CHAPTER#1 INTRODCTION

“HISTORY”
The first McDonald’s restaurant was started in 1948 by brothers Maurice (“Mac”)
and Richard McDonald in San Bernardino, California. They bought appliances for
their small hamburger restaurant from salesman Ray Kroc, who was intrigued by
their need for eight malt and shake mixers. When Kroc visited the brothers in 1954
to see how a small shop could sell so many milk shakes, he discovered a simple,
efficient format that permitted the brothers to produce huge quantities of food at
low prices. A basic hamburger cost 15 cents, about half the price charged by
competing restaurants. The self-service counter eliminated the need for waiters and
waitresses; customers received their food quickly because hamburgers were
cooked ahead of time, wrapped, and warmed under heat lamps.

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

“McDonald’s Mission
McDonald’s brand mission is to be their customer’s favourite place and way to eat.
Their worldwide operations are aligned around a global strategy called the Plan to
Win, which centre on an exceptional customer experience " People, Products,
Place, Price and Promotion. They are committed to continuously improving their
operations and enhancing their customer’s experience. The mission statement of
McDonald's fast food restaurants is a common mission for every restaurant, but the
McDonald's Values reflect the McDonald's experience. The mission statement of
McDonald's fast food restaurants around the world is not much different from any
restaurant chain. That broad and common mission statement is more clearly
defined by the McDonald's Values, which reflects the experience that customers
can expect when walking into a McDonald's fast food restaurant no matter where it
is located.

 They place the customer experience at the core of all they do.
 They are committed to their people.
 They believe in the McDonald's System.
  They operate their business ethically.
 They give back to their communities.
 They grow their business profitably.
 They strive continually to improve.

“The strategy”
Mr Greenberg did what the textbooks suggest. First, he focused on improving the
core business, announcing it as his top priority. Then, he also set a second priority:
to find a new platform for growth. With this audacious goal in mind, he supported
five acquisitions of related restaurant businesses-including Chipotle, a Mexican
food restaurant, and 50 percent of Pret A Manger, the UK sandwich chain " and he
set up the Partner Brands Division, to be responsible for these new businesses. Mr
Greenberg also opened the door to a number of other, more organic initiatives led
by his head of strategy, Mats Lederhausen.

KFC’s competes on several bases, including products, nutrition, cost and

franchising. They’re adapting their consumer offerings by targeting the large and
growing market for family meals, broadening their menu and offering attractive
meal bundles at compelling value. Their objective is to become the UK and
Ireland’s favourite quick service restaurant brand:

Winning food (i.e. the best quality food in the industry). KFC business experience
and success over the decades provides opportunity for entrepreneurs, business
owners and managers to learn valuable strategies and ideas to run their businesses
to success.

“McDonald’s Operations Management, 10 Decision

Areas”
1. Design of Goods and Services. McDonald’s goal in this strategic decision area
of operations management is to provide affordable products. As such, the serving
sizes and prices of its products are based on the most popular consumer
expectations. However, some McDonald’s products are minimized in size to make
them more affordable.

2. Quality Management. The company aims to maximize product quality within

constraints, such as costs and price limits. McDonald’s uses a production line
method to maintain product quality consistency. Consistency satisfies consumers’
expectations about McDonald’s and its brand in this strategic decision area of
operations management.

3. Process and Capacity Design. McDonald’s process and capacity design is

centered on efficiency for cost-minimization that supports the company’s
strategies. This strategic decision area of operations management focuses on
maintaining process efficiency and adequate capacity to fulfill market demand. At
McDonald’s, the production line method maximizes efficiency and capacity
utilization.

4. Location Strategy. McDonald’s goal in this strategic decision area of

operations management is to establish locations for maximum market
reach. McDonalds marketing mix includes restaurants, kiosks, and the company’s
website and mobile app as venues. Through these locations/venues, McDonald’s
reaches customers in traditional and online ways.

