Operations and Business Strategy of McDonald's

INTRODUCTION:

McDonald's is a very popular fast food business which is operating all over the world. It started its operations in sixties and currently it is serving worldwide chain of 30,000 restaurants. McDonald's restaurant has a quality that it serves its product according to the culture of that region where they are operating. Several artifacts of modern world has been very well organized as McDonald’s famous product, promotional plan with the famed toys and films, its participation in the aid organization and its dispersion classified adds.

More than 75% of McDonald's is owned and operated by local men and women. Its serves more than 40million people per day. It gets about 82% of its revenue from 8 different countries which include Japan, Korea, Australia, France, Germany and USA. But the biggest achievements got by McDonald's in these countries is creating a good name and brand image in people’s mind and hygiene cautions are the main driving advantage it has which helps the McDonald's to attract many customers. They have created a corporate symbol and saturated advertisement has helped McDonald's by creating a good brand name and image of logo in the million’s of people mind.

Overall McDonald's planned plan is called plan to succeed. There focal point is not to be the biggest fast food chain in the world but the finest fast food chain. McDonald's planned philosophy in the rear this plan is generates recovered experience through the finishing of multiple proposals immediate the five factor of incomparable customer understanding. (McDonald's, 2009)

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A key element of the McDonald's strategy since the beginning has been to own all the property on which the MacDonald was built doesn’t matter the property is franchised or company owned. Rental money differs from property to property but it has been estimated that McDonald generate more money from its rents of the property than the franchise fees it charges.

The success of the McDonald's since its beginning can be attributed to the customer’s service it provides. Each restaurant wants to have a good brand image by giving quality food and good customers services. In both field McDonald's has made its name as it is providing quality and cheap food together with quality service. It has come with a limited menu but with great improvements. Another invention was the introduction of the play area. McDonald's is continuing new inventions to facilitate the mass customization process. In 2001 McDonald’s began standardizing its technology its existing point of sale system with the office system in more than 11,000 stores in the United States. The company is investing in a common point of sale which will be available to use all over the world in its branches. (typepad, 2009)

McDonalds make possible the replace of value by matching the money paid by customers with quality and diversity of products and services resulting to the customer feeling of having acknowledged their moneys significance and even more than what they compensated for. McDonald's objective the customer happiness by food preparation the penchant to formulate the customers feels satisfied about the cost exchange. McDonald's is advice for the family or friends get-together as well.

MCDONALD’S VISION

“To be the best and leading fast food provider around the globe”

MISSION STATEMENT

“McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, value, and cleanliness so that we make every customer in every restaurant smile”

OPERATIONS AND BUSINESS STRATEGY

Business strategy is defined as it is a long term planning of a business with specific goals and target within a specific time with the available resources. It is a management plan constructed by the top level of management in order to make the business runs in profit.

In McDonald's the business strategy for the company is to make food fast available to its customers at a very low competitive price but to get profit as well by reducing the cost of the product and expanding the business world wide.

Operations strategies play a very important role in achieving organizational goals. By using these strategies an organization controls and maintains all of its operations. So these should make after a comprehensive marketing analysis according to capabilities and resources of an organization.

Operation management strategies in McDonald's are being made by made by top management. These strategies are implemented in all the branches of the McDonald's and these strategies are distributed to all its franchise branches in the written form. So there are operational managers in all the branches that control all operational activities.

McDonald's  has adopted a strategy which is based on the three sections. This strategy has emphasizing on the customer importance and customers satisfaction. As the company has increased using the information technology, it has developed new ideas to improve the operational activities of the business. With the introduction of stock control data base system, it avoids unnecessary ordering; keep the stock up to date in store. It has become very easy and time saving now to order the stock. Stockrooms are directly attached to point of sale system and the manager knows what product is moving fast and how much he should order more products. (typepad, 2009)

REDUCING COST WITH MORE EFFICIENT EQUIPMENT

The challenge facing the global equipment suppliers when they design the fryers for our restaurants is to develop such kind of equipment that are more energy efficient and gives better taste while improving the crew efficiency and using less cooking oil.

