Mcd's Balanced Scorecard

McDonald’s Balanced Scorecard

Terra O’Brien

From its first store opening in 1948 in San Bernardino, California, McDonald’s has encouraged a vision of quality qu ality service, products and innovation (McDonald’s Corporation, History, para.1). Since its beginning, McDonald’s has worked hard to differentiate itself and adjust to a market that has become increasingly fast-paced. McDonald’s adaptation of a balanced scorecard has made it what it is today. By focusing on key areas of the scorecard, McDonald’s can continue to improve and build on its vision and improve customer satisfaction, employee satisfaction, internal business operations and ultimately its financial position. Being in the fast-food industry, McDonald’s has a hard time differentiating itself from its competitors. This is likely McDonald’s biggest obstacle in its industry strategy. Competition such as Wendy’s, Burger King, KFC, Subway and ev en Taco Bell provide a challenge for  McDonald’s and make it harder for for profit potential. Although stores such as KFC, KFC, Subway and Taco Bell don’t necessarily provide the same products, they do provide competition in the area of cost reduction. Health consciousness has also be come another factor in regards to competition. Customers may feel like making healthier choices, such as sub sandwiches or salads at Subway (McDonald’s Corporation, History, para. 9). McDonald’s has tried to rise above with introduction of healthier menu items and a more active Ronald McDonald and cutting out characters such as the Hamburgler that promoted an unhealthy lifestyle of obesity (McDonald’s Corporation, Overview, para.6). In an effort to increase differentiation and innovation, McDonald’s introduced McCafe, selling premium coffee beverages at competitive prices, rivaling coffee chains such as Starbucks (Chain Leader, para.1&3). These new division of  McDonald’s offers new and existing customers different products and a whole different experience that will set them apart from their competitors.

McDonald’s uses many suppliers around the world to p rovide products to all their  restaurants. Suppliers from McDonald’s include Golden State Foods, Martin-Brower, J.R. Simplot, and coffee bean growers from around the globe including Central and South American and Indonesia (McDonald’s Corporation, para.2) (Chain Leader, para. 3). All McDonald’s restaurants use the same products from the same suppliers. You can get the same Big Mac whether you are in Rochester, MN or Beijing, China. This is the foundation in which McDonald’s wants to encourage consistency among restaurants (Speizer, 2006). McDonald’s relies on their suppliers to give them the highest quality products. Producing and shipping these  products across the globe is some of these suppliers whole business (McDonald’s Corporation, Overview, para. 2). If McDonald’s was to lose even one supplier it would have to change one or  more of its product lines and perhaps its menu all together, sacrifice quality products or change the items that McDonald’s customers are used to. This gives supp liers a large amount of   bargaining power. McDonald’s can use the five-industry analysis tool to assess its strategy. By eliminating the possibility of losing business to competitors, losing suppliers and being aware of  equivalent products and potential entrants into the market, McDonald’s can continue to differentiate itself and maintain its relations with suppliers, employees and customers. McDonald’s creation and distribution of its products are not necessarily unique or  different. McDonald’s operates on a cost leadership strategy, encouraging lower prices for  commonly produced goods. Although McDonald’s operates on the basis of cost leadership, Michael Yoshikami , chief investment strategist at YCMNet Advisors believes that they should also encompass a sense of product differentiation (Speed=Profit, 2009). Mr. Yoshikami states, “McDonalds is a mass-scale product, but they have to operate as though they’re a premium  product to keep gaining market share” (Yoshikami, 2009). By creating a strategy of low co sts and a superior product, McDonald’s will have a competitive advantage among its competitors.

Also, the introduction of healthier menu items and McCafe give McDonald’s the differentiation that Yoshikami is referring to. Customers are aware of McDonald’s ability to produce highquality fast food at low prices. Now McDonald’s can b egin to build a powerful empire based on customer service, employee satisfaction, financial perspective and internal business operations. McDonald’s offers valuable training to store managers at Hamburger University in Oak  Brook, Illinois (Speizer, para.1). At Hamburger University, 5,000 to 7,000 managers are trained every year in several different areas of operations at McDonald’s (Speizer, para.6). The goal of  the training programs and the McDonald’s corporation is to provide consistency in service and quality in all 120 countries that McDonald’s restaurants can be found (McDonald’s Corporation, Overview para.1). Focusing attention on the manag ers to push for consistency, integrity and McDonald’s vision is what will give the company a competitive advantage in the industry. In addition to six satellite universities operated around the globe, McDonald’s Hamburger  University provides training, advanced management training and developed a sound tracking method to ensure success among the trainees (Speizer, para.9,10,11) . Competency exams are given to students and follow-ups are done to evaluate the effectiveness of the training. Mystery shoppers are also used in McDonald’s to ensure that the vision of McDonald’s is being uphe ld and that training programs at Hamburger University remain effective (Speizer, para.11). Consistency is the goal of McDonald’s to reinforce the idea that every customer receives the best service and quality meal each time they visit a McDonald’s restaurant anywhere in the world (Speizer, 2006). In an effort to increase their profitability, McDonald’s also has worked on improving speed and efficiency in their restaurants. The plan to increase speed came after McDonald’s introduced their wraps, which were slowing speed times, as the preparation of these items required developing new techniques (Speed=Profit, para.1). Another driving reason to increase

