McDonalds golden principles for success

Essay by Rumaisa June 2005

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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 McDon¬ald'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...