Has McDonald's lost the plot?

Headnote

Troubled times under the golden arches

Marketing magazine calls it the brand that many love to hate and a "lightning conductor for anti-capitalists". But for the McDonald's Corporation in 2002, name calling has been the least of its concerns. After a sustained spell of seemingly relentless international growth, stock prices have now hit a seven year low. CEO Jack Greenberg has abruptly retired, restaurants are being closed down and competitors are fighting back to challenge what not too long ago was viewed as the unchallengeable - McDonald's reign as the world's number one fast-food chain.

When the going gets tough ...

Has McDonald's become a victim of its own success? Last year the company only opened around a quarter of the restaurants that it did in 1995. And as 2003 arrives there are plans to close around 175 underperforming restaurants around the world.

Other problems such as health scares, weak foreign currencies and the widely-- publicized shortcomings of Greenberg's "Made for You" food preparation system have not helped matters. Originally launched back in 1998, the "Made for You" system was designed to improve product quality in the face of stiffening competition from Burger King and Wendy's. Whilst the company claims quality has indeed improved, waiting times in restaurants have doubled. Taking some of the "fast" away from fast-food has not proved especially popular with customers.

Have years of expansion finally caught up with the quick service restaurant pioneer? It would certainly appear so. In 2001 earnings fell consistently throughout the whole year and McDonald's regularly performs poorly in customer satisfaction surveys. According to statistics published in the American Customer Satisfaction Index in February 2002, McDonald's finished dead last in the ratings, a full 3 percentage points behind nearest direct competitor Burger King.

Competitors turn up the heat

Marketing controversially suggests that the McDonald's brand is more recognized than the Christian cross. Yet even this near-mythical popularity has not insulated the company from the growing influence of rivals, both old and new. Despite some gloom on the part of Burger King, other fast-food players have enjoyed an encouraging...