Page 394 - Introduction to Business

368 PART 3 Marketing

Case in Point

McDonald’s Good at Distribution—But Problems Elsewhere

Although Jim Cantalupo had retired as and they have some competition, they are not as
chairperson and CEO of McDonald’s in good at generating sales gains per store. That is
2001 after 26 years of service, he was Wendy’s territory.” Increased fast-food competition, a
reappointed to the top spot in December 2002. The lack of innovation, and poor marketing have been
main reason for his return was to help the company cited by other analysts as reasons for McDonald’s
deal with a plague of recent problems. declining performance.
McDonald’s lost $344 million in the last quarter In an effort to deal with McDonald’s problems,
of 2002—the first time since its first year of opera- Cantalupo has put into play a number of strategies.
tion, 1965, that it had suffered a loss. Its return on • New products, such as the Grilled Chicken Flat-
capital and revenue growth were declining. During bread and different salads with Newman’s Own
2002, same-store sales in the United States dressings, are offered.
dropped every month; they had been stagnant for • A system for grading the performance of all 13,000
10 years. On a measure of customer satisfaction U.S. restaurants will be introduced.
developed by the University of Michigan, • The number of new store openings will be reduced.
McDonald’s brought up the rear in the fast-food • 700 underperforming stores will be closed.
industry and even ranked below airlines and the • Getting more people into existing stores will be
IRS. The company’s value has dropped $20 billion; emphasized.
the stock fell to a ten-year low at $14; and its last • Simplification of operations, eliminating some
new product success, Chicken McNuggets, was menu items, reducing the number of value meals,
twenty years ago. and paring the number of shelf-keeping units in the
Unlike most fast-food firms, McDonald’s empha- kitchens, will be employed in an effort to improve
sizes the real estate side of its operations. It owns the the level of customer service.
land and buildings of many of its franchise opera-
Source: Grainger David, “Can McDonald’s Cook Again?” Fortune,
tions. Thus it collects rent, which accounts for about
April 14, 2003, pp. 120–129.
10 percent of its annual revenues.
Anice Meyer, a restaurant sector analyst at Credit
Questions
Suisse First Boston, has covered McDonald’s for a
decade. She believes that “McDonald’s knows infra- 1. Do you agree with McDonald’s decision to rehire
structure. They are excellent at building supply lines Cantalupo?
and they are excellent at picking locations—building 2. Do you believe his recommended strategies will
stores here and overseas. The system is flawless. pay off?
Once they become penetrated and mature, however, 3. What else should Cantalupo do?

customs in both the United States and the foreign country, negotiate storage arrange-
ments, and most importantly, take care of all the confusing and time-consuming doc-
umentation (paperwork) needed to complete an international shipment.

Careers in Promotion

Advertising managers are responsible for their companies’ advertising programs.
They direct and coordinate the activities of the other advertising specialists, decide
on the size of the advertising budget, choose the ads to be used and the media
where they will appear, and select which advertising agency, if any, is to be used.
Copywriters write the ads to be used. Artists and layout directors select photos,

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