Competitive analysis and positioning | 39

McDonald’s all-​day breakfasts

McDonald’s is a fast food restaurant chain headquartered in Oak Brook, Illinois.
McDonald’s had slumping sales in 2014 and 2015. In 2014, “its overall profit plunged
to $812 million, or 84 cents per share, from $1.2 billion” (Gensler, 2015). As a result
of this downslide, in January 2015 CEO Donald Thompson announced his retirement
to take effect in March 2015, when Steve Easterbrook, who was the chief brand
officer, took over as CEO. Easterbrook inherited a large number of problems with
the company that were difficult, possibly impossible to solve. “Revenue fell 11% in
the first quarter, as it experienced across-​the-​board sales declines” (Gensler, 2015).
When taking over, Easterbrook’s position for fixing the company’s problems was
addressed when he made the following statement: “McDonald’s management team
is keenly focused on acting more quickly to better address today’s consumer needs,
expectations and the competitive marketplace. We are developing a turnaround plan
to improve our performance and deliver enduring profitable growth” (Gensler, 2015).
Although Easterbrook wanted to fix the problem, the question remained: How could
McDonald’s stop the decrease in sales?
Easterbrook wanted to better address customer needs. For years customer feed-
back has requested all-​day breakfasts from McDonald’s. Since 2007 tens of thousands
of customers had requested all-​day breakfasts on McDonald’s Twitter page. However,
McDonald’s has never wanted to do this, stating “limited grill space prevented the
company from offering breakfast past a certain time each day” (Geier, 2015). In an
attempt to fix slumping sales Easterbrook decided to listen to customer feedback and
ran a trial of all-​day breakfasts in select stores in the San Diego area in April 2015.
After testing all-​day breakfasts in several stores the company announced that it
would begin implementing them in all of its stores in October 2015.
The all-​day breakfast had a different menu based on region. Some regions would
get a McMuffin menu and some regions would get a biscuit sandwich menu, but not
both. The decision on which was made at the local level. Both menus had options for
hotcakes, sausage burrito, parfaits, and oatmeal. The availability of hash browns varied
by location, with some stores having them and some stores not. Easterbrook counted
on this limited all-​day breakfast menu to fix McDonald’s problems, but would it fix
McDonald’s slumping sales or would it cause more problems?

Background
With the first McDonald’s opening in 1955, it has become the favorite of many people
from all around the world. As of May 2015, McDonald’s is considered to be #6 on the
list of the world’s most valuable brands (Forbes, 2015). The fast food restaurant was
initially opened as a barbecue drive-​in but by 1948 it transformed into a walk-​up ham-
burger stand with a limited menu.This limited and simple menu was also a contributing
factor for the food being sold for a low-​cost price.This strategy ultimately became the
catalyst for the fast food chain becoming a successful restaurant, that quickly turned
into a franchise across the country and eventually entered the global market.
Not only has it earned its ranking, McDonald’s has become a permanent fixture
of the world we live in today as 88 percent of people easily identify and recognize the
40 | Competitive analysis and positioning

golden arches of McDonald’s without the name associated with the brand. But in com-
parison, only 54 percent of people could recognize the cross that represents religion
of Christianity. Another great example of McDonald’s and pop culture is the mention
in Bloomberg Businessweek that McDonald’s is like the music industry in which it is
inspired by different culture and converts that inspiration into new ideas and product
strategies (Helm, 2010). McDonald’s has taken cues and analyzed social elements
from the African Americans, Hispanics, and Asians to expand their offerings and have
executed advertising campaigns in the hopes of encouraging middle-​class Caucasians
to buy certain food items as they use hip-​hop and rock ’n’ roll.

