McDonalds Change Management Case Study
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Keywords: mcdonalds pestel, mcdonalds change management
In this report I will analyze the handling of a significant change that occurred in McDonalds few years back, how the management and other employees reacted to this change, how the resistance was handled, what were the major factors that led this change happen and to what extent the change was successful in achieving company's objectives.
It is very important for organizations to prepare themselves for the changes that they may have to face in order to compete with the latest development that is happening within and outside their environment. However these changes can bring many improvements and progress to that organization in certain aspects. For example it may be helpful for making the work easier; it can open ways for future innovations and can also help to generally improve people's life. Colin Carnall (2002)
The primary purpose of my report is to provide insights about the change management process in McDonalds that occurred recently and evaluate the outcome of implementing it. Moreover to highlight any resistance associated with it and how it was overcome by the management.
1.1 A Little about McDonald's
McDonald's started its operations in 1954. As everybody is now familiar with the clown character which is Ronald McDonald, that has been designed as the trademark for the company. McDonald's restaurants offer a uniform menu to a large extent, including hamburgers, cheeseburgers, chicken sandwiches, French fries, salads, milk shakes, desserts and ice cream sundaes. The company's top sellers are the Big Mac, Quarter Pounder with cheese, the Fillet-o-Fish and Chicken McNuggets. The customer target of McDonald's is usually children and young people.
1.2 Brief description of the recent change occurred in McDonalds'
Though McDonald's has a reputable brand image and a memorable history of previous achievements, yet management at McDonald's started feeling that the growing population has developed different nutritional attitude and behaviours as they are extremely different from the population of the previous decades. They felt a severe need to redefine the image of McDonald's and repositioning the brand in the minds' of customers as people today are more concerned with their health and figures than ever before. Since last few years people's perception about McDonald's food has changed considerably, as they feel that it provides greasy food which is very high in fats and more expensive than its competitors, whereas the competitors have already made measures to reduce fats in their products and also provide less expensive meals. Moreover McDonalds' had to face a considerable loss few years back as the consumers began to switch to its competitors, such as Burger King, Subway and KFC for the reason that they offer fresher and high quality food at comparatively lower price with faster service. In order to keep gaining the market share and retaining its customers McDonalds' had to respond to the changing behaviour of consumers. Furthermore, noticing that the obesity issue in the UK is getting serious and complex, McDonald's received a big challenge to implement certain changes the soonest possible time. Understanding the changing behaviour of its consumers and the health-conscious factor prevailing in the market, Management finally decided to implement a new integrated marketing communication plan as part of their marketing strategy that mainly involved innovations in their advertising and promotional campaigns focussing on changing the customers' perception for McDonald's food quality.
1.3 Main Objectives in making this change
- The main objectives of McDonald's for adapting to the changing demand of its customers were:
- Implementation of Integrated Marketing Communication (IMC) plan as part of their marketing strategy.
- Providing a balanced diet and an active lifestyle
- Operating with freedom to adapt practices to local markets, and to share best practices internationally between restaurants, markets and countries, while holding on to a common brand identity
- Innovation in advertising and promotional campaigns
- To be the customer's favourite place and way to eat
- Effectively tackling the obesity
- Adopting a new health-conscious brand image
- Meeting the latest trend of health awareness and the growing concern in obesity among the children and target market
- Introducing a new, separate low-fat menu for children
- Changing the public image of McDonald's
- Maintaining the traditional efficiency of fast food restaurant and provide comfortable environment to customers.
2.1 Main Drivers of the change
Like most big companies, McDonald's engages with a variety of different stakeholders in the countries where it operates, as well as monitoring all pending political initiatives. McDonald's is a large multinational business with many stores on high streets and in shopping centres across the country. As such, the company is affected by the external factors that impact all retail business in UK. The main drivers of this change are described as under:
- Changing social needs and market demands of customers
- Increased awareness in people about health and food consumption and safety
- Emerging diet programs that encourages public to be figure conscious
- Growing concern in obesity among target market
- Latest trends of health awareness
- Innovation by the competitors
- Developments in technology
- Economic trends and developments
- consumer confidence
- local environment
- competitive pressure
2.2 Explaining the need for change using appropriate framework
Above are the main derivers that created a need for changing the brand image of McDonald's over the last few years. Below I will explain in detail using models and frameworks as to how these drivers created the need for this change which took place.
2.2.1 PESTEL ANALYSIS
In this section, I will explain the all the factors (drivers) of this change with the use of the Pestel Analysis that comprises of political, economic, social, technological, environmental and legal factors that combine to be the main reason for bringing a change in an organisation.
