McDonald’s Case Study

Since its founding in 1948, McDonald’s has grown from a small restaurant in California into one of the most recognized brands in the world with a chain of outlets that spans the globe. For over 50 years, McDonald’s defined the fast food industry while indelibly etching its golden arches logo on the face of both American and global culture through such icons as character Ronald McDonald and the Big Mac sandwich. Millions of people started their very first jobs at McDonalds while even more began to have their eating habits redefined by the chain. Concepts like the drive-thru window were introduced along with the Happy Meal for children in order to provide a fast, affordable, and enjoyable dining experience for the masses and respond to the ever quickening pace of working men and women. Built around a low cost model, McDonald’s would go public in 1965 and its success would result in selling billions of burgers and its stock would split 12 times in the next 35 years.

The tide would turn against McDonald’s though. A string of failed new products, declining service, acquisitions of other chains, changes in cultural eating habits, and overexpansion would all combine to have dramatic effects on the success of the chain. In 1998, the company posted its first ever decline in annual earnings resulting in the ousting of CEO Michael Quinlan. His replacement, Jack Greenberg, attempted to slow expansion but his reign also saw the acquisition of other chains like Chipotle Mexican Grill and Boston Market and the introduction of 40 new menu items that failed to catch on with the public. McDonald’s stock declined 60% and posted its first quarterly loss under Greenberg and he was removed in late 2002. Former Vice Chairman James Cantalupo was brought back in early 2003 with the hopes of resuscitating the franchise. Cantalupo began to further reduce expansion plans and tried to focus more on the core business by selling off some of the chains that had been acquired by the corporation. There was also a renewed focus on improving service and relationships with franchisees and successful new product introductions like the McGriddles sandwich and a line of salads. Sales saw a very strong growth pattern over a span of three quarters but the corporation was stunned by Cantalupo’s sudden death from a heart attack in April 2004. Charles Bell was named his successor and vowed to continue with the plans Cantalupo laid out to restore the franchise to prominence.

SWOT Analysis

STRENGTHS WEAKNESSES

• Globally recognized brand name

• Market share (America & International)

• New CEO disciple of James Cantapulo • Customer service continues to decline

• Inefficient and “dated” stores

• Lack of menu development

• “buy-back” program with franchises draining cash

OPPORTUNITIES THREATS

• Partner Brand food chains (develop or sell for cash)

• Reinstitute training program

• Reinstitute grading and accountability for franchises

• McKid’s line of products • Increased expansion of traditional rivals

• Increase in fast-casual market

• Health conscious consumers

A variety of factors combined to create the challenges and struggles McDonald’s faced. Externally, pressures came from a variety of sources. Competition from other well known ‘burger joints’ like Wendy’s, Burger King, and Hardee’s became even more fierce with nationwide expansion of other burger chains like Jack in the Box and Sonic along with alternative chains like Subway, Quizno’s, Taco Bell and Chick-Fil-A. The market began to diversify in both its breadth and scope of offerings. Other restaurants that