5. Layout Design and Strategy. McDonald’s uses practicality for this decision
area of operations management. The strategy involves maximizing space
utilization in restaurants and kiosks, rather than focusing on comfort and
spaciousness.

6. Job Design and Human Resources. McDonald’s human resource strategies

involve training for skills needed in the production line in restaurant kitchens or
production areas. For this decision area of operations management, individual and
organizational learning are also emphasized to support McDonald’s organizational
culture.

7. Supply Chain Management. The firm’s global supply chain supports its
various locations around the world. McDonald’s has a strategy of supply chain
diversification for this decision area of operations management. Such strategy
involves getting more suppliers from different regions to reduce McDonald’s
supply chain risks.

8. Inventory Management. McDonald’s goal for this strategic decision area of

operations management is to minimize inventory costs while supporting restaurant
operations. The company does not directly sell products and ingredients to its
restaurants. Instead, local and regional intermediaries and distributors coordinate
with McDonald’s restaurant managers to manage their inventory.
9. Scheduling. McDonald’s uses corporate conventions for scheduling, based on
local market conditions and laws, as well as supply chain needs. For example, the
company’s strategy involves regular and seasonal schedules to address fluctuations
in local market demand. Thus, in this decision area of operations management,
McDonald’s is flexible and adapts to local market conditions.

10. Maintenance. McDonald’s lets restaurant managers or franchisees select

maintenance service providers. However, for kitchen/production equipment,
McDonald’s Corporation also has certified/approved maintenance providers. Thus,
the company addresses this strategic decision area of operations management
through local and corporate control.

“BUSINESS PORTFOLIO”
PRODUCT PORTFOLIO
 McDonald Organizational Structure

Envoirnmental Analysis
1)SWOT Analysis
Strengths

1. The second-largest restaurant network serving customers in over 120 countries

As of 2018, McDonald’s operates the second-largest restaurant network in the

world. In total, the company and its franchisees operate 37,241 restaurants in 120
countries.
Figure 1. Largest quick service restaurant (QSR) chains by number of locations in
2018

In terms of sales, McDonald’s outrivals any other QSR chain in the world with
US$22.820 billion in sales in 2017 alone (earning slightly more than Starbucks).
The sheer size of the company’s restaurant network is a strength that provides
many advantages over competitors, including:

 Economies of scale. The company can share its fixed costs over many
restaurants locations, which makes McDonald’s one of the cheapest places
to eat at.

 Huge gains from implementing best practices. The company can identify
better ways of performing tasks, managing restaurants or hiring new
employees and can achieve huge gains by implementing these best practices
in its vast network of restaurants.

 Market power over suppliers and competitors. Due to its size,

McDonald’s can exercise its market power over suppliers by requiring lower
prices from them. The company clearly demonstrates this with The Coca
Cola Company.

Because of McDonald’s and The Coca Cola Company’s agreement, no other

restaurant chain can sell Coca Cola drinks for lower prices than
McDonald’s, even if it means losing the business to PepsiCo.
 The Coca Cola Company could easily get out of such agreement if
McDonald’s wouldn’t be so huge and would generate less income for The
Coca Cola Company. McDonald’s can also use its size to affect the
competition by underpricing some of its items or driving them out of the best
locations.

 Wide audience reach. McDonald’s restaurant network allows the chain to

reach more customers than most of its rivals could reach. According to the
Company’s CEO[6], in five of its largest markets, 75% of population lives
within 3 miles of McDonald’s restaurants.

Wide audience reach does not only help the company to target more
customers and increase brand awareness, but also to introduce new services,
such as home delivery.

2. The most recognizable brand in restaurant industry

McDonald’s opened its first restaurant in 1940.[7] Since then, the company has
become the world’s largest restaurant chain in terms of revenue with the most
recognizable brand in the market.

According to Forbes[8] and Interbrand[9], McDonald’s brand is 9th and 12th most
valuable brand in the world, worth US$40.3 billion and US$41.533 billion,
respectively. No other restaurant brand, except Starbucks, is included in the list of
the top 50 most valuable brands.

