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CHAPTER 1 • THE NATURE OF STRATEGIC MANAGEMENT 5

McDonald’s in 2009 spent $2.1 billion to remodel The other two firms were Wal-Mart and Family Dollar
many of its 32,000 restaurants and build new ones at Stores.
a more rapid pace than in recent years. This is in stark Other strategies being pursued currently by
contrast to most restaurant chains that are struggling McDonald’s include replacing gasoline-powered cars
to survive, laying off employees, closing restaurants, with energy-efficient cars, lowering advertising rates,
and reducing expansion plans. McDonald's restaurants halting building new outlets on street corners
are in 120 countries. Going out to eat is one of the first where nearby development shows signs of weakness,
activities that customers cut in tough times. A rising boosting the firm’s coffee business, and improving
U.S. dollar is another external factor that hurts the drive-through windows to increase sales and
McDonald’s. An internal weakness of McDonald’s is efficiency.
that the firm now offers upscale coffee drinks like lattes McDonald’s receives nearly two thirds of its rev-
and cappuccinos in over 7,000 locations just as budget- enues from outside the United States. The company
conscious consumers are cutting back on such extrava- has 14,000 U.S. outlets and 18,000 outlets outside the
gances. About half of McDonald’s 31,000 locations are United States. McDonald’s feeds 58 million customers
outside the United States. every day. The company operates Hamburger University
But McDonald’s top management team says every- in suburban Chicago. McDonald's reported that first
thing the firm does is for the long term. McDonald’s quarter 2009 profits rose 4 percent and same-store
for several years referred to their strategic plan as sales rose 4.3 percent across the globe. Same-store
“Plan to Win.” This strategy has been to increase sales sales in the second quarter of 2009 were up another
at existing locations by improving the menu, remodel- 4.8 percent.
ing dining rooms, extending hours, and adding
snacks. The company has avoided deep price cuts on Source: Based on Janet Adamy, “McDonald’s Seeks Way to Keep
Sizzling,” Wall Street Journal (March 10, 2009): A1, A11. Also, Geoff
its menu items. McDonald’s was only one of three
Colvin, “The World’s Most Admired Companies,” Fortune (March 16,
large U.S. firms that saw its stock price rise in 2008. 2009): 76–86.

consumers today purchase only what they need rather than what they want. Societies
worldwide confront the most threatening economic conditions in nearly a century. The
boxed insert in each chapter showcases excellent strategic management under harsh
economic times.
The first company featured for excellent performance in the global recession is
McDonald’s Corporation, also showcased as the Cohesion Case in this 13th edition.
McDonald’s is featured as the Cohesion Case also because it is a well-known global firm
undergoing strategic change and well managed. By working through McDonald’s-related
Assurance of Learning Exercises at the end of each chapter, you will be well prepared to
develop an effective strategic plan for any company assigned to you this semester. The
end-of-chapter exercises apply chapter tools and concepts.

What Is Strategic Management?

Once there were two company presidents who competed in the same industry. These two
presidents decided to go on a camping trip to discuss a possible merger. They hiked deep
into the woods. Suddenly, they came upon a grizzly bear that rose up on its hind legs and
snarled. Instantly, the first president took off his knapsack and got out a pair of jogging
shoes. The second president said, “Hey, you can’t outrun that bear.” The first president
responded, “Maybe I can’t outrun that bear, but I surely can outrun you!” This story
captures the notion of strategic management, which is to achieve and maintain competitive
advantage.