Group Analysis
Running head: MCDONALD’S CORPORATION
McDonald’s Corporation Group Analysis
Charlotte Ford-Cunningham, Jeremy Hilgeford, and Lois Robinson
Ohio Dominican University
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Introduction
The late 1990s and early 2000s found McDonald’s Corporation in unfamiliar territory;
the company suffered from declining revenue and loss of market share. The decades prior to this
time were very friendly to McDonald’s. The company had relied upon new products and
innovative promotional strategies to become the market leader in the fast food industry. CEO of
McDonald’s Corporation Jack Greenberg was determined to reverse the negative sales and
growth trends. Faced with a multitude of problems, Greenberg planned for the company’s
recovery. Fast food restaurants have developed a reputation of serving cheap, greasy, and
unhealthy products. McDonalds’ faithful fast food customers have become health conscious in
recent years. In addition, consumer tastes in general have changed, now preferring the fast-casual
higher priced, superior quality—yet still fast—dining experience at restaurants such as Panera
Bread and Boston Market.
Today’s Market
McDonald’s has emerged although suffering minor hiccups through the recession,
stronger and still the envy of the fast-food industry. Low prices and value throughout the menu
led to strong sales in the fourth quarter of 2009. McDonald’s expanded value menu lured in
customers who typically would have dined elsewhere. In addition to value menu products,
McCafe coffees and premium burgers, such as the new Angus burgers, have added to
McDonald’s recent success. Overall, McDonald’s revenues rose 7.1 percent over the previous
quarter. McDonald’s also boasts that in 2009 it served over two million more people per day than
it served in 2008 (Marcus, 2010).
We have concluded that company's executives’ decision making process was
fundamentally flawed at the time the case was written. There were not subsequent circumstances
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beyond their control but they lacked foresight in accounting for consumer future likes and
dislikes. The greatest challenge is that they were not ready for change financially or socially to
make quick adjustments when consumer tastes changed dramatically.
Problem
One of the problems McDonald’s is facing with Wendy’s and Burger King is that they all
are strongly branded. The challenge is that they all look alike as far as their menus are
concerned. When one of them makes a change, the other one makes the same change. Consumers
will stop at either fast food restaurant to take advantage of the $1 menu – they don’t think in
terms of one tasting better than the other in this case. McDonald’s – Big Mac – $1 menu in
began 2002, Burger King – Whopper – $1 menu began in 1998, Wendy’s – Single $1 menu
began in 1989.
Over the past five years, consumers tastes have changed, causing fast foods companies to
struggle financially while trying to hold on to their market share. McDonald’s profits are slowing
down because the costs of the ingredients in the food they sell continue to rise. The profit margin
on McDonald’s most popular food item, the double cheeseburger is declining, so much so, some
restaurants have removed the double cheeseburger from the menu or they have slowly increased
the price over a period of a year. A very small attempt to try to recoup losses from the high
prices of the ingredients the new prices stretch anywhere from $1.29 to $1.50.
Areas of opportunity
1. Image – Marketing/Advertising – What does McDonald’s want to look like today? Is
McDonald’s about the (visual) Golden Arches or a Red Brick & Mortar building?
2. Coffee – the “Gourmet Experience” – Is this gourmet coffee or regular coffee with fancy
flavors in to look like gourmet?
3. Healthy Menu – Is there more than salad? Highlight No-Fat or low trans-fat foods.
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Image
The Building - An area of opportunity for McDonald’s is to restructure and reorganize
what they want their image to be now. The image must be very different from that of Wendy’s
and Burger King. Some franchises have returned to the building with the golden arches that was
originally introduced in 1962.
Baby boomers may love the retro look, however, college students and anyone younger
than thirty may not be able to appreciate what McDonald’s looked like year’s ago. Years ago
McDonald’s popularity was as much in the look of it building than it was for their burgers.