The brand value is closely related to the brand recognition and reputation. Usually,
the more valuable a brand is the better it is recognized worldwide. McDonald’s,
which operates in 120 countries, where billions of people live, enjoys some of the
greatest brand awareness among all global corporations.

Only KFC operates in more countries (131)[4] than McDonald’s and can compare
in brand awareness with it. Brand awareness also helps to introduce new products
or sell the current ones faster as the company needs to spend less money on
advertising.

While, McDonald’s reputation has suffered a lot during the years, the company is
still recognized for its innovations in fast-food industry and the American business
values it brings to other countries.
Figure 2.
McDonald’s
brand value
2000-2017

Few direct competitors have such a valuable and recognizable brand, which
strengthens the company.

2)Envoirnmental Analysis
McDonald’s Corporation’s strategies address issues in its external environment,
such as the ones identified in this PESTEL/PESTLE analysis of the global fast
food restaurant chain business. The PESTEL/PESTLE analysis model supports
strategic management by identifying the external factors that present opportunities
or threats, based on the remote or macro-environment of the business, pertaining to
the political, economic, sociocultural, technological, legal, and ecological factors
(the PESTLE factors). In the context of this business analysis, McDonald’s
employs a set of strategies for maximizing the benefits of opportunities in its
industry environment. These strategies are intended to address the external factors
in the organization’s environment, along with competitive rivalry involving firms
like Wendy’s, Subway, Burger King, and Dunkin’ Donuts, as well as Starbucks
Coffee Company. As the biggest fast food restaurant chain in the world,
McDonald’s uses its strengths to adapt to changes in its business environment,
such as the trends shown in this PESTEL/PESTLE analysis. Such adaptation is
essential to the long-term survival and growth of the business, especially amid
aggressive competition.
Through a PESTEL/PESTLE analysis of McDonald’s Corporation, management
decisions can focus on the most significant trends that influence the food service
business and its industry. These trends are among the defining factors of
developments in the global food and beverage market, which is also under the
influence of the strong force of competition shown in the Porter’s Five Forces
analysis of McDonald’s Corporation. In this regard, in understanding the
competitive landscape and the external factors and trends identified in this
PESTEL/PESTLE analysis, the company’s management can develop strategies
appropriate to the conditions of the business environment.

Political Factors Affecting McDonald’s Business

This aspect of the PESTEL/PESTLE analysis refers to the effects of governmental

actions and policies on the remote or macro-environment of McDonald’s business
and the economy as a whole. Governmental intervention can determine the rate and
path of business development. In McDonald’s case, the most significant political
external factors in the fast food restaurant chain industry environment are as
follows:

a. Increasing international trade agreements (opportunity)

b. Governmental guidelines for diet and health (threat and opportunity)

c. Evolving public health policies (threat and opportunity)

McDonald’s Corporation has the opportunity to expand its multinational business

based on improved international trade, which can enhance global supply chains.
This PESTEL/PESTLE analysis also identifies governmental guidelines for diet
and health as a threat and an opportunity for the restaurant chain business. For
example, this political external factor is a threat because it puts pressure on
McDonald’s, which has been the subject of criticism regarding the effects of its
products on consumers’ health. Nonetheless, this same external factor creates an
opportunity for the company to improve its products. Corresponding changes
in McDonald’s generic competitive strategy and intensive growth
 strategies can address this external factor. In relation, governments have evolving
public health policies, which present a threat and an opportunity for the restaurant
chain business. For instance, this external factor threatens the company through
policies that change public schools’ food programs for students. Still, the business
can improve through adjustments to provide more healthful options to
consumers. McDonald’s marketing mix or 4P already includes healthful options,
such as salads, but the company can add more to improve its status in addressing
this political external factor. This aspect of the PESTEL/PESTLE analysis of
McDonald’s Corporation shows that political external factors present opportunities
despite threats against the business.

