McDonald’s is revamping its global strategy in hopes of stimulating sales and profits. Some of its planned changes are substantial.
In January 2017, McDonald’s announced that it was selling a majority stake in its Chinese business. Given the huge size of the Chinese market, this is a dramatic move. As reported by Sui-Lee Wee for the Irish Times:
“McDonald’s is to sell its businesses in mainland China and Hong Kong for $2.08 billion to Citic, a state-owned conglomerate, and the Carlyle Group, a private equity firm. The deal gives Citic and Carlyle franchise rights for 20 years. Citic and its investment arm, Citic Capital, will have a controlling stake of 52 per cent, while Carlyle will take 28 per cent. McDonald’s will retain the remaining fifth of the company. ‘China and Hong Kong represent an enormous growth opportunity for McDonald’s,’ Steve Easterbrook, McDonald’s chief executive, said in a news release. ‘This new partnership will combine one of the world’s most powerful brands and our unparalleled quality standards with partners who have an unmatched understanding of the local markets.’”
“McDonald’s opted for a franchise deal to save on investing and modernizing stores itself, according to Ben Cavender, a senior analyst at China Market Research, a consultancy based in Shanghai. ‘At the end of the day,they can be more profitable if they are asset light and make money off franchise fees and leave the heavy lifting to somebody else.’”
Click the image to read more about McDonald’s China shift.
Then, just a few days ago, the fast-food giant issued a major press release, “McDonald’s Unveils New Global Growth Plan.” Here are some highlights:
“The growth plan focuses on enhancing digital capabilities and the use of technology to dramatically elevate the customer experience; redefining customer convenience through delivery; accelerating deployment of ‘Experience of the Future’ restaurants in the U.S.; initiating a new 3-year target for cash return to shareholders; and establishing new financial targets for sales, operating margin, earnings per share, and return on incremental invested capital.”
“The strategy connects key tenets of the brand to well-defined customer groups built around three pillars: (1) Retaining existing customers by fortifying and extending our areas of strength. Through a renewed focus on areas such as family occasions and food-led breakfast and transforming the experience in our restaurants, McDonald’s will build on the strong foothold it has and grow the core of the business. (2) Regaining customers lost to other QSR [quick-service restaurants] competitors. As customers’ expectations increased, McDonald’s simply didn’t keep pace with them. Making meaningful improvements in quality, convenience, and value will win back some of McDonald’s best customers. (3) “Converting casual customers to committed customers by being more present in underdeveloped categories and occasions and competing more aggressively given the untapped demand for McCafé coffee and other snack offerings.”
Click the image to read A LOT MORE, and see how honest McDonald’s is in assessing itself — a rarity for firm in a public press release!