McDonald's - Adding 'More' Happiness to the Happy Meal

Today’s brew is for McDonald’s,
Brew Date: 1st July 2015                                                
Type: Served Hot – Redefine and Transform brew

Why Roland McDonald is going to be unhappy, and why should PepsiCo and Coca - Cola as well start worrying?

To understand the business model of McDonalds, check out the following links:

The Brew will analyze McDonald’s on the following points:
a)     Business Analysis
b)    Improvisation to Business Strategy (Not required, the frameworks are all laid in the Business Analysis part)

The Brew also recommends McDonald’s to evaluate its Enterprise with The Brew Framework on priority to understand its Macro – Capabilities and improvisations from thereon. Click on this link to get redirected to The Brew Framework.

Now that McDonald’s has expanded its offerings to include McCafĂ©, a CafĂ© – style offering the bean blends, The Brew as well reciprocated to include McDonald’s to its list, by offering them its perspective to improve on their business J.

a) Business Analysis:
1)    Vision & Value Crisis and Value Gaps
McDonald’s currently suffers from vision, value & identity crisis in 3 distinct and critical areas, namely, Product, Value Proposition and Brand. And all these 3 are now having a concurrent interplay effect which now gets evident, noticed and of high concern in the McD’s performance parameters. And though, they are only evident now, the fault-lines have developed over a period of time, where singular factors largely played roles in individual capacity.

Effectively, the Consumer’s don’t exactly know What McD stands for, and not because McD has too many brand images, but due to lack of any it thinks it has, and the ineffectiveness of the ones present. And this symptom of Inadequacy has made its Product, Value Prop and the Brand highly vulnerable to the Consumer fatigue of Consumption. Needless to put, improvisation and shift are today, unquestionable and inevitable.

McD, with its huge presence in the world, and as an icon of globalization needs to have a much higher Purpose that affects the consumers in a positive way than the one at present (if it has any), it needs to increase its Contribution to Impact ratio to the world, and only then can it leverage high on the Globalization wave, the one which contributed to its success, but in the existing scenario, its lack of purpose exhibited through its Product, Value prop and hence the Brand, are Contributing against its tide to globalize and pepper the world with McD flavor.

2)    Competence
Another critical factor gone wrong in McD’s case is its lack of understanding of its Competence. McD’s Competence is not its Products, but the way the products were made, effectively, through incorporating the assembly line principles to stream line and automate the Food manufacturing value chain. The reason of success of Hamburger (a core product of McD) was due to its novelty to Consumer needs and due to speedy throughput.

Infact, McD was one of the earliest proponents of Quick Service Restaurants, which contributed to its High Growth model and because this was enabled by assembly line principles and later on by automation, the high growth model was highly scalable delivering high results.

To get the house in order, McD will have to understand this as its Competence, and extend this Competence to the Continuum of Consumer needs of Food Consumption. Infact over the years, McD has as well started believing what its Consumers believe for McD, of it being a Hamburger offering firm, leading to shift McD’s focus on the the products its offered, rather than developing the Competence, eroding the capital value of business. This along with the wave globalization was instrumental for other players to enter and dominate

To get the Competence understanding right, McD will have to understand that its not in the space of Hamburgers by being a QSR, rather its in the space of QSR’s which also offers Hamburgers along with playing as a value player of getting other Food products in this gambit with its experience, understanding and experiments.

3)    Dysfunctionality in the Strategy
McD seems clueless about its strategic direction along with the points covered in point 1 and 2. Its Strategy to spread out to health food like Salads, Portfolio expansion to Cafes etc seems a knee jerk reaction considering the market expansion in these segments.

Effectively, McD has clearly misunderstood what its stands for, what it wants to be and how it wants to go about considering the earlier Q’s.

The dilemma which embroils McD is, whether it wants to be in QSR space, where the Products are limited but come with concern of health, quality etc or whether its want to be in the space where it can cater to Higher and broader Continuum of Food Needs for Consumer at the cost of its Speedy throughput, and absence of any competence or understanding in this space at present. This where McD has to stop reacting, and start responding in lines with its Purpose, and its path to purpose.

McD will have to understand the working of both the Industries along with Consumer needs in mind. The QSR setup is great for a small who wants to grow quickly, to have its presence to masses, however a Firm which has huge presence needs to cater to broader needs of Consumers to be relevant at that scale, driving higher mindshare.

McD, unintentionally, by expanding the product portfolio has done a good thing, effectively, opening up to the undercurrent shift in Consumer patterns. It now needs to leverage on key Consumer patterns which will drive its growth, along with Re – Inventing itself completely, Offering a Consumerable Value Proposition to its products and the Brand. McD’s steps should be aligned be strategically covering all these aspects to ascertain further growth and progress.

4)    New Driver of Growth or Strong Competence.
With the Competence of Speedy Throughput when McD came in to existence, the Hamburgers proved to the key driver of Consumer growth for the icon of globalization, similarly, its revival in the existing times, will as well need either a Key Driver which correlates to Consumer growth, or a Strong Competence which will keep creating value in the existing model in the Consumer’s Continuum of needs.
But for the Scale of McD, it will only be fair to have an expectation of developing a competence internally along with identifying the next Consumerable Key driver in Consumption space, with both of these strategically being aligned to co-drive and co-benefit from mutuality.

5)    Pivot Competence
6)    Brand Improvisations
Apart from improvisations on product and value propositions, McD might like to rethink over is band messaging of creating happiness. It’s an impossible promise to keep and deliver given that McD expects Consumer to consume their products on daily basis, something on the lines of diminishing marginal utility and hence Food / Products alone cant fulfill this need. Given that it’s a QSR, it requires a higher churn out of folks and hence neither the ambience can contribute much in realizing the promise.
Importantly, if along with Happiness, McD can rethink over adding a direct attribute of Food to its promise (Healthy, Lifestyle, Natural, Authentic etc.) to make an impact. The offerings expansion will definitely lower the Consumer fatigue and the novelty will be instrumental in altering the perception along with some contribution to making Consumers happy.

7)    The Theory of Globalization & Standardisation:
This point states basically means that Globalization is force but Standardization is a Factor, especially in food, given the diversity index of the planet. (Force is an external systemic parameter means it will be helpful to entire Ecosystem, whereas Factor, is an internal parameter with its independent carry, but helped further with Force).

At McD, they both were possibly used interchangeably, and hence the McDonalisation of things still remains an unfinished American dream (and most certainly will remain that way). In the initial period, both, Globalization and Standardization worked in McD’s favor, but Globalization opens opportunities for the entire ecosystem which will tend to Consumer Centric in the long run, nullifying the Standardized offerings to various diverse markets.

In the Market Explosion phase, McD leveraged both, the force and the factor, however in the market expansion stages, McD needs to have a different approach to be relevant to the changing consumer behaviors as the markets expand in scale and variety.

8)    Rethinking McD and pivoting the Leverage
One thing which McD has done so successfully over years (and still continues to do good) is increasing its leverage ratio. More that 80 % of its 36,000+ stores across the world are operated by the Franchises, making it one of the most leveraged operational company, and it’s a no brainer, that the existing business will definitely see a change, The Brew recommends McD to choose a Higher Consumer Centric path where the existing leverage can be helpful to pivot the brand and offering along with realizing its promise of happiness.

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