The low down oil quantity Fryer is the next age band fryer. LOV improves cooking efficiency, simplifies filtering and cleaning, and provide enhanced environmental benefits.

The LOV’s ground-breaking design allows restaurants to roast the same sum of produce with in the region of 40% smaller amount oil. It in addition uses more or less 4 % a lesser amount of liveliness than average fryers. (Gallagher, 2003)

In McDonald's lighting represent an important role in reducing the cost of its operations. McDonald's uses fluorescent low consumption lighting in the kitchen. Tests revealed that each restaurant saves 11,000kWh of electricity each year.

Packaging plays an important role of McDonald brand not only for quality, integrity and safety but also in its visibility to our customers. McDonald also use its cooking oil in its transport operation which has significantly reduces the cost of operation as well.

Its not policy of McDonald's to make its employee work efficiently but with limited resources but it provides everything to its staff they required to do the the job efficiently and according to health and safety methods. It helps the McDonald to get more productivity and get more revenue and improve its services.

In order to achieve its business strategy goals, McDonald's is emphasizing more and more on reducing its cost of operational activities. In order to reduce the cost McDonalds purchases most of the vegetables especially potatoes directly from farmers, this help the McDonald's not even to cut the cost of chips production but also get fresh vegetable for salad for its customers. This also helps McDonald's to not get effected by the fluctuations in the market prices. (typepad, 2009)

Aside from offering hamburgers and fresh fries, McDonald's has start serving the family treat and as a community centre for the senior citizen. It has also start giving indoor playgrounds and promotional toys to its kids as well. As this movement begins there is an addition of extra service-oriented equipment is desired. They can carry out studies and review to improve knows which among the different possibilities serves the company’s target in good way. These will involve robots to do order tacking in replace of humans, automated processes of food in McDonald's has (typepad, 2009)

McDonald's has a policy to be in the market as a market leader. In order to keep its leadership it keeps low cost and gets more income by selling food at cheap price. Food made with the help of machine is considered more hygienic; however the continuous development in the technology McDonald's and especially its employees as they have to serve quick services. Computers and smart cashiers are used by the employees so that they would not get confused and they are provided with customized database management system.

These all operational activities are conducted in all the branches of McDonald worldwide in order to successfully implement the business strategy of the McDonald.

MCDONALD LAYOUT, PROCESS TYPE AND USE OF TECHNOLOGIES

MCDONALD KITCHEN LAYOUT

The strategy refers to the overall working and general environment offered by the McDonald.

It includes the personal level, service and product layout, interior and exterior.

McDonald's has a policy to serve the fresh food to it customers in a minimum time and at the same time they want to get as many as possible customers to get the more income. The most important thing on which McDonald operational department concentrate is the customer’s satisfaction. Customers satisfaction can only be achieved if it serves the customers with a good quality food in a quickly with minimum price. In order to perform this whole process McDonald's has a very specific type of layout. This layout gives an easy access to the staff to serves the customers in a quick way. At the till when a staff serves the customer, staff has a everything in its reach required by the customer. (Gallagher, 2003)

McDonald's keep maximum number of tills opens to serves the customers and each staff takes average one minute to serves the customer. The chairs are arranged in such a way that it gives a minimum disruption to the people who are standing in the queue.

In the kitchen department McDonald's has selected high efficiency fryers which take minimum time to fry the chips. Operations manager has assigned the task to different staff members according to their ability.

McDonald's get most of the things in ready to serve form from its main headquarter which decrease the cost of producing the food and it also help the McDonald's to keep the quality same all over its stores. Staff in McDonald's only has to put the food in oil and it gets ready to serve. It also helps the McDonald's to save lot of storage cost.

