McDonald's reinvents itself

McDonald's and Wal Mart are the only two companies in the DJIA whose share prices rose in 2008. Wal Mart's story is part of popular folk lore and is recounted here, here, here, here and here. The less well known story of McDonald's appears to be an excellent example of corporate strategic reinvention.

For long McDonald's has epitomized everything bad and unhealthy about America, and a favorite target of animal rights activists, environmentalists and nutritionists. In the last few years, the company has undergone a makeover - new menu items, focus on more appealing and healthier food, more chicken items and variety in drinks, longer hours to capture late-night diners, less aggressive expansion but more focus on quality and customer service, court more customers to existing stores through sparkling newer or refurbished buildings that includes flat-screen televisions and video games for children, and cheaper fare. All this was captured in a makeover plan, Plan to Win, that laid out where McDonald’s wants to be and how it plans to get there, all of this revolving around the "five P’s: - people, products, place, price and promotion.

In many ways, these changes mean a return back to the original mandate with which Ray Kroc franchised out McDonald's in 1955 - hot, high-quality food (burgers and shakes) at a great value and speed, and at the convenience of the customer - a mandate from which the company had strayed afar in the nineties.

The result of all this has been 55 consecutive months of increases in global same-store sales and 6% increase in share value in a year when the stock market lost a third of its value (its worst performance since the Great Depression), both astonishing achievements in such weak times.