The failures of McDonald’s were concluded as 4 main reasons, consumer dissatisfaction, over expansion, inaccurate marketing strategy and poor internal control. Examples are showed as below: i) McDonald’s failed to fulfill the expectation of customers. It is claimed that their services are rude, slow and inaccurate. Low satisfaction of customers caused the sales of McDonald to keep flat. ii) Keen competition in quick-service restaurant industry, the industry was only projected to expand in line with inflation but McDonald’s were opening restaurants at a rate higher than comparable companies, which opened 1130 restaurants per year.Especially, McDonalds’ expand too fast in emerging countries like Russian and China, and they serves in oil station, airlines and hospital.
They made a very ambiguous strategy in the consideration of place for running business. iv) Gimmick of McDonald’s Slogan was no more impressive. The slogan at the early Millennium was “We Love to see you Smile” This gives no buzz from the customers. What levers did McDonald’s top management pull to restore shareholder value? In 2003, McDonald’s top management had made respond to the declining trend of their company.CEO, Mr Skinner, has urged to run the revitalization “Plan to Win”. The focus of the plan is “on being better, not just bigger”, and he advocated that McDonald’s should reinforce their core value QSC&V They had also setup a clear financial goal to their restaurants individually.
They setup the sales grow target, margin improvement target, net income target for their restaurants. Skinner has decided to stop expansion of their numbers of restaurants, and they focus on improving the current restaurants.This implied that the top management would like to increase the market shares per point of distribution point rather than expand the distribution points. This direction can lower the capital expenditure for McDonald’s to relieve the pressure of short-term loan. Top management has also feedback to the expectation to customers.
They had setup the double drive-through to speed up their services and delivery for customers. The interior design of McDonald’s has also been changed to be more comfortable and stylish. This shows a well and right defined mission “Become our Customer’s favorite place and way to eat”.In addition, McDonald’s has promoted their new menu to customers with a more healthy food These foods are also promoted with celebrity likes Bob Greene, Oprah Winfrey’s personal trainer. Top management would like to rise slightly of the positioning of the product of McDonald’s.
They give message to the customers that they are providing the “premium product” to customers. Top management has also reinforced to their employee quality. Top management has introduced the “restaurant operations improvement process” ROIP globally in 2004. The franchisees/owners would share their experience with their workers.This helps the owner to share the McDonald’s Value from the top down manner. This helps the employees to understand the core beliefs of McDonald’s.
Furthermore, outstanding managers would be invited to participate the “Peak Experience” program in Las Vegas, which gives the reward to those managers with outstanding performance. This program helps to improve the incentive for those middle managements. How integral was marketing to McDonald’s turnaround? Marketing is one of the successful factors that pull McDonalds’ to global in the past 50 years.Top management has invited a new global chief marketing officer, Larry Light to reinvent the marketing and advertising part of McDonalds’. Larry has immediately started a global campaign to make the re-positioning of their brand. They used concept “I’m loving it” as their new core theme.
This theme has features a series of i-stores as their messages to their customers. This helps their customers to understand that McDonald’s is willing to change for customers’ side. This “i-concept” could also help McDonalds’ to reimage her brand and reposition her products.McDonalds’ also used the celebrity increase the buzz of their “i-concept” by using the up and coming pop icon “Justin Timberlake” and “Beyonce”. The power of this celebrity gives energy to McDonalds product once again.
McDonald’s successfully used the celebrity in different countries. The current example in HK is using the coffee expert actor Moses Chan for promoting their coffee in Mccafe. This help to reposition the coffee in Mccafe as a premium beverage. This enable McDonalds’ to set a higher price for their coffee.
Besides, the “i-concept”, Light introduced a “Forever young” concept to their restaurants.This concept is regarded as an internal marketing for her employee. These two concepts drive McDonalds’ employee to follow the reformation of their company. The marketing part not only effectively help McDonalds’ to improve the relation with customer, it also helps to remind the core value of McDonalds’ to their employee. The wisely use of 5P concepts had helped McDonalds’ back to right track after the chaos in 2003. How well accepted were McDonald’s marketing efforts internally? McDonald’s internal marketing efforts have been well accepted.
For example, the “restaurant operations improvement process” (ROIP) program launched in 2002 was successful. The franchisees that had a positive result under ROIP were invited to share experience with colleagues about their success. This top-down communication is a way of internal marketing, which enable the middle managers to share their experiences, objectives and core values with operators. This not only helps the operators to accept the suggestion from middle management, but also minimize the friction of running the “Plan to Win” Program, which raise the operational efficiency.
The speed of serving in restaurant and the hygiene environment of McDonalds’ are proved to be improved after this program. Besides the ROIP program, other internal marketing campaigns including “i-stories” and “Forever Young” are also well accepted. Cantalupo believe this “i-concept” campaign can motivate their employees. This help to bring the whole group of employee to feel that their lives are relevant, and they are connected in the same value. This is an effective internal marketing strategy to setup a core value for their employees.
A structural change in McDonalds’ has showed they put internal marketing more important than before. A new Global Marketing Team was set up to serve as an in-house consulting group that could advise each market. This helps centralizing the comments and make decision more efficiently. The right strategy and outstanding execution under the CEO Skinners from 2004, has helped McDonalds’ to back on track. It has delivered an annual growth rate of 5% with revenue topping $24 billion in 2010.
And the stock price has climbed from $13 in 2003 to above $98 in 2012.
