The Mcdonald’s Case Strategies for Growth Essay Example

The Mcdonald’s Case: Strategies for Growth Essay THE MCDONALD’S CASE: STRATEGIES FOR GROWTH Lintje Siehoyono Lecturer, Hotel Management Program Faculty of Economics Petra Christian University Email: [emailprotected] petra. ac. id Le Hoang Giang Press officer in Canadian Consulate, entrepreneur, hospitality consultants in Ho Chi Minh City Email: [emailprotected] com Abstract: This paper presents a case study of international franchising, focusing on fast-food sector. McDonalds is one of the worlds premier entrepreneurial success stories. However, early in 2003, McDonald’s has announced a re-structure plan including cutting jobs, closing many restaurants and slowing down the expansion plan. What went wrong with McDonald’s and what can other international franchises learn from these mistakes are investigated. Result shows business environments, corporate level strategies, and operations are the key issues. Keywords: McDonald’s, international franchising, fast food. In a global scale, the fast-food industry is facing some serious threats. First, the fast-food market has reached the boiling point in most of the main market such as United States, Germany, and United Kingdom. The war price of fast-food giants is a clear example of market saturation, for example, Wendy’s chain has introduced a lowest ever price value meal: 9p. In terms of the product life cycle, quick service restaurants have reached maturity stage. Figure one illustrates the life cycle of quick service restaurant in United Kingdom. * Source: http://www. thetimes100. co. uk/ Figure 1. Quick Service Restaurant Product Life Cycle Second, rising incomes allow people more opportunities to tur n eating out into a more individualised experience rather than a routine quick fix. In United Kingdom, market research reveals that the total number of meals eaten in the non-quick service restaurant sector has risen while meals eaten in the Quick Service Restaurant sector have fallen in total The Times 100, 2003). In United States, the situation is quite similar. According to a new McKinsey study, the fast-food industry will grow by only 1% a year during the next eight yearsless than half the current rate. In contrast, full-service restaurants will see annual increased sales of 3. 2%. In sum, sit-down eateries will see $42 billion in new revenue over the next eight years compared with $13 billion for quickservice restaurants. The rationale behind McKinseys numbers: As they age, Americans tend to trade up from quick-service to full-service restaurants. The consulting firm said that, in 2000, Americans etween the ages of 18 and 24 ate at fast-food restaurants 79% of the time and at f ull-service restaurants 21% of the time. Meanwhile, Americans who were 65 and older went to quick-service restaurants only 57% of the time and to sit-down restaurants 43% of the time. Headed in their direction are the Americans in the boomer demographicages 50 to 64who ate at fast-food restaurants for 65% of their meals and at full-service restaurants for 35% (Figure 2). Third, convenience food is a substitute threat for fast-food sector. Packed-food industry (Kraft, Campbell, etc. ) is in head-to-head competition with ast-food industry for a bigger portion of food market. In addition, supermarkets, convenience stores, delis, and petrol stations offer more and more carry-out meals and re-heatable packaged foods. 74 Siehoyono, The Mcdonald’s Case: Strategies for Growth Jurusan Manajemen Perhotelan, Fakultas Ekonomi – Universitas Kristen Petra http://puslit. petra. ac. id/journals/perhotelan/ 75 * Source: http://www. businessweek. com/1998/10/b3568001. htm Figure 2. Wher e the United States Eats Out, 2000 Last but not least, the biggest threat appears to come from an increasing awareness among consumers of the benefits of healthy eating. We will write a custom essay sample on The Mcdonald’s Case: Strategies for Growth specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on The Mcdonald’s Case: Strategies for Growth specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on The Mcdonald’s Case: Strategies for Growth specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Nutrition and health studies and reports have heightened public concern over the fat and sodium content of fast foods. Moreover, a Euro monitor report published in November, found that a sandwich is viewed by the majority of consumers as an inherently healthier product than burgers, chicken, fish and chips, or many other fast-food sub-sectors. Consequently, in 1990, burger consumption dropped to 17 percent of all restaurant orders, from 19 percent in 1982 (Lewison, 1994). As the results from aforementioned unfavorable trends, sales growth has slowed in the fast-food market from 7. 1 percent in the 1970s to 4. percent in the 1980s to 3. 0 percent in 1990 (Lewison, 1994). McDonalds is one of the worlds premier entrepreneurial success stories in fast food industry. However, early in 2003, McDonald has announced a re-structure plan including cutting jobs, closing many restaurants and slowing down the expansion plan. From all phenomena mentioned above, particularly what has happened to Mc Donald’s, what went wrong with McDonald’s and what can other international franchises learn from these mistakes are investigated in this paper. MCDONALD’S HISTORY: GOLDEN ARCHES â€Å"Whatever people ate, McDonalds would be the nes to sell it† Ray Krocs: McDonald’s Founder McDonalds Corporation is the worlds largest chain of fast-food restaurants. Although McDonalds did not invent the hamburger or the fast-food restaurant, their name has become nearly synonymous with both. The history of McDonald’s began in 1940 when brothers Dick and Mac McDonald opened the first restaurant in San Bernardino, California. The McDonalds restaurant gained fame after 1948, when the brothers implemented their innovative Speedee Service System, an assemblyline hamburger construction and self-serve operation. In 1954, entrepreneur and milkshake-mixer alesman Ray Kroc became interested in the McDonalds restaurant when he learned of its extraordinary capacity. Upon seeing the restaurant in operation, he approached the McDonald brothers with a proposition to open new McDonalds restaurants, with himself as the first franchisee. Kroc worked hard to sell McDonalds. He even attempted to overcome on his wartime in connection with Walt Disney, in the failed hope of opening a McDonalds at the soon-to-be-opened Disneyland. Eventually he opened his first restaurant in Des Plaines, Illinois. It was an immediate success. Krocs new company was originally named McDonalds