Mcdonald's

Introduction:

McDonald’s is the world largest chain of fats food restaurants with more than 30000 local restaurant serving 52 million customers in more than 100 countries each day. McDonald’s primarily sells hamburgers, cheeseburgers, chicken products, french-fries, breakfast items, soft drinks, milkshakes and desserts. More recently, it has begun to offer salads, wraps and fruit. Each McDonald’s restaurant is operated by franchise, an affiliate, or the corporation itself. The corporation revenues come from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald’s revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $ 3.9 billion.

History:

The business began in 1940 with a restaurant opened by brothers Dick and Mac Donald in San Bernardino, California. Their introduction of the “speedee service system” in 1948 established the principles of the modern fast-food restaurant. The original mascot of McDonald’s was man with a chef’s hat on top of hamburger shaped head whose name was “speedee”; speedee was eventually replaced with Ronal McDonald in 1963. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc,( in Des Plaines, Illinois on April 15,1955) who took over the small scale McDonald’s corporation franchise in 1954 and built it into the most successfully fast food operation in the world. Kroc later purchased the McDonald brother’s equity in the company and led its worldwide expansion and the company became listed on the public stock markets in 1965. (a

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hundred shares of stock costing $ 2.250 dollars that day would have multiplied into 74,360 shares today, worth approximately $ 3.3 million on December 31,2006). In 1985 McDonald’s was added to the 30 company down Jones industrial average. With the expansion of McDonald’s into many international markets, the company has become a symbol of globalization and the spread of the American way of life.

Internal and external factors affecting McDonald’s:

There were three factors that were chosen to outline the success of McDonald’s corporation. The first factor is globalization, which is define as closer contact between different parts of the world, with increasing possibilities of personal exchange, mutual understanding and friendship between "world citizens". Diversity, the difference among people and cultures, is the second factor. The final factor is ethics, which can be defined as a set of principles of right conduct. This paper explains how the McDonald Corporations uses the factors to conduct business around the world. In today’s society, corporations and enterprises are expanding their businesses in the global markets. Globalization is necessary for success and survival in the worldwide market; however, global competition is not easy. By the end of the twentieth century, the list of Fortune 500 companies was no longer only United States corporations due to an increase in international companies joining the list. As a leading food service retailer, McDonald’s joins those corporations with restaurants in 119 countries. Important strategic decisions are a key factor to their success with consideration for both internal and external factors. When considering the foreign market, companies need to consider there are risks. There must be local marketing to appeal to the local consumers and also to build relationships and trust.

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Therefore, the strategic planning for marketing has to be effective. McDonald’s caters its menu in other countries to the cultures of the regions. For example, in India, the nonvegetarian menu includes chicken and fish items only. Beef is not on the menu in India because are considered sacred. Global marketing decisions are no different than those made domestically but the decisions are unique to each country. Furthermore, operating on a global scale allows a company’s employees to experience working in different cultural environments. This is a good marketing strategy for recruiting employees. McDonald’s has a global core curriculum for its restaurant management. McDonald’s commitment to diversity is established on the foundational belief that diversity is not just a moral and ethical issue, but also a business issue. Due to the global expanse of McDonald’s business, diversity has become an integral part of the internal company culture. McDonald’s has over 30,000 restaurants around the world, which means franchise owner/operators, employees, and customers represent just about every culture, religion or ethnicity on earth. In addition, McDonald’s promotes the use of local suppliers and based on their policies of diversity, expects and retains suppliers that have a similar diversity culture. Knowing and understanding the local customs and traditions of the communities where McDonald’s has established businesses, integrating people from these communities into the company, and adapting locally to the tastes and cuisines of the community, has made McDonald’s the leader in their industry. In the United States alone, McDonald’s has won numerous awards and received national recognition for diversity. According to McDonald’s website, www.mcdonlads.com, awards include; PUSH-Excel Corporate Partner Award, Corporate Achievement and Image Award, Nullities Corporate Award, Corporate Vision Award, and the Circle of Inclusion Award. These awards and recognitions are not the result of a surface attempt to appease the critics.

