Bryson Frazier
McDonalds Corp.
BUS 453
Mc Donalds Corporation
During the late 1990s and the beginning of the new millennium, McDonalds found itself in
a regression, the first one since its conception in 1955. The Gold Arches werent shining
like they once did, however there are in the process of being polished, figuratively
speaking. In 2003 McDonalds ranked eighth out of 100 brands in the Global Brand
Scoreboard assembled by Interbrand Corporation and Business Week, proving that
McDonalds is one of the worlds best known and most valuable brands. However, that
wasnt the case during 2001 and 2002.
McDonalds prided itself on its consistency in service, atmosphere, product quality, and
restaurant experience. Every McDonalds restaurant was consistently the same. However,
that all changed when McDonalds finished last in a national survey among 50,000 frequent
eaters. The company that was once known for it good service and product quality, was
becoming synonymous with poor service and product quality. In 2003 the company
reported its first quarterly loss since it went public in 1965.
What went wrong for McDonalds? First, several new product launches didnt catch on with
consumers. Second, McDonalds failed to improve operations, such as fast wait times for
food, and custom orders. Third, internal conflict; franchise operators blamed corporate
executives and corporate executives blamed the franchise operators for the problems the
company was experiencing.
External Analysis
McDonalds has been the leader in the fast-food industry for decades, literally changing the
way Americans ate. Like every other business, McDonalds is subject to opportunities and
threats in their specific and general environmental sectors. Lets take a look at the
opportunities and threats effecting the specific and general environment:
Opportunities: specific environment
Consumer tastes and trends are changing and McDonalds need to be able to adapt to them.
There is a huge opportunity to develop new products that appeal to the health conscious
customer. To be more specific, McDonalds needs to develop new products that appeal to
young, health conscious women. So many women were taking their children to
McDonalds and buying their kids food but not buying any for themselves, because of the
lack of healthy choices on the menu. This is a huge opportunity that McDonalds hasnt
been capitalizing on.
Because consumer tastes are changing there is an opportunity to develop new product lines
that appeal to the new tastes of consumers. McDonaldss last “big hit” item was when it
developed Chicken McNuggets 1983. Just like how they werent capitalizing on the
opportunity to develop healthier products, they werent capitalizing on a substantial
opportunity to develop new products that satisfied consumer tastes.
McDonalds also has an opportunity to exploit economies of scale for their benefit. Since
McDonalds has over 30,000 stores in over 100 countries, economies of scale should be
exploited. For example, increasing levels of activity in their functional areas can lead to
cost saving because fixed costs are spread out over a larger volume, driving the cost per
unit (hamburger, Big Mac, etc) down.
Bargaining power of buyers. Since consumers only buy small amounts of food, and prices
between competitors are similar, and products between competitors are differentiated,
buyers (customers) have little bargaining power, thus creating an opportunity. Also, since
the products McDonalds sells arent a significant part of consumer costs, it allows
McDonalds to decide on the best price for their products.
Opportunities: general environment
The fast-food industry has a lot of growing potential because an increasing portion of
consumer dollars are being spent on eating-out. According to the Department of
Agriculture, consumption of food away from home accounted for 46.1% of total food
expenditures in 2002. Because there is room for so much growth within the industry,
McDonalds should focus on increasing its market share.
Demographics/ Sociocultural. McDonalds spent so much time, effort, and money on
appealing to children that they neglected teens, young adults, and adults. This was a huge
strategic mistake on McDonalds part, not to mention a missed opportunity. They were
successful in appealing to kids, all kids love McDonalds, but as people get older a cheap
Disney toy and a happy meal wont satisfy consumer trends and tastes. There is a huge
market that McDonalds needs to attempt to appeal to; if they do it will result in a higher
market share, and increased sales/profit.
Technological. As the years go by society witnesses many technological advances,
including the fast food industry. McDonalds should consider looking into new
technologies that could improve their product quality and service. For example,
HyperActive Technologies Inc, a Pittsburgh based company, “is testing technology at area
fast-food restaurants designed to give kitchen workers a good indication of what customers
want before the hungry souls even get close enough to place an order.” (Site). The new
system tell workers when they are about to get buys and even how much food to put on the
grill. The system uses cameras to monitor traffic going into a restaurants drive through
and parking lot. Right now the system is all about volume: if a minivan pulls into a drive
through the system will tell employees that there is probably going to be more that one
person wanting food. HyperActive expects to develop software in the next few years that
will be able to decipher what type of vehicle is pulling in and even if that person would be
more inclined to order a burger or a chicken sandwhich. Having a system like this would
cut down on waste and costs, and increase drive-through
efficiency and customer satisfaction.
Threats: specific environment
Consumer tastes and trends are an opportunity, but they are also a threat. A trend affecting