Target market
McDonald’s holds the leading position in the American fast food industry. Even though
it has seen recent slippages in sales and was required to close 700 restaurants around
the world in Q1 2015, McDonald’s is still well above its second-​place competitor in
revenues (Gaille, 2015). An interesting statistic provided for McDonald’s is that on
any given day, it is going to feed 1 percent of the human population which adds up to
roughly 70 million people. As of now, there are 119 countries in the world that are
selling 75 burgers every second.
With $27 billion in revenues, McDonald’s is the 90th largest company in the
world. It employs more than 1.7 million people at 350,000 branches as it sits at #2
behind Walmart for number of employees. One of the target markets for McDonald’s
is the children demographic; 1 in 5 food sales at McDonald’s includes a toy, making the
company one of the world’s largest toy distributors.
In the U.S., 25 percent of Americans eat some type of fast food and 57 percent of
the 18–​29 age segment have stated that they eat McDonald’s at least once per week.
Nearly 110 million Americans have visited a McDonald’s restaurant in the past month
at least once. Of households with an annual income of less than $20,000, 39 percent
eat at least once a week at McDonald’s.
McDonald’s marketing or business model does not officially aim towards a spe-
cific audience or consumer segment, in fact, the U.K. company has expressed that
McDonald’s aims to offer a fun and friendly environment for everyone to enjoy.
McDonald’s wants to offer and appeal to a wide range of people from families to
workers.Yet the customer profile still remains the same –​people in the lower-​income,
lower-​middle-​income bracket.
McDonald’s has tried to be something for everyone as opposed to being every-
thing for some people but it is now starting to change its direction by adding healthier
and more expensive options as in salads and quality chicken.

The company
McDonald’s divides its revenues into company-​ operated and franchised. It
should be known that McDonald’s conventional franchisees make up 57 percent,
24 ­
percent are foreign affiliates, and approximately 18 percent are company
operated. Revenue contribution from Europe was at 43 percent, which is under
the company-​owned business model and highest from the U.S., at 47 percent,
 Competitive analysis and positioning | 41

which is under the franchise business model. When looking at the operating
income, the U.S. is the company’s largest segment and it accounts for more than
40 percent of the company’s operating income. Outside of the U.S., Australia,
Canada, France, Germany, and the U.K represent 40 percent of the company’s oper-
ating income. The markets with comparatively advanced restaurant expansion and
franchising potential include China, Italy, Poland, Russia, Korea, Spain, Switzerland,
and the Netherlands. Together these markets accounted for about 10 percent of
the company’s operating income; India, a country in which the majority of people
do not eat pork or beef, has 179 restaurants. (McDonald’s Political Contribution
Policy, 2016).
In 1965, McDonald’s went public and the stock split 12 times. An investment of
$2,250 in 100 shares at that time has grown to 74,360 shares worth approximately
$7.0 million as of market close on December 31, 2014. McDonald’s started to divest
itself of other chains it had acquired during the 1990s.The company owned a majority
stake in Chipotle Mexican Grill until October 2006, when McDonald’s fully divested
from Chipotle through a stock exchange and, until December 2003, it also owned
Donatos Pizza. McDonald’s sold Boston Market to Sun Capital Partners on August 27,
2007 (Horovitz, 2011).
As of December 2016, McDonald’s earned total revenue of $24.622 billion.
Operating income in 2016 was $7.74 billion (Wikiwand, n.d.).

Political/​ legal
As per the McDonald’s website, the company has a political contribution policy.As per
the policy, McDonald’s does not make contributions to any specific political parties or
specific candidates for public office or for any political organization. Yet, McDonald’s
has realized that it is important to support public policies that have the best interest
for its business (for its corporate and franchise restaurants), thus in some cases,
McDonald’s will make contributions (McDonald’s Political Contribution Policy, 2016).
The policy also states that any political contribution made by the company is
required to be approved by the head of the government relations department of
McDonald’s Corporation and must support a political candidate, a political party, or
ballot that the head of the government relations department determines to be bene-
ficial for the long-​term interest of the organization.
Furthermore, if the contribution is more than $100,000 in a calendar year, it
should require the approval of the McDonald’s world president for that market
to agree in addition to the depth of government relations (McDonald’s Political
Contribution Policy, 2016).

