Fresh McDonald’s Burgers: a shift in competitive priorities
During this first half of the semester, we have spent time on many topics, but one that is very important is a company’s competitive priorities and how to stick to these or even improve them. From the start, we have used McDonald’s as an example of a company that stays true to its competitive priority of consistent quality. Over the past few years, Steve Easterbrook, a McDonald’s executive, has made many changes. The first was when we decided to get rid of the artificial preservatives in the McNuggets. This was a big change because McDonald’s was experiencing a lot of backlash when stories came out about their nuggets, so this change was almost necessary. Since then, the food chain has also rolled out new chicken fingers after experiencing supply issues in the past. But this new change might be the biggest of them all.
McDonald’s is now selling fresh beef in its Quarter Pounders. For a company that has prided itself on its burger sales ever since it was created, this is a big shift. Lower quality, frozen meat used to be the staple of the burgers, but now McDonald’s is clearly making a choice as a company to move towards higher quality. It started with the McNuggets and has now moved to the Quarter Pounders. While this switch in meat will not be an immediate process at all of the locations, McDonald’s will slowly be serving these new burgers on a few select sandwiches. This switch in beef turns McDonald’s into an even more direct competition with Wendy’s, which prides itself on serving never frozen patties.
With this change in meat, there also might be a change in competitive priority for McDonald’s. Consistency and speed will always important for the company, but now Top Quality needs to be talked about a little bit more. This is a big step for McDonald’s in increasing its food quality level.
Switching to never frozen beef also might shift a few of the other competitive priorities for McDonald’s. As the article talks about, suppliers had to make a large investment in order to make this switch which could in-turn potentially slightly raise cost of operations. This change does give McDonald’s more flexibility due to a slightly wider variety of burgers offered. Lastly, the competitive priority of Time poses a potential problem. Some franchisees are worried that drive-thru line will be slowed down since these new burgers are being cooked fresh when they are ordered. McDonald’s recognized this potential issue and made sure to pose solutions before the launch of the new patties. Other franchisees were worried about new processes and technology that came with the new patties, but some of the owners believe that this is just helping them stay ahead on the latest technology.
With this new release, do you see any other shifts in competitive priorities that McDonald’s might be signaling?
Do you think it was a good idea for McDonald’s to make this shift to selling some fresh beef?
https://www.nbcnews.com/business/business-news/mcdonald-s-goes-frozen-fresh-its-quarter-pounder-burgers-n853986
Matt,
I have attached an article outlining the competitive strategy of McDonalds from about a year ago. You might find it interesting to compare their current strategy to their strategy in the not too distant past. Fast, efficient, cheap, consistent, and universality were the main drivers in their competitive strategy. Giving the rising fad of healthy eating in America and the rest of the globe, it was essential for them to adjust their strategy given McDonalds poor reputation for having unhealthy, processed foods.
McDonald’s has exerted a great amount of resources and sacrificed more money to spend on the quality of their food to fix this reputation. This is a great real life example of the concepts we have been learning about Supply Chain Management. Your competitive priorities must meet both your corporate strategy, but also the current market place.
Source: https://research-methodology.net/mcdonalds-business-strategy/
I have attached an article outlining the competitive strategy of McDonalds from about a year ago. You might find it interesting to compare their current strategy to their strategy in the not too distant past. Fast, efficient, cheap, consistent, and universality were the main drivers in their competitive strategy. Giving the rising fad of healthy eating in America and the rest of the globe, it was essential for them to adjust their strategy given McDonalds poor reputation for having unhealthy, processed foods.
McDonald’s has exerted a great amount of resources and sacrificed more money to spend on the quality of their food to fix this reputation. This is a great real life example of the concepts we have been learning about Supply Chain Management. Your competitive priorities must meet both your corporate strategy, but also the current market place.
Source: https://research-methodology.net/mcdonalds-business-strategy/
Matt,
McDonald’s is known for its consistent quality, not for its top quality. With this transition to “fresh beef”, McDonald’s may be trying to change competitive priorities. Which is a logical course of action to take because of society’s focus on healthier foods and general well-being.
