McDonald’s Case Study

Strengths

Largest Food service business in the world, 34,000 local restaurants serving nearly 69 million people in 118 countries, a $40 Billion dollar brand worldwide, Universally recognized brand name with a large advertising budget Partners with other high value brands Dannon Yogurt, Kraft Cheese, Nestle Chocolate, Dasani Water, Newman’s Own Salad Dressings, Heinz Ketchup, Minute Maid Juice The majority of the retail locations are owned by independent franchisees, The company is able to grow while minimizing large capital expenditure Recession Proof – Low price menu items allow McDonald’s to survive when the economy is low as there are few economic situations where most consumers cannot afford McDonald’s.

Massive buying power- 34,000 locations allows McDonald’s to control pricing on its core menu items Highly trained management staff well versed in Customer service skills (hamburger University) Positive company social-image (Ronald McDonald House)

Impressive core competencies in franchising and logistics
Target market is children and teens
Weaknesses
Fast Food is viewed by many as poor quality and unhealthy, often associated with “cheap and greasy,” especially the baby boomers who built the brand in the 50’s and 60’s less than 6% of the over 100 item entrée menu is less than 200 calories more than half the entrees are high in sodium

Large size of the business makes growth more difficult to achieve
Commodity costs can quickly erode profit margins
Low differentiation with other similar fast food companies such as Burger King, Wendy’s High Employee turnover at the local level
Market saturation
Negative publicity, such as the movie Super-Size Me.

Opportunities
Adapting to fit the changing lifestyle of the largest population sector by adding healthier food options Fast food will never be completely viewed as healthy but efforts in this direction could aid in customer perception Parents would appreciate the convenience when selecting a family dining option Remodeling of older restaurants

Changing customer habits and new customer groups
Adding premium menu items
Entry into new product categories (coffee)
Provide optional allergen free food items, such as gluten free and peanut free. Sugar-free products for diabetics, and healthier beverage options. Internet applications to order in advance

Threats
Modern society views Fast food as unhealthy
Government agencies are enforcing healthier menu regulations such as posting of calories Commodity food price fluctuations – droughts and similar cost fluctuations cut into margin as it is hard to raise prices on most menu items Competition.
Regional or Local fast food restaurant chains

Being a market leader forces McDonald’s to shoulder more burden regarding research and innovations, copycat competitors can quickly implement any success without incurring the cost of a failure.
Competition and saturation in emerging markets

Needs to be more environmentally friendly with packaging
Scandals/ Bad publicity. Ex. Heroin happy meals
Minimum Wage rising
Employee health insurance issues

What alternative action should be considered?
The company should diversify toward additional healthy offerings. Perception is reality, if a consumer perceives McDonald’s as attempting to change to a healthier option that is sufficient. No one fools themselves into believing anything purchased at a fast food restaurant will be the healthiest item, but it can assist in showing efforts are being made. A company can highlight their ongoing concern for their consumer’s well-being. McDonalds should focus on healthier options, such as freshly tossed, made to order salads, featuring quality healthy ingredients. Expanding their healthy food menu by adding a variety of healthier breads and beverages. Other healthier food items can be incorporated into the menu such as panini’s, wraps, and healthy soups. Other changes would include, internet ordering, and home delivery.

List all resources required for the selected action.
Find vendors for the additional menu items and required packaging
Equipment purchases, ex.
Panini press, fresh salad chiller and display
Train the staff to implement these changes
Target the advertising campaign towards a healthier image.
Partner with local produce markets, to purchase vegatables,etc.

What controls would be recommended to measure the selective action? Point of Sale reports showing restaurant activity per product
Customer survey
Profit and loss statements
Meet & Greet by management
Comment boxes
Advertising & promotion of the new healthy menu.