The course concept of Ray Kroc, who was the CEO of McDonald’s in 1955-1973, might be identified as a franchise system based on quality, service, and cleanliness (QSC) principles. Kroc pursued cleanliness in his restaurants expecting that each employee will make every effort. Kroc did not invent the franchise, yet he has perfected it. He wanted a national network of McDonald’s to bring long-term profits and meet the quality standards.
The strategic initiative of the CEO also included the innovation as the “ability to develop innovative new products gives a company a major competitive advantage that allows it to
- differentiate its products and charge a premium price;
- lower its cost structure below that of its rivals” (Hill & Jones, 2012, p. 104).
In particular, Kroc introduced the Big Mac that increased sales by attracting customers. Assessing the success of this CEO, it is necessary to emphasize that the strategy of Kroc allowed to expand the company throughout the country and, therefore, to improve its overall operation. His success and the success of the entire company were based on the policy of the successful franchise system. McDonald’s sold franchises for relatively low prices, thus attracting the best partners.
Moreover, it allowed avoiding the main problem of the purchase or lease of premises. Due to the management strategy of Kroc, McDonald’s looks the way it is familiar to everyone: bright, clear, and, most importantly, delicious.
Fred Turner, who was hired to develop the company’s standards and train franchisees, used a decentralized strategy concept to make every restaurant stay close to the people. In other words, it was a competitive approach of focus, when all the peculiarities of a particular city or a town were taken into account by managers. For example, the mascot of Ronald McDonald was an impressive and increasingly successful strategy. As a result, “in 1992, McDonald’s delivered 40% of the fast-food sold to children under seven” (Hill & Jones, 2012, p. C56).
Trying to support the principles introduced by Kroc, Turner created the first guide of 75 pages exhaustively describing the procedures for the preparation of food and the rules of communication with customers.
However, there were two major threats to the company including franchisee and employee relations. To resolve the mentioned issues, Turner established the National Operators Advisory Board (NOAB). Based on the above analysis, Turner’s operation was highly successful and valuable for the company. Thus, Kroc knew the final goal of the company’s development, and Turner knew how to achieve it. It was a great team remaining faithful to their work throughout life.
Michael Quinlan focused on cost-cutting, customer service, and worldwide expansion. The low-cost strategy, by Porter’s model, is the key component that helped the CEO to create the value chain of McDonald’s. Consequently, the cost of leadership lied at the core of his strategy. The customer care initiative was expressed in the increased attention of all the employees to customers. Quinlan believed that it is of great importance to listening to customers to meet their expectations. Not only the quality of food matters but also the atmosphere of the restaurant plays an integral part in the image and success of the company.
Besides, the national expansion is one of the fundamental principles of McDonald’s restaurants, introduced by the CEO assumed to provide the same level of customer service in all parts of the world. According to Hill and Jones (2012), the competitive advantage is based “upon the distinctive competencies (unique skills) that underlie the production and marketing of those goods or services” (p. 148). In this connection, the value of the production for the entire unified quality standard system, the high culture of service, and availability created a worldwide attractiveness of fast-food restaurants. Therefore, the key merit of Quinlan was the successful expansion to foreign markets.
At the same time, it should be noted that the domestic market suffered from an embittered franchisees revolt along with the failed attempt to enlarge the menu adding pasta, fajitas, and vegetable burgers.
Jack Greenberg’s course concepts were the new menu and acquisition. The CEO saw the mission for the future of the company in the role of the best fast food restaurant in the world. On the contrary to Kroc, Greenberg introduced a new menu successfully applying the differentiation strategy. Additionally, he performed the acquisition of other food chains.
McDonald’s focused on both small business improvements, which increased customer satisfaction, as well as on significant innovations that could completely change the business system. Today the business concepts of the company are based on the use of modern equipment, computer technology as well as new operating procedures in the kitchen. The new system is a platform for further innovation. The potential for global growth was huge.
For example, in 1998, McDonald’s has achieved outstanding results both in market share and growth in revenue. The company generated a high cash flow and expected to rise further in the future. Despite the seemingly helpful innovations, standard anti-crisis measures did not produce results: layoffs and the closure of unprofitable outlets, lower prices, the introduction of the new range, and the output of high-risk positions could not break the global trend. In this connection, it is possible to evaluate the strategic initiative of Greenberg as average.
During his leadership, Jim Skinner held several strategic changes including a much wider range of restaurants and the enhanced interior. Also, over the years of McDonald’s actively increased its representation in foreign markets. Skinner’s business model can be compared with a three-legged chair, each of which represents operators (franchise partners), suppliers, and the parent company, respectively.
Only a perfectly balanced work of all three parts ensures the success of the system as a whole. One more great advantage of McDonald’s is the decentralized management approach determined by the mentioned CEO. Created in regions, the management teams are hiring staff from the local population. They are empowered to make decisions based on the needs of local people and buy local goods and services.
Skinner became famous for being one of the authors of the Plan to Win concept, which helped the company to successfully overcome the difficult financial situation, in which McDonald’s was in the early 2000s. The main point of this program was the focus of the company on product quality rather than the production speed. Although many people all over the planet can hardly call the food of “McDonald’s” healthy and beneficial, the winning strategy proved to be successful as the value of shares of McDonald’s steadily increases.
Hill, C. W., & Jones, G. R. (2012). Essentials of strategic management (3rd ed.). Mason, OH: South-Western Cengage Learning.