure that consumers everywhere would experience the same dining experience—a tremendous advantage for consumers who don’t want to be surprised with a bad meal. McDonald’s already has a history of doing this so it will not require major changes to its operations strategy—at least initially. It could then franchise that concept nationwide and get some of the dollars from consumers who have grown past fast food. If the product line-up gets too large. just a cheap and convenient one. which are what the company is all about. The company’s environment efforts. These innovative initiatives could include launching higher-end restaurants under new brands that wouldn’t be saddled with McDonald’s fastfood image. McDonald’s opening a new casual dining restaurant under the name of Splendor. Indeed. . McDonald’s must rely on test marketing new menu items in pilot locations. where the competition is not so cutthroat or by introducing new restaurant concepts under brands other than McDonald’s. While this will be an expensive undertaking. Because McDonald’s has pretty well saturated the U. while important. It’s not really a pleasant dining experience. The duds could be left to die quickly. The trick is to consider how to eliminate some of the existing menu items when you introduce new ones.S.To maintain consistency in new products as it expands the product line. McDonald’s could try a number of concepts simultaneous in different parts of the country. Those that seemed promising could be rolled out further.

They run Ronald McDonald House facilities.   The business is ranked number one in Fortune Magazine's 2008 list of most admired food service companies. no fillers or additives. along the highways. Hamburger University. and cities.  McDonalds is a community oriented. tourist locations.000 McDonalds restaurant managers and assistant managers were promoted from restaurant staff. McDonald's uses only 100% pure USDA inspected beef.500 restaurants in 109 countries. In addition they have a systemization and duplication of all their food prep processes in every restaurant. They have global locations in all major airports. which provide room and board. McDonald's foods are purchased from . socially responsible company. They also sponsor Olympic athletes.  They are a global company operating more than 23. 67.  They successfully and easily adapt their global restaurants to appeal to the cultural differences. they serve lamb burgers in India and in the Middle East. According to the Packard Children's Hospital's Center for Healthy Weight children age 3 to 5 were given food in the McDonalds packaging and then given the same food without the packaging. and they preferred the food in the McDonald's packaging every single time. In addition." McDonalds invests more than $1 billion annually in training its staff.000 employees graduate from McDonald's training facility. and every year more than 250. One of the world's most recognizable logos (the Golden Arches) and spokes character (Ronald McDonald the clown). full-time operators and McDonald's was named Entrepreneur's number-one franchise in 1997. They can also operate effectively in an economic downturn due to the social need to seek out comfort foods. and Ronald McDonald Care Mobile programs offers cost effective medical. Additionally the produce is farm fresh. food and sibling support at a cost of only $10 a day for families with children needing extensive hospital care. theme parks and inside Wal-Mart. Ronald McDonald Houses are located in more than 259 local communities worldwide.   They have an efficient. they provide separate entrances for families and single women. All franchisees are independent.  Approximately 85% of McDonald's restaurant businesses world-wide are owned and operated by franchisees. dental and education services to children. McDonald's serves 100% farm raised chicken no fillers or additives and only grade-A eggs. this gives them the ability to weather economic fluctuations which are localized by country. For example. assembly line style of food preparation.SWOT Analysis McDonald's Strengths  McDonald's has been a thriving business since 1955 and 20 of the top 50 corporate staff employees started as a restaurant level employee. By being spread out in different regions. Fortune Magazine 2005 listed McDonald's as the "Best Place to Work for Minorities.

