Mgt 409 - McDonalds in 2017

McDonalds

Team Case Analysis

MGT 409

Team 2

Jack Hsu

Esther Kilaja

Griffin Rigg

Jingsi Zhang

Danielle Stevens

September 25, 2018

According to the “McDonald’s in 2017” case prepared by Jamal Shamsie of Michigan State University and Professor Alan Eisner of Pace University. McDonald’s U.S market share of fast-food burger chains declined from 49.6% in 2014 to 17% in 2016. This demonstrates a collapse of over 65% from the previous market share. To restore their market position, on January 18, 2017, they announced to introduce two new versions of the “Big Mac” on limited basis. Although the changes were necessary, they failed to address the shifts in consumer preferences such as healthy eating. To emphasize, a recent survey showed that only 20% of millennials had even tried a “Big Mac”.

Millennials food preferences build a huge discussion because they currently hold the greatest purchasing power compared to other generations. In the fast-food burger market, most millennials are defecting towards traditional competitors like Burger King as well as new burger outlets like Five Guys that offer services with speeds rival to that of McDonald’s but with higher quality and more customizable products. Although there is high competition within the burger outlets, current U.S market share trends show that all fast-food burger chains are either declining or their market share is not growing. The real threat to McDonald’s is the customized ordering and fresh ingredients that fast-casual chains such as Chipotle and Panera Bread have brought to the fast-food market. McDonald’s response to the growing competition involves diversifying their menus to include salads and using healthier ingredients to prepare meals. However, this led to an increase in cost and preparation time which contradicted their key competitive strategies of being a fast and low-cost food service provider.

Change had to be made if McDonald’s was to reverse their declining share price. In order to revamp its image McDonald’s began using celebrity sponsors, such as Justin Timberlake, to be spokespeople for their products. Recently they’ve taken a more interactive approach when connecting to customers. In a post that has gone viral, two individuals decided to prank their local McDonald’s by hanging a poster of themselves with McDonald’s products on a blank wall in the store, after almost two months without it being taken down they shared their story via Twitter. McDonald’s rewarded both individuals with $25,000 each and now they are partnering with these individuals to promote diversity and awareness to their products worldwide. As individuals become more health conscientious, McDonald’s has had to make major adjustments some of which include the addition of fruit and yogurt options to kids’ meals and specialty salads and sandwiches that contain fresh cherry tomatoes and avocados. This has resulted in a wide variety of menu changes. With the spotlight on health and fresh ingredients, McDonald’s has also made their nutritional information more easily available for customers by having it displayed on all menu boards in each location. As the economy grows and new competitors enter the market, McDonald’s has also been forced to look at what they do not offer as they struggle to attract new customers, specifically the steadily growing population of vegetarian and vegans in the world. Currently, in the U.S., McDonald’s does not carry a vegetarian burger option and even after multiple lawsuits it is not common knowledge that their french-fries and hash browns are not actually vegetarian. Thus, limiting the available products for these individuals substantially.

        Technology has made it easier for companies like McDonald’s to combat some of these issues. At the current rapid rate that technology is developing, another route that McDonald’s can take is implementing more technology within their business strategies. One way to do this is through active engagement with customers through social media platforms. Currently, McDonald’s North American Facebook page has over 27 million fans, however, McDonald’s is only updating its status an average of 5 times a month. Most updates tend to be product promotions, and not customer activity. If McDonald’s invests more resources into interacting with customers, as seen with the poster prank, more feedback can be obtained as well as a reinforcement of the customer base. Technology can also benefit the speed of service and customization of products. Many fast food chains, such as Panera Bread, have incorporated kiosks in their storefront. Kiosks allow customers to order with greater speed as well as a wider variety of customization. Only a select number of McDonald’s locations have adopted the kiosks. The introduction of food delivery apps has been a major technological advantage for restaurants like McDonald’s that do not offer delivery. Customers are now able to get McDonald’s through services such as Eat Street, Grub hub, UberEATS, etc. all without leaving the comfort of their own home. McDonald’s still receives the benefit, without having to add an additional work or risk. Developing and implementing technology is expensive but is an investment in the long run. Investing in interactions with customers through social media, as well as more convenient mediums of delivery will create more value for the customers and ultimately put McDonald’s on top of the competition.