McDonald’s Corporation and Its Critics 1973 – 2009

The McDonald’s Corporation had to deal with a lot of crises over the years, and, consequently, saw very different approaches to solving its issues from the different Chief Executive Officers. The CEOs had different management and leadership styles, different views of the business’s future, tried approaches, which affected the development of the company.

Ray Kroc

Ray Kroc was the first official CEO of the McDonald’s business, and he was the one to recognize the potential of the small enterprise started by the brothers Richard and Maurice McDonald. By studying their model of operations, he realized that the business had some of the major building blocks for developing a high competitive advantage (Hill & Jones, 2012, p. 86).

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The brothers achieved high efficiency of work by separating the process of food preparation and customer services into separate, simple, and easily repetitive tasks. This approach was innovative and allowed for efficient customer responsiveness, since the “countermen” could focus on customers only, and better quality of the product, because of the divided responsibilities. This drew Kroc to take the business into his ownership.

Next, he showed his strategic initiative by focusing on increasing the company’s competitive advantage. Competitive advantage is the “advantage over rivals achieved when a company’s profitability is greater than the average profitability of all firms in its industry” (Hill & Jones, 2012, p. 4).

He achieved this by introducing the innovative and revolutionary concept of uniformity into the business model. By developing shared standards for all the outlets in the franchise, he achieved higher levels of quality, service, and customer response, while also encouraging innovation by the franchisees. It was also during Kroc’s run as the CEO that the company introduced the now-famous Golden-Arches logo, which became a staple of the business.

Kroc’s actions as the owner of the business changed it from a self-service restaurant into an innovative, quickly growing franchise with all the foundation for more future development and expansion.

Fred Turner

Before becoming the next CEO, Fred Turner worked first as a manager of one of Fred Turner’s restaurants, and then was tasked with developing standard operating procedures for the franchise, and providing training to the staff. This has helped Turner to develop a strong understanding of the business’ strengths and weaknesses, and would help him to expand upon Kroc’s success and maximize the competitive advantage and profitability he achieved, and further improve the franchise.

Turner sought to further increase the efficiency of the business model and build value, by developing the value chain of the company. The value chain of the company is “is a chain of activities for transforming inputs into outputs valued by customers’ value” (Hill & Jones, 2012, p. 91).

He began improving it by transforming the process of restaurant management from an individual skill to science that could be easily replicated. He achieved this by composing a training manual that systematized the knowledge and routines needed to efficiently operate a McDonald’s outlet. He further expanded the idea by supervising the creating of the Hamburger University, which trained employees for the workplace and introducing tools for supervising the stores in the franchise and their adherence to the operating standards.

He also introduced the mascot of the franchise “Ronald McDonald”, who gave the company a definite competitive advantage in the children’s market. Finally, he began the process of decentralization of the organizational structure, which allowed the franchisees the freedom to adapt to local conditions, and led to rapid expansion.

Overall, under Turner’s guidance, the company fully defined all of their competitive advantages and solidified itself as the leader of the market.

Michael Quinlan

Michael Quinlan was the next CEO after Turner and was a cunning competitor. In his strategic initiative, he sought to find the best way to position his business against its rivals, and achieve effective competitive positioning. For this reason, he started a chain of strategic decisions that fit the modern description of the business-level strategy. Business-level strategy is a “plan of action that strategic managers adopt to use the company’s resources and distinctive competencies to gain a competitive advantage over its rivals in a market or industry” (Hill & Jones, 2012, p.118).

Under his management, the franchise launched the McDonald’s Service Enhancement Program, aimed at addressing customer needs and improving customer service. This was achieved by introducing a variety of service enhancement techniques, such as face-to-face orientation and compliant tracking systems, as well as rewards for employees who showed particularly effective customer care. Quinlan also attempted to increase profitability through global expansion (Hill & Jones, 2012, p. 148).

During his presidency, the company also massively expanded its international presence, making its first steps towards becoming a multinational enterprise. He also attempted to achieve better product differentiation, but his new products were not accepted by the market, which led to them eventually being recalled. Also, his focus on international expansion hurt the home-based franchises, resulting in dropping market share and dissatisfied employees and the local population.

While successful in many areas, Quinlan was unable to maintain the home-based success of his predecessors and would have benefited from Porter’s five forces analysis (Hill & Jones, 2012, p.57). His strategy didn’t account for the treatment of new entrants and of substitutes, as well as the bargaining power of customers. This allowed Burger King and Wendy to outpace McDonald’s.

Jack Greenberg

These developments led Quinlan to eventually step down in favor of Jack Greenberg. He was recruited into the position from outside of the firm and presented himself as an agent of change. His efforts centered on trying to achieve what his predecessor couldn’t: regain ground and achieve better competitive positioning. He attempted to increase sales through a new menu and through acquisitions of other brands, to move away from the focused nature of the franchise to multiple numbers of different brands. However, these efforts failed to yield positive financial results.

New problems developed as a result of deteriorating quality of service in McDonald’s restaurants, as well as rising concerns that the food served by the business could induce health issues. Under Greenberg, the company sought to silence these allegations or distance itself from them, resulting in a further uproar.

Jim Skinner

The presidency of Skinner marked the comeback of the company. Skinner was an insider of the company, and had a very developed understanding of the inner workings of the company on all levels, and knew the customer base. This has allowed him to determine the main weaknesses of the company and to develop the company’s “Plan to Win” initiative, which meant to improve quality and customer service and focus on developing the existing restaurants, rather than continuing expansion.

He also aimed at addressing the public concerns by introducing higher quality foods into the menu and aligning the business with the image of a balanced lifestyle. Besides improving the outlets’ operations he also successfully diversified into the premium coffee drink.

Skinner’s innovations were very successful, helping the business regain its lost positions in the home and global market, and grow despite the economic recession. His success can be attributed to his adherence to the customer feedback, extensive research conducted into their needs and wants under his command, and the efforts put into improving the quality of the existing business, rather than banking on global expansion.

Reference

Hill, C. & Jones, G. (2012). Essentials of strategic management (3rd ed.). Boston: Cengage Learning.

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