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2. McDonald’s McGraw-Hill/Irwin Strategic Management, 3/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. 1-3 McDonald’s Ice Breaker Question Do you like McDonald’s?  In your opinion, what changes have occurred at McDonald’s since the first time you went there?  Are these changes good?

4. 1-4 McDonald’s 1.What situation did Cantalupo inherit when he became CEO?

5. 1-5 McDonald’s 2.What sources of competitive advantage does McDonald’s have?  Its position by its value chain?

6. 1-6 McDonald’s 3.What steps did Cantalupo take to fix the problems that McDonald’s faced?

7. 1-7 Q1. Strategy Issues  For decades, McDonald’s had a clear strategy; it stumbled as it tried to reevaluate its position.  Growing interest in healthier foods (and the success of chains such as Panera Bread) caused it to rethink its strategy.  Its new healthier offerings did not succeed.  Cantalupo brought in from retirement when Greenberg did poorly.  Greenberg’s strategic missteps:  Acquiring Chipotle Mexican Grill, Boston Market, etc.  Rapid introduction of 40 new menu items  Poor franchisee relationship and turnover

8. 1-8 Q2: McDonald’s Value Chain Value Chain Activity Primary: Inbound logistics OperationsDrop in quality of food; slowdown in service; outlets not always clean; lack of consistency across chain Outbound logistics Marketing and salesPrice cuts have not increased profits: franchisee problems with $1 menu; new product introductions failed; serious product missteps (pizza, salad shaker) ServiceDecline in speed and quality of service; delays after implementing Greenberg’s kitchen changes

9. 1-9 Q2: McDonald’s Value Chain (contd.) Value Chain Activity Secondary: Procurement Technology development Expensive cooking process failed to get desired results; lack of success with new product introductions (McLean Deluxe, Arch Deluxe burgers) Human resource management Growth pressures leading to lower hiring standards; less training time; deterioration in service quality General administrationPoor franchisee relationship due to top-down decision making; franchisee margin declined from 15% to 4%; turnover in franchisees

10. 1-10 Q3. Cantalupo’s Steps  Management Infrastructure  New hires and promotions  Franchisee Relations  Listening to franchisees for new ideas (Irwin Kruger in New York City)  Adapting store front to meet different needs  Toughing up grading system for franchisees

11. 1-11 Q3. Cantalupo’s Steps (contd.)  Marketing  New product introductions (McGriddles breakfast sandwich)  New slogan (“I’m loving it”) promoted in MTV style  Relaunching McKids line (interactive videos and books) to keep brand prominent among kids