In order to keep the system runs smoothly McDonald always keeps good relation with the suppliers. Their supplier makes sure that they deliver the goods to McDonald in the minimum possible time. (Swearingen, 2003)

STRATEGIC IMPORTANCE OF LAYOUT

Proper layout enables:

• It makes the utilization of space, equipment and people more efficient.
• It enables the movements of information, materials and peoples more effective.
• It boosts the employee morale and helps to provide him safer working conditions.
• It helps to improve the customer’s relations with clients.
• Flexibility

Layout design mean the overall working and general environment offered by the McDonald. It includes the personal level, service and product layout, interior and exterior etc.

STRATEGIES:

Exterior

McDonald's sets its premises in proper manner to handle any number of customers easily. The building design is standard world wide but it may be have some difference in size or in exterior according to the location. It enables them to save time, satisfy their customers, comfortable environment for both employees and customers. Ray Kroc was the first person in McDonald’s history who took the initative to franchise the McDonald's. He also maintain the McDonald's outlooks, its signs and layout same every where in the world which has directly improved the sale of the company. As it has an attractive layout and eye catching sign boards.

Interior:

Interiors areset to be “depoliticized.” In addition to new restaurant lighting, menu boards, artwork and graphics, new materials will offer choice when it comes to decor selection. Technology perks include Wi-Fi, programmed music, and video. (typepad, 2009)

MCDONALD’S USE OF TECHNOLOGIES

McDonalds has invested a huge amount of money on creating a technology board which has help the McDonald's to adopt new and new technologies in its operations with time. The main job of this board is to recommend the management to buy those kind of equipment which are very effective in saving the energy as well as are more productive.

In 2001 McDonald's has start investing money in the improvements of point to sale ordering system and at the same time linking the point to sale system with the back office computer in all over the world. So this thing has helped the management to know what actually happening inside the business. What customer likes and what they dislikes.

McDonald's  has invested capital in the improvement of electronic payment system as well which has make possible to process the transactions in less than 4 seconds. (swearingen, 2003)

McDonald's uses the best equipment to carry out the day to day operation in its outlet.

MCDONALDS EXPLOTATION OF VALUE CHAIN AND QUALITY

PORTER’S FIVE FORCES ANALYSIS

Competition

Restaurant industry is highly competitive industry. There are many small fast food businesses in the industry that fight each other to improve their customer base. McDonald's is not exception to this. Since it establishment in 1940, MCD has excelled in this sector. Nevertheless to stay in the competition, it started with MCafe. This helped the company to stay in the business as a major fast food business. Another major step came out when McDonald's started breakfast to compete with the existing businesses serving breakfast. Hence this industry is extremely competitive and the MDC should be up to date with customer taste and preferences. Quality is very important for McDonald's in order to stay in the market but at the same time it has to keep the prices minimum to maintain the cost leadership.

Ease of entry

Although it is hard to enter in the restaurant business as it demand a lot of investment and it is hard to establish a distinct brand name as well. There is a cost of entry in the market and there is high research and development cost. Large established companies like McDonald's perform compose it more easier said than done to enter and achieve something within the souk, new entrant find with the intention of they are facade with worth antagonism from offered string eating place. At the same McDonald's working hard to maintain the quality same throughout the time. It is aware that if it compromise on its quality then it will make very much easier for the new entrant to attract the customers with better quality of its food products.

Substitutes

McDonald's keeps a very close watch on its quality because it is aware that customers have many others substitutes of its food products. e.g MDC burgers, Beverages and dairy products.

Strength of Suppliers

The supplier’s power in the fast food manufacturing is quite miniature unless the foremost feature of the item for consumption is not voluntarily on hand.

Strength of Buyers

Relatively strength of buyers in this industry is relatively low.(Ifm, 2009)

PORTER’S FIVE FORCES ANALYSIS OF VALUE CHAIN

The main objectives of these kinds of activities are to give the customer a level of value which is more than the cost of activities. This has enables the McDonald to gain more profits.

