McDonald’s Great Britain – The Turnaround

McDonalds US – An active growth cycle. Sales in Great Britain did not show a

similar movement. Sales in 1,235 outlets had been sluggish for years.

Reasons being: New chains such as Yo! Sushi and

Nando’s chicken restaurants. Operators such as US based subway

restaurants. Starbucks Scare over mad cow disease Concerns about rising obesity.

McDonald’s Great Britain – The Turnaround

Lackluster performance in Great Britain affected European operations too.

European market is the second largest market after America, responsible for 30% of profits.

In 2005, European sales fell 0.7% while US sales grew 4.7%

Comments From Various News Sources

A 24-year old advertising sales representative in West London commented, ”the McDonalds near where I work is really smart, with internet access and everything, but I only go there as a last resort.”

“23 years ago or so, I had my first McDonalds. I was studying at Cambridge and a group of us drove to London to watch a football match. We stopped off at McDonalds in the Strands and I experienced the joy of Big Mac with fries, to go. It felt like the height of cool. Recently, I popped into the same outlet in Strand and clearly, its not just fashion that shifts; my taste buds have altered too. The burger bun tasted like cotton or wool, the beef in the burger patty lacked texture. It was manufactured, processed and quick.”

Some opine that like all empires, McDonalds has had its day and is now on the slippery slope of oblivion.

Everything has been hurled at McDonalds, from the mad cow disease to teenage girls suing the company for making them fat to a critical best selling book, Fast Food Nation

The hit film, super size me.

The documentary, McLibel

Steps Taken To Reverse The Trend

New offerings, including salads, yogurts and other health fare aimed at health conscious diners.

Opening of a test kitchen in Europe.

Face-lifting for many of its 6,200 European outlets.

Steps Taken To Reverse The Trend

Mcdonalds temporarily dropped its Golden Arches logo in the ads in UK in an attempt to change consumer’s perceptions and emphasize a new healthy menu in a 2 week campaign called “change” which carried the tag line: McDonalds but not as you know it.

Steps Taken To Reverse The Trend

Tray liners were used to convey dietary information along with an appeal from Ronald McDonald Children Charity (RMCC).

In April 2004, a Salads Plus Menu, was introduced in Britain

Steps Taken To Reverse The Trend

Aiming to boost its popularity among women, McDonalds launched an ad program in April 2005 featuring the performers destiny’s child. The campaign features its salads plus menu with addition of chicken salad with pasta. McDonalds has also replaced it dressing on salad plus which was criticized for having a fat content with lower calorie versions.

Steps Taken To Reverse The Trend

In response to the rise of coffee shops, McDonalds is serving coffee made from freshly grounded KENCO beans.

The response has been phenomenal, same goes for fruits and salads now offered. 10% of its profit mix is from salads.

Comments from C.E.O of McDonalds U.K.

We will upgrade McDonalds experience and give more value to the customers.

We need to get back to basics by giving the customers the choice they want and making sure service and cleanliness are great. I am finding out what's important and I am reacting to it.

I want McDonalds to be the U.K’s breakfast restaurant. Breakfast is a huge opportunity for us . We can use our drive thru to offer lattes and toasted bagels to people on their way to work.

Comments from C.E.O of McDonalds U.K.

We’re like a three legged stool, staff , suppliers and owner-operators.

By 2007, Light At The End Of The Tunnel

After five consecutive years of sales decline, in 2007 sales were up 4.6 % for the year with a substantial increase in the market share.

Steps taken by U.K management were beginning to pay off

Most salient events for this turnarounds were:

By 2007, Light At The End Of The Tunnel

Most salient events for this turnarounds were:

Menus were adjusted to include healthy “choices”.

New items, including lattes were introduced to appeal to a wider market.

New big mac launched to coincide with football season.

It is trying to become more locally relevant by offering diversity on the menu and has even opened a food factory in Munich dedicated to come up with new menus for 41 European countries.

By 2007, Light At The End Of The Tunnel

New designs for interiors and uniforms. A design studio on Paris was established to create nine different designs from which franchised restaurants could choose the design most appropriate for their location and clientele.

Closing of underperforming stores, new stores opened in upscale locations and old stores refurbished. Modern furniture and lighting with Wi-Fi access.

By 2007, Light At The End Of The Tunnel

Popular views of McDonalds paying bad wages to desperate teenagers led to the coining of the term “McJob” to describe someone working for a job with low pay and no future.

To counter this negative image, an advertising campaign by McDonalds argued that McJob is actually rather good and 80% of its managers began in the kitchens or serving counters and half of them now earn 40,000$ a year or more.

By 2007, Light At The End Of The Tunnel

The company was so worried about the use of “McJob” that it trademarked the word in 1992.

What looked like a disaster for McDonalds with bad publicity created by movies such as supersize me and fast food nation which attacked fast food restaurants and the worldwide concern about obesity may have proved the impetus for the rebirth for a lumbering superannuated giant that McDonald has became

List the problems from most to least critical, along with reasoning?

Sales decline, low earning per share and many restaurants were forced to be close – Lost profits, Poor competitive position.

Threats from competitors – Health issue. Lawsuits – Mad cow scare, unhealthy

food, obesity problem. Customers’ changing tastes and

preferences – Lost customers. Lack of innovation - Old menu.

List the problems from most to least critical, along with reasoning?

Inconsistent services and poor cleanliness-back to basics.

Poor publicity by movies & books – Company’s image.

Outdated interior & stores - modern outlets & menus by rivals.

Suggest the order in which issues should be addressed ?

The order in which issues should be addressed must be from least to most critical because it is ingenious to solve short run problems before the long run.

The short run problems require immediate actions.

These short run actions will help to cope with long run problems.

Suggest an approach to solving each problem?

Understanding and responding to customers’ changing tastes and preferences, Product innovation, adaptive menus, offering healthy food, proper advertisements, refurbishing interior and outlets should be done first

With these tactics we can attract customers.

Increased customers means higher sales

Higher sales leads to increased profits.

Increased profits results in strong market position which increases earnings per share.

Problems that still exists even after the pay off ?

It is seen to be “American brand” it should be “more European” and “locally relevant”.

Negative perceptions of quality and healthiness of fast food.

“Mcjob” – term for someone working for low pay in a job with no future.

What Actions should be taken?

Understand customers of each European division and serve their needs locally so that it should be accepted and appreciated by local European people.

Introducing healthy menus like salads, fruit meals, juices, yogurts, etc can polish its image about quality and unhealthiness.

It has trademarked the word “Mcjob” and also has started a campaign to transform its image.