Change of Guard at McDonald's - Is Turnaround Possible?



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Code : COS0113

Year :
2015

Case Length : 11pages

Industry :Fast Food Industry

Organization:McDonald’s Corporation

Period : 2004-2015

Region :

Teaching Note: Available

Structured Assignment : Not Available

Countries : United States

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Background Note: MCD was founded in California in the year 1940 by the Donald brothers, Mac McDonald and Richard McDonald, as a drive-in restaurant. Hamburgers were the chief item on their menu. MCD gained a significant reputation for its drive-thru services, attracting a large number of people. In the year 1954, Ray Kroc (Kroc), a salesman of multi mixers who was fascinated by the growing demand for MCD, approached the Donald brothers seeking a franchising opportunity. The next year, on April 15, MCD’s first franchise restaurant was opened at Des Plaines, Illinois . Within a short span of time, MCD expanded quickly across the US, opening its 100th restaurant in the year 1959 and the 500th in 1963. In the year 1965, MCD went in for a public issue quoting its share price at $22.50 . It made its international debut in 1967 with the opening of its restaurants in Canada and Puerto Rico....

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McDonald’s under Thompson

Thompson took charge as CEO on July 2012, from Jim Skinner (Skinner) who had held the position for 8 years. Thompson started his career with MCD in the year 1990 as an electrical engineer. He held various positions in MCD’s business eco-system. He served as President and as Chief Operating Officer of MCD, US. He was responsible for defining MCD’s global strategy and managing operations. With this knowledge and experience he was expected to improve MCD’s business and to sustain its growth in the long run. At the time of taking charge, his top priorities included offering the right products, improving customer satisfaction, increasing accessibility of services through the digital platform, and store expansion.

McDonald’s under Easterbrook

Easterbrook joined MCD in the year 1993 as financial reporting manager. He held various operational and financial positions during his tenure at MCD. In the year 2001, he was promoted as Chief Operating Officer of MCD’s United Kingdom (MCDUK) division and in 2006, was promoted as its President. The MCDUK division was confronting various issues at the time Easterbrook took charge, “I think the business had been flatlining. It had very modest growth or declining [growth] across the previous four to five years” said Easterbrook in 2006 . The UK division had around 1,200 restaurants and had invested around £35 million in marketing activities

Challenges Ahead

Easterbrook took charge at a time when MCD was finding it a challenge to retain and rebrand its market position and products in its home country. He needed to address various operational and strategic issues confronting the company. He was successful in leading MCD’s UK division in his home country. Now, he had to face the challenge of redefining the market perception of MCD in its home country. At the same time, he needed to focus on socio-economic factors as well as the competition from the other players in the industry (Refer to Exhibit-IV US Fast Food Industry). However, Easterbrook seemed confident and passionate about achieving the objectives “My motivation at the moment is around knowing how it feels to turn a business around, I can’t wait to have that feeling again,” said Easterbrook . During the year 2015, MCD planned to reduce opening of new stores and capital investments to only $2 billion, considered to be the lowest in the last five years

Exhibit

Exhibit-I: Timeline of Events at McDonald’s

Exhibit-II:Top Brands in US Fast Food Industry (2013-2014)

Exhibit-III:Scores According to Statista Inc ACS Index

Exhibit-IV:US Fast Food Industry







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