McDonalds Case Study

In order to understand McDonald’s structure and culture and why they continue to be the world’s largest restaurant chain we conducted a SWOT analysis that allowed us to consider every dimension involved in the business level and corporate level strategies.

Our research indicated more viable strengths than weaknesses. Strengths such as brand recognition, steady growth in global markets, and strong leadership. McDonald’s has become part of America’s culture and now the same can be said for the global arena based on the demonstration of growth and continued dominance over competitors. Business Week Magazine even ranked McDonald’s as “one of the ten most recognized brands in the world”, a position that creates significant opportunities for the company. An important strength that continues to have the most dramatic impact on McDonalds is their top level management. Even though this is classified an as internal strength, McDonald’s has capitalized on a management style that helps to infuse a strong culture. A dynamic aspect of the McDonald’s culture is the willingness to innovate and adapt, thus making necessary changes when the need arises.

Top level management includes Jim Skinner, the concepts of the late Charles Bell, and the late James Cantalupo. James Cantalupo was a former vice-chairman who had overseen McDonald’s successful international expansion in the 1980’s and 1990’s. He came out of retirement and took over as CEO in hopes of quashing the potential downfall McDonald’s was facing. He was instrumental in developing a strategic plan called “Plan to Win” which was the starting point for the turnaround at the beginning of 2003. This Plan contains aggressive goals and measures for success based on the critical drivers of customer experience or the 5 P’s: People, Products, Price, Place and Promotion. (Chief Executive, Salad Days) Today sales are strong in domestic markets and even higher in the global markets. The plan focuses on existing customers and by changing their image to promote healtheir

menu items. This was the long term goal set by Cantalupo, followed by Bell and now Skinner.

With strength ultimately comes weakness and McDonald’s has its fair share, especially in the last few years. Many weaknesses are due to the external environment which includes market saturation, increased price competition, and food and labor costs. These weaknesses affect many firms in the fast food industry so McDonald’s is trying to effectively combat these forces using a differentiation strategy. Developing new products such as the new gourmet, premium coffees, fruit salads, and premium chicken strips have given McDonald’s the ability to compete in an industry that has reached the maturity stage in the life cycle while still fighting off new entrants such as Chik-fil-A and Quizno’s. This change in strategy has allowed McDonald’s to continue to focus on their core competency which has always been their burgers. But new products have increased overall sales worldwide. New strategies have been introduced to increase the efficiency in the drive through

process. Research has shows that McDonalds ranked last out of 25 fast-food chains in a recent study of drive-through

order accuracy, down from 20th in 2004. (Wall Street Journal). When it comes to drive-through speed, McDonald's went from being the fourth-fastest chain to the sixth. This shows an inconsistency of McDonald’s short term objectives vs. its long term objectives. McDonald's goal is for customers behind the wheel to wait no longer than 90 seconds.

2005 2004 GOAL

167.9

152.5

90

Average Drive Thru Wait Time (Seconds)

In fast food, time literally is money. And with sales growth slowing at McDonald's, shaving off seconds at the drive-through is more important than ever. McDonalds was rumored to start using call centers for order taking, though there has been some experimentation in this area, McDonald’s has no plans to expand the use of call centers for order-taking, Instead, McDonald's is trying to improve drive-through

speed by offering cashless payment options, adding lanes and automating beverage service. (Chicago Business Press)

Opportunities involve changing trends and the long term international growth. Many trends are a result