McDonalds' just like other organizations follow certain rules and regulations imposed by the government. For that reason they need to obey all the policies in order to achieve their organizational goals. The UK government is very particular about health and safety of its people and have set some standards to be met by every food chain in order to keep the business running so McDonalds' had to bring this change of repositioning itself in its consumers' minds so as to give them a positive image of their food quality and price.
Due to the heavy slump in the economy, people have become much more price sensitive than ever before. Every single penny counts a lot now. Therefore they want to spend for the quality food that matches their demand, in other words they want return of every single penny they pay and that return includes the quality and satisfaction. These changing economic trends actually affected the profitability in terms of value for money and highly created a need for McDonalds' to adapt itself to the changing market demand and standards.
Social factors include the changing lifestyle of people which has made them more health conscious and safety sensitive. In case of food chain, demographics play an important role to affect the market conditions. Therefore, the age group which is the main target market for McDonalds is between 10-50yrs that includes children and young people who are truly becoming more aware of diet planning day by day due to the increased information available to them through various research planners and diet programs that encourage them to be figure conscious. This changing style of target market was a big challenge for McDonalds' to keep itself running successfully that could only be achieved by adapting itself to the environmental change and delivering what customer actually demands from them.
Advancement in technology has too much affected the mindset of people. As the technology evolves so does the human behaviour. With the use of internet and information technology, people have become more aware and active. They have got a quick access to all types of information, be it diet planning or education or environment or safety or any other issue. Developments in technology highly demands from businesses to evolve themselves as and when required by their consumers and same was the case with McDonalds'.
Environment is a very vital part of every business. McDonalds' faces a tough competition by its competitors including Subway, KFC and Burger King. Realizing that its competitors are evolving their business according to the changing lifestyle of customers, McDonalds' was forced to take prompt decision in order to beat the competition and staying ahead of it.
Legal factors involved the safety regulations as set by the government for all food chains. These regulations are actually set keeping in mind the customers' needs and are also monitored and improved on regular basis as per the changing lifestyle of consumers. Consumer protection is another factor that McDonalds' is expected to consider while doing business as part of the legal bindings.
3.1 Evaluating the process of change management by McDonalds'
In this section I am going to evaluate the effectiveness of the process of change management by McDonalds'. Their main aim was to change the mindset of the consumers and creating positive perception and image of McDonalds' in their minds. Here I will use ADKAR 'model of change management' to analyze the effectiveness of the process adopted by the management of McDonalds' to bring this change in place. This model comprises of five key goals including awareness, desire, knowledge, ability and reinforcement. Below is the in depth analysis of the change management process of McDonalds'.
3.1.1 ADKAR MODEL OF CHANGE MANAGEMENT
Awareness helps the company to realise and feel the need for bringing certain change that is why it is considered as a basic tool for innovation. In this case, when management felt that their sales started going down they tried to look for the reasons and found that the living style and needs of their target market has evolved. They realised that people have become too much health conscious, which is why they started to consider the fast food as unhealthy and greasy food. This gave them the awareness about the lifestyle of their target market and their changing demands.
Desire relates to the strength of McDonalds' to participate and support the change. It is quite understood that every organization wants to excel in the market by making huge profits and customer satisfaction so does McDonalds'. With the economic development there has been a great change in people's living standard as they have become more concerned about their health issues. Realizing this, the management at McDonalds' responded to the changing demands of its customers in a very supportive way, and was successful to handle the resistance by other staff members.
It was important for McDonalds' to have knowledge of how to change itself in order to match with the changing market demand. Once it was aware of the changing behaviour of the target market and was ready to adopt a change, management focused on what they needed to do in order to retain and satisfy the customers in the long run. The external factors including the competitors' strengths and the changing consumers' behaviour gave McDonalds, knowledge of what exactly to be done to make it stable and running.
McDonald's ability to implement the change can be analyzed by evaluating its goal and objectives. McDonalds' goal was to implement Integrated marketing Campaign to adopt a new health-conscious image in the minds of customers. It focussed heavily on the advertising and promotional campaign of the company. The company decided to introduce a new low fat menu for children that would help them to overcome the growing bad publicity about McDonalds' food for being rich in fat and to manage the obesity issue among children. Realizing the importance of consumers' health, McDonalds introduced 'McKids Meals' having both nutritional value and no fat thus making it different from the traditional McDonalds' meals. Moreover the innovation in their Integrated Marketing Communication provided an effective advertising and public relations campaign to successfully introduce the new McDonalds' to the public.
