McDonald’s Beef Fries Controversy

Presented to:-Prof. Bhawana Pant

Presented by:-Ravi Shankar VermaSaurabh Kesarwani

Indranil MajiSakshi Srivastava

PRESENTATION OUTLINE• INTRODUCTION• WORK CULTURE • CONFLICTS• APOLOGY• HALO EFFECT• INDICATORS OF REPUTATIONAL DAMAGE• INDICATORS OF DISCIPLINE• OUTCOME• AFTER MATH

INTRODUCTION

McDonald's was built in 1940 by the McDonald brothers (Richard and Maurice ) .

CEO- Steve Easterbrook.

Started off as a hot dog stand in CA [1937].

The McDonald brothers realized that hamburgers were their most profitable menu item, and changed their business to serve a limited menu.

• McDonald’s is a large corporation in the fast food industry.

• They have been around since 1955 - Ray Kroc started the chain of McDonalds.

• The majority of the restaurants are owned through franchises.

• Mc Donald consists – i) 447,000 employee. ii) 3,200 restaurants in over 119 countries.

• 1971 McDonalds really starts going globalAsian: Tokyo Ginza District, JapanEuropean: Netherlands, Munich, Germany

• 1967 - Canada & Puerto Rico (first restaurants outside the U.S.)

• 1971 - Tokyo, Japan, Amsterdam, Netherlands & Sydney, Australia

• • 1979 - Rio de Janeiro, Brazil

• 1990 - Moscow, Russia & China

WORK CULTURE

• Highly dependent upon the particular line manager in charge

• Higher readiness level of the team.• Customer feedback • Manager display concern and interest in well

being employees• Happy employees lead to happy customer• Providing training to employees

CONFLICT

• McDonald’s is lauded worldwide for its CSR policy.

• French fries contained a flavor enhancer made of beef extract.

• McDonald is aware of its customer’ taste and preference.

• In 1990s started using vegetable frying oils.

• In the 1970s and 1980s, McDonald’s introduced meat-free and beef-free products.

• The controversy erupted when Hitesh Shah enquire the oil that is used in cooking French fries.

APOLOGY

• ON 24TH MAY IN MEA CULPA 2001 board of McDonald issued an public apology

• Never intended to mislead American citizen.• Labeling policy.• Law suits.• Enhance transparency.• Donated 10 million dollars. • No other Mega corporation has paid and apologized.

HALLO EFFECT

McDonald the world largest fast food chain in Seattle , US. Promised and promoted their French fries being 100% Vegetarian . The company had

duped vegetarian customer into eating French fries that contained beef extracts which effect the

trust and emotions of customers.

Demonstrable Indicators of Reputational damage

• CONSUMER MARKET i) Sales dropped- among vegetarians and Hindus. ii) Sales of competitors increased- KFC, WENDY’S. iii) Factors for low sales- low exchange rates, concern to BSE, Swine fever ,foot and mouth disease in EUROPE.

• LABOUR MARKET i) Decentralized organization - Human Resource Policy is less vulnerable to reputational damage.

• Capital Market i) Significant response- 25th April to 31st May.

Demonstrable indicators of Disciplining

McDonald’s undertook several initiative to manage the issue-• In India, McDonald’s launched extensive

investigations.• McDonald’s reviewed its labelling policy.• A Dietary Practice/Vegetarian Advisory Panel was

established.• On 14 April 2002, McDonald’s published its first

global Social Responsibility Report as part of a new strategy of openness and transparency.

OUTCOMES

• Competitors got the advantage to capture the market share.

• McDonald’s disclosed information in an open and transparent manner.

• Hindus and vegetarians felt they were misled.• Clear and transparent information - but no

change in the preparation method.

AFTERMATH• The company also made a commitment to communicate

clearly about sensitive issues in future.• In relation to this McDonald’s has faced a lawsuit in February

2003 on the alleged responsibility for causing obesity.• Moral spotlight regarding issues such as the alleged use of

child labour in China.• In 2008 McDonalds removed the foam polystyrene packaging

it previously used and more recently reduced the size of packaging, saving 84 million tonnes of paper in 2012

• Fortune magazine listed McDonald's among the top ten companies for CSR.