Eva Liu's Blog

In Peter Lee’s blog post “Downfall of the McDonald’s dynasty,” Lee discusses how McDonald’s stagnant core value proposition of cheap, fast, and delicious food, is no longer working as consumers become more health conscious.

In addition to Lee’s points, I have also noticed that McDonald’s current value proposition is no longer reflective in their prices. The increase in employee wages and food prices are making it so that people are getting the same low-quality food at a now unreasonable price. The reason McDonald’s was so popular over the years was because the low quality of their food could be justifiable by its equally low prices. However, now, after the price increases, I personally would not prefer to go to McDonald’s over other fast food chains if I have to pay more than five dollars just to get a burger made with the same low-quality ingredients. If I was willing to spend that much money on food, I might as well just go to a casual-dining restaurant and pay the same price for better food made with “quality” ingredients.

In my opinion, McDonald’s seems to be undergoing a sudden “identity crises.” They are no longer focusing on cost leadership (by providing the cheapest food), nor product differentiation (by providing specialty menus). The only reason they are still doing relatively well is because they still sit at top of the perceptual positioning ladder in the consumers’ minds. However, that does not mean that their position is unchangeable. McDonald’s need to do something fast before cheap, low-quality burgers become a thing of the past. The barriers to entry in the industry are as low as ever, and their competition is gaining up on them fast.

References:

Downfall of the McDonald’s dynasty

Picture from: http://upload.wikimedia.org/wikipedia/commons/thumb/a/a9/Mcdonalds-90s-logo.svg/2000px-Mcdonalds-90s-logo.svg.png

http://www.bloomberg.com/news/2014-10-20/mcdonald-s-costly-burgers-send-diners-to-fancier-rivals.html

http://www.businessweek.com/articles/2013-10-23/mcdonald-s-new-dollar-menu-goes-up-to-5