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McDonalds No Longer the Great American Meal

CASE STUDY

INTRODUCTION
The two brothers richard and maurice started a restaurant after finding a business opportunity in this industry The brother first open a drive- in restaurant in a little town called sanbernardino california, in 1937. Drive-ins were a new concept at that time. The menu was pared down from 25 items to just nine: hamburger, cheeseburger, three soft-drink flavors, milk, coffee, potato chips and pie.

The prices were kept low - 15 cents for a burger, and 10 cents for fries. The critical success factors in the business were speed, service and cleanliness. As word of their success spread, franchisees started showing interest. The first franchisee was Neil Fox, a gasoline retailer, who set up his drive-in in Phoenix, Arizona in 1952. The most distinctive feature of the building was its two bright yellow arches, which later evolved into a new symbol for McDonald's.

Reason for fail in the Franchising system


The franchising system, however, failed for two reasons:
* The McDonald brothers observed very transparent business practices. This encouraged imitators and created competitors. * The franchisees also did not maintain the McDonald's standards of cleanliness, customer service and product uniformity.

Entry of Ray Kroc


In 1960 Kroc had established over 400 franchising outlets. In 1965, McDonalds went public, selling its shares Over the counter(OTC) exchange for $22.50 each. Its share price skyrocketed to $49 within a week. They increased their price of Hamburgers was 15 to 18 cents. In 1986, McDonalds became the first fast food chain to provide customers list of ingredients used in its products. In that year, Michael Quinlan became the CEO.

ISSUES
1. Changing customer preferences

2. Obesity
3. Alleged as unhealthy food by the researchers

4. Catastrophe happened in tourism sector in US


5. Negative growth rate

6. Stiff competition
7. Problems with franchises

Contd In 1990 McDonalds focusing on building more stores, and they not much concenterated in quality, service, cleanliness. They started Mystery shoppers In 1999, McDonalds introduced a made to order system called Made for you. But they failed due to delay in the customer order.

Entry of Cantalupo

After McDonald's announced its first quarterly loss in 38 years in 2003, the board realized that big changes were required in the company's strategy and direction.

The board ousted Greenberg and installed Cantalupo as the CEO. Cantalupo had led McDonald's international expansion through the 1980s and 1990s an had been one of the contenders in the CEO race won by Greenberg. In 2003, he was brought back from retirement to lead the company's turnaround.

He than changed the philosophy from building more stores to get more customers, to getting more customers in the existing stores. The more emphasis was given to cleaniness, service and staff productivity. All these measures were aimed at bringing the customer back. January 2003, Contalupo and his team was focussing on simplifying the operations.
McDonald also decided to reduce its capital spending drastically.

The company also decided to get rid of its marketing activities which relied heavily on regional campaigns, that often ended up giving diffused and ineffective messages to the customers. It initiated a massive national ad campaign that revolved around the dollar value menu.

Recommendations
Concentrate on Asian markets too Change menu according to the changing preferences of the customers

Provide a good customer service-dont let their customer wait for a long time
Try to make business model non-transparent

Thank you