Economic Factors Important to McDonald’s Corporation

This aspect of the PESTEL/PESTLE analysis pertains to the effects of economic
conditions and trends on the remote or macro-environment of McDonald’s.
Economic changes directly and indirectly influence business performance. The
global economy, regional economies, and local economies influence McDonald’s
industry environment through the following economic external factors:

1. Slow but stable growth of developed countries (opportunity)

2. Slowdown of the Chinese economy (threat)
3. Rapid growth of developing countries (opportunity)

Social/Sociocultural Factors Influencing McDonald’s

Business Environment
This aspect of the PESTEL/PESTLE analysis refers to the social conditions that
support or limit McDonald’s business. Social trends influence consumer behaviors
and, in turn, affect the remote or macro-environment of the business in terms of
revenues. In this case of McDonald’s Corporation, the most significant
sociocultural external factors are as follows:

1. Rising disposable incomes (opportunity)

2. Busy lifestyles in urban environments (opportunity)
3. Increasing cultural diversity (threat and opportunity)
4. Healthy lifestyle trend (threat & opportunity)
 Technological Factors in McDonald’s Business
This aspect of the PESTEL/PESTLE analysis pertains to the impact of
technologies and related trends on the remote or macro-environment of companies.
In this external analysis case, McDonald’s Corporation’s success depends on
business adaptation to maximize the benefits of technological trends and resources.
The company needs to address the following technological external factors:

1. Moderate R&D activity in the industry (opportunity)

2. Increasing business automation (opportunity)
3. Increasing sales through mobile devices (opportunity)

Ecological/Environmental Factors
This aspect of the PESTEL/PESTLE analysis refers to the trends linked to the
natural environment, and how these trends affect McDonald’s remote or macro-
environment. This company analysis examines the influence of ecological trends
on businesses and consumers. In McDonald’s business environment, the following
are the most significant ecological external factors:

1. Rising interest for corporate environmental programs (opportunity)

2. Increasing emphasis on sustainable business strategies (opportunity)
3. Changes in climate conditions in some regions (threat)

McDonald’s Corporation can improve its environmental programs and

sustainability to strengthen its brand and business performance.

Legal Factors
This aspect of the PESTEL/PESTLE analysis pertains to the impact of laws or
regulations on firms. Changes in legal systems and new laws shape the remote or macro-
environment of businesses by imposing new requirements. McDonald’s Corporation must
consider the following legal external factors in its industry environment:

1. Increasing health regulations in workplaces and schools (threat)

2. Increasing animal welfare regulations (threat & opportunity)
3. Rising legal minimum wages (threat)
Health regulations impose limits on the accessibility and availability of fast food in some
workplaces and schools. This legal trend threatens McDonald’s revenues from these
market segments.
 CHAPTER#2

Product and Operation Management

of Organization
 1)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 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 are being made by made by top

management. These strategies are implemented in all the branches of the
McDonald 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 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.

2)Design of Goods and Services.

McDonald’s goal in this strategic decision area of operations management is to

provide affordable products. As such, the serving sizes and prices of its products
are based on the most popular consumer expectations. However, some McDonald’s
products are minimized in size to make them more affordable.
3. Process and Capacity Design. McDonald’s process and capacity design is
centered on efficiency for cost-minimization that supports the company’s
strategies. This strategic decision area of operations management focuses on
maintaining process efficiency and adequate capacity to fulfill market demand. At
McDonald’s, the production line method maximizes efficiency and capacity
utilization.

4. Layout Design and Strategy. McDonald’s uses practicality for this decision
area of operations management. The strategy involves maximizing space
utilization in restaurants and kiosks, rather than focusing on comfort and
spaciousness.

5.McDonald's property, plant, and equipment from 2006 to 2019

Property, plant, and equipment can be defined as the sum of all net property, plant
& Equipment fields. Where companies do not report a break down of plant,
property, & equipment, the value is entered in this field alone.

