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 used to be dine-in only began to offer to-go options and supermarkets and convenience stores also entered the mix, further increasing the options for fast, convenient dining.

McDonald's also had to deal with an increasing emphasis on healthy eating and a movement away from processed and industrialized foods. McDonald's began to receive a lot of criticism over its use of trans fats and how unhealthy its food was amid rising concerns over adult and child obesity in America. The documentary "Super Size Me", which chronicled the effects one man experienced from eating nothing but McDonald's food for one month set off a negative public relations nightmare for the company. Competition now also included the ever growing Subway chains, as well as restaurants such as Blimpie and Quizno's.

McDonald's also faced internal pressures that were contributing to its struggles. Their major weaknesses are inter-related, customer service and store efficiency. The corporation's relationship with franchisees began to deteriorate in the face of sharply declining profits and poorly received corporate directives. Franchisees bristled at expensive company mandated kitchen upgrades and price cuts to the menu which have reduced margins further. Many franchisees have sold their stake and some have even moved on to competitors. Part of the tension between the corporation and franchisees over declining profits may have been the result of overexpansion by the corporation. The declining service may have been the result of headquarters stopping the grading of franchises on cleanliness, service, and speed as well as the reduction in training provided to new employees. McDonald's also suffered from a lack of focus on its core business as they acquired other chains and tried to realize growth through that outlet along with poor new product introductions. Products like the McLean Deluxe, Arch Deluxe, and salad shakers all failed to generate new interest. Under Greenberg, McDonald's saw the introduction of 40 new menu items, none of which made a substantial impact in customer demand. These internal pressures combined with the external environment led to the decline McDonald's was dealing with when Cantalupo was installed as CEO.

McDonald's biggest strength lies within their global brand name. Internally their biggest strength is their CEO Charles Bell. Mr. Bell succeeded James Cantalupo and vowed to continue the plan laid out by Mr. Cantapulo, which included reducing expansion plans and focusing on the core burger business. Both individuals wanted to focus on customer service and enhance the customers' experience with each visit. Improving