McDonald’s Corporation Case Analysis

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When it comes to the weakness of McDonald’s, the biggest one is the lack of competitive advantage. The products are easy to be substituted and the operational efficiency is not costly to be imitated, let alone if there are any capabilities that are valuable and rare. However, this is the common weakness in this quick service restaurant industry. The second one lies in the swollen menu which has over 120 items. Appropriate products can help to draw the customers into the stores but too many products would be just the opposite. Customers will be confused by complex menu offerings and what’s worse, ineffective and inefficient operation chain with longer service time would result in the growing customers’ complaints and employee stress, more equipment costs would generate and the speed which was once the core competency would be sacrificed. Serious staffing issue is another weakness that McDonald’s need to pay highly attention to. The growing customers’ dissatisfaction about the services could do harm to the brand image and reduce the customer loyalty.

ALTERNATIVES

Alternative 1: Limit the menu to burgers, fries and drinks as the original strategy. According to the case, 30 percent of the company’s sales still derive from just five main items: Big Macs, hamburgers, cheeseburgers, McNuggets and fries. Others actually are either / or options but sharply increase the operation costs and decrease the operation efficiency. Selling, general, and administrative expense increased from $2,333millions in 2010 to $2,488millions in 2014. Thus, it is not a good idea to execute “build Your Own” tablets where customers design their own sandwich from over 30 choices of meats, toppings and buns. Increasing costs and growing employees’ stress are definitely the foreseeing result, what’s worse, customers will be more and more confused about the brand image due to the complex positioning. Therefore, focus on simplicity and improve the food quality on limited items would be an alternative.

Alternative 2: Acquire a fast-casual restaurant such as Five Guys to attract as much millennials as possible while McDonald’s only targets cost-sensitive market. According to the survey, millennials who value ingredients quality, social events and transparency are more likely to eat in a fast-casual restaurant. This is a nonreversible trend and an opportunity for McDonald’s to turnaround its business. Let this fast-casual restaurant be the independent and premium brand.

Alternative 3: Combine alternative 1 and alternative 2 together. McDonald’s target cost-sensitive market customers with limited but well-known items and at the meantime, acquire a fast-casual restaurant to seize the premium market share.

Appendix table list their advantages and disadvantages for each alternative based on the same criteria.

RECOMMENDATION AND IMPLEMENTATION PLAN

Alternative 3 is my recommendation based on four-criteria evaluations as can be seen in appendix 3. It is costly in the short term to acquire a fast-casual restaurant but in the long run, McDonald’s will dominate both the cost-sensitive market and millennials market. Meanwhile, by limiting the menu, operation costs will decrease and less stressful from employees’ side. Customer satisfaction will be improved since employees can provide better service without those burdens. Besides, saved cost can be used to improve the quality of products and thus, the general brand perception will increase gradually.

The implementation plan is made up of four sectors. In the immediate term, it is necessary to have a board meeting to communicate new strategy and to emphasize the need for change management. The board should come to agreement and leave no doubts thereafter. In the short term, McDonald’s need to do the research and determine on which items to select so as to limit the menu to a right size and at meantime, improve food quality by signing contract with suppliers who can provide better raw material. At this stage, staffing issues need to be solved by setting affordable and attractive HR policies. In the medium term, acquisition should be brought forward and starts from investigating on which company to acquire. Choose the best way for long-term financing is also a big issue. In the long term, market and customer-habits research is a never-ending projects. McDonald’s need to monitor the business operation and adjust tactics accordingly.

APPEDIX:

- SWOT Analysis for McDonald’s

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- Competitors Comparison Table

Brand Awareness

Food Quality

Products’ Price

Customer Satisfaction

Market Share

McDonald’s

High

Low

Low

Low

High

Burger King

High

Low

Medium

Low

Medium

Wendy’s

High

High

High

High

Medium

Taco Bell

High

Medium

Medium

High

Low

Subway

High

High

Medium

Medium

Medium

Fast-casual

High

High

High

High