The Change That the Company McDonalds Needs, Essay Example

Abstract

This paper discusses the change that the company McDonalds needs to undergo to get its market and profit share back. In order to do successfully suggest the changes that the company has to undergo, this paper uses the Kotter’s 8-step approach to effect a positive transformation in the organization.

Introduction

In the world of business, there is not a single company that succeed without undergoing positive transformation at least once in about 5 years. This is due to the fact that the business industry is an ever changing industry. What could be a trend today might not be a trend tomorrow or in a few months. In this regard, there is a need for a constant change, reforms and reviews at least quarterly to ensure that these companies are on their right track and direction for profitability and marketability. It has to be remembered that change is the only constant thing in the world. Thousands of companies (both bigtime and small time players) have undergone transformation for the purpose of bettering themselves and to get even a one-step lead over their competitors. This does not apply just to the companies or organizations that are struggling to make money or are scraping the bottom of the barrel. Change is also being utilized by successful companies. However, change is more warranted by companies who are struggling to gain a profitable market share or to those who have gained their market share and due to external and internal variables have lost or are losing their share of market or profit.

It is in the aforementioned reasons that change should be implemented and should be understood. This is due to the fact that the economy is unpredictable in the same manner that consumers’ tastes and preferences likewise change. Companies need to change alongside its customers to ensure that they can maintain their clientele and gain some more. Without change, there will be a clear failure in terms of management. But then again, it is important to note that not all changes are good. Therefore, in order to effectively change and transform an organization or a company, management always turn to the utilization of Kotter’s 8-step approach to change for guidance and to ensure that right transformation is on its way.

Company Overview

McDonalds is one of the most successful and profitable fast food chain in the whole world with more than 35,000 franchises and restaurants from the United States of America and all the way to the Philippines. As a matter of fact, it is said that McDonalds can be found in over 100 countries and serving over 70 million customers worldwide on a daily basis. In 2014, McDonalds acquired 17% of the fast food chain market in the United States alone. However, the competition is not very far off. Its biggest competitor is the Yum brands that are comprised of Kentucky Fried Chicken, Pizza Hut and Taco Bell and these brands gained 11% of the market share.  McDonalds is known for its food services and known for its French fries, Bic Mac and other sandwiches. The company also serves ice cream, beverages (hot drinks, pop and juices), and even salads and wraps. It is important to note that McDonalds offers foods that are local to the country where it operates. In the Philippines, McDonalds have rice and chicken meals combinations and also offers their fries and their burgers. In China, they are serving (for a limited period of time) a black and white burger; and in India, McDonalds are serving veggie pizza. Recently, they started serving gazpacho in Spain.

However, with the increasing competition among the fast food chain not just in the United States of America but in all over the world where McDonalds is operating, it cannot be denied that the company is taking a hit as well. As a matter of fact, it is found out that the company is losing some of its market and profit shares in favor of its competitors Chipotle Mexican Grill and Yum Brands on a monthly basis. McDonalds is hoping that is could get its mojo back but to no avail. Many of its food chains in the United States are closing while the entire corporation is losing money.

Diagnosis

Market and economy observers have revealed that McDonalds has been losing money over the past years. As a matter of fact, it was predicted that McDonalds will experience a drop in sales at about 1.7%. However, in May of 2015, McDonalds actually experienced a 2.2% drop in its sale. Clearly, McDonalds is losing its success streaks. This drop in sales is reflected by the decline of the number of people coming in to eat in the restaurants. The CEO of the company indicated that changes will be implemented in the company and these changes involved the reorganization of its management, cost-cutting and repaying cash to its valuable shareholders. However, there is a bigger problem than the management, cost and the company’s shareholders. The main problem of the company lies in its image.

It is a known fact that McDonalds’ foods are competitive in terms of its price and affordability. The strategy that is being employed by the company target the younger generation with only a little bit of money to spare to treat themselves to a McDonalds meal consisting of a drink, fries and a burger. This is where the problem started. Many people assume that the affordability of the food sacrifices the quality of the products. Not to mention that the society nowadays are choosing real food over McDonalds that are known to be using steroid-pumped beef and chicken for their burgers and other hormones that are bad for the people’s health but are good for the corporations pockets. A lot of people and movements are discouraging consumers to buy McDonalds products due to the aforementioned reasons. As a result, the company is continually losing its market shares and a lot of its stores are closing. It is imperative to note that the “go organic” movement is rising over the past year. With the growing strength of this movement, the sales of McDonalds are going down. Hence, change is very much needed.

Kotter’s 8 Step Approach

Establish a Sense of Urgency

The corporate management must hold a meeting with the board of directors regarding the financial situation of the company. The discussion must include the reasons why the sales are declining and why some of the stores are closing. A review of how the company performs in the market as well as its competitors must be included in the meeting as well. This is not going to be a one-time meeting as there are other preparations needed in order to ensure that the right strategy and team are developed to ensure success. After several meetings and reviews of the company, its performance, sales and its competitors, a proposal for change must be developed and presented to the board members and everyone involved in the decision-making process of the corporation. The reason why the changes and the proposal are necessary will be explained to the key players. In order to motivate and encourage a positive reception on the proposed changes, the potential benefits and results of the changes must be outlined as well and presented to the decision-makers. This includes the weighing of the risk and the benefits and comparing them to the present situation of McDonalds. Long-term benefits will be explained and elucidated to make sure that the decision-makers have a full grasped comprehension as to why there is a need for a change with how the business is being conducted (Kotter & Cohen, 2002).