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They are the result of McDonald’s embracing and integrating diversity into their company ethos as an asset and an ally. McDonald’s realizes that having diversity as an asset greatly enhances the profitability of the company. Diversity is a direct reflection of a company’s interpersonal relationships. These relationships, if positive, result in a rewarding venture. Conversely, if the relationships are negative, the company’s morale declines and if not addressed, leads to the deterioration of the company. This deterioration directly impacts the company’s income and the community’s acceptance of the business. However, McDonald’s leadership encourages diversity through their policies and programs. McDonald’s proven success with leveraging the advantages of diversity can be attributed to their core value of ethics. McDonald’s success is built on the foundation of personal and professional integrity. From the beginning, McDonald’s has based its reputation on trust and dependability, and their commitment to the community made them a household name. Founder Ray Kroc, believed in giving something back to the community in order to make the world a better place. Throughout the 1970’s, McDonald’s became involved with a lot of charity work. In 1974 established a charity called Ronald McDonald House. The purpose of this program was to provide temporary housing for the families of seriously ill children receiving treatment at nearby hospitals. Since the 70s, more than 10 million families around the world benefited from the comfort provided by Ronald McDonald Houses. In addition to their community involvement, McDonald's has a long-standing commitment to environmental protection. Restaurants around the world have innovative programs for recycling, resource conservation, and waste reduction. The environmental achievements of this corporation have been recognized by organizations such as the Audubon Society,

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Conservation International, Keep America Beautiful, the National Recycling Coalition, and the U.S. Environmental Protection Agency. McDonald's is also an equal opportunity employer. As an equal opportunity employer McDonald’s ensures that employees and job applicants are selected, trained, and promoted without discrimination to race, gender, sexual orientation, age or disability. The company promotes their employees based on their relevant skill, talents, and performance. In support of this McDonald's promotes and sustains a working environment, which is free from unlawful discrimination, harassment and bullying. Employees are regarded as members of a team where everyone's opinion is valued and respected. The Human Resources department monitors the effectiveness of the discrimination policies at regular intervals and takes corrective action as necessary to ensure that they being complied with. Employees who feel that they have been treated unfairly are encouraged to use the remedies outlined in the Company's handbooks. McDonald’s ethical standards, as well as their strategies for globalization and diversity are instrumental to the overall success of the company. (http://www.freeonlineresearchpapers.com/external-internal-factors-affecting-mcdonalds)

SWOT analysis:

1.Strengths: -McDonalds has built up huge brand equity. It is the No. 1 fast-food company by sales, with more than 31,000 restaurants serving burgers and fries in almost 120 countries. Sales, 2007 (11, 4009 million), 5.6% sales growth. -Good innovation and product development. It continually innovates to retain customers in the business.

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- The McDonalds brand offers consumers choice, reasonable value and great service. - Large amounts of investment have gone into supporting its franchise network, 75% of stores are franchises. - Loyal staff and strong management team.

2.Weaknesses: - Core product line out of line with the trend towards healthier lifestyles for adults and children. Product line heavily focused towards hot food and burgers. -Seasonal -Quality issues across the franchise network.

3.Opportunities: -Joint ventures with retailers (e.g. supermarkets). -Consolidation of retailers likely, so better locations for franchisees. -Respond to social changes - by innovation within healthier lifestyle foods. Its move into hot baguettes and healthier snacks (fruit) has supported its new positioning. -Use of CRM, database marketing to more accurately market to its consumer target groups. It could identify likely customers (based on modelling and profiles of shoppers) and prevent brand switching. -Strengthen its value proposition and offering, to encourage customers who visit coffee shops into McDonalds. - The new “formats”, McCafe, having Wi-Fi internet links should help in attracting segments. Also installing children’s play-parks and its focus on educating consumers about health, fitness. - Continued focus on corporate social responsibility, reducing the impact on the environment and community linkages. - International expansion into emerging markets of China and India.