Moreover they introduced 'McChicken Premiere' and a 'zesty chicken' to satisfy customers' desire for good quality products at affordable prices. To keep the children, it also started to give more choices with 'Happy Meal' including no-sugar-add fruit drink that is a low fat drink and also McDonalds' coffee which appeals to adult. Furthermore McDonalds' have responded in time to the changing healthy trend by adding salads and other lighter options in their menu.
As children are one of the biggest consumers groups to McDonalds', therefore they paid considerable attention to them. They tried to provide a huge variety for children including the 'happy land' with 'happy meals' with toys. They believe that if they make themselves best suited for children, they can attract the whole family too.
Finally the foundation for all above innovations was the Integrated Marketing Communication through the use of attractive advertising and promotional activities which could promote these new products in the market and made people aware of these innovations. These promotions were the basic tool for creating a positive perception in consumers' minds for McDonalds' and gaining their trust back. Therefore McDonalds created its new image in the market by the use of new advertisements and new theme "I love it even more!".
It was not enough to bring the change or adapt to the changing environment but it highly demanded from McDonalds' to retain the change in the long run. That is why reinforcement of practicing and retaining that change played a vital role as post implementation of that change. McDonalds' is quite successful to reinforce its employees to continuously practice retain their changed positive image in consumers' minds. This was successfully done through positive encouragement and other rewards for the employees.
3.2 Resistance occurred in implementing this change
Different people react differently to a change in the organisation. However it is important to accept this reality that resistance is always there in any form which may be there before, during or after the implementation of the change. McDonalds had to face certain conflicts and resistances in the process of bringing this change. This resistance came both from customers and McDonald's employees. Some of the employees were in favour of implementing Integrated Marketing Communication whereas some were against it and same was the case of customers as some of them opposed the change whereas others liked it. Overall the company faced following main conflicts/resistance:
Different assessments of the situation
Some managers and employees opposed it because they had a fear of the company being going into a loss if this implementation would not help to produce a positive result. They were confused that this change may make the problem more complicated and could make bad impression of McDonalds in customers' minds instead of improving it. Moreover they were quite uncertain about the capability of the team that was dedicated by McDonalds to bring the required IMC (Integrated Marketing Communication) in place. They were thinking that the team may not be able to produce an effective quality due to lack of knowledge.
Lack of communication and inadequate information
The other resistance was related to the technological facilities being used by the McDonalds team. As employees thought that the systems that were used by the McDonalds team to implement IMC campaign might be downgraded due to the rapid advancement in the field of IT these days. Therefore they were very unsure whether the customers would have a positive reaction to their new campaign or not, which could result in not achieving the core objective of the change for McDonald as a whole.
Low tolerance of change
Another conflict among the managers was related to the experience of the team that was organized to help sustain the implementation of the changes. Some of the managers had a view that McDonalds may face a shortage of qualified workforce to keep up the capability of the marketing communication approach.
Cultural differences among employees
Another issue was the cultural differences among the staff that created some inner conflicts. Due to this the team may not function with proper co-ordination thus making the implementation of change be more complicated.
Unwillingness to take risk
Another resistance came from the staff was due to unwillingness to take risk. They were quite doubtful about the reaction of customers after the implementation of this change.
Psychological resistance involved with new working challenge
Management and employees were also resistant due to pressure of working with a new challenge and new environment.
3.3 How McDonald's managed the Resistance to change
It was really a crucial phase for McDonald's to implement these changes and overcoming the resistance by employees and customers. Management knew that their plan would only be successful if they would be able to handle this resistance successfully as they knew that achieving their organisational goals entirely depends upon the way any resistance to it is managed. They had to obtain the strong support in sustaining the success as bringing the change is something that has to be a continuous process that needs equally important post implementation attention as well. However comprehending the whole scenario, McDonald's tried its best to overcome the resistance by adopting following techniques:
Involving everyone in the process of change
For McDonald's, the most important point to start with solving the resistance was to involve everyone in the change process so that everybody should undergo some learning experiences in order to understand and appreciate the objectives of that change. Management provided them complete information to let them understand the objectives in making this change so that they must realize and appreciate the importance of doing this and also let the employees feel that they are important in making this change successful. This helped McDonald's in gaining the support from the staff and overcoming their resistance.
Face-to-face interaction to gain trust of employees
The management created an environment where they can have face-to-face interaction with all employees to develop strong interpersonal relationships and trust.
Providing enough time to employees
It was important for the management to let employees understand the changing environment and required changes to be made accordingly. For that employees need to have tacit knowledge which comes from observation and experience so management tried to provide space to employees to learn from their experience and observe the surroundings.
Providing updated technology to facilitate knowledge management
As the management was responsible to implement this change so they decided to deteriorate all the negative responses related to the technology, by providing the customers, employees and staff their respective demands. For that they provided the staff with the technology that could last much longer. Moreover they facilitated them with systems that guaranteed long lasting functions in order to assure them that the technology they will be using is quite compatible with the latest development in the world of IT.
