1.0: Introduction
McDonald’s is an international fast food company. It was founded in 1937 in California, USA by Maurice and Richard McDonald. The company has market for its products in more than 100 countries (McDonald’s Corporation, 2017). Currently, it dominates the fast food industry with more than 36,000 outlets. The company’s products are French fries, desserts, cheese burgers, hamburgers, soft drinks, milk shakes and chicken products. Over the past few years, the restaurant industry has encountered altered preferences towards healthier food options. This made McDonald’s to introduce fish, smoothies, salad and fresh juice into their menu (McDonald’s Corporation, 2017).
McDonalds’s is the leading company in fast food industry considering the level of revenue it generates and number of restaurant outlets and franchises. However, it encounters competition from other restaurants in the industry and new entrants. The market for its products in UAE is large in Dubai and Abu Dhabi (McDonald’s Corporation, 2017). The fast food market in UAE is highly fragmented and the company aims at increasing its business in UAE with increased fragmentation. McDonald’s competitors in the Middle East include; Emirates Fast Food, Kuwait Food Company and Subway Arabia. Some of these companies are franchises of other International Fast food companies. For example, Americana is a franchise of KFC. McDonald’s encounters competition from large and high –end international restaurants that target the health-conscious and affluent consumers. The company operates in countries with different cultures, some of which prohibit some of the McDonald’s products (McDonald’s Corporation, 2017). In the Middle East, the Islam culture prohibits consumption of pork .Animals such as cattle should be slaughtered by Islam people in a particular manner. In India, the culture prohibits beef consumption. Therefore, the company has to come up with strategies on how to provide different kinds of consumers with the appropriate menu that conforms to their personal and cultural preferences (Blizzard, 2012).
2.0: Company strategy
The McDonald’s company vision is to be the leading provider of fast food products globally. The company’s mission is to be the favorite place for customers to drink and eat. The company continuously enhances its operations as well as customer experience. The company’s mission statement does not include product and services, concern for employees, public image and technology. The operations of McDonald’s company are guided by several values namely ; core focus on customer experience, giving back to the community, commitment to the customers, ethical business operations, believing in its business system, profitable growth of the business and continued improvement (McDonald’s Corporation, 2017).
Since 2003, McDonald’s has focused on two strategies. The company had to introduce new options such as premium chicken sandwich and the angus beef burger in its menu in order to keep up with the changing customer spending patterns, demographics and preferences. It also campaigns for healthier food options such as salads. This strategy is a reflection of innovation as opposed to traditional food options (Smith, 2004). It is viewed to be a success determinant in the fast food restaurant industry. The company has also focused on increasing its sales through its existent restaurants rather than opening new restaurants (McDonald’s Corporation, 2017). In order to achieve this, McDonald’s has increased its menu options and kept its outlets open up to late hours. Other new restaurants are increasingly entering the fast food industry and McDonald’s has been made to open approximately 1000 units and also opens new restaurants at a rate of 1% to 2% yearly. The company focuses on customer satisfaction and use of information technology such as the stock control data base. The company uses the balanced score card performance method to measure workers’ performance. It focuses on the customer satisfaction perspective. The activities measured include order status, order fill rate and delivery date. The company uses social media such as Twitter to conduct customer analysis and surveys to measure the workers performance using the customer perspective (McDonald’s Corporation, 2017).
3.0: Forecasting
Forecasting is an important aspect in conducting the total quality management. An accurate forecast of customer demand is necessary in provision of high quality services. When customers receive the product they need at the time they need it; they perceive it to be high quality services. Failing to forecast accurately can result into a financial catastrophe for the company (Chase and Apte, 2007). When McDonald’s customer walks into one of its restaurants, they expect their orders to be served within the shortest time possible. They expect to be provided with the item they want at that particular time. Accurate forecast of its product demand and the traffic flow of its customers help the company to schedule for sufficient food stock, enough servers and food production in order to deliver high quality services to its customers (Gregory, 2017).
McDonald’s company managed to move to position three in the Gartner Supply Chain in 2012 following proper forecasting. The company’s supply chain is totally outsourced as it lacks distribution centers. One of its key performances Indicator is to never be out of stock of any item. The company operates in accordance to the principles of its supply chain in order to achieve this. The company uses the JDA Manugistics 7 application to conduct its forecasting which continually evaluates and reports the company data. The input for its forecast includes; daily point of sale data, product list, stock levels and item level at the restaurant. It also considers the marketing plan in instances such as when assessing whether the data concerns a promotion product or a standard product. The output of the forecast is validated by measurers of forecast accuracy. The profits and turn-over realized varies in different outlets depending on internal and external variables. Each of the McDonald’s franchise is expected to contribute significantly to the overall company sales. The average return rate is expected to be more than 20 % over the lifetime of franchises (McDonald’s Corporation, 2017).