Technological
McDonald’s has always been known for its friendly and fun landscape and restaurant
design.Yet, that is now going to change as McDonald’s is taking the first step in the fast
food industry for revamping its interior design. The project started in 2011 with a $1
billion plus budget aiming for a completion in 2015/​2016. McDonald’s is moving away
from its signature Pantone red in favor of yellow, both inside and out. This includes a
42 | Competitive analysis and positioning

yellow “eyebrow” detail on buildings and drive-​thru that modernizes the traditional
golden arch concept (Horovitz, 2011).
The design is also aiming to speed up the drive-​thru process as it will offer
double lines for fast speed. The fiberglass tables and industrial steel chairs are going
away and incoming are wooden tables with comfortable faux leather chairs. The aes-
thetic is known as McDonald’s “Less Is More” (LIM) design. It creates an uncluttered
environment with simple, tasteful, and comfortable furniture. It’s a European look that
will be adopted globally.
In addition to the design and logistics of the restaurants, McDonald’s is also
taking big steps with technology. In 2014, McDonald’s Corporation announced a
new payment method in its U.S. restaurants with Apple Pay. As per McDonald’s, the
Apply Pay will enhance its global digital strategy and aim to provide the McDonald’s
customer convenience and greater speed. Apple’s mobile payments service offers
a great convenience to McDonald’s customers, as it will allow them to instantly
pay and stay, or pay and be on their way. In 2018 McDonald’s plans to invest $2.4
billion in capital projects, most of which will go toward ongoing work in converting
U.S. locations to the experience of the future model, which includes ordering kiosks,
table service, and increasing use of the mobile app. The company plans to convert
another 4,000 U.S. restaurants during 2018.The plan is to overhaul most freestanding
U.S. restaurants by 2020 (Trotter, 2018).

Company info/​organizational analysis

McDonald’s has long been a leader in the fast food industry, even boasting on its signage
that it has sold billions of burgers. However, in recent years, as the fast food industry
has suffered through something of a publicity crisis, McDonald’s has implemented
various marketing strategies to try to help promotions and bolster sales once again.

Stakeholders
McDonald’s has a number of stakeholders to which to answer. Suppliers are
stakeholders because without the investment of McDonald’s in the products they
supply, their bottom line is affected. Employee stakeholders are invested in the brand
because declining sales often means hiring freezes, lay-​offs, and wage freezes. When
the brand is performing well, employee stakeholders receive the trickle-​down effect
of that success. In that regard, declining sales are not just a problem for the company,
but it has an effect on the staff and the suppliers. When the company is not making
money, these two groups are not able to benefit.
Investors as stakeholders always have a stake in the company’s ability to be
successful.When the company isn’t doing well from a financial perspective, then stock
prices become more volatile and the people that have invested their money in the
brand stand to lose that money plus any of the profits they may have made on it.
Since the company is making the move towards the all-​day breakfast, there are some
considerations with regard to marketing strategy as well. For instance, employees
will be impacted in the fact that they will need to learn to cook the limited break-
fast menu while cooking lunch/​dinner. They will need to make sure to include those
 Competitive analysis and positioning | 43

options when they are upselling menu items or making suggestions to customers.
Moreover, those working in the grill areas of the restaurant will need to be prepared
throughout the day with the items needed to make breakfast just as they are with
lunch-​related items.
Customers, as stakeholders, are impacted in that they will now have access
to certain breakfast items after 10.30 a.m. Interestingly, customers are also
stakeholders in a general sense for McDonald’s as they are significantly affected
by the quality of food being served by the fast food chain. Finally, there are the
suppliers, which stand to increase profits from the restaurants. Suppliers that are
offering breakfast supplies will now have a higher demand to meet, which usually
means better profits their end.

