McDonalds has been renowned for offering convenient and family-friendly meals since 1940. According to the company’s website, their initial restaurant in San Bernardino, California used to be a barbeque spot. However, after eight years, Dick and Mac McDonald revamped the establishment by simplifying the menu to only nine items, one of which was their iconic 15 cent hamburger.
The first McDonalds franchise was established in Des Plaines, Illinois in 1954 by a salesman who sold mixers and recognized its potential. Within four years, the chain expanded to over 100 restaurants. Presently, McDonalds is a global corporation with stores in approximately 100 countries.
Jim Skinner, the current president and CEO of McDonalds, began his career as a restaurant manager in 1971 and climbed up the ranks without a college degree. His “Plan to Win” strategy has significantly increased worldwide restaurant sales from $50.1 billion to $70 billion in 2008, making it one of only two Dow Jones Industrial Average stocks to end that year with a gain.
Despite the economic downturn, McDonalds has demonstrated resilience. Its earnings for the fourth quarter of 2009 indicated a 7% rise in overall revenue at $5.97 billion, along with a net income of $1.22 billion or $1.11 per share.
McDonalds takes pride in several strengths including its significant market share and strong brand name, image, and reputation.
According to Dess (2007), CEO Jim Skinner and previous CEO James Cantalupo successfully implemented a strategy that helped McDonalds bounce back from its first ever loss in 2003. The strategy, known as the “Plan to Win,” emphasized people, place, price, and promotion. By introducing new and healthier menu items and ensuring convenient and friendly service in a family-friendly setting, McDonalds has built a reputation for satisfying customers. As a result, the company has established a strong global presence, with improved sales in Europe demonstrating its competence in the global marketplace.
The cleanliness, speed, and service at some franchised McDonald’s locations have been negatively affected due to decreased control. This has also impacted McDonald’s reputation for quality. Customer service has suffered as a result of staff training cutbacks and high turnover. Media criticism has led to concerns among customers and legal action concerning McDonald’s unhealthy food image, particularly their use of trans-fats in cooking (Dess, 2007). While the increased focus on healthier foods has received a positive response, it has also resulted in higher costs for the company.
Despite facing setbacks with their new menu items, McDonald’s can capitalize on the increasing demand for healthier food choices. They have the potential to develop new menu options that address customer’s health concerns while still being a popular choice for busy families who rely on fast food for convenience. Additionally, the decrease in consumer spending has had minimal impact on McDonald’s sales and has even proved advantageous as consumers seek affordable dining options.
McDonalds has the chance to expand its global presence in countries like China and India, offering them more opportunities for exploration. Their approach revolves around using franchising as a means of expanding into new areas without incurring substantial costs (McDonalds MCD, 2010). Nevertheless, McDonalds also confronts various challenges. They contend with rivals such as Burger King, Wendy’s, and others in their quest for market leadership both internationally and domestically. Moreover, they must address anti-American sentiments while managing the consequences of the worldwide economic decline and fluctuating currency values.
It is essential for McDonald’s to maintain a strong relationship between its corporate level and franchise dealers in order to ensure consistent high standards across all stores. This is crucial for preserving the reputation of the brand. However, the fast food industry as a whole encounters difficulties in meeting customer expectations related to health and environmental concerns. McDonald’s has been criticized by health professionals and consumer activists who claim that the company plays a role in health problems like high cholesterol, heart attacks, diabetes, and obesity. An analysis of the industry dynamics can be conducted using Porter’s Five Forces Model.
THREAT OF NEW ENTRANTS: Despite McDonalds’ dominant brand identity and leadership in the fast food industry, it still faces competition from newcomers and other established chains with innovative offerings. BARGAINING POWER OF BUYERS: The increasing demand for healthier food options may reduce the attractiveness of McDonalds among consumers. BARGAINING POWER OF SUPPLIERS: The profitability of McDonald’s is influenced by the costs of commodities like beef, corn, cheese, and poultry.
McDonalds faces difficulty in passing on increased costs to customers due to competition. Alongside hamburgers, they also face rivalry from other fast food establishments that offer alternatives like pizza or sub shops, coffee shops, supermarkets, and street vendors. The intense competition within the fast food industry enables customers to switch between chains easily if a competitor offers superior quality, healthier choices, greater value, or a family-friendly environment.
