BIT2019 Operations Management for McDonalds

Answers

Introduction

In its entire life, McDonalds has experienced both good and bad times, which have affected the growth of company in fast food industry. McDonalds is one of the leading organizations in fast food industry and offering a variety of products. The given case study includes the growth of McDonalds in last half century. Company has started its business operations by opening small franchises and then used different effective strategies for its survival in competitive business environment. With the passage of time, the firm has confronted intense competitors, when different competitors have entered in the fast food industry with similar product range. This report includes the organizational life of McDonalds that how the competition for the company has transformed over its existence and these changes have affected the operations strategy. In the next part of report, there are some most significant infrastructural and structural decisions in the operations strategy of organization. These decisions have impacted the major performance objectives of the company. The report evaluates the operations management and operations strategy of McDonalds in its life of half century.

Company Description 

McDonalds is a well-known destination for a major customer base and they are making it one of the largest fast food outlets worldwide. McDonalds is a leading fast food outlet in terms of profits and revenues. The company was founded in the year 1955 by Ray Croc in Illinois, United States. Currently is headquartered in Oak Brook and operating more than 36900 stores in over 100 countries. Now, it has its operations from United States to Europe to Middle East and to Pacific Region. It offers a menu with the wide range of food products, like; burgers, milkshake, cold drinks, salads, cookies, french-fries, coffee, ice-tea, chicken, cheeseburgers etc. Moreover, it provides different breakfast items in US and other international markets. In this range, products include like; Big Mac, McFlurry, McNuggets, McMuffin etc. The major competitors of McDonalds are like; Burger King, Subway, KFC etc. These companies are also selling same products to the customers and introducing new products segments considering the needs and expectations of their customers (McDonalds, 2012).

1. From its foundation, McDonalds has seen different times and faced moderate competition from emerging players in the fast food industry, but the company has become the king of burgers. Till now, the company holds the highest market share in the industry. In its entire life, McDonalds has faced competition from different players, like; Burger King, Wendy’s, Taco Bell, KFC etc. The company has responded to these competitors successfully with its innovative ideas and strategies. In this context, the period of 1990s to mid-2000s was very difficult for the company. In this era, the growth of company was hindered and effected the operations management of the company (Anderson, Anderson, and Parker, 2013).

Under its operations management, the major focus of the company was on providing quick services in its outlets and some other aspect like; quality of products, fast service and wide range of food products. McDonalds has implemented various effective strategies to deal with the competitive pressure and introduced cost effective products and discounted items, like; it has provided discounts on its core items, like; Big Macs, Soda, McNuggets, so that it can maintain its value promotion in the market (Aviv, Lariviere, & Terwiesch, 2009). In response to this, Burger King and Wendy’s have also provided similar discounted products, committing a full meal along with the sides and drinks. Burger King has advertised itself on a flame grilled quality and Wendy’s provided completer level of food services. Moreover, Taco Bell had undercut the prices of McDonalds with its value pricing advertisements and promotions. It has confronted the competition from some smaller players, like; Chipotle and Shake Shack, which had taken the local market share. All of these competitors continued to try new and innovative things as they compete with each other, but they are still behind McDonalds. McDonalds dominates the market and now it has more than 36000 stores all over the world (McDonalds, 2010).

To deal with this competition, McDonalds just focused on its services quality and excellence. It is continuously implementing effective strategies and market tactics to overcome the threat of competition (Brown, Bessant, & Lamming, 2013). Company has conducted the market research and tried to understand the changing needs and preferences of customers, which assisted the organization in introducing new product segment accordingly. It has used a pricing strategy, which is affordable for the people from all age groups and income levels. By this market research, it came to know about its leading competitors and their plans to cover the market and enhance the market share.

In order to deal with this competitive pressure, McDonalds had made some changes in its operation strategy. These changes in the competition affected the operations strategy of company and there was a need of transformation. This firm was using an operations strategy, which was totally focused on improving the customer experience. The CEO of the company, i.e. Steve Eastbrook has reformed the outlets to make them more modernized and offered new products, like; cappuccinos and coffee (Fitzsimmons, Fitzsimmons, and Bordoloi, 2008). At that time, company has faced the health issues, caused by fast food, which also affected the operations strategy of the company. These health concerns related to fast food forced the company and its competitors to introduce a new range of healthy food products and salads. The changes in the competition and increased competition have forced the organization to introduce effective operations strategy and launch new and innovative products for their fast food outlets.