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4.Threats: - Social changes - Government, consumer groups encouraging balanced meals, 5 day fruit and vegetables. -Focus by consumers on nutrition and healthier lifestyles. -Competitive pressures on the high street as new entrants offering value and greater product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S… - Recession or down turn in economy may affect the retailer sales, as household budgets tighten reducing spend and number of visitors. -Pressure groups - environnemental.

Performance objectives:

1. Speed: the target time taken by McDonalds for serving customers is 90 seconds after taking order.

2. Quality: - Good quality of food; - Clean and decorative areas; - Good quality of service; - Staffs are friendly and happy to serve the customers.

3. Dependability: -serving customers on time before 90 seconds.

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4. Flexibility: - McDonald’s restaurants in the world can satisfy every kind of customers, like in India they make vegetables menus.

5. Cost: - an appropriate price for the level of the quality of the product.

Work flow process of McDonalds:

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Order is Placed Of raw materials Transport of raw materials= Storage of raw Materials

Prior Preparation of The varieties

Movement from the kitchen to the shelf= Taking of order

Cash payment

Customers wait Packaging Done Inspects whether the Appropriate items Are Placed Movement to the customers for tables =

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Supply network: Second-tier Suppliers

first-tier Suppliers

first-tier customers

secondtier Customers

Ink suppliers Packaging suppliers Paper and Cardboard Supplier Vegetables; fruits; McDonalds restaurant

Farmers

franchisee

consumers

cheese… suppliers

Water suppliers Coke suppliers Sugar suppliers

 Outsourcing: McDonalds outsourced some products like ketchup by HEINZ; milk by nestle…

 Vertical integration: it is a Backward Vertical Integration because McDonald’s expands its operations into industries that produce inputs to the McDonald’s products.

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4 V’s profile McDonalds VS Freezer Meals Company: McDonalds

freezer Meals Company

Low

High

High

High

Volume

Variety

Variation in demand

Visibility

high

low

low

low

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McDonalds:

-Volume: low-medium volume.

- Variety: only sandwiches but by different ingredients (with beef; egg; chicken; Vegetables…) example: Mcchicken; Mcegg; filet-o-fish…

-variation in demand: medium-high; it depends on traffic and on seasons with a decrease of sales during holidays and week end.

-visibility: high, the process is total exposed to the customers.

Freezer Meals Company:

- Volume: high, the company produces a big quantity every day.

- Variety: medium-low; customers (supermarkets) choose only few different kind of meal.

-Variation in demand: low variation in demand.

-visibility: very low (the personnel never meet the end consumers).

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Type of business process of McDonalds:

- It is a batch process because there are a moderate volume, moderate variety, less flexible equipment and less skilful workers that in a job shop environment.

Capabilities: - McDonalds doesn’t have the same capacity of production all over the year; McDonalds is better sold in summer and in holidays.

Conclusion: -Even if McDonalds is the largest fast food in the world, it faces some problems like the bad image that consumers have on their foods, especially when there are a new competitors who offer nearly the same products with a better image. - I think that this a huge problem for McDonalds because it will affect clearly it sells. -McDonalds should advertise more and more their products and show the best quality to the customers, and preserve good relations with Medias which can affect badly the image of McDonalds if they start by writing or doing movies when they show bad things about McDonalds.

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Outlines - Introduction - History of McDonalds - Internal and external factors affecting McDonald’s - SWOT analysis - Performance objectives - Work flow process of McDonalds - Supply network - 4 V’s profile McDonalds VS Freezer Meals Company - Type of business process of McDonalds - Capability - Conclusion

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BM204 – Managing the Business

Assignment 1of 1

Coursework contribution: 50% of module total

Set by date: 18/12/08 Hand in date: 19/01/09

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References

- en.wikipedia.org/wiki/McDonald's -http://www.mcdonalds.com/corp.html - http://www.mcdonalds.com/corp/about.html - http://www.mcdonalds.com/corp/about/mcd_history_pg1.html - http://en.wikipedia.org/wiki/History_of_McDonald%27s - Operations Management (4th edition) by Nigel Slack; Stuart Chambers and Robert Johnston. -http://www.mcdonalds.ca/en/aboutus/suppliers.aspx

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