Operations Management: McDonald s Corporation

1 Operations Management: McDonald's Corporation

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Executive Summary

McDonalds is a well known fast food retail chain that has a strong global presence and an impressive market position. The company is well known for serving hamburgers at very affordable rates. It is a very popular brand among the kids as well. Its corporate strategy has been such that the company is renowned for the speed of service in the fast food segment. The paper is aimed towards analysing the operations strategy of the company and identifying the order winners and order qualifiers for the restaurant chain through market research.

The paper begins with an analysis of the corporate strategy followed at McDonalds in various stakeholder segments and also as a whole. It moves on to try to analyse the corporate health of the concern by analysing company financials and analysis of a few ratios. The paper then analyses company revenues and profit figures over a 5 year period and draws a perception map in comparison with its key competitors in the industry to know its market standing. Based on a research carried out through personal interviews of 100 people divided between 4 age groups, the paper calculates what qualifiers among taste, variety, accessibility, price, speed of delivery and service emerge as order winners and qualifiers. Based on this research, the paper concludes in recommending strategies for the company that would help retain its competitive position.

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Introduction Founded by Richard and Morris in 1940 in California, McDonald's is the biggest fast food chain across the world. The company started its operations by selling milkshakes. Impressed by the speed of service of milkshakes, the company moved on to open retail outlets of fast food chains that primarily delighted customers with their speed of service. The first retail outlet started in Illinois and today, the company has over 30,000 hamburger retail outlets in about 119 countries worldwide (Sitesgoogle, n.d.). The company operates primarily through franchise outlets and affiliates and enjoys competencies in almost all areas of the restaurant business including marketing, retailing, franchising, operations and service. They also take pride in their active social involvement. Figure: Market share of major players of Fast Food Industry

(Source: Sitesgoogle. n.d.) The figure represents that McDonald's lead the market share in the global fast food industry having a total of 19% market share followed by Yum Brands, Doctor's Association, Wendy's Subway and Burger King. About 60% of McDonald's revenues come from its international sales.

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This represents a significant international presence in developed as well as emerging nations. The company's target market is the growing middle class in these nations.

McDonald's also introduced McCafe in 2008 that targets the high profit beverage segment. Its chief competitor in the segment is Starbucks.

McDonald's targets primarily customer from the middle income group. Here its target segment can be categorise in three different groups namely, children, families and students. There is nor market segmentation in the adults category. McDonalds also segments its target market in terms of geographical location where menus are altered depending on the popular choices (Nation's Restaurant News, 2005A).

Research Methodology The research for identification of order winners and order qualifiers was conducted by means of personal interviews, the data for which was gathered by means personal interview. The primary data was collected from 100 respondents which were evenly distributed between four types of customer segments namely, kids, students, employed and pensioners. Responses obtained from each of these segments were scaled up and ranked on a scale of 100 between the five factors, taste, speed of delivery, variety, price, service and accessibility. Based on the scores obtained in each category, the order winners and qualifiers were identified (Appendix 2).

Appraisal of McDonald's Strategy McDonalds Corporation is one of the most famous hamburger fast food retail chain known by children and adults alike. It has had an impressive track record with increasing sales and profits over the years. It is observed that through various strategies, McDonalds has been able to sustain its competitive advantage in the fast food market.

Lately, observing the rise in the number of health conscious consumers, the company has decided to introduce products like sausage burrito and cinnamon role on the breakfast menu and also keep the bagels as optional choices. Its plan to introduce the super seized French fries has

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also been phased out. The company is emerging as a healthy food chain that supports balanced lifestyle (Mcdonalds, 2013).

The company is also looking at refurbishing its stores to increase sales at established selling point by enhancing store efficiency rather than investing in new stores. For this, McDonalds would bring in better cooking technology so as to promise healthier and hotter food based on the made to order platform.

Strategic Analysis of McDonalds

Corporate Strategy McDonald's operates through 2 basic strategies since the last decade. The first is to keep itself updates and cater to changing needs of customer's preferences, spending patterns and demographics. For example, countries where beef is unpopular, McDonald's has designed burgers that are made out of chicken alone. It also keeps on updating its menu to cater to the competitive environment of diverse offerings in the hamburger segment. As a part of changing consumer preferences, the company has also introduced premium salads that serve the health conscious consumer. This shows that novelty is the key business strategy as opposed to selling traditional products.

The second strategy is that of increasing margins by enhancing sales of existing franchises rather than opening new store to increase sales. For this, they have increased restaurant timings, given their stores a fresh look and increased variety on the menu. This, however, has not stopped its expansion plans (Han, 2008).

Stakeholder Requirements The primary stakeholder group for McDonalds consist of its workers, its consumers and its shareholders. McDonalds primarily owns the supplier end in terms of the fact that it mostly produces its own raw materials and also owns units of production. The company has been investing in increasing employee payroll and benefits by $103 million over the 2011-2012 period. It also takes pride in being the most renowned brand name in the fast food chain in about

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