The Surprising Power of a slow-Down Strategy.
What a surprise! When McDonald's drastically cut back on opening new stores, profits went up, and in a big way. How can this be? First, the $4 to $5 billion that was spent on opening new stores could now be directed elsewhere to remodeling existing stores, to prudent food diversification, to refining operations, to maketing stockholders happy with increased dividends. Fully as important as the saving of expenditures was the freeing up of executive time that was surely diluted by all the details of finding new store sites, overseeing construction, recruiting and training new employees, etc. Now existing operations could be better served. Maintaining the Highest Standards Requires Constant Monitoring McDonald's heritage and its competitive advantage had long been associated with the highest standards and controls for cleanliness, fast service, dependable quality of food, and friendly and well-groomed employees. The following Information Box discusses strategy countering by competitors and the great difficulty in matching non price strengths. Alas, in recent years McDonald's let its control of operational standards slip Surveys of customer satisfaction in 1995 and 2001 gave McDonald's low marks quality, value, service, and cleanliness, with its competitors rating considerably better. Why this lapse? Without doubt, maintaining high standards among thousands of units, company-owned as well as franchised, requires constant monitoring and exhortation. But this was successfully done for over four decades. How was this lapse allowed to happen? We can only speculate that such standards became taken for granted, not emphasized as much. Then it became difficult to resurrect them.