Example of a Good CSA: NFLC @McDonalds MGMT5800- Good CSA-Short 1 Challenge This report has been created for McDonald’s CEO Steve Easterbrook outlining a sustainable strategy for McDonald’s to fend off rivals and continue forward as a market leader in the quick service restaurant (QSR) industry. McDonald’s initially found success as a first mover, using proprietary methods to create high-quality, cheap burgers served lightning-quick. As more competitors entered and consumer preferences changed, McDonald’s prior leadership implemented reactive strategies, causing distinctive competencies to be eroded. McDonald’s challenge is to build an adaptive culture to execute both proactive initiatives and reactive adjustments to meet current and future market trends. Our strategy will diversify and grow McDonald’s for the period December 2017 to December 2020: international revenue will increase 10% yoy,2020, US revenue will increase 5%, net income will increase by 7%. N= 127 Alternative 1 – McDonald’s Food Court – Add McGreen′s A PESTEL analysis highlights the concern that numerous QSRs, including McDonald’s, have caused consumers to suffer from a series of health issues, such as obesity and diabetes. In order to alter the image of McDonald’s as being solely junk food in customers’ minds. McDonald’s will aunch an innovative greenfield venture, a health brand called McGreen’s. McGreen’s consists of nutritious, plant-based foods, such as plant-based meat burgers, vegan wings, and various salads. These plant-based items will complement McDonald’s existing core menu. McDonald’s traditional fast-food menu will be reduced. Fresh juices and smoothies will be added to the all-day breakfast adding a “green” option. This is a low-cost, differentiation strategy creates a McDonald’s Food Court composed of McCafe, McDonald’s using their distinctive competencies around low-cost and speedy orders. This will set up McDonald’s for sustainable success. The packaging and cups of McGreen’s will be made of recyclable materials There will be expansion internationally, allowing for to local preferences, e.g. rice or noodles in Asia. BAU initiatives to apply to all alternatives: maintain its all-day breakfast, reduce the size of menu but maintain some menu localisation, improve food quality, be more transparent about ingredients sourcing, continue to digitalise menus, improve the mobile app and become a data-driven company. Alternative 2 – Food Trucks McDonald’s can diversify its portfolio and engage with customers, using into its innovative roots and be a first mover with food trucks. Food trucks fit with McDonald’s strengths: inexpensive, quality food, with quick turnaround. This utilises their proven franchise model, it creates a fresh revenue stream while reducing typical expansion costs s franchises own and maintain the trucks. McDonald’s will promote the food trucks and benefit from access and flexibility. By locating food Example of a Good CSA: NFLC @McDonalds MGMT5800- Good CSA-Short 2 trucks in high-density areas, McDonald’s captures purchase at ideal times but avoids high rent and overhead costs prevalent in big cities stores. McDonald’s will use big data analyses to determine optimal location and hours, and the popularity of menu items. The smartphone app will be upgraded to include a live map of locations and operating hours. The food truck model can also be easily adapted for international consumer’s preferences. As for BAU, refer to alternative 1. Alternative 3 – Barbell Approach We recommend McDonald’s adopt a two-pronged barbell approach in order to reposition themselves as a low-cost provider of quality food and enter the growing fast casual, ‘healthy’ premium end of the market via an acquisition. McDonalds will use a data-driven culture to improve McDonald’s the supply end of the value chain to deliver produce and supplies quicker and cheaper. The minimisation of the menu and the automation of kitchen processes will yield massive time reductions. McDonalds will achieve a key success factor, getting quality orders out more quickly than competitors. RonaldX a data analysis play at HO will conduct research to deliver actionable insights to attract new and retain existing customers. Data input will arrive from purchase data, and customer surveys including online/mobile surveys. They will acquire a stand-alone fast casual brand focused on the premium, healthier end of the market – Sweetgreen. The addition of this “healthy” brand with juices, smoothies, salads, grain bowls and other millennial focused offerings will allow McDonald’s to reach a customer segment they have struggled to attract. Sweetgreen stores will follow the same franchising model as McDonald’s. The name will be changed to McD’s Sweetgreen. As for BAU, refer to alternative 1. N= 570 Solution – Alternative 3 A Porter’s five forces analysis reveals that: consumers are a moderate force; suppliers are a moderate force; competitors the strongest force; new entrants and substitutes are a weak forces. A SWOT analysis indicates that McDonalds’ biggest strengths are their supply chain, brand recognition and large retail