MCDONALD’S CASE

McDonald’s
 
• From an article authored by Phil Wahba published May 04, 2015 at Fortune.com.
• McDonald's laid out on Monday the broad outline for its strategy to shake off years of underwhelming results and stem an accelerating exodus of its
customers: Get a higher percentage of its restaurants owned by franchisees and reorganize its structure.The fast food giant's new CEO, Steve
Easterbrook, acknowledged that the company has been bogged down by a cumbersome structure and too much bureaucracy that is making it slow to
adapt to big changes, like customers gravitating to what they perceive as healthier fare. It also has been grappling with a poor perception of its food
quality and customer service.
• "The reality is, our recent performance has been poor. The numbers don't lie," Easterbrook said, recognizing that McDonald's has been asleep at the
wheel as rivals from Wendy's to Starbucks to Chipotle Mexican Grill have stolen away customers. Last month, McDonald's reported an 11% decrease in
revenue and a 30% drop in profit for the first three months of the year, and announced hundreds of store closings. McDonald's has been trying to fix its
problems, which have been particularly acute in the U.S., a market that generates 40% of its profit. There, it has simplified a menu that had grown
bloated and slowed down service, and it is testing all-day breakfast. Additionally, it is implementing new drive-thru menu boards that Easterbrook said
would reduce errors in orders.
• Easterbrook, who took the helm in March and is widely praised for his turnaround of the McDonald's U.K. business, announced a reorganization that
would lump McDonald's markets together into groups organized by business similarities. The U.S. market will continue to be led by Mike Andres.
Important international markets like Australia, Canada, France, Germany and the United Kingdom will be in one group, led by Doug Goare, current
president of McDonald's Europe. The idea is that what McDonald's is doing in Australia with its new restaurant formats, or the high-touch service at
McDonald's locations in France, can be used in restaurants in every other market in their group. Another group will lump in fast-growing markets like
China, Italy, Poland, Russia, South Korea, Spain, Switzerland and the Netherlands, and will be led by Dave Hoffman, now president of McDonald’s
APMEA (Asia, Pacific, Middle East and Africa) unit. A fourth will be the “foundational markets” that combine the rest of the countries where
McDonald’s operates. It will be run by Ian Borden, currently APMEA’s chief financial officer.
• The company is also speeding up its efforts to sell corporate-owned restaurants to franchisees. It wants 90% of its restaurants globally to be franchised
by 2018, up from 81% now, bucking an industrywide trend. Easterbrook said the benefit of more franchise-owned restaurants was that it provides
McDonald's with a more stable and predictable cash flow all while shifting risk to local franchise owners. While more details of the turnaround strategy
are yet to come, Easterbrook recognized the urgency to get McDonald's house in order, and he stated that his immediate priority for the restructured
business is growth in McDonald’s largest markets.
QUESTION 1

Chapter 6
• Easterbrook’s plan for McDonald’s new structure is best
characterized as:
a) Domestically-oriented Structure
b) Global Product Structure
c) Global Geographic Structure
d) Global Matrix Structure
QUESTION 2

Chapter 6
• Easterbrook appears to be continuing to use a strategy where
product design and marketing are tailored to the specific needs of
each country, otherwise known as:
a) Globalization strategy
b) Global responsiveness strategy
c) Localization strategy
d) Multidomestic strategy
QUESTION 3

Chapter 6
• The main advantage of the reorganization proposed by Easterbrook
is to “lump McDonald's markets together into groups organized by
business similarities.” Thus, he appears to be trying to capitalize on:
a) Low-cost factors of production
b) Economies of scope
c) Increased differentiation
d) Economies of scale
QUESTION 4

Chapter 4
• The plan to sell more corporate-owned restaurants to franchisees
is an example of reducing environmental uncertainty by:
a) Changing domain
b) Establishing favourable linkages
c) Decentralizing decision making
d) Increasing differentiation
QUESTION 5

Chapter 5
• McDonald’s has lost customers to restaurants that have been able to
find a niche in the fast food market with products that appeal to
customers looking for something that appears to be high-quality and
fresh. These shifts in the fast-food industry are best explained by:
a) Population ecology
b) Stages of international evolution
c) Coercive forces
d) Low-cost factors of production
QUESTION 6

Chapter 10
• Given the structural change proposed by Easterbrook, which of the
following theories should be applied to guide the implementation?
a) Dual-core approach
b) Horizontal coordination model
c) Organic management processes
d) Switching structures
QUESTION 7

Chapter 8
• To improve performance in the U.S. market, McDonald’s decided to
remove a layer of management above the head of the U.S. operations
and scale back oversight of its U.S. restaurants. In making these
changes, McDonald’s is trying to:
a) Reduce bureaucracy and speed up decision making
b) Increase market control and reduce bureaucratic control
c) Decrease formalization and increase bureaucracy
d) Decrease centralization and increase formalization
QUESTION 8

• The case states that McDonald’s was “bogged down by a

cumbersome structure and too much bureaucracy that is making it
slow to adapt to big changes” which suggests:
a) McDonald’s needs more centralized decision making
b) McDonald’s structure was not aligned with the level of environmental
uncertainty
c) McDonald’s was in the fifth stage of organizational decline
d) McDonald’s needs to reduce resource dependence
QUESTION 9

Chapter 8
• When Easterbrook took over, McDonald’s appeared to be facing
which life cycle crisis?
• Need for leadership
• Need for delegation with control
• Need for revitalization
• Need for elaboration
QUESTION 10

Chapter 6
• Which new or proposed change at McDonald’s is aimed directly at
meeting the global challenge of needing to coordinate and transfer
knowledge and innovation across different units?
a) New simplified menu
b) Selling corporate-owned restaurants to franchisees
c) Grouping markets by business similarities
d) Hiring Easterbrook, who had successfully turned around the McDonald’s UK
business
QUESTION 11
Chapter 9 Ethics
• In November 2019, Easterbrook was fired after the board learned that he had engaged in an
inappropriate relationship with an employee, which is against company policy. Then, several
months later, an anonymous letter sent to the board indicated that Easterbrook had had several
other inappropriate relationships, and now the company is suing Easterbrook for not being more
forthcoming when he was fired (and given a multi-million dollar payout).
• Which of the following might have helped McDonald’s avoid this situation?
a) Code of ethics
b) Chief ethics officer
c) Ethics hotline
d) External stakeholders
QUESTION 12

Chapter 9 Ethics
• If Easterbrook is the only current or former McDonald’s employee to engage
in inappropriate relationships, it would suggest that the unethical behaviour
was likely the result of which factor from the ethical decision making model?
a) Personal ethics
b) Organizational culture
c) Organizational systems
d) External stakeholders
QUESTION 13

• According to the myths discussed in the article by Amis, Mair, & Munir,
someone who believes the myth that organizational practices are based on
meritocracy might be likely to believe that the lower average revenue and
lower performance ratings of Black-owned restaurants are the result of:
a) Discriminatory practices by McDonald’s corporate offices
b) Overall sales declining across all McDonald’s restaurants
c) Black franchisees being less effective business owners
d) White franchisees getting lucky with more lucrative locations