McMcDonald’s Great Britain – Turn Around New menus, improve services, advertising, opening new stores, closing others, and refurbishing others have propelled McDonald’s U. S. back into an active growth cycle after experiencing a slack period in 2003 and 2004 – U. S. sales have climbed for 40 straight months. Sales in Great Britain have not shown a similar movement. Sales at McDonald’s 1,235 British outlets have been slughish for years, and the reasons are numerous. New chain such as Yo! Sushi and Nando’s Chicken Restaurants, which features spicy Portuguese chicken, have outpaced McDonald’s.
Operators such as U. S. -based Subway Restaurant are pulling in customers with fresh salads and sandwiches on foccacia bread. Starbucks has made McDonald’s outlets look sterile and out-of-date. And the 2001 scare over mad cow disease, along with concerns about rising obesity, make things worse. In part because of lackluster performance in Great Britain, McDonald’s European operations- the second biggest market after America, responsible for about 30 percent of profits, have suffered. In 2005, European sales fell 0. 7 percent, while U. S. sales grew 4. 7 percent.
Further, same-store sales for European restaurants open more than a year registeres a 3 percent decline. To give you a flavor of what McDonald’s U. K. faces, here are observations about McDonald’s Britain. COMMENTS FROM VARIOUS NEWS SOURCES * A 24-year-old advertising sales representative in West London commented, “The McDonald’s where I work is really smart, with Internet access and everything, but I only go in there as a last resort. ” * “Twenty-three years ago, or thereabouts, I had my first McDonald’s. I was studying at Cambridge and a group of us drove to London to watch a football match.
We stopped off at McDonald’s in the Strand and I experienced the joys of a Big Mac with fries, to go. It felt like the height of cool. I was from Cumbria, and McDonald’s, which came to this country only in 1974, hadn’t yet penetrated that far north. My friends were Londoners, hip, dead trendy. They had cars at university, they drove to see the capital’s smarter teams, and they ate at McDonald’s. “Recently, I popped into the same outlet in Strand and clearly, it’s not just fashion that shifts: my taste buds have altered too- either that or after two or three pints at a football ground, anything seems delicious.
Eschewing the option- as most of its customers do- to go healthly and order a salad, I went for a traditional double cheeseburger. The burger bun tasted like cottonwood, the beef in the burger patty lacked texture. It was manufactured, processed and quick. ” * Some opine that like all empires, McDonald’s has had its day and is now on the slippery slope to oblivion. McDonald’s could go the way of Howard Johnson’s, another restaurant chain that once covered America but now has all but disappeared. Everything has been hurled at the company, from fears about contracting mad cow desease to two teenage girls suing the company for making them fat to a savagely critical best-selling book, Fast Food Nation (which revealed, among other things, that the beef in McDonald’s patties can come from up to 100 different cows) and a hit film, Super Size Me (whose maker, Morgan Spurlock, did nothing except eat at McDonald’s for a month with disastrous effects to his health, turning his liver into something approaching pate).
The result: profits fell, earning per share were down, and the firm famous for its expansion was forced to close restaurants. * A recently released documentary, called McLibel, reopened old wounds for McDonald’s. McLibel recounts the story behind a decade-long court battle- the longest in British history- that pitted McDonald’s against two Greenpeace activists whom the company accused of libel. McDonald’s sued (1994) five London-based Greenpeace activists after they distributed leaflets that asked, “What’s Wrong with McDonald’s? Three pulled out but two fought for the chain. After initially being ordered to pay damages, the two appealed twice, then took their complaint to the U. K. ’s Court of Human Rights, claiming that a lack of access to legal aid hurt their right to a fair trail. In February the court sided with the activists, giving the government three months to appeal.
At the time of the decision McDonald’s said the world has moved on since then and so has McDonald’s. * There are positives for McDonald’s U. K. For all its perceived problems, McDonald’s profits are ? 18 million a year. Nearly 3 million people visit its British branches every day and among teenagers, McDonald’s is still the number one food brand. * The company monitors news articles and television references to McDonald’s in Britain, rating them “negative,” “neutral,” or “positive. ” In 2004, most reports were negative, but in 2005 opinion had moved to pretty much neutral ground. STEPS TAKEN TO REVERSE THE TREND * McDonald’s has rolled out new offerings, including salads, yogurt, and other fare aimed at health-conscious diners.