Business culture
The business culture at McDonald’s has changed in accordance with the company’s
strategy over the years. In the past, McDonald’s was considered a wholesome
option for a meal, and the business structure reflected that. Franchises were owned
by prominent people in the community and there was a family feel within the cul-
ture of the company. However, since that time, the culture has changed significantly.
Franchisees are completely disconnected from the core of the company and this
is somewhat reflected in the inconsistencies in the quality of food and the level of
service. Moreover, corporate culture has made it increasingly more challenging for
franchisees to grow. More stringent guidelines about what the franchises can and
cannot do under the umbrella of the brand have not only left franchisees with an
inability to be creative in attracting new customers, but they have not enticed new
franchisees to invest in the company.
New leadership has helped in this regard, with the introduction of Steve
Easterbrook as the new head of the company in 2015 (Neate, 2015). He has not only
asked for more input from the franchisees in terms of improving the brand, but he has
implemented some radical ideas of his own, including the all-​day breakfast. He is also
the driving force behind McDonald’s upcoming line of gourmet burgers. The com-
pany is now taking a look at the marketplace to determine areas where McDonald’s
may not have ventured in the past and making it a point to try new things in order
to ensure that the brand doesn’t stagnate. After all, also at issue has been the fact
that McDonald’s has somewhat been resting on its laurels. The company has made
the incorrect assumption that because of its place in the market, it didn’t need to go
above and beyond in its marketing endeavors. Anything that the company has tried
that hasn’t worked in recent years has simply been eliminated from the menu and the
company has gone back to its proven strategy of what works.

Organizational structure
The core organizational structure at McDonald’s is one typical of the corporate/​fran-
chise environment. The company CEO is the head, answering to a board of directors.
Under the COO is the executive leadership team and leadership staff.There is a layer
of middle management responsible for overseeing the various franchises, which is
44 | Competitive analysis and positioning

comprised of regional managers. There are the franchise owners that work directly
with the company and from there, store management and beyond.
However, it should be noted that the company has moved to eliminate many of
its middle management positions, in order to keep key company leadership in better
communication with staff and franchisees (Jargon, 2014b). This change in structure
came as part of the company’s effort to attempt to stymy the tide of falling profits.
Fast casual restaurants and more health food options contribute to lower than ever
profits for the fast food giant. The company has been seen as being out of touch as
rates of diabetes, heart disease, and childhood obesity continue to be pressing health
issues in America, and around the world.
As a result, McDonald’s is attempting to make the organizational changes
needed to bring in an influx of new ideas meant to revive the struggling fast food
chain and help it to recover. This is where the aforementioned change in culture
is helping in that the company has had to contend with the public relations crisis
of both unhappy franchisees and the unhealthy quality of its food. While it is doing
more to address the business culture, it is not doing as much to address the issue of
food quality. The company has introduced a few products to make the menu appear
healthier, but has done nothing to eliminate some of the unhealthy aspects of the
food –​such as the hydrogenated oil in which it makes its fries –​or the quality of
its meat sources.
As such, the company is attempting to distract from these issues by ingrati-
ating itself into the community through better relationships with the franchisees.
Moreover, organizational structure has been changed in the last year to cater
to regional zones (Jargon, 2014b). This means more offerings that are closer to
the local favorites that reflect the communities McDonald’s is serving around the
country. This focus on more relevant food items by marketplace has not seen huge
margins in terms of results just yet, but they are part of a larger organizational
reordering that the fast food chain has committed to moving forward (Jargon,
2014b2).

Strategies
Given the issues that McDonald’s has had with its image as a fast food giant and
the business culture that has fostered some resentment among those franchisees
considering an investment, it has implemented a few new strategies.The main strategy
in place to revive sluggish sales is the McDonald’s all-​day breakfast venture. The com-
pany hopes that this plan will intrigue customers that only eat at the chain for break-
fast while capturing some of the market of other fast food brands that offer a full
menu any time of the day. Breakfast is the most popular menu item at McDonald’s, so
the company is hoping to head off further declining revenue by offering this popular
choice all day. Additionally, customer polls have consistently revealed that many don’t
find the choices available at McDonald’s to be relevant ones in keeping with the fast
casual concept that continues to dominate the market (Jargon, 2014a). McDonald’s
is hoping that by making the more popular menu items available throughout the day,
customers will be willing to come at times of the day when they normally would not.
It hopes that customers will eat at McDonald’s more than they might throughout the
course of an average week.
 Competitive analysis and positioning | 45

