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MGMT 301; Case Study Analysis McDonald’s Corporation-2017 Having reviewed. McDonald’s brief history under successive CEO’s, what might be most pertinent for the new CEO, Steve Easterbrook to keep in mind, as he seeks to turn around this corporate giant. Describe the Strategic issues that Mc Donald’s needs to address. Consider the perspectives of all stakeholders including the Customers, the Company and the Competition. What are McDonald’s Core Competencies? (Remember! Core Competencies are invisible, unique strengths developed by an organization over a long time that lie deep within the firm.) Support your answer by introducing data from the case that supports your point of view. What is McDonald’s business model? How does McDonald’s make money? What are its four primary revenue streams? Why does McDonald not own their stores like Starbucks or Chipotle, etc.? Which trends in McDonald’s external environment are likely to have the greatest impact on the company’s ability to sustain a competitive advantage? Considering Mc Donald’s competitors, what strategy should Easterbrook pursue to ensure McDonald’s future success? What current challenges must McDonald’s overcome to be successful in their target markets? What should they do? In preparing your answer, also consider what they should not do. Please remember to introduce at least six course concepts throughout your analysis to help support your analysis. For the exclusive use of M. Alharbi, 2019. MH0037 1 2 5 9420477 R EV: September 14, 2015 FRA NK T. R O THA E RME L MARNE L. A RTHAU D- DAY McDonald’s Corporation SEPTEMBER 1, 2015. Steve Easterbrook walked into his office in McDonald’s corporate headquarters. He had finally achieved his dream of becoming chief executive officer (CEO) at a major Fortune 500 company, but somehow he had expected it to feel better than this. Don Thompson, the former CEO who had recently “retired” had not been just his boss, but his friend. They had both started their careers at McDonald’s early in the 1990s and had climbed the corporate ladder together. He had not taken personal joy in seeing either his friend or his company fail. Rather, Easterbrook had fantasized about inheriting the company at its peak and taking it to new heights—not finding the corporate giant on its knees in desperate need of a way to get back up. The company’s troubles had snowballed quickly. In 2011, McDonald’s had outperformed nearly all of its competitors while riding the recovery from a deep economic recession. In fact, McDonald’s was the number-one performing stock in the Dow 30 with a 34.7 percent total shareholder return.1 But in 2012, McDonald’s dropped to number 30 in the Dow 30 with a –10.75 percent return. The company went from first to last in 12 brief months (see Exhibits 1 and 2). In October 2012, McDonald’s sales growth dropped by 1.8 percent, the first monthly decline since 2003.2 Annual system-wide sales growth in 2012 barely met the minimum 3 percent goal, while operating income growth was just 1 percent (compared to a goal of 6 to 7 percent).3 Sales continued to decline over the next two years. Net income in 2014 fell almost 15 percent to $4.76 billion, representing the company’s first annual drop in “likefor-like” sales since 2002.4 By early 2015, McDonald’s shares had dropped below their 2012 price point, while the overall market was up by 50 percent.5 Things were not much better overseas. The weak global economy was a further drain on domestic sales.6 When the dollar was relatively weak, it had been an asset for the company to generate almost 70 percent of its revenues from other countries, but the dollar’s current strength made McDonald’s trademark products even more expensive for its international consumers.7 Asian sales were still recovering from a 2014 scandal, where a major Chinese meat supplier had been accused of selling expired meat to McDonald’s restaurants. European sales were also soft due to political problems in Russia. Several McDonald’s outlets had “failed” inspection and been shut down in retaliation for U.S. sanctions against the Russian invasion of Ukraine.8 Thompson had already tried revitalizing the menu (e.g., the McWrap), eliminating poorly selling items, increasing customization, and restructuring U.S. operations to give local franchises greater autonomy. He had named Deborah Wahl the new chief marketing officer in March 2014 and brought Mike Andres in as president of the U.S. division in October that same year.9 Yet customers still seemed Professors Frank T. Rothaermel and Marne L. Arthaud-Day prepared this case from public sources. The authors are indebted to Research Associate Justin Collins for contributions to an earlier version of this case and to Srikanth Prabhu for research assistance. This case is developed for the purpose of class discussion. It is not intended to be used for any kind of endorsement, source of data, or depiction of efficient or inefficient management. All opinions expressed, and all errors and omissions, are entirely the authors’. © by Rothaermel and Arthaud-Day, 2015. This document is authorized for use only by Meshal Alharbi in Management Fall '19 taught by MOLLY BURKE, Dominican University - Illinois from Aug 2019 to Jan 2020. For the exclusive use of M. Alharbi, 2019. McDonald’s Corporation confused by the complex menu offerings, distrustful of the quality of ingredients, frustrated at how long it took to get their food, and angry at the company’s “exploitative” labor policies.