Create a Guiding Coalition

The guiding coalition for the company should be focused on the development of a marketing and production team. This is due to the fact that the main strength of any business and company lies in its marketing, advertising and production teams. The marketing team will be responsible for the creation of the new image of the company. It cannot be denied that McDonalds’ reputation is tarnished and destroyed by the “go organic” movements and by the shifting of the consumers’ preferences to what is considered as real and healthy food. The production team will be the one responsible for making proposals as to what needs to be improved in the products and services of the company in order to gain back its market and profit share. In order to build the team, there is a need to hand pick the members of the team that have a proven reputation in marketing and production (Ulrich, 2005). This is crucial in the change process because the success is determined by how well the teams envision the change in the company and how they will be able to successfully present a new and improved McDonalds to the public.

Develop a Vision and Strategy

The main vision of the company is to destroy the bad reputation of the company. It has to be remembered that the company’s poor performance is not because it does not have proper management or good workers. The problem lies with the bad reputation and what would seem to be propaganda to destroy McDonalds.  The company’s food quality is being criticized in a regular manner. There is a need for the company to communicate this problem to the entire corporation not just the chains and restaurants that are located in the United States of America but as well as all the franchises in all across the globe. There is a need for a collaborative effort to support the brand and enhance the way people view the company from a negative perspective to a positive one. In addition, there is a need for the company to make sure that the whole corporation from the CEO to the cashiers of every franchise understand the need for a new image development and food production. The short-term as well as the long term benefits of the proposed change must be reiterated in order to embed the benefits of the change in the minds of the key players in the company. There is a need to understand why the change is required and the manner in which it will positively impact the business.

Communication of the Change Vision

In order to communicate the change vision of the company, there is a need to present the vision to the whole company in a plain and simple manner. The CEO of the company has stated that the company will be switching from steroid-pumped chickens and antibiotic treated cows to sourcing poultry that has minimal antibiotics. This is the most important change that the company can make since it is the consumers’ main problem with the brand. Hence, in order to communicate this vision to the entire company, verbal and non-verbal information must be disseminated. Meaning to say, the company can make posters and memorandums about the changes that should be done in the company. Communication plays an important role in the crucial time of transformation. Everybody must be on board. Analogy and examples will be used as well to ensure that the idea is properly interpreted. Moreover, the company must be open for suggestions and questions in order to remove any gray areas and misunderstanding regarding the proposed changes and transformation (Kotter, 1996).

Empower Broad-Based Action

Equally important to the creation of vision and communicating the same is the empowerment of broad-based action. It is imperative that the company opens a feedback communication system to allow the top level management to understand what the concerns of the bottom level management and workforce have in relation to the proposed changes or if there are any other suggestions. Hiring new leaders, training staffs and investing on new brand development are critical as well. There is a need for market survey and removal of any barriers to the success of the implementation of the changes.

Generate Short-Term Wins

It is important to make sure that the objectives and the vision of the company is attainable in a timely manner. The company has to plan a schedule targeting when and how the objectives are going to be met. It is likewise imperative that the timing and schedule of objectives are realistic in order not overwhelmed the organization and the staff. There is no need to rush into accomplishing a bigger end result. The phrase slowly but surely can be applied in this case. Meaning to say, there is no need to set an objective today and get it done to tomorrow. Although it is possible to some extent, the failure to do see that objective accomplished in a day will draw a big disappointment. Hence, the management must ensure that realistic timing is utilized and to celebrate the success for change and transformation every step of the way.

Never Let Up

Even if the McDonalds is seeing great and effective changes and transformation in the company, the management and the key players that initiated the change must keep the urgency level of the situation high. This is particularly true in the emerging food business where competition is very high. There is no room for errors. The management must constantly ask for feedback and review the changes and the strategies that are being implemented within the organization to effect the transformation. The review will help and aide the managers to get rid of strategies that are not working and to implement new ones that will bring sales up and gain market share. It cannot be denied that there is an importance to analyse the business processes and the strategies. This is to ensure effectiveness of the strategies and the proposed changes. It will be a trial and error until success is achieved. And even then, the expectation for changes and transformation is still heightened (Wood, 1998).

Anchor Change in the Organizational Culture

In order to effect change in the company, the management must make an overhaul of the values, ethics, and norms within the organization that support and strengthen the changes and the desired transformation. The promotions and advertisement of the company must contain the ethics of the company and what they stand for. The company values must be reflected through its entire workforce and align them to what the company wants to achieve in the industry. McDonalds must also align its products and service in line to what their customers look for to make sure that they keep their market share. This should be the culture of the company. They should also be customer-centric and take it as their priority to ensure that the customers are satisfied with their products and services. The change must be incorporated in the company. Everyone should understand the need for the change, how it will impact the company and how can it strengthen its market share.

Conclusion

With all the foregoing, it cannot be denied that McDonalds has a long way to go in changing how the world sees and views the company. McDonalds still has its potential to gain its market share back. The truth is even though the company is losing money in the United States of America, it still has valuable clientele in other parts of the world. It is still making money in a sense (Johnson, 2001). However, there is a need to mitigate the problem with its image so as not to lose the North American clientele. Change is highly due.

References

Johnson, G. (2001). Exploring Corporate Strategy. London: Prentice-Hall.

Kotter, J. (1996). Leading Change. Boston, Mass: Harvard Business School Press.

Kotter, J. & Cohen, D. (2002). The heart of change: Real life stories of how people change their organizations. Boston: Harvard Business School Press.

Ulrich, D (2005). The HR Value Proposition. Boston: Harvard Business School Press.

Wood, R. (1998). Competency-based recruitment and selection. Chichester, UK: Wiley.