Q1. Briefly summarize the problem(s). (Assume we’ve read the case). Think about the problem from McDonald’s perspective.
Despite the fact that McDonald’s is one of the most famous companies in the world, the business model which was so critical to its massive success in the past is threatened. The critical success factors that led to its dominance are no longer present in the American fast food marketplace today. America is growing more diverse and consumers are demanding a wider variety of products, even from fast food restaurants. This includes not only the standard diversity of beef and chicken, but also ethnic diversity, as manifested in the dominance of franchises such as Chipotle. Yet the McDonald’s primary revenue remains derived from its burger offerings, chicken nuggets, and fries.
Even many of its direct competitors for its burgers are offering menu items of higher quality than McDonald’s. Fast casual restaurants are likewise encroaching upon its revenue, and again offer a more diverse array of food products than McDonald’s. Many of these products are also healthier than McDonald’s core offerings, and McDonald’s has yet to design a product that is as equally desirable as its burgers and fries, yet appeals to a healthier consumer. McDonald’s has been a company associated with greasy, fast, comfort food, and to shift its brand image from this means sacrificing the image which has been the core of its revenue base. On the other hand, the attractions of this type of food are no longer embraced by the majority of consumers.
Offering greater variety and healthier and fresher items is time-consuming. But while the newly desirable millennial target market may demand such qualities from the establishments they frequent, this means that McDonald’s may have to sacrifice speed and the low cost of its items to answer these demands. On the other hand, one of the core principles of any sound branding is to offer a unique value proposition to customers that competitors cannot easily replicate. McDonald’s has always stood by its value (as exemplified in its dollar menu) and speed.
Yet even in regards to speed, McDonald’s is lagging behind, as more and more companies offer online ordering, which means that...
McDonald’s also is not the fastest fast food company, in regards to its drive-through dining. McDonald’s cannot ignore these competitive threats, but on the other hand diluting its brand image by raising its prices and increasing its premium offerings or investing in products that may not sell well (like more salads and healthy burgers, which have traditionally not been its strength, based upon historical data). Healthier foods are often more costly to maintain (such as refrigerated salads) and diversity means buying more items, but less in bulk, which can make it more difficult to keep the company’ price point low. The central problem is how can McDonald’s become a 21st company, yet still retain the essential features that make it quintessentially McDonald’s.
Q2. Which trends in McDonald’s external environment (PESTEL) are likely to have the greatest impact on the company’s ability to sustain a competitive advantage?
Political
McDonald’s, like all chain restaurants, has found itself pressured by certain external political influences upon the food industry, including the demand to post calorie counts on its menus by the FDA (2019). This makes consumers more aware of the nutritional value of the food, its ingredients, and high calorie counts. Consumers have a greater ability to compare food based upon nutritional value.
Economic
Although the economy is recovering, people still desire value when they dine out. A core component of McDonald’s customers are still attracted by its value menu. On the other hand, when consumers are trying to save money, cutting out eating out is often one of their first priorities—although for patrons of its dollar menu, eating out might be cheaper than buying ingredients for a home-cooked meal.
Social
Dining out, remains an important trend, given that consumers are increasingly limited in terms of the time they have on their hands, due to both parents working and long commutes. Parents with children are often attracted to McDonald’s because of its ability to offer kid-pleasing meals palatable to parents as well. But concerns about nutrition are driving many parents…