the speed and efficiency in the restaurants was also due to slowing economic times, making it more likely that customers will choose to dine at h ome rather than in a restaurant to conserve money (McDonald’s Corporation, para.9). By ensuring that McDonald’s was producing the highest quality food with exceptional speed and efficiency, the restaurants were giving themselves the best chance at retaining their customers. Promoting cost leadership along with quality service and products is what makes McDonald’s rise above its competitors (Speed=Profit, 2006). There are a few ways that McDonald’s is working on increasing their profitability. First of all, product innovation takes place off site to allow for training and development. When a new  product is introduced, like the snack wrap, McDonald’s works to see if the product is worth marketing or if it will slow production time too much (Speed=Profit, para.1). Warming trays have also been introduced and tested to hold 50% more hamburgers (Speed=Profit, para.3). Soda fountains are also being tested to fill automatically so drinks are filled immediately and employees can multitask and not wait for the drink to be filled (Speed=Profit, para.9). In addition, software and hand-held devices were in development to help short-circuit lines by getting employees out from behind the counters, and simplify the ordering process (Speed=Profit, para.3&10). All these improvements that are being tested will help cut seconds off ordering and waiting times, streamline the drive-thru process and at the same time keep customers coming back to experience a quality meal with exceptional speed and delivery time (Speed=Profit, 2009). According to the McDonald’s Quick Time video, the restaurant chain focuses on key areas of opportunity from the balanced scorecard. From a financial perspective, McDonald’s likes to focus on profitability and sales. From the customer perspective, mystery shopper scores and drive-thru service times are the key areas of focus. From a learning and growth perspective,

employee commitment and turnover are the key focus. Store managers need to view all these areas and more to maximize the potential of its balanced scorecard. I have created my own  balanced scorecard for McDonald’s on page 7, from the perspective of a store manager. First of  all, from a financial perspective, McDonald’s is focusing on profitability and sales. A store manager would probably like to specify the areas that finances can be improved. Increasing market share and speeding production and delivery times are what is going to maximize McDonald’s productivity. Focusing on sales, McDonald’s needs to center its attention on cost leadership, efficiency, and consistency. Customer perspective will need focus on many areas including number of new customers, retaining existing customers, speed, pricing, quality and service. A combination of these areas will make sure customers are having repeat experiences o f  quality products and services and that those happy customers are telling their friends. Learning and growth can focus on a number of important concepts. Employees need to have the knowledge, training and development to succeed in the company and provide exceptional customer service and training of new employees. Techn ology will play an important part in giving employees the ability to work quicker and more efficiently and cut waiting times in line. McDonald’s can also improve employee satisfaction by investing in its employees. This includes sending managers to Hamburger University, rewarding their hard work an d dedication and following up to ensure that the training programs are still successful. From an internal-business  process perspective, McDonald’s can focus on order-delivery time, production and globalization. Keeping the balanced scorecard effective in its operations around the globe is the key to McDonald’s success. Focusing on the different areas of the scorecard, McDonald’s can ensure that consistency, productivity and efficiency are always at the forefront of the bu siness. By maintaining customers and employees who are willing to work hard and are trained in the right areas, McDonald’s will feel comfort in knowing that their vision is being upheld. The balanced

scorecard can be a powerful tool in any business. McDonald’s has demonstrated that their   balanced scorecard has been a key component to their success and that continued improvements can always be made.

Profitabilit

Sales

 c   a   n Increase market share

Efficiency and consistency

Cost leadership

Speed pro ductio and delivery tim

 s   u  C   e   m  o  t   r   c   p  s   e  r  v  t  

 n  a   e   L   g  w  o  r    tr  

Numberof new customers

Retainment of  existing customers

Knowledge based

Speed

 Training and development

Quality

Pricing

 Technolog

Servic

Investment i employees

 a   n  c   p  s   e  r  v  Order-delivery time

Productio

Globalizatio

Bibliography

Bramhall, Joe. McDonald’s Corporation. Retrieved February 13, 2009, from Hoover’s database. http://premium.hoovers.com.proxy.msbcollege.edu/subscribe/co/factsheet.xhtml? ID=ffffrfskcfcrhyctjc

Chain Leader. McDonald’s Promotes McCafe Nationwide. (2009, May). Reed Business Information Online. Retrieved February 12, 2010 from http://www.chainleader.com/article/384831-McDonald_s_Promotes_McCafe_Nationwide.php Courtney Dentch Bloomberg News. (2009, November 10). Speed = profits McDonalds speeds orders by seconds to keep customers. Daily Herald,1. Retrieved February 14, 2010, from ProQuest Newsstand. (Document ID: 1898822391). Speizer, Irwin. (2006, May). McDonald’s Consistency Begins with an Education at Hamburger  University. Workforce Management Online. Retrieved February 2, 2010 from http://www.workforce.com/section/11/feature/24/37/85/243790.html