Summary
Starbucks recent attempts will not be enough to stem the market share inroads made recently by McDonald's. The Combined Beverage plan of McDonald's is a comprehensive program built on a solid foundation that is both strategically and tactically solid. Concurrently, Starbucks jumps from sandwiches to instant coffee to liquor to lean. They look like McDonald’s did a decade ago, lost. I will explain the principle reasons while McDonald's will continue to take market share from Starbucks.
Analysis
The stark contrast in approaches between McDonald's and Starbucks demonstrates why McDonald's will turn out to be the clear winner in this contest!
First, McDonald's re-engineered the entire production system around a lean production engine (made for you) a decade ago. While they are able to consistently add new products quickly and efficiently, Starbucks bought a Turbo chef oven and reheats pre-made sandwiches in something that looks more like a circus than the fluid machine they once were.
McDonald's has reimaged thousands of stores minimizing Starbucks advantage in physical plant.
McDonald's strategically implemented menu expansion - improving quality perception with premium products, including coffee. It's a 90% of the quality at 25% off approach. In a recession, value is king!
In restaurants convenience is always a huge plus! From drive thru to production engine to adding a full menu of coffee and smoothie products produced at the touch of a button in 30 seconds - advantage Mickey D's.
For Starbucks the solution is simple! Starbucks needs a lot more focus in the areas they are the category killer - quality and place. Next they need a comprehensive plan of attack to beat McDonald's at their own game - convenience.
New technological advances could enable this; they could leapfrog McDonald's in fast time. I don't see Starbucks taking advantage of these opportunities anytime in the near future.
Steve Bigari consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
