McDonalds Case Study

INTRODUCTION:

McDonalds is the largest fast-food chain in the world. The company was founded in 1954 with two brothers Mac and Dick McDonald and Ray Croc. The company has grown exponentially over the past 60-plus years. McDonalds' franchises can be found throughout the world, with "32,000 restaurants in 117 countries, providing jobs for 1.7 million staff and feeding 60 million customers per day" (Slack and Lewis, pg. 441).

During McDonald's rapid expansion they created very rigid standards in order to maintain consistent levels of quality, service, and products. Additionally, they tailored their menu to include only a limited number of items that were sold at every restaurant. The company prided itself of the lack of variation in their menus. In recent years, McDonalds has experienced increased competition from Burger King, Taco Bell and Sonic. They have been criticized as a low-paying employer and vilified for the unhealthy menu items. McDonalds has remained profitable but their market share has decreased.

MAJOR CHALLENGES:

1. To what extent should McDonald’s change its operations strategy to accommodate the growing need for flexibility and variety in products. Was it merely tweaking—or a dramatic change — that would support the company’s volume growth objectives?
2. To what extent would environmental concerns compromise McDonald’s traditional strengths and complicate an already challenging competitive situation?
3. Finally, what lessons learned help McDonald’s as it seeks solutions to its continuing competitive challenges?

PROPOSED OPTIONS:

• McDonalds should offer and test new menu items that are healthy and do not degrade the environment.
• New menu items should leverage local farmers, producers, and suppliers. This will improve their reputation by helping local economies.
• Create strict standards and consistency in the new menu items, using the same innovative mindset utilized previously (ex. Frozen fries)

McDonalds needs to take some calculated risks with their menu offerings. Currently, many of their item choices are scrutinized as being unhealthy and degrading to the environment. Entire documentaries have been made criticizing McDonalds' food for causing obesity, diabetes, heart disease and other negative health outcomes. Additionally, many news outlets have reported that the beef industry (and beef production) are degrading the environment. Public scrutiny in regards to feeding hormones to the cattle in order to meet the growing demand (and speed) for beef has negatively impacted McDonalds. In addition to the hormones, cows are being fed corn so that they can grow bigger and faster inexpensively. Essentially, a large number of farmers are growing corn for cattle instead of being used to feed humans. This has become problematic and fast food chains such as McDonalds (and other fast food chains) have been blamed heavily for this change.

McDonalds can increase business and repair their reputation by tweaking their menu. Beef is becoming highly scrutinized by the public, primarily because of the abuses and changes in beef production. McDonalds can be a catalyst to change in both their choices and by being an agent of change, publicly decrying these practices and implementing changes in their business practices.

RISKS:

1. New menu items will lead to additional suppliers that will need to be managed, possible issues with said suppliers and variations in the supply chain.

1. The fast food market is competitive and saturated. Many of the food items that could be offered are already available at other restaurants.
2. New menu items may drive away loyal customers that expect consistency in McDonalds.

There will be strategic, financial and reputational risks in the above proposals. However, these risks can be managed with significant preparation and awareness of the potential pitfalls. McDonalds will have to use aggressive marketing in order to tailor their message to the public prior to making the changes. By priming the public with the "why" behind the changes, McDonalds will be able to shape their message and public perception in a positive way.  McDonalds will have to "sell" to the public the benefits of the changes and be transparent about their past abuses. For example, McDonalds will boast that they used frozen burgers in the past, but now they use local farmers with environmentally-responsible procedures to obtain beef.