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The New York Times reports that McDonald's yesterday "announced the first steps of a global turnaround strategy, acknowledging that a business that has served up billions of burgers on the cheap was in urgent need of change."

While the fast feeder has said that it wants to be a “modern, progressive burger and breakfast restaurant," and has been simultaneously simplifying some elements of its menu while also testing, on a limited basis, more customized offerings, the Times notes that yesterday's changes were largely operational.

CEO Steve Easterbrook said that the company will engage in "refranchising," the sale of company restaurants to franchisees, and also will "reorganize itself into four new global segments, grouping previously separate markets together: 'lead' markets like Britain and Australia; 'high growth' markets like China and Russia; the United States, which accounts for more than 40 percent of the company’s operating profit; and business in the more than 100 other countries where it operates."

The Times quotes Easterbrook as saying that "these and other changes to the corporate structure would contribute to some $300 million in net savings a year."
KC's View:
Ah. I love it when troubled companies decide that the best way to reconnect with consumers and regain sales and profit momentum is to cut costs.

That may have a short term impact, and it may make investors happy, but it won't solve the essential problem - that McDonald's food and restaurants seem largely out of touch with modern consumption habits. The food is not great (with some exceptions), the restaurants are plastic, the service is largely desultory, and the experience is mediocre at best. They can cut costs, but they probably ought to be investing in efforts that will make them actually competitive.

Besides, a good rule of thumb is that you cannot cut your way to prosperity.