 McDonald's property, plant, and equipment for the quarter ending

September 30, 2019 was $23.325B, a 3.15% increase year-over-year.
 McDonald's property, plant, and equipment for 2018 was $22.843B,
a 1.76% increase from 2017.
 McDonald's property, plant, and equipment for 2017 was $22.448B, a 5.6%
increase from 2016.
 McDonald's property, plant, and equipment for 2016 was $21.258B,
a 8.05% decline from 2015.

6.Scheduling. McDonald’s uses corporate conventions for scheduling, based on

local market conditions and laws, as well as supply chain needs. For example,
the company’s strategy involves regular and seasonal schedules to address
fluctuations in local market demand. Thus, in this decision area of operations
management, McDonald’s is flexible and adapts to local market conditions.

7. Inventory Management. McDonald’s goal for this strategic decision area of

operations management is to minimize inventory costs while supporting restaurant
operations. The company does not directly sell products and ingredients to its
restaurants. Instead, local and regional intermediaries and distributors coordinate
with McDonald’s restaurant managers to manage their inventory.
8. Quality Management. The company aims to maximize product quality within
constraints, such as costs and price limits. McDonald’s uses a production line
method to maintain product quality consistency. Consistency satisfies consumers’
expectations about McDonald’s and its brand in this strategic decision area of
operations management.

9. Supply Chain Management. The firm’s global supply chain supports its
various locations around the world. McDonald’s has a strategy of supply chain
diversification for this decision area of operations management. Such strategy
involves getting more suppliers from different regions to reduce McDonald’s
supply chain risks.
 Conclusion
McDonald's is one of the largest fast food companies in the world. They continue
their path for success by keeping their consumers in mind regarding their product
selection as well as their prices. They encourage their employees to do a good job,
usually promotes from within, and offers several scholarships to encourage
education. Though McDonald's is a centralized, "wait and see" company they find
ways to use technological products that will increase their productivity, service,
and sales, everywhere from using the Nintendo DS to train staff to using New POS
touch screen registers. McDonald's will certainly be around for plenty more years
to come.

McDonald’s faces some difficult challenges. Key to its future success will be
maintaining its core strengths, an unwavering focus on quality and consistency while
carefully experimenting with new options. These innovativeinitiatives could include
launching higher-end restaurants under new brands that wouldn’t be saddled with
McDonald’s fast-food image. The company couldalso look into expanding more
aggressively abroad where the prospects for significant growth are greater.The
company’s environment efforts, while important, should not overshadow its
marketing initiatives, which are what the company is all about.Once the marketing
strategy is in place, various responsibilities are given to different individuals so that
the plan can be implemented. Systems are put in place to obtain market feedback
which measure success against short-term targets. McDonald’s has to ensure that
this is done within the confines of a tightly controlled, finite marketing budget .
 Recommendations
1. Service Differentiation: McDonald’s needs to focus on service differentiation
strategy in order to position the restaurant as a superior service restaurant in the
minds of the target consumers. The service differentiation strategy implies that
McDonald’s shall offer superior services at each step of the customer touch points
right from the placement of order through the delivery of the products.

2. Personnel Differentiation: The availability of well-trained staff is essential for

delivery of high quality service to the customers. McDonald's should continue to
invest in the training and development of its employees to ensure high service
quality. Well-structured training programs shall ensure the long term growth of the
organization.

3. Integrated Promotional Mix: McDonald’s can implement an integrated

promotion mix that has a balance of both traditional and modern digital media for
brand promotions. McDonald’s must recognize the importance of digital media in
the promotional mix for organizations, and should devise digital marketing
strategies to engage with the online customer base.

4. Product Augmentation: McDonald’s can offer additional product and service

features such as food on demand and home delivery so as to provide convenience
to customers. Product quality can be further enhanced with fresh ingredients.
McDonald’s should continue to invest in menu customization and menu
standardization strategies to attract and connect with target customers in diverse
geographical markets.