McDonald s Rebirth Through a Low Growth Strategy Essay

For several decades McDonalds experienced uninterrupted growth in sales, profits, and number of stores opened. When the company seemed to reach maturity in living cycle, one chief executive officers decision for a low-growth outline started the rebirth of McDonalds. In its early years, McDonalds success was founded on principles of high quality standards and service. However, as time passed, their standards and controls slipped and same store sales began a downward trend. Some insisted that the dip in same store sales was evidence of grocery saturation. However, McDonalds executives disagreed. With bullnecked support, one McDonalds CEO went on a new-store binge.As McDonalds continued its unprecedented expansion, relations with franchisees deteriorated because corporate owned outlets were nominatenibalizing franchisees profits. Another CEO began to acquire other fast- fodder restaurants, but that model failed as it proved a drain on profits. McDonalds was struggling to keep its growth mode. Then crowd together Cantalupo took the reigns and began a low-growth strategy that turned the companys fortunes around as he slashed capital expenditures by 40% by closing poorer do restaurants and adding fewer new restaurants. Eighteen months into Cantalupos stint as CEO, McDonalds stock price rose from eighteen dollars per sh atomic number 18 to just over twenty-four dollars per share. Just as McDonalds fortunes seemed to turn, James Cantalupo died suddenly of a heart attack.SWOT AnalysisInternal Strengths & WeaknessesAmong McDonalds greatest strengths are its brand recognition, strong advertising, and market share. It was the most valuable fast food brand worldwide in 2013 with an estimated brand value of eighty-five billion dollars, three times its close-set(prenominal) competitor, Starbucks see appendix 1.1. McDonalds strength of brand recognition can primarily be attributed to its strong advertising and market share. This is evidenced by a 1970s survey which r evealed that ninety-six percent of children place with Ronald McDonald, ranking him second only to Santa Clause. Furthermore, McDonalds uses high-profile sponsorships and major advertising campaigns to maintain awareness and promote new launches (e.g. 2014 FIFA macrocosm Cup and 2014 WinterOlympics). In 2013, its advertising expenditure in the United States alone was 1.43 billion dollars for details see appendix 1.2.McDonalds has won its market share via strong marketing/advertising efforts and providing convenience for its customers. When McDonalds accelerated growth period ended, it had approximately 13,000 domestic restaurants. The belief was practical the more stores in a city, the more per-capita transactions would result. As of 2013, McDonalds had 35,429 restaurants worldwide- 14,276 of which are domestic (Statista, 2015). McDonalds other internal strengths include partnerships with big brands (e.g. Disney), international front man, localized food menus, and revenue. Now th at we have examined McDonalds internal strengths, lets examine the companys internal weaknesses.Among McDonalds greatest internal weaknesses are its negative publicity, low presence of corporate social responsibility, high employee turnover, and low strategy differentiation. McDonalds is heavily criticized for offering unhealthy foods to its customers, further exacerbating the obesity problem in America. The documental film Super Size Me, which explores the health consequences of a diet based solely of McDonalds, is one example of the negative publicity surrounding McDonalds. Environmental groups oft criticize McDonalds for a lack of sustainable sourcing of beef products (USA Today, 2014). This reflects poorly on McDonalds for having a weak presence of corporate social responsibility. Furthermore, McDonalds has a high employee turnover as it offers low paying and low skilled jobs.These jobs are often seen negatively by employees and usually result in high employee turnover. This i s an internal weakness because it increases training costs and adds to McDonalds overall costs. Lastly, McDonalds has low strategy differentiation. It has become incredibly difficult for McDonalds to cross off itself from other fast food restaurants thus, forcing McDonalds to compete on price rather than features. This is an internal weakness because price wars reduce a companys gross margin, which results in deteriorating profits. McDonalds other internal weaknesses include Declining market share, disgruntled franchisees, quality and taste of products, slowed revenue and income growth.External Opportunities & ThreatsMcDonalds is in the unique(p) position to rebrand itself by offering healthier menu options and increasing its corporate social responsibility. In 2006, McDonalds newly redesigned logo and restaurant layout are world credited for 8-9% sales growth. Furthermore, McDonalds has the unique opportunity to be the early fast food restaurant