Learning from McDonald’s and Bed, Bath, & Beyond
Two iconic companies have been in the news over the past few days, and there are some great
business acumen learning lessons from both. As Advantexe teaches in our core business acumen programs, everything in business starts with the strategy and the value proposition a company chooses to offer to its customers. Once the value proposition has been locked in, the company must execute that value proposition through operational decisions. The stories of Mcdonald's and Bed, Bath, & Beyond provide some interesting contrasts and insights into strategy and execution.
What is Happening with McDonald’s
McDonald’s has announced 4 significant changes it is making to maintain its market share leadership position. These changes are based on research and a recognition that the real and perceived quality of their products has dropped too low behind their competitors. The improvements McDonald’s is implementing include:
- Better, softer buns
- Consistently melted cheese
- Better sear on the patties
- More Big Mac sauce
McDonald’s has an operational excellence strategy, meaning their value proposition is cost-effective fast food at reasonable (to their customers) quality. In a competitive environment where differentiating beyond price is very difficult, these 4 enhancements suggest that McDonald’s feels a need to up their perceived quality. The question is, do these decisions bring parity or are they differentiating towards a quality (product leadership) position which could indicate a change of strategy that I doubt is happening?
As you scan the internet, there are literally hundreds of articles and millions of opinions on what is the best fast-food burger including the “Big Five” national chains including Shake Shack, Five Guys, Wendy’s, Burger King, and McDonald’s. When you add in two regional favorites such as In ‘N Out and Sonic, there is a lot of competition. No matter which article you read or the opinion you seek, it is very rare that McDonald’s is ever mentioned as a higher-quality product. That honor seems to go to Five Guys and Shake Shack on a consistent basis.
It should be clear that McDonald’s is taking these 4 major steps to lift up the actual quality of the products to maintain their share in a fiercely competitive market.
For Bed, Bath, & Beyond, - who announced their bankruptcy over the weekend – it’s too late for a similar strategic adjustment.
How Bed, Bath, & Beyond failed
All companies make strategic pivots to take advantage of opportunities and alleviate the impact of market challenges. Earlier in this blog I shared the latest pivots of McDonald’s. BB&B also made strategic pivots a few years ago that has failed to lead and have caused the bankruptcy filing.
The original value proposition of BB&B was to entice shoppers with a “racetrack configuration” so when they came in to buy a new toaster, they would end up with 10 other impulse items they didn’t know they “needed”. Boxes and boxes of top brands were piled to the ceiling and customers would collect 20% off coupons and splurge on these beautiful, branded products at reasonable prices after the discounts were applied.
But several things happened along the way including a little global pandemic.
BB&B made two fatal errors:
1) They failed to see the impact of online shoppingAmazon has obliterated BB&E at their own game. Instead of physically walking around a store full of expensive inventory that may or may not sell, Amazon has an infinite and virtual inventory. Their shopper algorithms make even better suggestions than impulse buying. The fact that an Amazon Prime shopper can have the gratification of the product in a matter of a few hours makes the experience even better.
2) They went private label
BB&B’s shoppers loved the known brands at discounted prices (with coupons). The merchandising didn’t matter because the quality value proposition of the known brands only made the experience better. By going private label, there was no perception of quality, and the experience of walking around a store loading up on branded products at discounted pricing imploded.
Business Acumen Take-Aways
Both McDonald’s and Bed, Bath, & Beyond provide interesting insights into how to make the best business decisions. We all know that markets change every day as a result of changing customer demands, supply chain issues, and increased competition. Businesses are forced to react and change every day. The secret, as seen in these two examples, is to make sure that you:
- Truly understand your customer's needs and make decisions that 100% are aligned with their needs.
- Be careful of copycat trends. Bed, Bath, & Beyond went private label like other retailers but they ended up upsetting their vendors and their customers.
- If you are going to change your value proposition, make sure that you can execute it. McDonald’s better be sure they are putting more special sauce on their Big Macs or their customers will be very upset!