Switching competitive priorities may anger a lot of people. People that already dine at McDonald’s may not place a whole lot of emphasis on health. It is a quick, cheap meal that always delivers the same product every time. A change in the quality (even if it is for the better) could affect the number of consumers. McDonalds may be losing customers because of this switch. Consumers know that there are healthier food options out there. This is similar to when Coca-Cola launched “New Coke” back in the 1980s. Coca-Cola was a well-established brand but decided to launch a new product in response to Pepsi’s advancement in the cola market. There was initial acceptance, but that acceptance later turned into resentment. A few months later, Coca-Cola reverted back to the original formula and had more sales than New Coke and Pepsi. Coke failed to consider the reaction consumers had that were alienated by the new formula. McDonald’s is in a tricky situation here. Because they are such a well-known brand, it may be the wrong move to change what always has worked. Another problem that was mentioned was the possibility of the competitive priority of time being affected. Fresh patties would require more cooking time. McDonald’s is known for their ability to serve food fast which is a reason some people choose McDonald’s.
On the other hand, a shift towards higher quality may be the right decision. Our society and culture is shifting towards eating healthier and better. It is a gamble, but Mcdonald’s may be making the right call.
Matt, I feel as if we discuss McDonald’s a whole heck of a lot in this class. Perhaps this is because they do so much in the area of operations management that it comes naturally to break down their processes and look at them in an operational sense. I wanted to look further into McDonald’s recent transition to fresh beef, and I came across an article from Forbes that outlines some of the potential areas that may trouble McDonald’s in their transition to fresh beef. The primary motive here for McDonald’s is indeed to appeal to a consumer base who desires less-processed food. This move has been in the works for four years now, and now 3,500 restaurants are serving fresh beef. However, the fresh beef is not included in all products on the menu. Fresh beef is only available on McDonald’s select burgers and the quarter pounder sandwiches. This may impact McDonald’s consistency competitive priority is the firm is not careful. The Forbes article states that McDonald’s is being unpredictable and is sending mixed messages to its consumers. It will be interesting to see where the company goes. I like that we discuss competitive priorities within McDonald’s because it seems as if this is the foundation for which operational decisions are made. Thanks, Matt! Here is the link so anyone else can go read the Forbes article about McDonald’s: https://www.forbes.com/sites/michelinemaynard/2018/03/06/mcdonalds-unpredictability-goes-on-with-fresh-beef-for-quarter-pounders-no-switch-for-big-macs/#b9e0f14764fd
Matt,
Your post offers a good opportunity to revisit some of the early class material in an effort to understand this radical change in McDonald’s operations, competitive priorities, and overall strategy.
In the first class discussion, we discussed where SC/Operations functions fit into a business. In the simplest sense, businesses take inputs, create outputs, sell those outputs to generate revenue, and finally they use revenue to purchase more inputs and the cycle continues. The three primary functions that drive that cycle are operations, marketing, and finance. At the core of a business sits the company’s strategy which drives the decision-making in the finance, operations, and marketing functions (Competing with Operations Presentation, Slide 14).
Supply Chain and Operations sits in a unique position between the financial and marketing functions of a business. As a result, Operations deals with a significant amount of information flow coming from these two sides. It is integral that operational strategy actively listens to and acts on the information that flows to a firm’s operations function.
With this framework in mind, let’s take a look at some of the information that has been flowing into the operational function of MCD’s business recently.