The primary value chain activities are:

Inbound Logistics

Inbound logistics is the raw material McDonald's received in its warehouse and then distribute it to different branches according to their requirements McDonald's has an efficient warehousing and transporting goods to its branches. All the products are made in the warehousing and goods are distributed as per the requirement of each branch.

Operations

It is the activities which are being conducted in order to transform the inputs into finished products and services. McDonald's has a very good operation system as it has trained staff for each task in the kitchen. Most of its product is already in the ready to serve form. All they have to put them in the ovens or in the oil and the product get ready to serve in the minimum possible time which normally takes from 1-5 minutes.

Outbound Logistics

Outbound logistics mean to keep the finished goods in warehouses and then distribute them to different branches. McDonald's has a very well established transporting system. As all of its products are prepared at the warehouse, so in order to improve the distribution process it has applied the IT technology which inform the warehouse body that which branch is running out of the products, so before the products get finished it immediately make available the product to the branch. This process is very cost effective as branches do not need to have the stock room for the goods.

Marketing & Sale

It is a complete science that McDonald's use to market its products in order to generate more sales.

Service

All the extra activities which are provided to customers even after the sale of goods.

The primary activities are supported by :

• Technology development- Technologies helps the McDonald to access the activities done inside the business which are as follow:

• Cost advantage - Keep a eye on the costs and minimizing it out of the value adding actions.

According to the porter’s five forces analysis McDonald's competes with the forces which are inside the business in order to gain the maximum profitability. So it proves that business profitability is took place in the porter’s five forces mode. (Ifm, 2009)

Further there are Secondary support activities which directly supporting the operational activities of the business. HRM department make it possible for the business to get the energetic people to perform the operations. They always keep motivating the staff to work hard. The Management makes possible to select the technology which is cost effective together with the efficiency.

CONCLUSION

McDonald's is a very well established organization. The success of the McDonald's is completely based on the extensive research of the market internal and external forces. It has done research on the people behavior of specific country, on their culture, buying power and social issue. McDonald's has paid special attention on the location of the business, its interior and exterior outlook and types of technologies it going to use to get the maximum production at short time. The most important thing which it focused on was the quality and the market forces which directly affect the business.

REFERENCES

• Publications from McDonald's web site. McDonald's culture and history. 2009. [online]. [Accessed on 4 December 2009]. Available from World Wide Web: http://www.mcdonalds.com/usa/work/companyhistory.html.
• Publications from biz/ed web site. McDonald. 2009. [online]. [Accessed on 5 December 2009]. Available from World Wide Web: http://www.bized.co.uk/compfact/mcdonalds/mcindex.htm.
• Publications from typepad web site. McDonald’s business Strategy. 2009. [Accessed on 5 December 2009]. Available from World Wide Web: http://ivythesis.typepad.com/term_paper_topics/2009/02/mcdonalds-business-strategy.html.
• GALLANGHER, S. 2003. McDonalds technology trials.[online]. [Accessed on 10 December 2009]. Available from World Wide Web: http://www.baselinemag.com/c/a/Projects-Management/McDonalds-Technology-Trials/.
• SWEARINGEN, J. 2000. Operations Management, Layout Strategy. [online]. [Accessed on 11 December 2009]. Available from World Wide Web: http://online.uis.edu/spring2000/bus322/lectures/chap09/sld001.htm.
• Publications from Ifm website. Porter’s value chain. [online]. [Accessed on 23 December 2009]. Available from World Wide Web: http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html.
• PAUL, J. 2005. International Business. New Delhi. 2nd Edition. Ashoke K Gosh.
• Publications from typepad web site. McDonald’s business Strategy. 2009. [Accessed on 5 December 2009]. Available from World Wide Web: http://ivythesis.typepad.com/term_paper_topics/2009/02/strategic-business-analysis-of-mcdonalds.html