Additionally, the company is switching things up internally, looking at all internal

stakeholders. The company aims to determine what benefits exist –​if any –​from
those that have long tenures on the board and with regard to the investments the
company makes.The strategy here is to clean house internally to breathe new life into
the company (Neate, 2015). There are also plans to implement new products such as
mozzarella sticks, and a line of gourmet burgers. McDonald’s is also aiming to include
new technology in its new strategy, creating customer-​centered portals that make it
easier than ever to order and pay for a meal (Jargon, 2014a).
The idea is to streamline the customer experience to the fullest extent pos-
sible. Convenience is the name of the game for a company like McDonald’s, and it is
aiming to capitalize on that. For instance, the company is looking at a system where
customers can place an order, customize it, and pay for it using a touch screen that
enables them to have full control over the ordering process (Jargon, 2014a). This may
eliminate some redundancies in terms of jobs, but create opportunity elsewhere. The
strategy here signals that this is the McDonald’s of the future, no longer stuck in a
1950s mentality in terms of the way burgers are ordered and served in 2015. The
company is taking steps to implement lasting strategies that will help to ensure its
survival moving forward.

Restaurant industry info/​micro-​environment

McDonald’s has been the leader of the fast food industry for many years, but its recent
sales performance had shown how the competition had affected its sales. McDonald’s
has had decreasing sales partly because of the emergence of new competitors and the
change of customer taste. As Wohl states,

The world’s largest restaurant company has to be more nimble to keep up with
competitors that have been quicker to respond to customers’ tastes … That means
everything from speeding up internal tests and doing more to appeal to diners who
are looking for cleaner labels on what they eat.
(Wohl, 2014)

McDonald’s has not been able to grow at the same pace as its competitors.
As McDonald’s Chief Financial Officer, Kevin Ozan, stated, McDonald’s “chain’s sales
results in the U.S. –​[had] a 0.9-​percent increase, [however McDonald’s is] still
3.2 percentage points behind its immediate quick-​service sandwich competitors”
(Maze, 2015). In the same way the Investor’s Business Daily points out that for the first
time after at least four decades, “McDonalds had been closing more stores in the
U.S. than it is opening” (Investor’s Business Daily, 2015). McDonald’s has not adapted
to the trends of the market and the competitors have taken advantage of this.
McDonald’s has been trying to appeal to customers with new menu offers like
the McWraps, Buttermilk Crispy Chicken, and others. However, this has not been
successful. The market has changed, and consumers are more concerned with taste,
quality, and ingredients. “McDonald’s has had trouble finding new menu items that
diners want” (Derousseau, 2014). Sales have decreased for the past two years.
McDonald’s does not only compete with its traditional competitors like Burger King
and Wendy’s, but the growing and trending fast casual dining segment is overtaking
46 | Competitive analysis and positioning

McDonald’s customers. In order to avoid losing more market share, McDonald’s CEO
Eastwood decided to create the all-​day breakfast menu.

Quick service restaurants segment

During the last decade, quick service restaurants (QSRs) have grown at a faster pace
than any other restaurant segment in the industry. McDonald’s, Burger King, KFC, and
Wendy’s have provided their customers fast food, with average quality and minimal to
no table service. The menu in these restaurants is very limited and the prices range
from $3 to $6 per person (Trefis Team, 2014). The fast food segment had been led
by McDonald’s for many years. Nevertheless, its main competitor Burger King had a
better year than McDonald’s in 2014 (Wong, 2014a). Burger King was more effectively
attracting customers to its venues. As Wong (2014a) stated, Burger King has made its
menus simpler while McDonald’s has make them more complex. In addition Burger
King has created very attractive promotions. Burger King has been able to develop
and promote more impactful products than McDonald’s. In the same way “Burger
King is stealing away [from McDonald’s] low end customers with hot-​selling items like
chicken fries and extra-​long pulled pork sandwiches” (Egan, 2015).
McDonald’s is losing market share to Wendy’s as well. “Wendy’s is luring
customers with higher-​priced favorites like the bacon portabella melt on brioche”
(Egan, 2015). Wendy’s has seen the need to launch new products because customers
are more concerned about freshness and quality. Wendy’s has been able to repos-
ition itself towards the higher-​end market, and McDonald’s is losing market share
from both ends. While McDonald’s sales decrease, Wendy’s and Burger King’s sales
increased. In the U.S.,Wendy’s restaurant sales increased by 2.4 percent in the second
quarter of 2014 (Egan, 2015). Burger King’s sales increased nearly 7 percent. The
increase in sales is the result of new menu items. Meanwhile, “U.S. sales dipped 2%
during the last quarter at the Golden Arches” (Egan, 2015). The fast food segment is
being affected by the new trending segment of fast casual dining. For this reason, most
of the fast food restaurants are trying to innovate with new menu items and changing
their public image, as a more healthy eating option.