Financial Information:
– After steadily increasing revenue every year from 2005 to 2013 (with a slight dip in 2009, likely attributed to the financial crisis), revenue has decreased steadily every year since 2014. (Source: Statista https://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/)
– This decline in growth has occurred in everyone of MCD’s markets, including its leading international markets and high growth markets. (Source: Statista: https://www.statista.com/statistics/219453/revenue-of-the-mcdonalds-corporation-by-geographic-region/)
Marketing
– Channels of distribution: This decline in revenue from 2013-2017 persists despite the continued increase in MCD locations over the same time period (Source: Statista: https://www.statista.com/statistics/219454/mcdonalds-restaurants-worldwide/)
– Marketing costs: Advertising spend has declined significantly since 2013. This decline is likely contributed to (1) declining revenues and effort to cut costs, and (2) the rise of digital media as a widely acknowledged, effective, and viable means of advertising (Source: Statista: https://www.statista.com/statistics/286541/mcdonald-s-advertising-spending-worldwide/
– Consumer satisfaction: Perhaps most the most important information flow has been that MCD’s ACSI score (a measure of consumer satisfaction) has declined sharply since reaching a high of 73 in 2013. Although MCD’s ASCI score is currently at 69, a modest rise since it bottomed out in 2015 at 67, the message is clear: American consumers are less satisfied with MCD than they have been in the past. The corresponding drop in worldwide and US revenues, suggests that declining consumer satisfaction may be the main culprit in MCD’s declining revenues. (Source: ASCI)
Knowing this information, it is not surprising that MCD executives have taken steps to rejuvenate the firm. Although MCD consistency of quality is an operational feat, the firm’s competitive quality of low cost places a ceiling on the quality of the food. This lower quality is at odds with the movement toward healthier options in the food industry gaining more and more steam each year. This point is highlighted by a statistic from a recent Business Insider article that cites a Deloitte study that 83% of Americans say that traditional fast food menus are not healthy enough (Source: Business Insider: http://www.businessinsider.com/future-of-fast-food-healthy-affordable-2017-11). The information flows from finance and marketing have highlighted a need to change the firm’s competitive priorities to encompass a higher quality product. This change starts with MCD’s operations and supply chain function. Operations leaders will have to answer many questions in their implementation of this new strategy (such as: Will MCD need new suppliers? Will they have to have more suppliers in local markets since they will not be serving frozen patties? How will they transport and distribute this new product? Will MCD be able to continue their competitive priority of speed if these patties take a longer time to cook?). This will be an interesting case to follow in the coming months.
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Matt,
It is important for a company to stay true to their competitive priorities and improve their priorities in order to maintain customer satisfaction. The four main competitive priorities we discussed in class were: time, quality, time, and flexibility. McDonald’s was the prime example of a company that executes consistent quality. McDonald’s is known to have standardized work methods, employee training procedures, and purchasing practices of raw materials. This standardization across all of their storefronts no matter their location has allowed McDonald’s to achieve consistent product quality across their worldwide restaurants. Additionally, McDonald’s is known to use a production line method in the kitchen allowing them to produce consistent mass quantities of their products.
McDonald’s is known as the original fast food restaurant. When people think of McDonald’s the thought of a Big Mac, French fries, Chicken McNuggets crosses their mind. In today’s society, those foods are considered unhealthy. In order for McDonald’s to compete with their competitors such as Wendy’s and their newer competitors such as Panera, they needed to make adjustments to their menu to make it healthier. McDonald’s began this adjustment by removing the artificial preservations in McNuggets. This change was also in response to the growing customer concern of what exactly is in McDonald’s chicken nuggets. At this time, McDonald’s experienced a decrease in sales as a result of the public’s health conscious eating shift. McDonald’s responded to the criticism of what they put in their nuggets with a video showing the production of their chicken nuggets. (Here, is a link to a CNBC report on McDonald’s response: https://www.youtube.com/watch?v=BJRsG2h3cfA.) McDonald’s response to the consumer criticism emphasizes the importance of customer satisfaction to a company and the impact of negative satisfaction can have on a company.
More recently, McDonald’s has been slowly implementing fresh beef in their quarter pounders. This allows McDonald’s to further compete with Wendy’s whose motto is “Fresh Never Frozen Beef”. This switch from frozen beef patties to fresh beef can signal a change in the competitive priorities of McDonald’s. It appears now that McDonald’s is shifting from lower quality to higher quality ingredients. However, this change can impact the competitive priority that McDonald’s is known for. McDonald’s is known for its consistent quality with a standardized production process. However; using fresh patties McDonald’s is changing the production process. Therefore, this could affect the consistency and speed of the products delivered to McDonald’s customers. These new patties could require McDonald’s to implement new work procedures and for employees to undergo additional training to learn the new standardized procedure. Lastly, this change could affect the response or delivery time aspect of McDonald’s since the fresh patties are prepared fresh while the frozen patties are prepared in a production line.
