COMPREHENSIVE CASES FOR ANALYSIS app3

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Comprehensive Cases for Analysis

Appendix 3

Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

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McDonald’s Corporation

• Background– For years, McDonald’s had been at the forefront of

the fast-food industry – The company prided itself on its consistent

product and restaurant experience– By 2000 it became known more for slow, surly

service and poor product quality.


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McDonald’s Corporation – cont’d

• What Went Wrong?– Poorly planned product changes, ineffective

marketing plans, and changing consumer attitudes toward fast food

– Major restructuring of its U.S. operations in 2001. eliminating corporate jobs were eliminated and consolidating service regions

– Additional corporate jobs were cut in 2002, and some 175 underperforming stores closed


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• Marketing– Ranked sixth on the list of the top 100 brands the

2011 ranking of best global brands (BusinessWeek and Interbrand Corporation)

– Packaging has become an increasingly important opportunity to connect with consumers

– The company always has been and continues to be on the forefront of product innovations


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• Beyond Burgers– McDonald’s has tried different strategies to move

beyond its reliance on burgers– Developed a McKids line of clothing and toys to

build on its strong brand name– Invested in different restaurant formats including

the Chipotle Mexican Grill (in 1998) and the Boston Market chains (in 2000).


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• Taking Care of Its People– “Take good care of those who work for you, and

you will float to greatness on their achievements.” (Ray Kroc, Founder)

– Criticized for its “dead-end McJobs” work environment and its high employee turnover

– Training is at the core of McDonald’s people strategies. It wants its employees worldwide to be committed to quality, service, cleanliness, and value


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• Operational Excellence– CEO Jim Skinner is a fanatic about operations– Implementing some new operational strategies

like move to a round-the-clock schedule and food delivery in Singapore, Egypt, and several countries in Asia and the Middle East


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• Doing Business Responsibly– The philosophy of doing good and giving back is an

important part of the company’s heritage– Its community responsibilities focus on local

development by supporting local schools, youth sports, and other community programs

– The Ronald McDonald House charities, provides health care and help to children and families around the world


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• Industry Characteristics– The global fast-food market is forecast to increase

by 27.7 percent through 2016– Rapidly fragmenting market with different

ethnicities that have made once-exotic foods like sushi and burritos everyday meal options

– Consumer concern over food safety


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• What Now?– Since 2002, the company has logged 115 months

of global comparable consecutive quarterly sales increases (through the end of the first quarter of 2012).

– Results for 2011 showed system-wide sales of $27.5 billion, up 12 percent globally and net income of more than $4.9 billion, up over 11 percent


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• Background– Southwest Airlines began service in June 1971,

with three planes flying between three Texas cities: Houston, Dallas, and San Antonio.

– Southwest’s strategy was to fly short-haul routes where the fares were competitive with driving

– Overall strategy was to minimize total travel time for customers, including ticketing and boarding, and to provide service out of airports convenient to doing business or vacationing in a city


Southwest Airlines

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Southwest Airlines – cont’d

• Current Operations– Southwest Airlines bills itself as the nation’s low-

fare, high customer satisfaction airline– It serves primarily short- and medium haul routes

with single-class service targeted at business and leisure travelers


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• Low-Cost Advantage– Historically, Southwest has enjoyed a significant

cost advantage compared to other traditional carriers, and low operating costs continue to be one of its competitive strengths

– Use of a single type of aircraft—the Boeing 737—that allows for simplified scheduling, operations, maintenance, and training

– For several years, Southwest benefited from fuel hedging


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• Legendary Customer Service– For 17 years running the American Customer

Satisfaction Index has ranked Southwest first among airlines for highest customer service satisfaction

• Mission Statement – “The mission of Southwest Airlines is dedication to

the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”


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• Plane Maintenance and Inspection Troubles– In 2008, Southwest faced serious allegations about

its plane maintenance program– The company grounded 8 percent of its fleet due

to safety concerns until required inspections of the planes could be completed

– Suspended three employees and pledged to “fix any deficiencies in its internal controls.”


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• Culture and People– One of the most unique cultures among those of

all major U.S. corporations– It’s a high-spirited, often irreverent culture, much

like its legendary cofounder Herb Kelleher– The company describes its culture from the

perspective of “living the Southwest way, which involves a warrior spirit, a servant’s heart, and a fun-LUVing attitude.”


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• Financial Highlights– 39 consecutive years of profitability in an industry

that’s known to be challenging and competitive– During 2011, revenues were up 29.4 percent to

almost $15.7 billion, but net income was down 61.2 percent to $178 million

– Considering the state of the economy, however, the ability to even post a net income is a testament to Southwest’s strategies


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• Company Awards and Recognitions– One of the most admired companies in Fortune

magazine’s annual ranking of Most Admired Companies (In 2012, it ranked number ten)

– Recognized as one of the top 10 safest airlines in the Holistic Safety Rating 2011 by the Air Transport Rating Agency

– Named the Number One Airline Brand by The Harris Poll in March 2011.


