For this assignment, you will conduct a case study of McDonald's in 2017. Apply the knowledge from Chapters 1 and 2 and use the process discussed in Chapter 13.

Case Study - McDonalds

The purpose of this analysis is to use your skills to look at a case, determine what the key issues are, understand and present an analysis of the issues, and present your recommendations about what you think the organization needs to focus on/do. Please note the number of points related to recommendations. You are approaching this as if you are looking at it from the vantage point of a management consultant.

Part of your analysis must include a global focus for the industry or company. Your global focus needs to look at industry trends not just in the United States but globally. The discussion should include a comparison across the different global markets and/or global competitors.

Please read Chapter 13 for suggestions on how to analyze a case. Since an organization is constantly evolving, it might be beneficial to research recent changes that have occurred since the case was written to create a more coherent picture. You may choose to include additional information that you have uncovered. However, this assignment is primarily about your ability to take a case and analyze it. This is about the synthesis and integration of key facts.

Simply restating what is in the text will not be enough for more than an average score. Do not over-recite the history of the organization. Remember, I can read the text, and also you are writing to a person who is familiar with the organization. The points emphasize analysis and recommendations.

Summary of Situation (very brief)

• Key IssuesIdentification and Analysis
• Recommendations Where we should go from here? (include rationale)

You may use other topical areas. I would also strongly encourage you to have an introduction and a conclusion, for example.

MCDONALD'S IN 2017* On January 18, 2017, McDonald's announced that it was margarine to real butter, decided to use chicken that has introducing two new versions of the Big Mac on a lim- been raised without antibiotics, and to make use of cage- ited basis. Although such changes are necessary for the free eggs. Mike Andres, president of McDonald's USA, world's largest restaurant chain, the new offerings will be explained why the firm has decided to make these changes: similar to the original version because they will use frozen "Why take a position to defend them if consumers are say. beef patties and a secret sauce. This is unlikely to addressing they don't want them?" the shift in tastes among consumers for fresher beef and These changes are expected to address some of challenges a variety of toppings. In fact, a recent survey indicated a that McDonald's has been facing in many markets, including serious cause for concern for the firm, finding that only the U.S., where it has over 14,000 of its 35,000 mostly fran- 20 percent of Millennials had even tried a Big Mac (see chised restaurants. It has lost a lot of ground with consum- Exhibits 1, 2, and 3). ers, especially Millennials, who are defecting to traditional Nevertheless, Steve Easterbrook, who took the helm competitors like Burger King and Wendy's as well as to new of McDonald's in March 2015, has continued to push for designer burger outlets such as Five Guys and Shake Shack. changes to several of the ingredients that the firm has Changing tastes are also responsible for the loss of custom- been using in its products. It has removed high fructose ers that are lining up at fast-casual chains such as Chipotle corn syrup from its buns, changed from the use of liquid Mexican Grill and Panera Bread, which offer customized ordering and fresh ingredients (see Exhibit 4). Over the years, McDonald's response to this grow- ing competition was to expand its menu with snacks, sal- *Case prepared by Jamal Shamsie, Michigan State University, with the assistance of Professor Alan B. Eisner. Pace University. Material has been ads and new drinks. From 33 basic items that the chain drawn from published sources to be used for purposes of class discussion. offered in 1990, the menu had grown by 2014 to 121 items. Copyright 2017 Jamal Shamsie and Alan B. Eisner. The greatly expanded menu led to a significant increase in Year Ending EXHIBIT 1 Income Statement ($ millions) Total Revenue Operating Income Net Income $24,622 7,744 4,686 $25,413 7,145 4,529 $27,441 7.949 4,758 Source: McDonald's Year Ending EXHIBIT 2 Balance Sheet ($ millions) $ 4,186 Current Assets Total Assets Current Liabilities Total Liabilities Stockholder Equity $ 4,849 31,024 3,468 33,228 (2,204) $ 9,643 37.939 2,950 30,851 7,088 34,281 2,748 21,428 12,853 Source: McDonalds CASE 3: MCDONALD'S IN 2017 C7 costs and longer preparation times. This forced the firm to increase the prices of many of its items and to take more Pulling out of a Downward Spiral time to serve customers, moving it away from the attributes Since it was founded more than fifty years ago, McDonald's that it had built its reputation upon. McDonald's stands has been defining the fast food business. It provided mil- for value, consistency and convenience," said Darren lions of Americans their first jobs even as it changed their Tristano, a restaurant industry consultant.? eating habits. It rose from a single outlet in a nondescript The fast food chain has been through a similar crisis before. Chicago suburb to become one of the largest chains of out- Back in 2002-2003, McDonald's had experienced a decline lets spread around the globe. But it gradually began to run in performance because of quality problems as the result of into various problems which began to slow down its sales rapid expansion. At that time, the firm had brought James growth (see Exhibit 5). R. Cantalupo back out of retirement to turn things around. This decline could be attributed in large part to a drop He formulated a "Plan to Win," which has been the basis of in McDonald's once-vaunted service and quality since its McDonald's strategy over the last decade. The core of the expansion in the 1990s, when headquarters stopped grading plan was to increase sales at existing locations by improving franchises for cleanliness, speed, and service. By the end of the menu, refurbishing the outlets, and extending hours. This the decade, the chain ran into more problems because of time, however, such incremental steps might not be enough. the tighter labor market. McDonald's began to cut back on C8 CASE 3: MCDONALD'S IN 2017