Case Synopsis

Since it was founded more than $50$ years ago, McDonald's had been defining the fast$-$food business. It provided millions of Americans their first jobs even as it changed their eating habits. It rose from a single outlet in a nondescript San Bernardino, California location to become one of the largest chains of fast$-$food outlets spread around the globe. But it had run into various problems that began to slow down its growth.

This decline could be attributed in large part to a drop in McDonald's once$-$vaunted service and quality since its expansion in the $1990$s$,$ when headquarters stopped grading franchises for cleanliness, speed, and service. By the end of the decade, the chain ran into more problems because of the tighter labor market. McDonald's began to cut back on training as it struggled hard to find new recruits, leading to a dramatic falloff in the skills of its employees. According to a $2002$ survey by market researcher Global Growth Group, McDonald's came in third in average service time behind Wendy's and sandwich shop Chick$-$fil$-$A Inc

Over the years, McDonald's response to this growing competition was to expand its menu with more sandwiches and salads. It also started to add snacks and drinks, but the greatly expanded menu led to a significant increase in costs and longer preparation times. This forced the firm to increase the prices of many of its items and to take more time to serve customers, moving it away from the attributes that it had built its reputation upon.

Directions:

Read the case in your text and respond to the following questions; be prepared to participate in class.

Note on grading: Class participation is a component of the grade.

Case Questions:

What are the current forces in the external environment that might affect McDonald's strategy?

What source of competitive advantage does McDonald's have, and is that position supported by its value chain and other internal resources?

What other strategies could McDonald's formulate to achieve a competitive advantage?