Strategic Audit of McDonalds

Current Situation

Current Performance

McDonalds is one of the world’s most recognized chain restaurants. It is a company that has been in business for a very long time. It is the hallmark of the American fast food industry and is growing to also become the worlds as well.

McDonald’s present performance is very good. With over 26,000 restaurants in more than 117 countries it would be hard to argue they are doing badly. In the past few years they’ve had some low points. In 2002 McDonalds even fell out of profitability. The board soon identified the problem and elected a new CEO, Jim Cantalupo. After this they began experiencing a turnaround due to the “Plan to Win.” Jim Cantalupo’s plan was to focus on the operations of current McDonalds franchises, improve customer satisfaction, and to sell non-McDonalds businesses that took managements focus away from McDonalds Inc. This “Plan to Win” effectively brought McDonalds stock from $20.00 a share in 2002 to $80.34 in December of 2010. The “Plan to Win” has done so well, the board of directors made it part of their core values. The stock in McDonalds has been referred to by many investors as “recession proof” because it’s continued to climb despite the financial meltdown. Their stock has been climbing because of the reinvestment into their own franchises around the country and the addition of the McCafe drink line. These new types of coffee drinks are not served at any other fast food chain. With the McCafe line McDonalds is targeting the Starbucks customer. They plan on taking business from Starbucks by offering very similar drinks but at lower prices. McDonalds went through a little bit of a slump but they have rebound fully and are aggressively targeting new customers.

Strategic Posture

The board of directors of McDonalds implemented seven core values to guide the decision making process. There is no need to go into all of them but they can be simply summed up in one statement; they believe in the McDonalds system.

The board plans to reimage about 600 restaurants in 2011. They plan to invest in about 40% of each restaurant’s reimaging and they have asked each franchisee owner to invest the remainder which amounts to around 500,000 per restaurant. Their plan is to invest into their company when other chain restaurants do not have the capital to do so. This will give McDonalds a substantial competitive advantage.

Their hope is that the reimaging will lead to increased guest counts and more spending at McDonald’s restaurants. McDonalds is currently outperforming all over fast food chains and could easily continue on that path with no reinvestment at all, but the board and franchisee’s recognize in order to stay on top they need to reimage and continue seeking new customers.

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