McDonald's: Strategic Analysis of Competitive Decline and Recovery

This case study examines McDonald's strategic management in light of increasing competition and changing consumer preferences. It identifies trends in the external environment, such as the growing preference for healthy and socially conscious fast-casual restaurants among millennials, which negatively impacts McDonald's competitive advantage. The analysis reveals that McDonald's is not well-positioned against competitors like Burger King and Wendy in terms of food, service, and innovation. While McDonald's historically employed an integrated differentiation and low-cost strategy, recent disruptions have rendered it less effective. The company's global expansion strategy, based on transactional considerations, is also discussed. The case concludes by outlining strategic recommendations for CEO Easterbrook, including focusing on high-quality products, increasing restaurant presence in high-traffic areas, and adopting effective leadership strategies to address the company's decline. Ultimately, the organization needs to focus on turnaround plans by decreasing management layers, meeting customer needs, and changing internal structure to foster prompt decision-making and stronger accountability.

Running Head: MANAGEMENT 0
STRATEGIC MANAGEMENT

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1) The trends in McDonald external environment having great influence on company
capability to sustain competitive advantage include the millennial taking out
consumption at fast-casual restaurant that is healthy and fresh. In fast food industry,
the millennials are known to be as regular consumers that will go to one chain twice
or more and thus considered to be major demographic. Nevertheless, the company is
not able to do well in this demographic as of the new trend to be healthy where most
millennials are more tends towards to those restaurants who are embracing upon fresh
and healthy products. Moreover, the millennials are also like those restaurants that
determine social awareness.
Considering this demographic, McDonald reputation does not match and thus they
face issues to attract a number of millennials.
2) McDonald is not positioned well against its major competitors in relation to foods,
service, and innovation. Nevertheless, McDonald is known to be largest brand in the
industry, it has been following behind its competitors. In comparison with McDonald,
Burger King is doing very well by making its presence as world third largest in the
industry and with their usage of simplicity in encompassing the product lines. In terms
of innovation, Burger King only adds various sorts of bacon, sauces and cheese to the
core menu items. In addition, the company also was successful in offering and
attracting promotions to appeal customers without slowing down service time.
Wendy is also one of the competitors of McDonald which differentiates itself by
being “a cut above” its competitors. They deliver greater quality products that are
made fresh-to-order. The success of the company can be determined with their
approach of “barbell” considering pricing and products. Moreover, they also have a
much faster service time having an average of less than 1 minute in comparison with
McDonald i.e. 189.2 seconds.
3) Since 1940, the company has successfully incorporated an integrated differentiation
and low-cost business strategy that help them in their huge growth over long period.
McDonald drove down their costs by streamlining the process of food production,
delivering quick service and this provides value to the customers. However, much
extreme competition from rivals and recent social trends cause many disruptions in
their low-cost/differentiation strategy and thus these changes negatively impact
McDonald in the last couple of years.

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Considering another component of their business level strategy, the differentiation
McDonald has also proven to be ineffective while delivering value to new consumers.
Groups like millennials have strayed away from many fast food chains as they are
more focused on higher quality products. The company also tried to create value to
these groups by offering addition things like WI-FI, TV and greater seating facility
but fail in most of their cases. The company strategy has been ineffective as creating
value from differentiation comes from many things.
4) McDonald employed “Transactional Strategy” to expand their business in the global
markets. They take considerations of all aspects related to political, economic and
legal environments of different regions. Cost also varies for setting the business in
different locations (Bolton, Lemon & Verhoef, 2008). The company adopted effective
supply chain management to make the environment-friendly for the consumers. They
focus on standardised process and system while considering pricing strategy as most
important element for expanding the business in global markets.
5) McDonald CEO Easterbrook needs to follow such strategic plan, which looks more
appealing to the customers as they already, face decreases in the lists of consumers.
The CEO announces that the company is required to focus on producing high-quality
products and many of their rivals are getting more profitable and productive.
Easterbrook is also required to increase the number of restaurant in those areas where
people are mostly going out for dinner. This may considered to be the best strategy for
getting their customers back.
In order to make company progressive, they also need to adopt effective leadership
strategy as due to the ineffective management, the business already moved towards
downward stream.
6) With decline in sales, the organisation focusing on various changes with considering
turnaround plans to recover the business. Easterbrook, CEO of enterprise
recommended to decrease various sorts of layers of management presently exists and
focuses more on meeting customer needs and changing expectations.
In addition, there is also need to change internal structure and functioning of the
company. The organisation needs to take prompt decision making in align with
stronger accountability systems so as to provide good service (Gorla, Somers &

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Wong, 2010). To streamline the organisation structure, rearranging of franchising
target can also be done in result with efficient administration. All the roles are
symbiotically significant to each role in the strategic management of a corporation.
The most significant role Easterbrook will need to use is implementing the strategy;
he should be in a position where he will be able to join the enterprise capability and
culture that can work to get the best outcomes out of the strategy.

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References
Bolton, R. N., Lemon, K. N., & Verhoef, P. C. (2008). Expanding business-to-business
customer relationships: Modeling the customer's upgrade decision. Journal of
marketing, 72(1), 46-64.
Gorla, N., Somers, T. M., & Wong, B. (2010). Organizational impact of system quality,
information quality, and service quality. The Journal of Strategic Information
Systems, 19(3), 207-228.