4.0: Capacity planning
Capacity planning helps in assessing the capacity of the products that the company required to achieve in order to meet the dynamic demands of customers for its products. Capacity refers to the maximum level of work that is done by a company within a particular period of time (Chase and Apte, 2007). Capacity planning is essential in the decision making process of a company. The operations managers have to differentiate between long- term, medium and short term goals (Slack, et al., 2011). The McDonald’s operations managers set the capacity for its food products such that it responds fast to customer demands for their products in peak times. This is crucial in restaurant food chains such as McDonald’s. The operations managers have to ensure that the restaurants have adequate stock of materials to prepare the food items they sell. Failure to maintain a good stock of all ingredients may result into a halt into the entire production process (Chase and Apte, 2007). McDonald’s operation managers also need to set a high capacity for its food preparation in order to attend to order promptly to meet customer demands (McDonald’s Corporation, 2017).
Capacity planning helps in dealing with better responsiveness of the customers. It also enables a firm to compete effectively in the competitive global market. Through capacity planning, the company responds to the operation manager’s demands by focusing on the long-term, middle and short term capacity decisions. This can be regarded as aggregate planning as it has to deal with different kinds of operation output (Gregory, 2017). Proper capacity planning results in increased sales through proper capacity decision making, proper organization and readiness to serve a large volume of customers within the shortest time possible. While targeting at high capacity, the products must also achieve high quality standards for optimum production (Smith, 2004).
5.0: Process selection and facility layout
McDonald’s process selection begins with a product flow. The products are made following a customer order utilizing a process layout. The Company products are stocked in a pre-cooked state so that the product is finished following a customer order. This enables the company to be highly flexible and produce products in large volumes due to a large customer base. When a customer arrives and makes an order, an employee orders for preparation of the order as the customer makes payment (Smith, 2004). Within a short time, the customer gets the order and chooses whether to eat in or out. The company is a leading multinational fast food chain .The company maintains its success by providing their employees with scholarships for high education. Technology and innovation are a major aspect in the production process of McDonald’s (McDonald’s Corporation, 2017). The company uses technological advances to increase its productivity level. The company has installed Wi-Fi in its international outlets to enhance the operations platform. It uses the bio diesel technology that minimizes carbon emissions for its delivery vans. It also uses an electronic model of payment that makes the ordering process easy and convenient. It uses the Nintendo DS system to recruit qualified employees (McDonald’s Corporation, 2017).
The facility layout makes it easy to prepare food as well as servicing of the facility. The company provides a good working arrangement for the employees. It provides administrative and storage areas. The company facility is designed using traditional scale plans, techniques, travel charring and diagrams at a low cost. The layout allows for high flexibility such that service layout allows for customer education and product exposure. The office layout allows better flow of information between employees and customers while the retail outlets layout enables allocation of shelf space and response to customer needs.
Process chart for McDonald’s
6.0: Product and service design
The objective of product and service design is to achieve customer satisfaction by meeting their expectations and needs effectively. This enhances the company’s competitive advantage. The design of McDonald’s products focuses in maintenance of consistency in product preparation and the raw materials that are used (Stoll, 2017). The company ensures quality product through employee training and standardization efforts. McDonald’s introduces new products more frequently as the demand choices for customers change. The company’s menu focuses on five main products namely; bread, beef, milk, chicken and potatoes. The McDonald’s main menu offers French fries and big Mac. Big Mac is composed of lettuce, two beef patties, cheese, onions, pickles, sauce and seasoning (Stoll, 2017). The customer first makes an order before the ingredients are combined. The company’s product standard name originates from the company’s convention practice of adding the term “Mc” to its product name (McDonald’s Corporation, 2017).
Despite McDonald’s being a global company, it mainly operates locally. The restaurant provides regional products such as coconut milk and Japan shrimp in Brazil and Rice burgers in Taiwan. The ethical considerations about the McDonald’s product design focus on minimizing the level of obesity and diabetes in the consumers of its products. It is also focuses on negative complaints about unhealthy food options (Stoll, 2017). The company purchases safe and healthy supplies and aims at minimizing negative impact upon the environment through green packaging technique. The company has managed to produce unique and tasty sandwich products. The customers have an option of putting ketchup, pickles or tomatoes on the sandwich or have it plain. The Big Mac product is appealing to customers of all ages. The McDonald product design attributes largely to the company’s revenues (McDonald’s Corporation, 2017).
7.0: Location
The McDonald’s restaurant company was first established in California, USA. However, as time progressed, it achieved continuous growth and has managed to expand its operations into new locations such as Europe, Asia/ Pacific Islands, Middle East, India and Africa (McDonald’s Corporation, 2017). In Europe, it operates in the UK, France and Germany while in Asia; it operates largely in China market. In Middle East, the company has outlets in Abu Dhabi and Dubai. While establishing its restaurant outlets in different geographical locations, the company considers the different foreign cultures. Studying the cultures effectively helps the company to produce local McDonald products that are consistent with the cultures by including what the cultures prefer and omitting the products that are prohibited by different cultures (Blizzard, 2012).
