The Problems at McDonald's - From the Inside | tutor2u Business

The Problems at McDonald's - From the Inside

This has to be one of the best business articles I've ever come across for A Level students. In a detailed investigation of the problems faced by McDonald's in the US, Bloomberg Business talks to a former McDonald's franchisee who by his own admission has "ketchup in his blood". What follows is a damning indictment of McDonald's business strategy in recent years and the effect it has had on the day-to-day operations of its franchisees. Absolute business gold dust.

There is so much students can draw from the article and then explore what might be done by McDonald's to turn things around.

McDonald's is a classic mass market business that is struggling to sustain its market position. It is now closing more stores than it opens each year in the US - the core market which still accounts for around a third of total revenues.

Why is McDonald's struggling?

Put simply - because it has lost its competitive advantage of scale and efficiency.

There is a telling quote midway through the article which sums up the issue well.

"They [McD's] don't seem to the best at anything any more"

In other words McDonald's has suffered a significant drop in competitiveness against faster-moving, more innovative competitors who have targeted and developed faster-growing segments of the fast food market.

The other theme that comes through strongly from the article is that of "strategic drift" - a concept that AQA A2 students will look at during their studies.

Another quote illustrates strategic drift nicely: commenting on McDonald's top management, the franchisee concludes:

"I don't think they know what to do"

Examples are provided of McDonald's doing too much. For example expanding the menu to over 100 items. The result? Significantly lower efficiency in the outlet and a deterioration in customer service (as evidenced by longer drive-thru waits and longer queues).

What does McDonald's want to be?

How can it focus and organise itself to regain competitive advantage?

I suspect the answer lies in a comment from the franchisee early in the article. McDonald's, he says, is best at making "burgers and fries".

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