McDonald’s Strategic Choices

Thomas Edison once said that “Opportunity is missed by most people because it is dressed in overalls and looks like work. ” The words of Thomas Edison aptly describe McDonald’s Corporation’s formula for success. McDonald’s is living proof that success is not achieved overnight. Success can only be achieved through dedication and commitment to excellence and hard work. Back in early 2000, McDonald’s suffered a corporate slump. Externally, sales suffered because of issues relating to mad cow disease and the search for healthier and greener alternatives to fast food.

Internally, sales also suffered because McDonald’s was starting to saturate its market, losing to the increased competition and failing to meet the changing needs of its customers. As a result, stock prices were at a low and corporate targets were not being achieved. This is evident as the price of its stock hit the all-time low in March 2003 at 13. 85 per share. Below is the graph showing McDonald’s historical share prices from 2000 until 2009. It shows that McDonald’s share prices and investor confidence started to decline from 2001 until 2004.

It managed to slowly recover in 2005. At present, McDonald’s has fully recovered from its corporate slump. Before it was able to fully recover, McDonald’s identified its problems that affected its corporate performance. Among these problems is the failure to manage its growing number of franchises.

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Franchisees have complained of McDonald’s management that there were certain problems with stores operated by franchisees which management have failed or refused to address (Kathy Bergen, 1997); aggressive expansion strategy created a cannibalization effect among existing stores. Before McDonald’s dramatic recovery, its business strategy was focused on aggressive expansion. McDonald’s was able to open new stores but the appearance of growth was merely superficial. The unintended result was that each McDonald’s store catered to the same customers.

A McDonald’s franchisee even remarked that he loses more in sales every time a new McDonald’s store opens near his location compared when a Burger King or Wendy’s store opens. For McDonald’s to recover it needed to come up with ways to manage its existing stores. It must be stressed that its problem boils down to store management. Jim Cantalupo and his team came up with the Plan to Win in an attempt to fix the company’s management problems. One of its first acts is to accept that there was a problem within the organization.

The second act is to shift its strategy from aggressive business expansion to focus on better management of its existing stores and better customer satisfaction. The strategic focus was on “being better, not just bigger. ” Thus, instead of McDonald’s wanting to open new stores, it decided to improve its services by coming up with better products and better services to its customers. It changed its goal from opening thousands of stores to retaining its existing customers and attracting more new customers to McDonald’s.

Consequently, the Plan to Win was born. Plan to Win has the following basic elements: Service, Menu, Value and Restaurant Ambience. McDonald’s adopted a different perspective in its Human Resources by making employee training a priority. The crew members were given better training on customer service. The top executives who supported this initiative even brought in customer surveys so that they can get inputs from its customers. The menu was likewise improved and salads and fruits were added to cater to customers who are health and weight conscious.

The change in strategy was immediately felt in McDonald’s store as it started to attract new customers. McDonald’s dominated not only the lunch and dinner but it even started to conquer the breakfast market which is estimated at $25 billion (“McDonald’s 24/7”, 2007). Just a few years ago, McDonald’s directly competed with Starbucks and started serving coffee in all its stores to attract breakfast-eaters to its store. Recent Consumer Reports say that McDonald’s coffee has overtaken Starbucks in terms of taste and price. At present, McDonald’s continues to dominate the coffee market.

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