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In January 2003, McDonald, for a company that has enjoyed sizzling growth for decades announced its first ever-quarterly loss--$343.8 million. One of the main reasons for this is because McDonald has expanded too much and too fast both locally and internationally. Because of their fast growth, they sacrificed their customer services and quality.
McDonald, the company that had been opening 1,700 stores a year over the past decade is dramatically reducing their number of new sores openings worldwide. According to David Grainers (2003) Can McDonalds cook again? An article taken from the Fortune 5 Hundred magazine stated, McDonalds-the company that once made its living on prompt, friendly service-has ranked at the bottom of the fast-food industry since 1994. It now sits below every single airline as well as the IRS (Grainer, 2003, p.120). More significantly, in 1993 due to the frustrated franchisees the company allowed the restaurant national grading system to be eliminated which in affect was a bad leadership move.
McDonald has let its services slip because they thought they could afford to, in return it shows the arrogance in the leadership until they were slapped in the face by their fast growing competitors such as Taco Bell, Pizza Huts and Kentucky Fried Chicken. In addition, there are more subway restaurants than McDonalds in the U.S. (Grainer, 2003, p.129). Furthermore, the company was mostly focusing on the growth of their real estate than to their quality and service. With every franchise McDonald sold, the more profit that they gained from the rent. They concentrated more on the spread of the franchise than they did on the quality of their service. They should be aware that if this franchisee does not do well, in return it would affect on McDonalds overall profits. The problems grew when other fast food restaurants such as Taco Bell and Pizza Hut arrived with lower prices.
Application of the Demings Points
In order for McDonalds quality program to be effective, Demings developed 14 points theory should be applied. Out of the 14 Demings point, McDonalds problems are:
1)To continuously improve product, quality and service.
2)Lead to promote change
3)Build long term relationships with suppliers.