Explain how McDonalds lost their way internationally and how they were able to reenergize their organization. Before 2003 McDonalds was driven by building the number of stores and driving sales by expanding the number of stores. On 2003 their new direction was to enhance the experience at the store level and drive sales at existing stores. They wanted to increase the number of visits to the store by the same individual. They wanted to be bigger by being better. They decide to pursue improved profitability by revitalizing the brand!
McDonald’s sales were in decline, market share was shrinking,
franchisees were frustrated, employee morale was low, and customer
satisfaction was even lower.3 The loss column was full.
The brand had
been declining slowly, painfully, and publicly for some time. The simplest analysis of what went wrong is that McDonald’s violated the
three brand-building basics for enduring profitable growth:
McDonald’s failed to continuously improve its brand experience by ignoring these three criticalities: renovation, innovation, and marketing. McDonald’s focused on cost reduction instead of quality growth of the top line.
When the image of the brand was deteriorating, instead of investing in brand experience renovations and innovations, McDonald’s focused on monthly promotions rather than on brand building. Instead of brand building marketing communications, the focus was on monthly promotional tactics designed to drive short-term sales at the expense of brand equity. One member of my global team called this the “fireworks” approach to marketing: big bursts of activities that dissipated quickly.
As a result, between 1997 and 2002, we witnessed the sad decline of a mismanaged and mismarketed brand. The brand misery was played out in the press. One analyst saw a faltering brand that was lacking in food quality, pleasant service, and helpful employees. Mark Kalinowski at Salomon Smith Barney was highly critical of the management of the McDonald’s brand, and in response to management’s briefing on revamping the exteriors of the restaurants, he said, “Having a better looking building does nothing to fix rude service, slow service, or inaccurate order fulfillment.”[8
As same-store sales declined, McDonald’s focused on building new stores as the primary growth strategy. Instead of increasing the number of customers visiting existing stores, McDonald’s focused on increasing the number of stores. The major strategic road to growth was to open new restaurants, open new countries, and generate traffic with the fireworks of monthly tactical promotions and price deals. At an analysts briefing, Michael Quinlan, then chairman and CEO, said in January 1998, “You can look for about 2,200 worldwide and maybe 350 net new restaurants in the US…” as restaurant expansion plans for 1998 are likely to replicate last year’s. This projected rate of expansion is approximately equivalent to a new store opening every four hours.
There are consequences to overzealous expansion as a growth strategy. It was not possible to properly staff and train people to provide a quality McDonald’s experience at this rate of store openings. Service suffered because people had to be trained too quickly. The focus changes to efficiency at the expense of effectiveness. You lose your connection to your core promise as you race to ribbon-cuttings
Three Pillars of the Plan to Win
- Brand direction
- Freedom within a framework
- Measurable milestones
The Plan to Win is designed to guide brand thinking, the setting of priorities, and the development of a viable and feasible action plan. It is a business concept, crossing functions and geographies and organizational boundaries. It is the most powerful tool in a manager’s toolbox. It affects every aspect of the business. The Plan to Win has four goals at its base:
- Attract more customers.
- Convince customers to purchase more often.
- Increase brand loyalty.
- Become more profitable.
In other words, more customers, more often, more brand loyalty, more profitable; these are the bottom-line goals for brand revitalization.
Four Goals of the Plan to Win
- More customers
- More often
- More brand loyalty
- More profitable
The Plan to Win is based on a disciplined thought process we call the Eight Ps. The Eight Ps of the Plan to Win represent eight critical areas for brand and business success: Purpose, Promise, People, Product, Place, Price, Promotion, and Performance.
Eight Ps of the Plan to Win
Purpose and Promise define the brand direction. The brand purpose defines the overarching mission of the brand, and the brand promise is the contract with our customers. It is a promise that if you buy this brand, you will get this experience. A brand promise answers the question “what kind of brand experience do we wish to promise and deliver to every customer every time?”
The final P in the Plan to Win is Performance. Performance is the definition of the measurable milestones to assess our progress in brand revitalization.
The Five Action Ps
What are the actions we will take to achieve the measurable milestones? This brings us to the five action Ps: People, Product, Place, Price, and Promotion.
Delivering the brand promise is not determined by good intentions. It is accomplished by the actions we take. The five action Ps define how we plan to achieve the bottom-line goals of more customers, more often, more brand loyalty, and more profit. How we expect to deliver our promise across each of the five action Ps (people, product, place, price, and promotion) is articulated in the Plan to Win.
