Net income in 2014 fell almost 15 percent to $4.76 billion, representing the company’s first annual drop in “like-for-like” sales since 2002.4 By early 2015, McDonald’s shares had dropped below their 2012 price point, while the overall market was up by 50 percent.5 Things were not much better overseas. Sales continued to decline over the next two years. In 2012, McDonald’s’ sales growth dropped by 1.8 percent, the first monthly decline since 2003.2 Annual system-wide sales growth in 2012 barely met the minimum three percent goal, while operating income growth was just one percent compared to a goal of six to seven percent.3 Things went from bad to worse. The company went from first to last in twelve brief months. In fact, McDonald’s was the number-one performing stock in the Dow 30 with a 34.7 percent total shareholder return.1 But in 2012, McDonald’s dropped to number 30 in the Dow 30 with a –10.75 percent annual return. In 2011, McDonald’s had outperformed nearly all its competitors while benefitting from the fallout of the great recession (2008–2010) as more custom-ers flocked to its low-cost meal options. The company’s troubles had snowballed quickly. Rather, he had hoped to take the helm at the company at its peak and then take it to new heights-not inheriting the corporate giant in a turnaround situation. Easterbrook had not taken personal joy in seeing either his friend and mentor, or the company they both loved, struggle. They had both started their careers at McDonald’s early in the 1990s and had climbed the corporate ladder together. Thompson was in the top job for less than three years, overseeing a more than four percent decline in customer traffic in 2014. His thoughts turned to Don Thompson, his predecessor and friend. Now two and a half years into the job of McDonald’s CEO, he is starting to see some of his early turnaround initiatives show results. Steve Easterbrook walked into his office in the McDonald’s corporate headquar-ters in Oak Brook, Illinois. What are the potential caveats (pitfalls) to your recommendations?.Your recommendations should flow logically from your analyses.Discuss your recommendations to address the strategic challenges, given the external and industry environment, its core competencies and its current business level strategy. What do you think are the most important strategic challenges facing McDonald’s? Explain. What business-level strategy does McDonald’s employ? Is it effective? Has it changed over the last few decades, and if so, how?ĥ. How is McDonald’s positioned vis-à-vis its major competitors? (hint: strategic groups)Ĥ. Which trends in McDonald’s external environment (PESTEL) are likely to have the greatest impact on the company’s ability to sustain a competitive advantage?ģ. Think about the problem from McDonald’s perspective.Ģ. The company is amid its most serious turnaround situation, and needs to define a clear strategic position to deal with competitive challenges on several fronts.ġ. Easterbrook must confront several challenges if he is to return the company to its former glory. Dated approximately six months after Easterbrook assumed office in March 2015, it highlights the company’s recent and dramatic decline in performance amidst increasing competition. The case is written from the perspective of McDonald’s CEO Steve Easterbrook.
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