Currently they are doing the golden arch buildings in some states but keeping the majority of the
rest of the buildings being red brick & mortar buildings across the US. McDonald’s franchises
are now found in hospitals, malls, etc. Consumers don’t look for the “arch” anymore, they look
for the $1 burger and everyone has that.
Cheap $1 burger menu or Healthy Food/Gourmet Coffee image
The brand name speaks for itself; everyone knows McDonald’s sells burgers. They
should keep their prices at a competitive price and shed the “cheap image”. The word McCafe
does not sound like it is selling a “gourmet” coffee. The “coffee bar” image they are trying to
gain should correspond with the “gourmet experience”. Instead, McDonald’s posts a large sign in
the window – McCafe Coffee $1.99 and the signage looks like a “for sale” sign. Not much for a
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“gourmet experience”.
The Healthy Menu
McDonald’s began offering salads in 2003 – right around the time the political arena was
charging that fast food companies were the cause of the obesity problems Americans were
experiencing. McDonald’s should continue to focus on being innovative in promoting how they
want to play a critical role in the health of their consumers by offering healthy options for those
that want food fast, but want it healthy. Consumers today want a whole lot more for less which
includes a wide variety i.e. salads, grilled chicken, etc. Another healthy alternative may include
turkey sausage and/or turkey bacon. Vegetarians may not eat meat, but they will eat fries, salads,
etc. maybe McDonald’s may even consider a vegetable burger.
The Alternatives –Pros/Cons
The building – the improvement is to capitalize on the building image (golden arches)
from what they had that was so popular in the 60’s and 70’s or build on the newer/modern
McDonald’s building of today. They currently are using both which can cause some of
McDonald’s image to get lost in similar physical appearances (red brick & mortar) of Wendy’s
and Burger King. Example: White Castle is in a class by itself when it comes to the physical
building of their brand. Pro’s – consumers are consumed with “new”, but it is a challenge to keep
them interested. The con – this can be very costly if there is no major addition to what the
McDonald’s brand has always offered.
The Gourmet Coffee
The coffee must taste good, which means that McDonald’s has to make the experience
worth the visit. Pro – attracts old and young serious coffee drinkers. Con – getting the look and
feel to appeal to the average coffee drinker. The visual – there must be something about the
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cup/what it looks like/the flavors – how fancy they are average will not do. The Con – the risk is
in the cost of selling “gourmet” to the consumer that is an the average consumer that will always
see McDonald’s as a cheap place to get a cheap cup of coffee – the frills must be very appealing
to this consumer.
Recommended Action and Rationale:
McDonald’s must take into consideration that consumers get bored very easily. If you
want to hold their attention while making money, you have to do something that not only
satisfies their taste buds, it entertains them as well. Part of McDonald’s customer service
experience that we all have become accustomed to is the give-a-ways. Consumers love plastic, a
card that would allow points for discounts on gas and food. McDonald’s should supply any
customer that requests it, a plastic card with the Golden Arch logo that can be swiped at time of
purchase to earn points for example:
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Points for gas
Points for free dinner
Free Newspaper “to go” with coffee purchase
Movie tickets
Rationale #1: It’s a Recession and when there is a recession people hold onto their money
as they don’t feel they can splurge. We live in a society that wants to get something for free.
When you get a customer to purchase your food and allow them to earn or get something free,
they will spend more. Rationale #2: People love plastic! The plastic card can be made to hang
on your keychain. The card is used as a marketing strategy to keep the customer coming back to
get something as they spend. Rationale #3: MOST IMPORTANT! No other fast food chain has
a plastic card that allows the consumer to earn points or bonuses back. This is a way that
McDonald’s can stand out from their competition.
Group Analysis
References
Marcus, M. (2010, January 22). Gotta love McDonald’s profit. Retrieved March 21, 2010 from
Forbes.com: http://www.forbes.com/2010/01/22/mcdonalds-burger-starbucks-marketsequities-earnings-dollar.html.
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