McDonald’s Two-Edged Problem

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By Jacob Maslow

mcdonalds fries
MOSCOW, RUSSIA-JULY 7, 2013: McDonald’s French fries (chips) McDonald’s Corporation is the world’s largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries

McDonald’s (NYSE:MCD) is one of the most powerful brands on the planet. There is hardly any country without a McDonald’s restaurant. That is how powerful McDonald’s reach is. In many cultures, McDonald’s is a stand-in for America.

If you love America, McDonald’s is a reminder of everything that is great with America. If you have issues with America, McDonald’s is a ready stand-in for all your frustrations. It is no surprise that when there are political protests in some countries, the first establishment that protesters ransack or even burn down is the local McDonald’s. With that said, as powerful as McDonald’s global brand is, it is under a lot of pressure currently.

The market is changing. Any seasoned business person would know this. There is no such thing as an eternally static market. That is what makes business exciting. That is what makes markets challenging. Markets change. Why? People change. People’s tastes begin to evolve.

McDonald’s is finding itself in a very rough crossroads of its existence. If it wants to stay relevant and if it wants to justify its stock price, it needs to make decisive moves. Unfortunately, the direction McDonald’s needs to take is far from clear. The main reason for this lack of clarity is the fact that McDonald’s is actually facing two demographic pressure points.

On one hand, McDonald’s new CEO has to convince younger consumers to buy Big Macs and other McDonald’s items using their mobile and wireless gadgets. This is not always easy. It is not just a question of technology and making your brand available on a wireless format. It is all about communicating values that are hip, up-to-date and engaging in the mobile age. McDonald’s brand might seem a bit too tired, old and static to make that transition.

It is not about availability. It is not about simply putting McDonald’s logo and brand online. That is the least of McDonald’s worries. It is all about the brand making the transition to the mobile age, and the attitudes and expectations the mobile age brings with it.

On the other end of the spectrum, McDonald’s is facing pressure from its older consumers. Older customers are actually leaving McDonald’s behind. These are people who grew up on McDonald’s, who are familiar with McDonald’s, and who used to be very loyal customers. Why are these older customers leaving? Their tastes have changed.

They are looking for slower food. They are looking for food that is more specialized, like Chipotle. They are looking for specialty burgers. The focus is no longer on fast food, but more on quality.

With these two pressure points, it is understandable why McDonald’s has been caught flat-footed these past few quarters. It is understandable why its stock has been sinking to the tune of around 8%. McDonald’s needs to move quickly, but the first step needs to be clear as to the demographic pressure points it is dealing with.

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