Corporate management has indicated in interviews with

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mixed class responses here. Corporate management has indicated in interviews with the case writer that they are not all that concerned about the threat of new entrants, due to their size.
13-39 2. When questioned about cost leadership and product differentiation in a recent interview, McDonald’s management was hesistant to make a choice of one over the other. Several of the company’s strategies (#2 and #5 in the case) point to product differentiation through product innovation. Perhaps the class can name some recent examplesthe McDLT, pizza and pasta (people didn’t want to wait for a pizza at McDonald’s), Happy Meals, and Value Meals are just a few. The popularity of bagels has triggered McDonald’s to begin testing bagel sandwiches in a few of its company-owned stores. Cost leadership is also apparent in McDonald’s actions. There is constant pressure to drive costs out of operations. Restaurant food waste is tracked, and standards exist for the preparation of each food item on the menu. Special dispensers mete out the precise amount of soda for each cup size, and scales are used to weigh french fry portions. Their products could be considered similar to competitors’ offerings, so lower selling prices and high-quality products (cost leadership) rather than unique products or services provide a measure of competitive advantage. 3. See if you can get students to think beyond financial measures such as sales or net income as performance indicators. For example, McDonald’s tracks market shareand customer satisfaction. Service times at the drive-thru, front counter, and during lunch are tracked. Labor data are reported for the following: employee satisfaction, crew turnover, average hourly rates, overtime, labor as a percent of sales, and actual versus needed hours. One of the key factors in deciding what goes onto the McDonald’s scorecard is whether the items under consideration can be controlled by the store manager. Another factor is linkage to vision and strategy. Challenge students to justify the measures in their scorecard in light of these factors.

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