MCDONALDS SUCCESS

McDonalds Success

McDonalds Success

Company Overview

McDonald's has built itself into the number one food service retailer in the world with over 30,000 restaurants in 119 countries; it serves over 47 million customers daily. The company's mission is to leverage the unique talents, strengths, and assets of our diversity in order to be the world's best quick-service restaurant experience (McDonalds.com, 2004). Founded in 1937 by brothers Richard and Maurice McDonald, the company began as a simple food processing and assembly line at a small drive-in restaurant; business expanded slowly. Noticing an opportunity, salesman Ray Kroc negotiated a franchise deal and eventually bought the brothers out in 1967. The company has enjoyed a long run of success in its over 40 years in business but encountered a rough stretch over the past 18 months, reporting its first ever quarterly loss of $343.8m in January 2003.

In January 2003 McDonald's, the world's largest fast food chain, posted its first ever quarterly loss of $343.8 million. The loss was attributed to increased competition, poor management and marketing, and a failure to respond to changing customer needs and to requests from franchisees to alter aspects of McDonald's menu and operating practices. In the midst of these challenges, CEO Jack Greenberg stepped down and James Cantalupo came out of retirement in January 2003 to take the reigns of the foundering Fortune 500 Company. Cantalupo wasted little time in admitting that the company was "in serious need of improvement." Cantalupo immediately announced an aggressive, broad-ranging turnaround plan (called McDonald's Plan to Win) designed to refocus McDonald's on its mission by increasing focus on internal operations, slowing store expansion (opening 640 fewer units than in 2002), enhancing the relevancy of McDonald's to its customers, and making the consumer the new boss at McDonald's.

McDonald's has come along way from its beginnings as a 1948 drive-in opened by Dick and Maurice "Mac" McDonald in San Bernardino, California. The initial changes were introduced by Ray Kroc, the pioneering entrepreneurial founder of McDonald's who conceived and implemented many of the strategic and operating elements that transformed McDonald's into one of the most successful franchising models in history.

By 2002 McDonald's had a 33% share of U.S. fast food market with 13,491 units in the United States (second behind Subway) and 16,534 outlets in 120 countries. However, sales growth was slowing and franchisees were increasingly unhappy. The company's problems were due partly to mounting competition (including price wars and other market tactics) initiated by fast-food rivals dissatisfied with their market share and partly to changes in consumer eating preferences. One of McDonald's strategic responses under CEO Jack Greenberg was to acquire other Quick Service Restaurants (QSRs), including Boston Market, Chipotle, Donato's Pizzeria, Pret a Manger, and Fazoli's. Greenberg also attempted to fuel growth in McDonald's core business by continued store expansion efforts, refurbishing older stores, and introducing new methods to speed service delivery. However, there was accumulating evidence that McDonald's management was not attuned to fixing the right things. For example, while the company still espoused Kroc's ...