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Pamantasan ng Lungsod ng Maynila (University of the City of Manila) Intramuros, Manila

GRADUATE SCHOOL OF MANAGEMENT Master in Business Administration

Case Study of McDonaldss


Presented by: Raquedan, Arlene F. Abrigo, Glenn Joy Bautista, Elizabeth D. Abacan, Neil D. Udaundo, Edrei Y.

Point Of view Newly appointed CEO of McDonalds, Charles Bell


Time Frame April 15, 2004, after the death of James R. Cantalupo Executive Summary Since it was founded more than 50 years ago, McDonalds has been defining the fast food business. However, the company had been stumbling over the past decade due to its rapid expansion in the 1990s and the lack of adequate employee training. McDonalds was headed into serious trouble until the arrival of James Cantalupo, who turned around the company by introducing new additions in its menu and cutting back on its expansion plans. During his brief tenure, McDonalds recorded strong growth in sales over the last three quarters.

Statement of the Problem With the unexpected death of its present CEO, James Cantalupo, what is the best strategic move Charles Bell, the newly appointed CEO, should take to sustain its sales and profits growth? Statement of the Objective For McDonalds to achieve positive growth in sales and profits though another three quarters by achieving the following objectives: 1. Upgrade operations 2. Attract new customers and encourage existing customers to visit more often 3. Improve quality of service

Areas of Consideration Strengths: Worldwide recognition (largest chain of outlets spread around the globe) Prior to James Cantalupos death, his brief tenure has improved the companys lackluster performance as reflected in strong growth sales over the last three quarters. Big success of the McGriddles breakfast sandwich which has been bringing in about one million new customers every day. New CEO Bell shared Cantalupos focus on customer experience The Up and Out grading system will ensure all branches/franchisees will have the high-level service and quality

Focused on what it is known for which is the Burger Business, and improving its franchisees and while putting off expansion plans Energy and fresh ideas brought by younger executives Weaknesses: the quality of service has not made any progress compared to its rivals the steady decline in profit margins of McDonalds franchisees the failure of the non-burger chains acquired by Cantalupos predecessor

Dependence on cutting prices in order to drive up sales, which its franchisees are frustrated about Consistent failures with its new product introductions Public perception. McDonalds contributed to American societies obesity. Opportunities:

Opportunity to continue to build on sales by introducing another new set of product/s after success of the McGriddles sandwich
Opportunity to redesign its brand similar to what its other franchisees have done

Opportunity to develop fresher and healthier products in its menu Opportunity to take advantage changing customer habits

Threats: Competition has been coming from quick meals of all sorts that can be found in supermarkets, convenience stores and even vending machines. Increased competition with same burger brands like In-N-Out chain and YUM!

Public health crisis. With a growing of obesity cases among Americans, McdDonalds will continue to be overshadowed by its products offerings (supersized meal) Growing demand for healthier chains like Cosi and Zuizino

The risks involved in moving into the line of childrens clothing and toy

Alternative Courses of Action

ACA#1: Product development. To satisfy the preferences of consumers, McDonalds will introduce new and healthier products in its menu

ACA#2: Improvement of fast food operations/processes. Invest in the training of its workforce and necessary equipment upgrades to provide faster service/ better quality products ACA#3: Product diversification. Product lines would include childrens clothing, toys, interactive videos and books

ACA#1: Product development. To satisfy the preferences of consumers, McDonalds will introduce new and healthier products in its menu

Advantages Addresses the trend toward healthy eating New customer experience New products may mean new customers

Disadvantages May lose revenue from its other existing products New R & D Uncertainty of success depending on the customers response

ACA#2: Improvement of fast food operations/processes. Invest in the training of its workforce and necessary equipment upgrades to provide faster service/ better quality products Advantages Customer satisfaction in the longrun Will create brand loyalty due to efficient service experience Satisfied customers will eventually drive up sales/revenues Will have the chance to compete with its rivals, in terms of quality of service Will improve financial performance for the company and its existing franchises Disadvantages Rebuilding, renovation and reimaging requires capital cost Temporary shutdown of operations due to restructuring and training Time-consuming Dilemma for franchisees whether to undergo such costly upgrades

ACA#3: Product diversification. Product lines would include childrens clothing, toys, interactive videos and books

Advantages May create bigger appeal for kids Will make the brand more prominent May increase sales if successful

Disadvantages Requires royalty cost in making deals with partners relative to product lines. Uncertainty of customer response

Conclusion Objectives Increase in Sales/Profits Costs Customer Satisfaction Long-term benefits Total ACA# 1 2 3 2 2 9 ACA# 2 3 1 3 3 10 ACA# 3 1 2 1 1 5

3 2 1

Legend: -

Highly Favorable Moderately Favorable Least Favorable

Based from the comparative analysis of all the alternative courses of action, ACA# 2 is the best alternative.

Plan of Action

Activity

Person-In-Charge

Time Frame

1. Identify areas where improvements in processes and employee skills can be made a. b. c. Interview with managers Survey with customers Reverse engineer competitors processes

Charles Bell and Store Managers

6 months

2. Engage employees in various training activities / Purchase new equipment and install to stores

HR Head / Operations Head

5-7 months

3. Identify pilot locations to set-up new practices / equipment upgrades 4. Pilot run new practices / equipment Upgrades 5. Evaluate its contribution to quality of service and customer satisfaction 6. Set corrective actions for identified issues.

Operational Heads and Managers of Stores

1-2 months

Operational Heads and Managers of identified Pilot Stores Store Managers

6 months

3 months

Store Managers

3 months

Thank You