to source 100% of its ingredient s from sustainable production. Younger generations are very conscientious of the impact their purchasing habits have on the environment.The aforementioned opportunities can be done still pursuing a low growth strategy. But, McDonalds still has opportunities for growth. Economic research suggest that Chinas middle class is on pace to grow from six percent of its cat valiumwealth to fifty percent of its population by 2020 (Business Insider, 2014). McDonalds has historically targeted middle class families, so there is plenty of opportunity for growth in China. If McDonalds is able to make a more localized menu and provide an atmosphere that can strike the right accord with the Chinese culture therefore McDonalds has the opportunity to flourish in China.Among McDonalds greatest threats are the growing segment of health conscience consumers and the strength of competition. The health conscience consumer, a growing segment of society, poses both a threat and opportunity for McDonalds. The change in customers habits represents new collects that must be met by McDonalds. In an attempt to cater to this market, McDonalds has added salads, fruit, and oatmeal to their menu. Additionally, they have eliminated trans-fat oil- a product blamed for the nations obesity. Other areas of concern are the threat posed by Starbucks, which plans to offer a breakfast and lunch menu. McDonalds strongest competitor remains Yum Brands- owner of popular fast food chains Taco Bell, Pizza Hut, KFC, and locomote Street see appendix 1.1. Other external threats include saturated market, macroeconomic factors.RecommendationsThe central strategic decision that needs to be addressed is whether McDonalds result commit to rebranding itself so that it is seen not only as an economical food destination, but as an appealing high quality one aswell. The social shift to a more health conscience consumer provides McDonalds such an opportunity. Alternatives to Strategic Decision MakingMcDonalds has three viable options for continued success. The first two, allow McDonalds to continue its low growth strategy. First, McDonalds can create and promote an attractive menu that that will grab the prudence of health conscience consumers. Second, it can focus on the stronghold its gained in the coffee space, as this could be an interesting new endeavor to bind (i.e. a new SBU). The third option would be to pursue a growth strategy for Asia, especially China. However, it must be noted that the growth strategy may burden the company with debt to pay for capital-intensive expenditures, but should it be successful McDonalds revenues and profits could reach new ceilings.It would behoove McDonalds to fill the need of the health conscience consumer by adopting and promoting a healthier menu. This can be done without abandoning their staples (e.g. Fries, Big Mac, Happy Meal, and Egg McMuffin). If McDonalds is able to meet the changes in customers needs and habits, there is no reason why they shouldnt continue to experience growth in sales. I believe that this is the dress hat option because it is not capital intensive, yet it could allow McDonalds access to a new segment of the market. Furthermore, McDonalds number of locations provides the health conscience consumer with convenience. execution Evaluation and ControlThe following steps are keys to a successful implementation of a strategic marketing plan 1. Who are we? Who are our customers? What do our customers want? 2. Set strategic marketing goals Assess internal strengths and weaknesses then compare your vision/mission to the reality of your external environment. Once you have identified the areas of need, choose specific goals to address those areas. 3. Establish strategic marketing activities/plan of actions Once specific goals have been set, identify various activities to utilize resources and choose the outdo course of action to implement.4. Establish timeline to execute goals and plan of actions By having a clear understanding of your strategic marketing goals then youcan establish common understanding of when such action plans can be reasonably accomplished. 5. Review and re-evaluate progress By consistently reviewing and re-evaluating progress in implementing or instituting plan of actions, you can take a proactive approach in making adjustments due to changing melody climate, environment, external threats and opportunities that may arise in everyday business decisions.ReferencesBrumley, James. (April 23, 2014). McDonalds Is About To Tap Into A Huge Growth Opportunity. Retrieved from http//www.businessinsider.com/mcdonalds-expanding-international-2014-4Horovitz, Bruce. (April 30, 2014). McDonalds sets 2020 sustainable goals. Retrieved from http//www.usatoday.com/story/money/business/2014/04/30/mcdonalds-sustainability-fast-food-social-responsibility-restaurants/8513245/Statista. (February, 2015). Retrieved from http//0-www.statista.com.leopac.ulv.edu/topics/1444/mcdonalds/