McDonald's Strategies Regarding Competition

McDonald's has long been the world's largest fast food chain, and it has been the dominant company in the field in the United States for decades. However, this is a highly competitive business, and sales have been reduced for McDonald's even as they have increased for other chains such as Burger King, Taco Bell, and Wendy's. McDonald's sales have continued to increase in foreign markets, but growth was not sustained in the U.S. market and especially was not evident for individual stores. Some of these problems were brought on by McDonald's itself as it tried to open too many stores too close together. Other problems were in the nature of the business and a changing demographic among the customer base.

McDonald's sought new products and new promotions to attract customers. It tried to develop new products, with limited success. It tried to introduce an entire line it labeled "adult" and so damaged its traditional base while failing to attract new customers. It then tried a C-55 Promotion in which customers could purchase a Big Mac for 55 cents if they bought fries and a drink at the regular price. This effort also failed. It was opposed by franchisees who were losing money, and it was did not seem to attract any customers to the stores. This leaves the company uncertain as to what strategy to try next in its effort to improve growth.

The Big Mac promotion in 1996 was intended to increase business for the individual stores b

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e as customers developed fickle tastes and sought cheaper food through deep discounts. The proliferation of the microwave also meant that more people stayed home and made their own fast food. People were suddenly concerned about diet and about the ingestion of red meat, and this also changed their tastes and wooed them away from the traditional hamburger. McDonald's began to experience a slowdown and sought ways to turn this around, and one of the first ways they tried was to diversify the menu after years of keeping the menu essentially the same. The company also began tinkering with the entire recipe that had been used for its success--a small menu, speedy service, consistent quality, and good value. Early in the 1990s, the average McDonald's began to serve salad, chicken, decaf coffee, and sausage on a biscuit. The physical setting was made larger and more comfortable, with larger tabletops, movable chairs, and perhaps a diaperchanging station in the men's room. However, such innovations, coupled with the escalating expense of prime urban real estate, raised the average cost of opening a new McDonald's from $983,000 in 1985 to $1.4 million in 1990. The standard McDonald's menu then had 33 items, not counting various si

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