McDonald's has not only succeeded in the face of a recession and a highly competitive market, the company also continues to be at the forefront of campaigns focused on food health issues, environmental concerns and anti-globalisation protests.
Many companies would have crumbled in the face of such hostility but it seems to have spurred the company onto greater and greater success.
There are three factors underpinning its impressive performance:
- Operating Excellence. The whole organisation, from the CEO down, is obsessed with the McDonald's system (which integrates franchise owners, suppliers and employees) and ensuring that the business continues to function efficiently and effectively. As the McDonald's insiders would say they "keep their eyes on the fries!"
- Distinctiveness. It is not enough simply to be focused -- McDonald's is also distinctive. It has huge brand awareness (it was the first brand my two-year old son noticed, for instance) and a clear customer offer. It targets its offer and its communication on customer groups who will react most positively - in the UK these are young families and young men.
- Agility. As the tastes and requirements of its core market has evolved, McDonald's' managers have been willing and able to refine the proposition. Eighty percent of business may still come from the core ranges -- Big Macs, Quarter-Pounders and fries, but McDonald's now offers salads, higher-quality coffee and new types of sandwiches -- all of which are delivered within its value-focused system. The company also allows country managers leeway in flexing the offer locally.
Here's some examples where the company didn't get all three.
- Imprisoned by past success. This company may have a distinctive proposition (or at least had one in the past) and can operate effectively, but its lack of agility means that performance declines over time as it fails to evolve its business to new external realities. Recent examples: Kodak, The Gap, Woolworths.
- Broken promises. A business that has a clear and distinctive proposition and has the agility to adapt its offer, but which is insufficiently focused on its operational effectiveness will lose customers as it fails to live up to its reputation or its desired brand position. Recent examples: Starbucks, Rentokil Initial.
- Lost in the crowd. A company that operates effectively and is agile enough to try new things, but which is insufficiently distinctive, will fail to generate clear advantages or deliver superior profits. As a consequence they may simply fade away or be acquired by a competitor. Recent examples: Somerfield, bmibaby, Superdrug.
- Success Sweet Spot. These companies manage -- for a sustained period -- to combine all three attributes and deliver superior returns and profit growth. Recent examples: McDonald's, Ryanair, Apple.