They have yet to capitalize on the trend towards organic foods. they could provide more upscale restaurant settings. fruit. Weaknesses     Their test marketing for pizza failed to yield a substantial product. Formica restaurant settings.only certified and inspected suppliers. growers and suppliers to ensure food quality and freshness. High employee turnover in their restaurants leads to more money being spent on training. Newman's Own Salad Dressings. McDonald's was the first restaurant of its type to provide consumers with nutrition information. Minute Maid Juice. McDonalds are required to run through 72 safety protocols every day to ensure the food is maintained in a clean contaminate free environment. beverage and convenience categories. They would be the first QSR (Quick Service Restaurant) to have FDA approval on marketing a low fat low calorie hamburger with low calorie combo alternatives. More than 2000 inspections checks are performed at every stage of the food process.  McDonald's takes food safety very seriously. For example. Leaving them much less able to compete with fast food pizza chains. $3. McDonalds works closely with ranchers. roasted chicken. but also mean that restaurants get increasing numbers of customer visits.879 million (2007). Operating profit was $3.984 million (2005) $4. bottled water and other low fat and calorie conscious alternatives. Net profits were $2. In 2009 McDonald's saw the full benefits of a venture into beverages. Nutrition information is printed on all packaging and more recently added to the McDonald's Internet site. Opportunities  In today's health conscious societies the introduction of a healthy hamburger is a great opportunity.   Provide optional allergen free food items.  McDonalds only serves name brand processed items such as Dannon Yogurt. like the one they have in New York City on Broadway. McDonalds offers salads. Nestle Chocolate.544 million (2006) and $2. Kraft Cheese. McDonald's have problems with fluctuations in operating and net profits which ultimately impact investor relations. such as gluten free and peanut free. In 2008 the business directed efforts at the breakfast.  They have industrial. Dasani Water. Currently McDonald's and its competition health choice items do not include hamburgers. .433 million (2006) and $3. to appeal to a more upscale target market. chicken.395 million (2007). hot specialist coffees not only secure sales. Heinz Ketchup.  .602 million (2005).

McDonald's is the leading global foodservice retailer with more than 31. playgrounds and popular movie character tie-ins. Children grow up eating and enjoying McDonalds and then continue into adulthood. KFC and any mid-range sit-down restaurants. They have been criticized by many parent advocate groups for their marketing practices towards children which are seen as marginally ethical. More than 75% of McDonald's restaurants worldwide are owned and operated by independent local men and women. This documentary was a direct attack on the QSR industry as a whole and blamed them for America's obesity epidemic. toys. McDonalds no longer pushes the super size option at the dive thru window. contributing to the obesity epidemic in America. where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. Starbucks.  They have been sued multiple times for having "unhealthy" food. They entice children as young as one year old into their restaurants with special meals. Taco Bell. In 2004.Threats  They are a benchmark for creating "cradle to grave" marketing. especially e-coli. Wendy's. allegedly with addictive additives. Due in part to the documentary. like Burger King. .   Any contamination of the food supply. Michael Spulock filmed the documentary Super Size Me. Major competitors.000 local restaurants serving more than 58 million people in 118 countries each day.