The details of the Plan to Win are discussed in Chapter 9, “Realizing Global Alignment: Creating a Plan to Win.” The Plan to Win is a brand action blueprint. Adhering to the Plan to Win is critical for building brand revitalization.
Rule #1: Refocus the Organization
In revitalizing the McDonald’s brand, we not only had principles, we also had rules-based practices. Underlying the rules and the rules-based practices is the Plan to Win.
Refocusing the organization around common goals is the first step in creating a Plan to Win. What are our common goals? What is our common brand purpose?
To refocus the organization means moving from a provider mindset to a customer mindset. A provider mindset states: “How do we profitably sell what we know how to provide?” But a customer mindset means focusing on, “How do we profitably provide what we know our customers will want?”
It may sound trite, but it is true: The customer is the boss, and we must figure out the best way to please the boss. It is all about how we market to the boss. Or, as Phil Kotler and Gary Armstrong define marketing, it is all about satisfying customer needs profitably.
 Kotler, Philip, and Armstrong, Gary, Principles of Marketing, 9th edition, NJ: Pearson/Prentice Hall, 2001.
Refocusing the Organization: The Practices
Refocusing the organization requires a total commitment to four actions:
- Explain brand purpose and goals
- Exercise financial discipline
- Enforce operational excellence
- Employ leadership marketing
Rule #2: Restore Brand Relevance
The second P in our Plan to Win focuses on ensuring the relevant differentiation of the brand promise. Where the first P—the brand purpose—provides an inspiring sense of corporate mission for the whole organization, the brand promise is an articulation of the relevant and differentiating experience that the brand will deliver to every customer, every time, everywhere so that we can make progress toward achieving the stated purpose.
How we define the brand promise is critical. Needs-based market segmentation is an important first step. It is also important to collect and synthesize the various opinions, views, and visions of people at all levels of the organization including the top management team.
Restoring Relevance: The Practices
Four things that must be accomplished to restore relevance:
- Develop a thorough knowledge of the market
- Adopt needs-based market segmentation
- Create customer insight
- Define the brand promise
Chapter 4, “Rule #2: Restore Brand Relevance,” also discusses the use of the brand pyramid—the Arcature approach for helping to define the brand promise.
|Question 1 of 5
Once a domestic business strategy is created, why should a business plan be created that is focused entirely on the Global Market? The student should understand the complexity of the foreign market and the huge opportunities that exist to further drive their product and brand. The international corporation must have a clear corporate objective and direction that should closely align to the corporate goals and objectives. While the execution will vary by market, the basic strategy of the firm and identity needs to be established, understood, and communicated.
When writing a business plan, what are the potential audiences that you should address and how would you adapt your business plan to each of the audiences? Students should understand that there is the board of directors who will scrutinize the plan. The board must be able to understand the plan and that the plan has a high probability of success. Internal marketing, salesmen, operational people, etc, must all understand the program so there is a clear corporate direction that the organization is pursuing. The investment community must understand the plan and have confidence in management’s capability to execute the program. The plan should align with your customers’ needs and wants. The plan must be able to address the different countries and cultures that the firm will be competing in and must be flexible enough to address the uniqueness of the international market. Finally, the shareholders need to know you have a clear and concise business strategy that will maximize the long term success of your corporation.
|Question 3 of 5
Identify the 6 Rules for Market Revitalization and how they are critical when competing in the global market. Branding is not the same as advertising. It is a promise that when you buy a product in the international market you will get and have an experience. A brand is a promise versus the actual deliverable which is a product or service. This is its international identity and its commitment to deliver on its promise. Rule 1 Refocus the organization Rule 2 Restore brand relevance Rule 3 Reinvent the brand experience Rule 4 Reinforce a results culture Rule 5 Build brand trust. Rule 6 Realize global alignments Detailing these initiatives and how they are absolutely critical in establishing a solid international plan that will be successful.
Why are operational processes so important when trying to execute your strategic global business plan? Once a solid plan and strategy is established it really is up to the operational and technical people to establish a plan that can allow the rest of the organization to execute on their established initiatives. The operation plan must be achievable, understood and followed. Where a country may have some barriers to entry the team must establish processes to overcome the local issues. A detailed plan that addresses issues that may occur is absolutely necessary. Part of the plan is coordinating your deliverables with your sales and marketing team in order to insure the promises to the customer from the brand are achieved.