Fast casual dining segment

The fast casual restaurant has become more popular in the American market. As a
result fast food restaurants are launching new menu items in order to compete with
the fast casual market. The fast casual segment is positioned between the QSR and
the casual dining segment. This establishment provides a “more customized, freshly
prepared and high quality food than traditional QSRs” (Trefis Team, 2014). The fast
casual restaurants are characterized by their comfortable and clean ambiance. The
consumers feel comfortable and welcome. Nevertheless, the prices are higher than the
ones of the QRS.The prices per person range between $8 and $15 (Trefis Team, 2014).
McDonald’s is losing market share to the fast casual segment. “A backlash
against fatty foods has created an opportunity for so-​called fast-​casual competitors
like Chipotle, a company once owned by McDonald’s and whose menu options are
perceived as healthier and more authentic” (Allison, 2015). McDonald’s has lost market
 Competitive analysis and positioning | 47

share because of the perception that the public has of their food and because its stores
do not have a welcoming ambiance. The fast casual segment is growing. Restaurants
like Panera Bread, Chipotle, Starbucks, and Five Guys are becoming more appealing for
consumers. In 2014, the fast casual restaurants segment grew by 10.5 percent, while
traditional fast food chains grew 6.1 percent. One of the main players in this segment
is Chipotle, which had an annual growth rate of 20 percent (Rosenberg, 2015).
The fast casual segment has been able to attract the market because it is
perceived as a healthier eating option. Nowadays, people do not see burgers and
fries as they used to. Fatty food has become less appealing to customers than before.
For that reason “McDonald’s shifted to healthier menu items with its new wraps but
the products didn’t take off as per the company’s expectations” (Trefis Team, 2014).
McDonald’s is trying to enhancing the taste of its products and improve consumer
perceptions of quality (Maze, 2015). “McDonald’s renaissance will encompass a sim-
plified menu, remodeled restaurants, and modern amenities as Wi-​Fi” (Wong, 2014b).

All-​day breakfast market

McDonald’s is attracting the customers by “adding burgers with lettuce ‘buns’ and
launching all-​day breakfast service” (Egan, 2015). McDonald’s, with all-​day breakfast,
is competing with Dunkin Donuts, Panera Bread, Starbucks, and others. McDonald’s
decided to have all-​day breakfasts to increase sales. But the all-​day breakfast compe-
tition is intensive. As a response to McDonald’s all-​day breakfast, a Burger King fran-
chise in Garwood, New Jersey decided to serve a few breakfast menu items all day
(Nazario, 2015). In the same way the Dunkin’ Donuts CEO said, “I think the reality
is, if [Dunkin’] executes our plans well, if we go out there and deliver a great coffee
experience, a great breakfast sandwich experience, we deliver a variety of donuts and
we execute well on our stores, we can fight anybody any day” (Snyder, 2015).

Everyday restaurant war

In the U.S. the customers are pushing the QSR restaurants to have healthier items
on their menu. The fast casual segment is growing rapidly but the QSR segment is
still growing as well. Rosenberg stated “established fast food companies can main-
tain healthy margins from their existing footprint, while newer fast casual chains
invest billions to build out new locations around the world” (Rosenberg, 2015). In
the same way, McDonald’s losses from 2013 to 2014 were $664 million dollars but
these losses are not dramatic. McDonald’s has been able to maintain its expenses
relatively flat, generate profits, and provide its inventors with a dividend of 3 percent
(Rosenberg, 2015).