the company makes significant use of billboards and signage.McCafe coffee shop. McDonald's restaurants have been encouraged to participate in the environmentally friendly movement by getting involved in community clean up days to cut down on the amount of litter around their stores. the biggest fast-food chain in the world. Over 250 worldwide in 48 countries. Threats  Many competitors for same costumer Subway . to utilize recycling both in packaging their products and in what they use day to day which has allowed them to cut down on their waste significantly. This strategy is a risk and pressure tactic which would ensure that is a epidemic and bird flu .than any other private entity in the US. but also the ways in which they go about using their resources and acquiring them-. Television has always played a central role in the company's advertising strategy. McDonald's operates more playgrounds .energy management.What opportunities and threats did McDonald face How did it handle them What alternatives could it have chosen? Opportunities 1) "Going green" . This has been planned by McDonald's Corp. and few others slogans for select countries and regions. and newspaper). 3) McDonald's has f maintained an extensive advertising campaign for decades. environmentally friendly refrigerants. Until now.Taco Bell  Criticism . assisted by Environmental Defense. yesterday asked the High Court to stop two London environmentalists from distributing a leaflet which links the company's meals to heart disease and cancer and accuses it of despoiling the environment and exploiting the Third World.Burger King . For popularity they use media (television. They always advertise McDonalds much different way to their customers. Ill. and other health problems Leaflet 'A Threat' to McDonalds MCDONALD'S. and partnering with Greenpeace for rainforest protection 2) New store looks/styles ..contribute to obesity. they have planned an exclusive advertisement campaign. They have already gotten rid of super sizing and I think they have made their fries healthier currently. Bird flu no threat to McDonald's chicken: Advertisement strategy In a bid to save its plummeting sales of chicken products in mcdonalds. //The campaign would ensure that the customers get the message that chicken here is safe. improving packaging efficiency.designed to attract children (and their parents) to its restaurants . McDonald's continues to be environmentally conscious in their business and they are currently testing a restaurant that will potentially give off less harmful pollutants by using alternatives to harmful refrigerants 5) They have the ability to add healthier lines of food. Their policy now an outline is not only the individual restaurants' behaviors. They have made an effort. of Oakbrook. radio. 4) Recently McDonald's is actively trying to reduce their negative impact on the environment by altering their company policies. There is another personify isThe Golden Arches are now more widely recognized than the Christian cross.KFC . and makes coolers of orange drink with their logo available for local events of all kinds. McDonald's has used 23 different slogans in United States for advertising. and "forever young" redesign  Charity . Since the 1990's.The Ronald McDonald House provides a cheap or free place to stay for parents of sick children. sponsors sporting events from ranging from Little League to the Olympic Games.

 Mcdonald can done better performance then his competitors by providing dishes which are a part of that culture. It rejects the claims. HOW DID McDONALD HANDLE THEM? Mcdonalds handle these threats by by these possible steps. Burger giant faces court threat over bad language idea Fast-food giant McDonald's could be in trouble with race watchdogs for asking its staff to speak English. According to a report in the Financial Times. and has been working to dispel the McJob tag with which it is saddled. the report will admit that McDonald's has learned that "we could do better in our understanding of wider social trends and expectations".  Mcdonald should provide traditional dishes .  Mcdonald should distribute free sample in different offices and colleges.  Mcdonald should increase advertisement in Europe. » Mcdonald should it think at the level of middle customer rather then the high level .McDonald's is set to admit that it has not done enough to reassure the European market on issues about the nutritional value of its food and the quality of jobs it provides. This kills the virus.  By decreasing health problem. McDonald's faces up to European fears over food and job quality LONDON .  Mcdonald should launch some new dishes according to condition. But experts now believe the burger giant could have infringed workers' human rights and European employment law. » Mcdonald should decrease its prices in that country where per capita is very low. including accusations that McDonald's "does not value its employees" and that "working at McDonald's doesn't look like much fun".scare spread they can influence the customers. in a corporate responsibility report to be published next week. » Mcdonald should open new restaurant in that area where fast food has important part in the culture of that area.  For better performance in Europe Mcdonald has to do a lot of work by providing the taste and dishes which have high demand in europen market. WHAT ALTERNATIVE COULD IT HAVE CHOSEN? Mcdonald can use following alternative to increase his value: » Mcdonald should stop his product where it's not doing well and take corrective action and check his quality. It says that the report will quote negative and positive comments given to it in a year of interviews.  Mcdonald have to provide the job that person which can attract more customers through his stratigies. » Mcdonalds should make his manuals which include traditional dishes of that area.An outlet in Manchester put up a sign ordering employees to use English at all times in the store . They have already prepared ads and would air them.  By delivering superior value to customers then competitors.  Mcdonald should make planning to avoid from bird flu and other diseases in future.including in the staffroom. as soon as needed. » Mcdonald has to choose that management which can easily understand the demand of all customer. It is now a fact backed by scientific research that humans cannot get bird flu by eating chicken that has been cooked and prepared properly.

customer. . » Mcdonald should provide bonus to his employees for better performance.

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