Strategic location of a company is advantageous when considering the aspects of convenience for customers. McDonald’s restaurant outlets are located in areas with high human traffic and business centers. Many career people do not have enough time to prepare food in their homes (McDonald’s Corporation, 2017). Therefore, they opt to spend the shortest time possible within their areas of work to get breakfast or fast food. McDonald’s outlets have been located in places where free delivery can be made to homes and also accessible to a large customer base. In the case of orders made from relatively far distances, the company has enough delivery vans and personnel who can deliver the product to the customer’s current location (McDonald’s Corporation, 2017). The company makes use of local input to produce products in local companies such that they do not require shipment of materials from a common source. This has helped in overcoming the location challenge considering that the input is perishables.
8.0: Quality management
Every company should be able to assess the degree to which its products can meet its intended purpose. This can be assessed through four determinants of quality namely; design, conformance quality, ease of use and delivery after-delivery services. The design of McDonald’s Bid Mac product is characterized by specific ingredients unique to the product. This product contributes largely to the popularity of the company’s brand due to its tasty ingredient and combination option of ingredients for different customers. The product achieves the quality of performance intended by its designer. The intension of the company is to create a uniquely tasty product that makes customers choose McDonald’s and not any other restaurant for that specific product (Ebanos, 2012).
The product is easy to make as the ingredients are stored in a pre-cooked state and finished within a short time after a customer order. The ingredients of the product are well labeled to provide the consumers with the choice of selecting what is best for them. McDonald’s services after delivery are excellent. It allows the customer with a convenient technological platform where they can provide feedback regarding areas of improvement, complaints and suggestion about the product. The company conducts regular inspection checks for its products starting from the farm to the restaurants and to the end consumer (Ebanos, 2012). The company can improve the quality of its product by using the best production systems possible, innovation and maintaining an excellent leadership role at the company. The company can achieve quality improvement using the following simple flowchart.
Benchmarking involves measuring services, products of a company and its practices against its competitors. An effective benchmarking process is achieved through appropriate analysis. If I would bench mark a company, I would start with the company’s mission statement as well that of its competitors. The company should analyze all of its procedures and identify areas that need improvement (Gregory, 2017). Benchmarking is a tool for continuous improvement and tool for growth potential. Competitive benchmarking is performed in direct competitor companies (Stevenson & Hojati, 2007). This type of benchmarking is important for comparing the companies with competing products. For instance, McDonald’s is a major competitor with the Burger King. Information about the direct competitor cannot be accessed easily but can be obtained from the public domain.
9.0. Conclusion
McDonald’s dominates the fast food industry with outlets in different countries. It is the leading company in fast food industry considering the level of revenue it generates and number of restaurant outlets and franchises. It encounters stiff competition from other restaurants in the industry and new entrants. The McDonald’s company vision is to be the leading provider of fast food products globally. The company operates in two main strategies in which it had to introduce new options in its menu in order to keep up with the changing customer spending patterns, demographics and preferences. Its strategy is a reflection of innovation as opposed to traditional food options.
The McDonald’s operations managers set the capacity for its food products such that it responds fast to customer demands for their products in peak times. The company uses the JDA Manugistics 7 application to conduct its forecasting which continually evaluates and reports the company data. The company’s Process selection enables the company to be highly flexible and produce products in large volumes due to a large customer base. McDonald’s effective benchmarking process is achieved through appropriate analysis. The company’s multinational locations enable it to attract large customer base hence high revenue. The company is consistent with its business strategy as continues to see themselves as market leaders in the future.
It is recommended that the company should place healthy food options as a priority and this is the strategy that direct competitors focus on due to the changing preference of consumers to healthy food that is contain low calories. The company should invest more time and financial resources to promote its new healthy food menu in the international market to achieve maximum sales.
10.0: References
Blizzard, A. (2012). The Impact of Cultural Distances on the Country Selection Process.
Chase, R. and Apte, U. (2007). A history of research in service operations: What’s the big idea?. Journal of Operations Management, 25(2), pp.375–386.
Ebanos, (2012), https://opsmgt.edublogs.org/2012/09/22/mcdonalds-and-top-quality- management/,retrieved from https://opsmgt.edublogs.org/2012/09/22/mcdonalds-and-top- quality-management/.
Gregory, L., (2017), Business, Management ,McDonald’s Operations Management, 10 Decisions, Productivity, Retrieved from http://panmore.com/mcdonalds-operations- management-10-decisions-areas-productivity
McDonald’s Corporation (2017). Company Profile, retrieved from http://www.referenceforbusiness.com/history2/56/McDonald-s-Corporation.html.
Slack, N., Johnston, R. and Brandon-Jones, A. (2011).Essentials of operations management. 1st ed. Harlow, England: Financial Times Prentice Hall.
Smith, T. G. (2004). The McDonald’s equilibrium. Advertising, empty calories, and the endogenous determination of dietary preferences. Social choice and welfare, 23(3), 383- 413.
Stevenson, W. J., & Hojati, M. (2007). Operations management (Vol. 8). Boston: McGraw- Hill/Irwin.
Stoll ,J., (2017),McDonald’s Big Mac, retrieved from http://designawards.core77.com/Packaging/33292/McDonald-s-Big-Mac.