Education and Communication
Managers tried to educate and inform people about the change effort so as to why it was needed and the expected outcome of that change which would be for the betterment of the company and employees as well. This helped the employees to realize the logic in the change effort. It also reduced any doubts in their minds about the negative effects of the change.
Training and follow-up programs for the team involved
As far as the conflict was raised regarding the deficiency of the talented team that was designed to work for the marketing communication, McDonald's decided to conduct special follow-up programs for the staff that was involved in the said changes, which would enable them to receive proper training and development required to implement the required changes.
Developing a thriving organizational culture
To overcome the inner conflict that was raised due to differences in culture, the management of McDonald developed a thriving organizational culture and a stronger organization by proper management of the staff, providing them what they actually deserved in order to motivate them. They highly focussed on the proper handling of elements such as organizational design, compensation programs for employees, performance management and career path in order to motivate employees and create interest in them to word dedicatedly for the company and support them bringing this change. Furthermore, the human capital management of the McDonald's also incorporated a process to ensure equality among employees to make them feel an important part of the organization irrespective of their cultural differences. This helped them gaining employees' loyalty and hard that not only helped the employees but also the organization.
Overall McDonalds' management was quite successful in handling the resistance and conflicts raised by employees and customers and they all participated and supported the implementation and helped McDonalds' gain its positive image back.
4.1 Assessing the effectiveness of the Change in meeting its Objectives
It was very important for McDonalds to handle the conflicts and resistance carefully because it is something which leads to the success or failure of the change for being properly handled or by being neglected otherwise. Therefore management of McDonalds understood the importance of handling the resistance properly in order to make the change occur successfully. However McDonalds was quite successful in implementing the change effectively and was able to meet its following objectives:
Shifting the attitude of children
Shifting the attitude of children about healthy fast food meals was not easy but through proper marketing communications and campaign's strong encouraging characteristics, management was quite successful in doing it. As parents are the one who are responsible for eating patterns of their children so McDonalds aim was to encourage parents about their new healthier food plans for children and let them enjoy McDonalds more than ever before.
Positive Image Building
McDonalds' new image successfully created a place in minds of people as they could see the new advertisements of McDonalds at all types of media which let them associate with the brand in a more positive way than ever before. Through the new advertisements and new theme of "I love it even more!" McDonalds was successful in
encouraging parents to let their children eat healthy meals. This helped them to achieve its main objective of positive image building.
Creating a safe environment
Moreover the management was able to implement the change effectively by creating a safe environment for change that encouraged all employees to support and stay committed to the organizational efforts in bringing the change to meet its overall objectives. This helped them to overcome all the conflicts raised by employees and customers, before and during the implementation of these changes.
Gaining organizational strength and competitiveness
This change also helped McDonalds to enhance its overall organizational strength and competitiveness by gaining customer loyalty back and positive image building of the brand. People started associating themselves again with McDonalds and started encouraging their children to eat McDonalds' which was the core element for bringing this change.
Expand the business portfolio
Moreover it also encouraged the management to strengthen and expand its business portfolio and survive to the tough competition in the market. By gaining its customers back, McDonalds started to earn more market share as compared to its competitors which led them to enter new market with same brand and expand the business to be children's' most favourite place to eat and entertain themselves.
4.2 Assessing the need for any further changes
As people are getting very particular about their health so it is necessary for McDonalds' to retain its good image in minds of customers and to maintain its food quality and standard along with the prices. They may need to focus on producing low fat products and should think of entertaining children in a lot more other ways as well just like the play section they already have. They need to keep a proper check on the services of its competitors so as to manage it accordingly. McDonalds must try to maintain its services in order to cope up with the changing social needs and market requirements. Furthermore management at McDonalds' should be able to carefully plan such innovation and they must use effective strategic tools to implement such change in future as well, this would help them to achieve its vision of a food industry that provides a health-conscious sub-image which is consistent with the latest trend in health awareness today and for the future.
Moreover the management leaders at McDonalds' should always try to monitor what is working and not working in the process of the organization change in order to implement the change effectively. Such changes will help McDonalds' to enhance its competitiveness and strength. Whenever the management observes the need of any further change, then that is the only time, they must impose required changes to be done in order to save the company to undergo any downturn again. It is recommended that McDonalds' must see to it that any further changes are well planned and implemented carefully, because these will be the basis for the success or failure of the organization. McDonald's must continuously review, update and improve its products according to the changing environment in order to ensure and enhance its competitiveness.
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