Customer/​consumer info
McDonald’s is the leading worldwide hamburger and food service retailer and holds
the leading share (42 percent) of the U.S. fast food market (Trefis Team, 2015). It is
said that 8 percent of the American population eat at a McDonald’s on an average
48 | Competitive analysis and positioning

day and 96 percent eat a meal there at least yearly (Trefis Team, 2015).The U.S. popu-
lation was McDonald’s largest segment accounting for more than 40 percent of the
company’s 2014 operating income (McDonald’s, 2010–​2015).
Although the demographics change based on the different markets McDonald’s
serve, the company bases its segmentation on demographics, with age as a parameter,
psychographic (convenience and lifestyle), and behavioral. Kids, students, and family
are the main driver of McDonald’s segmentation and product positioning. However,
the adult target group has yet to be identified. Consequently, its target group for the
breakfast model has not been identified either. The chain is trying to adapt to this
new consumer. McDonald’s recently reorganized marketing to focus on demographic
groups –​families, millennials, and adults –​rather than food groups from its menu
(Bertangnoli, 2014).

Millennials
Since the entrance of Fred Ehle (McDonald’s first VP-​customer officer) McDonald’s
focus was to enhance the customer experience while visiting the restaurant.
McDonald’s was facing a millennials (customers in their 20s and 30s) problem and
it needed to be addressed. Millennials today are pickier and are more attracted to
higher quality offerings of chains such as Chipotle (Anderson, 2014). Mohamed Amer,
vice president, global integrated retail unit, said: “The problem is people no longer
find novelty in just fast foods as the key convenience marker and do expect fast, tasty
(even healthy) and upscale as the new experience and value proposition” (Anderson,
2014). This target group has become more health-​conscious. Although price is a
driver for them, tastiness, healthiness, and ambiance seemed to be more predominant
when deciding their next dining experience (Lutz, 2014). In fact, these same millennials
were opting for chains such as Chipotle Mexican Grill Inc. and gourmet-​burger chain
Five Guys Holdings LLC over McDonald’s for their next meal or dine-​out experi-
ence (Jargon, 2014a). In an effort to regain the millennials market, McDonald’s says
new items like its McWrap sandwiches –​chicken and vegetables rolled in tortillas –​
are helping to woo millennials. They are also trying to enhance its credibility with
the young customer by marketing more through digital channels and testing mobile
ordering and payment (Bertangnoli, 2014).

Kids and family

McDonald’s has been very predominant in its kids’ appeal. Kids and parents of
young kids have been heavily marketed with all the different toys and happy meal
with toy included promotions. However, in recent years this target market has also
been endangered by the millennial parents who are more health-​conscious and seek
fresher and better options when taking their kids out to eat. This mentality change
has driven McDonald’s sales to decline as well. By mid-​2014, families with a child aged
12 or under accounted for 14.6 percent of McDonald’s visitors, from 18.6 percent
in 2011, according to Technomic research on the composition of customers of the
nation’s 100 largest restaurant chains (Bertangnoli, 2014).
 Competitive analysis and positioning | 49

Students
McDonald’s has done a strong marketing campaign for students offering perks such
as being part of the restaurants with special discount cards for food (iConnect
Card) (ISSU, 2014), free Wi-​Fi, scholarships, internships, students’ business studies
(offering case studies and real business situations to be analyzed by the students
to provide a viable solution) (McDonald’s, n.d., 2010–​2015), and more. McDonald’s
advertises its free Wi-​Fi at over 11,500 participating restaurants. Now customers
can access the Internet using their mobile devices, laptops, or PDAs at no charge.
Many students with low-​income budgets can benefit from the whole dining experi-
ence at McDonald’s. They can enjoy an average/​low-​cost meal and work on their
school projects while dining at one of the participating establishments (McDonald’s,
2010–​2015).
With regards to the scholarships, the organization has been providing various
scholarships for aspiring college students and thus helping a number of students
in fulfilling their dreams. Apart from this its unique restaurant management cur-
riculum is also been recognized by the American Council on Education and thus
enlightening the career path of a number of students in the same field (Scholarship
Positions, 2011).

