Case Analysis of McDonald's

The purpose of this research was to perform a case analysis on the McDonald's Corporation, the fast food industry leader.1 The time frame for the case is early1983, with performance data presented through 1982. Research external to the case, however, extended the analysis in time through the fall of 1989. In the following section, the salient facts of the case are presented. This presentation is followed by an identification and diagnosis of the problem. The concluding section suggests a course of action for the company to follow in addressing the identified problem. In the development of the suggested course of action, events occurring subsequent to the time frame of the case were considered.

In early1983, McDonald's occupied its longstanding position as fast food industry leader, with little or no worry that any of its competitors could dislodge it from that position in the foreseeable future. All was not peaches and cream for the company, however, as a number of uncomfortable issues pricked

1H. Openshaw, and M. McKellin, "McDonald's Corp.," Value Line Investment Survey, 21 October 1989, 326.

2 at management's tendencies toward smugness and complacency. The most significant of these issues were as follows:

1. Competitor comparative advertising suggested that McDonald's cooking methods produced a less tasty product than the competition (Burger King), and that the company's meat was not as fresh as that

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concern to McDonald's in early1983 involved two major problem areas, each of which affected consumer behavior, and each of which concerned the approach of the company's top management to the job. The first of these two problem areas is the tenet of centralized control practiced at the company, while the second is the "we know best" attitude of top management. A major reason for Mcdonald's success is that it is a valuebased firm. The company's underlying values are clearly stated, and they are honored. McDonald's values are concerned with (1) public service, (2) community involvement, (3) __________ 3P. Kotler, Marketing Management, 6th ed. (Englewood Cliffs, New Jersey: PrenticeHall, Inc., 1987), 18. 4 providing a high value/price ratio in its products, and (4) fostering human resource development within its organization. The company is highly successful in adherring to and promoting its values. In this effort, a strong reliance is placed on centralized control. Centralized control is essential in the maintenance of standards such as cleanliness and product quality. It may prove to be stifling, however, when a rigid top management insists that all restaurants in the chain be absolutely identicalright down

Category: Business - C