To develop new recipes, the company has opened a test kitchen in Europe. It’s also planning facelifts for many of its 6,200 European outlets. * McDonald’s temporarily dropped its globally recognized Golden Arches logo in ads in the U. K. in an attempt to change customers’ perception and emphasize a new “healthy menu. ” The two-week campaign is called “Change” and carries the tag line “McDonald’s—But not as you know it. ” The ads show healthy meals such as fruits and salads. * The Bid Tasty, a burger on an oversize bun introduced last year, is selling well, the company says. April 2004 a Salads Plus menu, which features four varieties of main-course salads topped with warm chicken, a premium chicken sandwich, and a fruit-and-yogurt dessert were introduced in Britain. * In response to demands for more nutritional information on McDonald’s menu, tray liners were used to convey dietery informstion. On the top of tray liners is an appeal for RMCC (Ronald McDonald’s Children’s Charity) and on the flip side is a detailed breakdown of nutritional and alergy information.
Every item available in a McDonald’s is listed, from the obvious- a Big Mac at 493 calories, 22. grams of fat, and 5. 9 grams of fiber- to the less obvious- mineral water comprises no nuts, no seafood, no gluten, and no egg and is suitable for vegetarians. No other restaurant chain goes in for this analytical overload. One observer’s reaction to the nutritional details was less then positive. “The amount of detail is mind-boggling, and disturbing. You come in for fast burger and fries, knowing they aren’t the healthiest foods on the planet, and you are assailed with battery of facts and figures that merely confirm what you already know. * McDonald’s feels itself under siege from diet campaigners and food experts as well as competitors pushing “healthy” salads and even bread-free sandwiches. To some it seems that McDonald’s has adopted a defense posture even though it is still the second best known brand in the world, behind Coca-Cola. * Aiming to boost its popularity among women, McDonald’s launched an ad program (April 2005) featuring performers Destiny’s Child. The campaign features its salad with pasta, which includes roast peppers, basil, and cherry tomatoes.
A low-fat, grilled-chicken Caesar flatbread will replace the grilled chicken flatbread item launched six months earlier. The company has also replaced its dressing on its Salads Plus, which had been critized for its fat content, with lower-calorie, lower-fat version. * In response to the rise of coffee shops, McDonald’s is serving coffee made from freshly ground Kenco beans. Since the restaurants started grinding beans, the response has been phenomenal. The same goes for the salads and 10 million fruit bags were sold in the first year after introduction.
COMMENTS OF A NEWLY APPOINTED CEO OF MCDONALD’S U. K. * We’re not innovating the way we used to, we’re not leading the way we used to. The world is changing- our customers tell us they’re changing and we’ve not been changing. * We will upgrade the McDonald’s experience and give more value to the customer. * We’ve slipped. In the area of service, it has become spartan and inconsistent. Our cleanliness didn’t just used to be good, it used to be great. We need to get back to basic. The first part of back to basics is giving the customers the choice they want.
The second is making sure service and cleanliness are great. I’m finding out what’s important and I’m reacting to it. * We’re the innovator, we’re the leaders. Our customers are outspoken and they criticize. My job is to understand the problem and to lead. If we can get this right, our customers will reward us. We took our eye off the ball. Our customers have been changing and we haven’t noticed. In the last four or five years, a raft of companies have come to the market-place that have done a better job of identying those changing tastes. I want McDonald’s to be the U. K. ’s break fast restaurant. Households have been blitzed with new menus, including toasted bagels and toast, and sampling deals. I want people to try it, to compare us. 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. * One immediate task is to assuage the franchisees and owner-operators. If our performance is flat, they’re flat. My philosophy is that we’re like a three-legged stool-staff, suppliers, and owner-operators. * Does he eat at McDonald’s?
Not every day, but three times a week. His favorite- double cheeseburger. Questions: 1. Identify the problems confronting McDonald’s U. K. ,and list them from the most to the least critical. For each problem identified, explain your reasoning. 2. Some problems you identified in question 1 may require a “quick fix” in the short run while others may require a major shift in company strategy. Assuming that you cannot focus on all the problems at once, suggest the order in which the issues should be addressed and suggest an approach to solving each problem.