McDonalds maintains its competitive advantage through a strong brand image and diverse range of high-quality products. Their strategic approach, known as the “Plan to win,” prioritizes quality and enables them to establish an edge over competitors by providing fast, friendly service and an enjoyable experience for the whole family. CEO Jim Skinner has taken steps to improve customer service by retraining employees and franchisees, modernizing older stores, reducing new outlet openings, minimizing non-burger acquisitions, and eliminating underperforming franchisees. Additionally, McDonalds has worked on enhancing its perception of being unhealthy by introducing healthier menu options and promoting them. The company’s marketing initiatives target various customer segments with input from franchisees about their markets. These efforts serve as a valuable example for other fast food chains in the maturity stage of the product life cycle where cost management, multi-segment marketing, and defending market share are crucial amidst intense competition within a saturated market. However, McDonalds faces challenges in maintaining its competitive advantage due to being in a mature phase of the product life cycle. Despite having a recognizable brand name, McDonald’s must uphold its image and product quality in a competitive market where consumers are now more focused on health-consciousness and environmental concerns.McDonald’s should alter the perception that their products are associated with elevated levels of calories, fat, and cholesterol that may negatively impact one’s health.
McDonald’s needs to cater to different consumer segments, such as busy adults, children, and global consumers. It is crucial to monitor franchise outlets for cleanliness, quality, and customer service standards. Recommended action: Under the leadership of CEO Jim Skinner, McDonald’s appears to be effectively maintaining their competitive advantage. However, there are some recommendations that can be made: 1. Enhance marketing endeavors targeting children by promoting the Ronald McDonald and friends characters.
Families play a significant role in McDonald’s success, as they seek an enjoyable dining experience that keeps their children entertained. Therefore, it is vital not to underestimate this segment. Additionally, it is crucial to conduct consumer research to create new products that meet their needs. Marketing should be tailored for different consumer segments and focus on eco-friendly packaging and healthier food choices to attract today’s consumers. Moreover, efforts should be made to alter the perception that McDonald’s food is not healthy.
Here are some suggestions for improving McDonald’s:
- Gradually eliminate trans-fats and opt for lean meats, like a potential “tofu” burger.
- Promote McDonald’s products by directly comparing them to competitors’ offerings, highlighting McDonald’s as the healthier choice.
- Foster teamwork and exceptional customer service among employees.
- Closely monitor franchise stores to ensure they uphold service, quality, and cleanliness standards.
It is worth noting that McDonald’s is an interesting subject for research due to its consistent success as a respected company.
The history of the products and ideas that have been promoted over the years is a fascinating subject for me, as it brings back memories of my own childhood. McDonald’s serves as an excellent example of a success story that should be studied. This is particularly true in terms of monitoring the company’s progress and how they handle new perspectives on fast food, as well as their expansion into global markets.
REFERENCES: Berr. (2010, January 22). McDonald’s Beats Expectations, Upbeat for 2010 – Daily Finance.
The article “McDonald’s beats expectations: is it enough?” was retrieved on January 25, 2010. It can be found at http://www.dailyfinance.com/story/investing/mcdonalds-beats-expecations-is-it-enough/19327439/. Additionally, on May 12, 2009, Chief Executive Magazine named McDonald’s CEO Jim Skinner as “CEO of the Year”. More information about this can be found at
http://www.chiefexecutive.net/ME2/dirmod.asp?sid=0CC7FBE04E534C16922586F98AF9AEB3&nm=Articles&type=Publishing&mod=Publications%3A%3AArticle∣=8F3A7027421841978F18BE895F87F791&tier=4&id = DD3ED12 F23814 CAAAF29 D37044 AC2C0
Dess, G., Lumpkin, G., & Eisner, A. (2007) Strategic Management (3rd ed.). Boston: McGraw-Hill Irwin.
Jim Skinner – About McDonald’s. (n.d.). Retrieved January 25, 2010, from http://www.aboutmcdonalds.com/mcd/our_company/bios/jim_skinner.html.
McDonald’s (MCD). (n.d.). Retrieved January 25, 2010, from http://www.wikinvest.com/stock/McDonald%27s_(MCD).
McDonald’s History – About McDonald’s. (n.d.). Retrieved January 25, 2010, from http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html.
