McDonald’s case analysis
When McDonalds brothers first started in the year 1941 with their unique and attractive idea of the drive in fast foods restaurant it appealed for the Americans and was successful, and McDonalds was said to be the first of their kind in the fast food industry which gave a great opportunity to entering the market and shortly after that dominating it for years, and according to the 5 forces of porter they almost had no barriers for entry and they were also able to crush the rivalry "old classical eat-in- restaurants" with their unique idea of foods that were of a good quality, quickly assembled and served, and at the same time affordable to customers.
After the idea appealed to many local business men, McDonalds started franchising the restaurant and that was an opportunity for the business to grow even bigger, and at the year 1952 the first franchise was opened in Arizona but later after that, the franchisees weren't able to keep up with standardization of the restaurant's cleanness as well as the operations and assembly lines which created a very lethal internal threat at that time.
After Ray Kroc joined McDonalds and became the national franchise agent he eventually bought out McDonalds and became the chairman and CEO and called it the McDonalds corporation, he knew that standardization was a success factor for McDonalds so he created the Hamburger University and came up with the a philosophy of QSCV that the entire chain had to maintain, and later after that the skyrocketing profits opened up new opportunities for the corporation to invest largely in real estate, by leasing potential stores and then subleasing it to franchisees and that turned out to be great idea, with a lot of revenue gain.
For the McDonalds business everything was good until the 1990, then they started facing problems and their sales started to drop, many threats like increased preference of buying from competition (Wendy's, Burger King ...etc) which according to the 5 forces of porter increased the customer's power and made it easy for them to start switching to substitutes in the market, also another threat that McDonalds faced is that the people became more health aware and didn’t want to eat red meet and fried foods, that made them prefer eating home or buying fast microwave heated meals. To add to all that the international sales didn’t make it any easier on McDonalds, they were faced with a hostile global environment, McDonalds suffered huge losses because of the out burst of mad cow disease, and the Asian financial crisis "made people more price sensitive".
From 1987 to 1994 the number of foreign markets increased from 2000 to 4700, and the international operations made 45% of the operating income, the good numbers made the management live in ignorance of what is really going on in the US market and even international markets, that ignorance later on created a lethal threat within the cores of McDonalds corporations giving strength to competitors to improve on the menu and services, the increased number of competitors increased the threat of substitutes and forced McDonalds to switch to cheaper prices and the rivalry have had to a far extend weakened McDonalds brand image.
Another threat McDonalds were faced with is revenue cannibalizing between stores, that’s due to the continuous store opening, although McDonalds came up with a plan that no new franchisee would open in a area were McDonald is already existing, so that the area in only for the old franchisee still store cannibalizing affect the revenues, our opinion that there was a lack of planning and strategizing expertise in the corporation, instead of distributing the stores in areas accordingly and trying to cover as much as possible of the market they would opened 2 or 3 restaurants in the same neighborhood, and leaving other areas not covered which also opened another window for the competitors to increase their market share in those...
References: • http://www.emeraldinsight.com/Insight/menuNavigation.do?hdAction=InsightHome (journals)
• Consumer Behavior 10th edition
• Operational Management 13th edition by Shiffer
Please join StudyMode to read the full document