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• The Airline Industry and Major Competitors– The airline industry is intensely competitive and

highly unpredictable– It is tremendously capital intensive– There are enormous fixed costs– It is fuel intensive– It is labor intensive, and there are fewer and less

experienced workers available to fill jobs


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• The Future– Severe cost pressures have led the company to

implement some aggressive measures to improve productivity

– Even though Southwest continues to have some of the lowest costs in the industry, costs continue to climb. Keeping costs under control and keeping its culture alive are just two of the key challenges facing Southwest


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Ford Motor Company

• History– In the early 1900s, Ford “began a manufacturing

revolution with its mass production assembly lines.”

– Fabulous successes in product design (Mustang, Ford Explorer, Taurus, and F-Series truck)

– Some notable failures (Pinto, Edsel, and the Firestone tires–Ford Explorer fiasco)


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Ford Motor Company – cont’d

• Industry and Competitors– The global car industry is one characterized by

fierce competition; fickle customers; manufacturing overcapacity worldwide; maturity stage of the industry life cycle, and declining demand for cars in an anemic global economy.

– Once-dominant U.S. car manufacturers have been displaced by strong, smart, and aggressive global competitors


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• Industry and Competitors – cont’d– In 2008 as car sales volumes continued to decline,

both Chrysler and General Motors took bailout money from the U.S. government

– Ford was the only U.S. car manufacturer that did not take any government monies

– Consumer demand for cars, especially in the U.S. and European markets, tends to follow the state of the economy


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Ford Motor Company – cont’d• Industry and Competitors – cont’d– Japanese car manufacturers have used flexible

manufacturing allowing multiple models to be built on the same assembly line

– U.S. car manufacturers had lagged behind Japanese competitors in terms of manufacturing costs and efficiency, but they are making progress

– Chrysler and Toyota both averaged 30.37 manufacturing labor hours per vehicle; GM 32.29 and Ford 33.88 hours. (2008)


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• Ford Motor Company Today– Former Boeing executive Alan Mulally named

president and CEO in 2006 – Mulally identified four key priorities1. aggressively restructure the company2. accelerate product development3. obtain financing4. work together with accountability with all

partners


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• Manufacturing and Product Design– Decision to close 16 plants and eliminate 44,000

jobs by 2012, with nine of the plants closed by 2008

– Strategic initiatives to reduce costs by quality improvement and waste elimination methodology (consumer-driven Six Sigma)

– Quality improvements led to a dramatic reduction in car recalls and drove down warranty spending by 18 percent


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Ford Motor Company – cont’d• Manufacturing and Product Design – cont’d– Working on improving its safety ratings– Working collaboratively with suppliers to find

additional areas for performance improvement– Competitors have the advantage of binding

arbitration and a ban on strikes. Ford does not.– Agreement with the United Automobile Workers

union reduced workers’ hourly rate (including salary and benefits) to $55, saving the company at least $500 million a year


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Ford Motor Company – cont’d• Marketing– Brands include Ford and Lincoln– F-series best-selling truck in America– Currently has about 100 nameplates, but wants to

reduce that number to around 13 by 2014– Chief global marketing executive James Farley

decided that the company’s brands needed to be more focused - Lincoln focus on premium , Ford brand to offer the broadest range of products and options


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Ford Motor Company – cont’d• Employees– Planned to eliminate of 44,000 jobs by 2012– Used buyout offers to persuade hourly workers to

retire early or to give up their jobs– Additional workforce reductions came from the

elimination of salaried positions through early retirements, voluntary separations, and even involuntary separations

– Adding about 7,000 new jobs in the next two years


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• Employees – cont’d– Increasing health care-related expenses,, $3.1

billion for U.S. employees, retirees, and their dependents in 2006

– Has shifted a higher portion of health care costs to its employees and retirees, but still expects its health care costs to continue to increase


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• Corporate Culture– Ford believes strongly in the values that have

guided the company over the years. But that heritage also made needed changes more difficult

– The new message at Ford is that “the bigger-is-better worldview that had defined it is being replaced with a new approach: less is more”

– Changes haven’t been easy for Ford’s hourly workers or for its management team


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• Financial– The company has forecasted 2012 earnings to be

flat, compared to 2011’s strong profits


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• The Future– In the company’s 2012 Outlook, Alan Mulally

reiterated his commitment to delivering the key aspects of the One Ford plan. “In a global market, success flows from having ONE TEAM working on ONE PLAN with ONE GOAL in mind.”


A3-34Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

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COMPREHENSIVE CASES FOR ANALYSIS app3

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