How does McDonald’s deliver customer value?

“You deserve a break,” “Feed your inner child.” This commitment of quality of food
and service in a clean, hygienic, and relaxing atmosphere has ensured that McDonald’s
maintains a positive relationship with its customers. “We remain focused on listening
to all of our customers and evolving our menus to meet their expectations and eating
habits,” Mr. Irwin says in an email. McDonald’s “takes our responsibility to children
and family very seriously, and we offer food choices that fit within a balanced diet”
(Bertangnoli, 2014). McDonald’s is responding to the evolving eating habits of its
customers and adjusting its menu options to offer healthier choices for the customers
it serves. The all-​day breakfast was another attempt to show value and to respond
to the many requests its customers have made throughout the years requesting
extended breakfast hours. However, was this enough? Many customers showed a
positive reaction to McDonald’s new all-​day breakfast as this new model was seen
as convenient to people that wanted to have a breakfast McMuffin past 10.30 a.m.
However, for true breakfast fanatics, the response was not the same (White, 2015).

Issues/​business performance
McDonald’s was having many issues with its business performance. In 2015 before
Easterbrook took over “Revenue fell 11% in the first quarter, as it experienced
across-​the-​board sales declines” (Gensler, 2015). In the first quarter of 2015 store
sales in the U.S. were down 2.6 percent. Some store sales in other regions such Asia,
Africa, Pacific, and the Middle East were down 8.3 percent for the quarter (Gensler,
2015). Shares had been “down 5% over the past 12 months” (Gensler, 2015). The
company was losing customers to fast food competitors and fast casual restaurants.
50 | Competitive analysis and positioning

McDonald’s growth had slowed. In the fourth quarter of 2014 stock closed
down 1.5 percent. In 2014, “revenue fell to $6.57 billion from $7.09 billion” (Horovitz,
2015). It will only open 1,000 new restaurants globally in 2015 compared to 1,300 the
previous year. “McDonald’s will cut its capital expenditures virtually in half in 2015,
investing about $1 billion compared with the $2 billion that it spent in 2014 (Horovitz,
2015). McDonald’s has always been perceived by consumers as having cheap inex-
pensive products and customers’ perception of cheap products is that they are low
quality. However, it had been trying to compete with fast casual restaurants by offering
higher-​priced items.

To increase profits and better compete with the likes of Starbucks, Panera Bread,
and Chipotle, McDonald’s is constantly trying to entice customers into spending
more on “gourmet” and “premium” options like espressos and McWraps. As a
result, service has slowed, lowering the value proposition at the same time, and
McDonald’s pricing doesn’t make sense to many customers.
(Tuttle, 2015)

Traditionally customers have gone to McDonald’s to get inexpensive food, with

quick service. The larger menu risked making wait times longer. By offering higher-​
priced options attempting to compete with other companies like Panera Bread,
Starbucks, and Dunkin’ Donuts McDonald’s was doing the opposite of its traditional
market and risked upsetting its traditional market segment. “When there are a bunch
of burgers for under $2 in the Dollar Menu & More section, it’s puzzling why anyone
would pay $5 or so for what seems like a very similar burger on the regular menu”
(Tuttle, 2015).
McDonald’s has also lost some of its traditional customers to competitors such
as Burger King and Wendy’s. Both companies offer similar products at similar prices
for breakfast, lunch, and dinner. Even with the new all-​day breakfast McDonald’s faces
competition from companies like Starbucks, Dunkin’ Donuts, and Panera Bread who
also offer all-​day breakfast. By adding all-​day breakfast, McDonald’s will have even
more menu items at once and risk making service even slower. It could also cause
problems for employees trying to adjust to the new routine. Will the McDonald’s all-​
day breakfast reverse the company’s declining sales? Or will it create more problems?

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