McDonald’s Corporation is the largest fast food restaurant chain in the world, operating more than 32,000 restaurants in 118 countries. In 2008, McDonalds and Wal-Mart were the only stocks in the Dow Jones to end the year with a gain. From 2007 to 2008 they raised revenues in billion dollars earning above average returns. Its ability to create value for its stakeholders is impressive, but this trend hasn’t always been the same.
This mini case study takes place in the year 2003 when for the first time they had a quarterly loss and its stock price devalued almost $35. This case study talks about the factors that took McDonald’s to this downgrade and what strategic decisions they made to regain their position as the largest and most successful fast food chain in the world. The case study mentions several facts about McDonald’s situation in 2003 which can lead us to make a brief SWOT analysis for a better understanding of the characteristics of McDonald’s at that exact moment.
Some of the facts mentioned can be rearranged as the following SWOT analysis: Strengths: dominates the quick service restaurant industry, possess the largest number of restaurants + 32,000, most recognized brand in its industry, largest expansion on its industry, largest variety of products. Weakness: low quality service, poorly trained workers, over excess of variety creates low quality in food, lack of innovation, low variety on healthy food and out dated style restaurants.
Opportunities: Enter new markets such as Europe, exploit new market niches such as the Chipotle Mexican Grill restaurant concept, and keep expanding at higher rates than the competition. Threats: Overexposure and rapid growth of other fast food chains, new healthy lifestyles, economic crisis. In 2003, when McDonald’s experienced its first ever crisis, their strategic leaders did these type of analysis on a greater level of stringency to detect what areas should be fixed.
After examining their firm’s deteriorating situation, McDonald’s strategic leaders decided to change its corporate-level strategy and to take different actions to implement its business-level strategy. On a business level strategy, McDonald’s decided to focus on product innovations and upgrade on existing properties instead of continuing to expand rapidly. From a corporate level strategy, they decided to become less diversified and started focusing on their main core products, and disposed all those niche markets that weren’t giving the expected revenues.
Operationally McDonald’s started listening to its customers and started implementing what they wanted such as including more salads, more chicken sandwiches, greater value options, better training for their employees, increasing the hours of service and redesigned stores to appeal to a younger market. All of these strategic actions were taken into consideration and implemented to achieve a sustained competitive advantage and regain its worldwide dominance in its industry.
This shows how success it’s not guaranteed for how long you’ve been on the industry nor how big and powerful you were, instead it shows that success is achieved as long as you remain foreseeing and satisfying your consumer needs. This introductory mini case study is really helpful because it lets us know how a case study is structured and how should we approach it. Also it shows us how we must interpret and analyze it at the moment when we must decide what strategic decisions to make. It puts us in the position of a strategic leader and gives us a glimpse of how business decisions affect our future.