presence. Retail presence is the greatest strength as size and international spread makes it extremely rare, valuable and non-substitutable. Their biggest weakness lies in their inability to improve the quality of their product without compromising efficiency or price. The increasing number of cash rich millennials who prefer to dine out, high rates of obesity, and negative media coverage regarding fast food pose a threats to the company. Our PESTEL analysis has identified important political and legal factors that impact McDonald’s such as the adoption of mandatory labelling of calorie counts on food items. Example of a Good CSA: NFLC @McDonalds MGMT5800- Good CSA-Short 3 NFLC recommends McDonald’s implement Alternative 3, a two-pronged approach to become an ambidextrous organization by simultaneously refocusing the core and acquiring a high-end, fast- casual food chain to meet the premium end of the market. As a low-cost provider of high quality food McDonald’s must address their supply chain and in-store production inefficiencies in order to simultaneously improve both quality and speed of delivery. They will apply TQM throughout the organization. They will invest in automating cooking processes to ensure high quality every single time. Supply chain efficiencies are gained by data analysis to segment the market by location (US and International) and seasonality. For freshness and cost, scheduling of ingredient shipments will be improved. RonaldX, will ensure McDonalds stays on the cutting edge of rapid revolutionary change to attract more targeted customers. Analysis will help create products/recipes that sell better and market segmentation will maximise sales and identify new initiatives. Further innovation in pre-ordering and drive-thru pick up will improve speed of delivery fulfilling an industry key success factor. This will occur globally. In addition to their refocusing, McDonalds also needs to benefit from the more premium fast casual segment, particularly millennials. They will position themselves as a provider of healthier food options through the acquisition of Sweetgreen. Sweetgreen is a small privately held chain, the acquisition cost will be low and swift. Sweetgreen is considered a company on the rise promoting a healthy lifestyle and eating habits by selling salads and grain bowls. McDonald’s can use this asset to reposition the company as McD’s Sweetgreen allowing the association of healthier food to correlate with McDonald’s. After the acquisition closes, rapid expansion of Sweetgreen to the end of 2018 in the USA via a franchising model will be followed by incrementally increasing international expansion. The first stores abroad will be in culturally similar markets such as in Europe in years 2019 and 2020. Based on the success of that, McDonald’s can then franchise it to all other countries it operates in, at the same time testing and localising menu options. As for BAU, refer to alternative 1. N=489 Execution October 2017 – March 2018 Evaluate Sweetgreen as an acquisition target (October 2017) Limit locally influenced offers in all international stores. Identify key supply chain inefficiencies – data analysis Research TQM methods Evaluate possible cooking and kitchen processes for automation Evaluate strategies for efficiently acquiring customer feedback Example of a Good CSA: NFLC @McDonalds MGMT5800- Good CSA-Short 4 Introduce digital ordering platform (March 2018) April 2018 – October 2018 Acquire Sweetgreen (April 2018) – Change brand name Phase out underperforming products Hire elite professionals for RonaldX Implement Customer surveys on Mobile App and on web services (June 2018) Implement TQM Integrate big data evaluation for forecasting and inventory in the US November 2018 – March 2019 RonaldX – testing of new ideas Conduct audit of product quality of goods and supplier network Sweetgreen franchise expansion in the USA market Hire media experts to promote Sweetgreen – US and repair reputational damage (‘obesity’ and fast food links) in US and International Integrate big data evaluation for forecasting and inventory in international markets April 2019 – April 2020 First performance evaluation of McD’s Sweetgreen in the US market (Year 1) Launch McD’s Sweetgreen in Canada and Mexico (April 2019) Launch ad campaign for McD’s Sweetgreen international promotion 1st Performance Evaluation of Supply Chain (April 2019) Appraise product quality of all goods and supplier network Launch McD’s Sweetgreen in Europe (November 2019) RonaldX top recommendations to the C suite May 2020- December 2020 Second performance evaluation of McD’s Sweetgreen (Year 2) 2nd Performance Evaluation of Supply Chain (April 2020) RonaldX top recommendation implemented Define clear strategy for the next three years Contingency plan: The most notable risk of this alternative would be a lower cost-benefit then planned for. In the event, the adopted strategy fails to meet the MoS (US Revneue $9.9b, International $22.4b, by December 2020, and net income $6.56b) McDonalds should strategically pivot and commence the implementation of alternative 2. N = 303 Tn = 1489