Erin,
Like you mentioned in your comment, it is extremely important for a company to hold true to and follow the competitive priorities that they have set for themselves. McDonald’s currently finds themselves in a unique situation as they are trying to hold true to their priority of consistent quality while also innovating and adapting to a changing market. McDonald’s must make changes in their current menu (removing artificial additives in the Chicken McNuggets, using fresh beef patties) in order to keep up with the trend towards healthier options. However, this could also hinder McDonald’s ability to maintain a consistent quality among their products. It will be interesting to see how McDonald’s phases these changes into their stores and if changes to the production line will need to be made or if there will need to be additional training.
Lily,
I agree with what you are saying. McDonalds is the go-to fast food chain for cheap, consistent food, and it is true that if they do not adapt to the health-conscious trends they are going to face major consequences. The new menu additions—like fresh beef and non-artificial chicken nuggets—are just some of the changes they have made in becoming a healthier option. In fact, an article I found states that McDonalds is the top buyer of apples in the country. However, I think that they face a much bigger obstacle that fresh beef patties are not going to be able to fix. By nature, McDonalds is an unhealthy option and has the perception of not being good for you–think “Super Size Me”. Year after year we are becoming more health conscious country, so people are tending to go to their competitors who have healthier menus. Because of this, I’m not sure if gambling with the consistency McDonald’s is known and loved for is the best option. It is good that they are trying to improve their quality–but at what cost?
http://www.dividend.com/news/2017/09/06/mcdonalds-fast-food-in-health-conscious-world/
Caroline,
I agree that this change towards fresh beef – and a slow change, according to Matt’s analysis – could be detrimental to their brand. They are known for a consistent quality. If they are implementing a slow change, then going to different locations may mean getting inconsistent products. This can cause them to lose their incredibly loyal, regular customers. According the foodandwine.com, McDonald’s customers are actually more loyal than Starbuck’s customers, which is saying a lot! Because of their strong connection and loyalty to the brand, disrupting their consistent quality product(s) can ruin this loyal relationship, which is incredibly difficult to rebuild.
http://www.foodandwine.com/news/mcdonalds-customer-loyalty-starbucks
Here is the reference associated with my previous comment:
http://www.businessinsider.com/wendys-anti-mcdonalds-fresh-beef-campaign-could-backfire-2018-2
Hey Matt,
This is a great find with an article and it is very interesting to see that McDonald’s now going to start offering fresh, never-frozen beef. Earlier in the semester, I remember reading a blog post about McDonald’s and somebody said that it would not be beneficial for McDonald’s to make this switch because they would almost be ignoring some of the qualities that made them so successful to begin with: cheap, fast, and consistent quality. With this shift, it will be interesting to see the increase to customer wait times and menu prices. Despite these negatives, I think this shift is very beneficial for McDonald’s as it will help them compete with other restaurants in a society that is starting to grow increasingly health conscious. This shift will also strengthen their image as McDonald’s is currently viewed as the “unhealthy” food option. By adding fresher options, maybe McDonald’s can steal some of the market share back from the restaurants that offered fresh products. I even read an article that seems to agree with this. The article mentions a Wendy’s Super Bowl ad which slammed McDonald’s for using frozen beef in their burgers. However, as the article mentions, McDonald’s actually did offer a fresh beef quarter pounder at the time of the Super Bowl ad. This false claim by Wendy’s actually generated a lot of extra publicity for McDonald’s, leading to increased business for McDonald’s. In the article, an anonymous source said, “All I can say, if Wendy’s knew how well the fresh quarter pounder beef was doing at $MCD (and taking business away from competitors) they would steer clear of any reference of it.”