The organization has introduced some innovative practices to stay competitive in the market. Changes in the needs and preferences of the customers are also major reasons behind making changes in the operations management and its strategies. To deal with the tough competition, it has introduced an operations strategy for process and capacity design. This strategy was based on the effectiveness for minimizing the costs, which the support other strategies of McDonalds (New, 2015). This strategic decision of operations management emphasizes on sustaining the efficiency of processes and capacity to satisfy the demands of market. Company has used the production line method that increases the capacity utilization and efficiency of the organization and its services.

Before this, the company only focused on quality management strategy, but now it has focused on the production costs also. By minimizing the production costs, it has offered the products on comparatively lower costs than other competitors, like; Wendy’s, Burger King, etc. In addition to this, this firm has focused on the location and layout of the fast food restaurants. As discussed above, it redesigned the outlets and opened new franchises in the locations with maximum market approach. Thus, the changing competition has affected the operations management at McDonalds and operations strategy (Paul, & Roy, 2014). The company required to make changes in the operations strategies also, so that it can stay more competitive in the fast food industry and gain more competitive advantage. By implementing new and innovative strategies, the company was able to become successful fast food player over its emerging competitors.

2. There are different strategic decisions, which are very important in the operations strategy of McDonalds. The company has made some structural and infrastructural decisions under its operations strategy. These decisions are stated below;

Structural Decisions 

Process and Capacity Design

Under its structural decisions, the company has focused on the capacity and process design. Its capacity and process is focused on minimizing the costs, which aids its other strategies. Under this, it has tried to enhance the efficiency and effectiveness of operations and introduced a new production method, which enhances the capacity utilization (Untaru & Ispas, 2013).

Location strategy

The major objective of the company under this strategic decision is to constitute the locations, where a maximum customer base can reach. Under marketing mix tool of McDonalds, place strategy includes the kiosks, restaurants, organization’s official website and mobile application. Though these locations, the organization tries to reach customers in both online and traditional ways.

Layout design

This organization utilizes the realism in this decision of operation strategy. It includes the utilization of maximum space in kiosks and restaurants rather than emphasizing on spaciousness and comfort (West, Ford, & Ibrahim, 2015).

Infrastructural Decisions 

Design of products

The objective in this infrastructural decision area of operation strategy is to offer affordable products and services. The serving prices and sizes of its products and services are done on the basis of expectations and preferences of customers. However, some products of the company are reduced in the size to make them more affordable for all the customers.

Quality Management

The organization targets to enhance the quality of products within components, like; price limits and costs. It utilizes a production line mechanism to sustain the quality consistency of products. It satisfies with expectations and needs of customers about McDonalds and its infrastructural decision of operations strategy (Xu, 2014).

Human Resources and Job designing

Human resource strategies of McDonalds include different training and development program for enhancing the skills and abilities of the employees, which are required in the production method in restaurants or production process. For this decision of operations strategy, organization and individual education and learning are also focused to assist the organizational culture.

There are some performance objectives, which are related to the operational activities and the fundamental function of satisfying the needs and wants of customers. McDonalds has set 5 performance objectives, like; quality, speed, flexibility, dependence and costs (Thornton, et al, 2016). The above mentioned decisions of operation strategy can influence the performance objectives of McDonalds. Quality management techniques of the company will assist in enhancing the services quality. They adopt just-in-time strategy that reduces the costs of wastage and storage. The company has provided proper training to its employees, which are trained to prepare the food according to the specific processes and by considering the quality standards. The company is taking feedback from the customers to enhance the quality of customer service delivery (Dawson, and Andriopoulos, 2014). The company has set a preparation time for the burger and other products, so that order can be delivered very quickly. The decision to provide effective training to its human resources is one of the best decisions under operations strategy of McDonalds. Under its product and service design decision, the company can increase the range of products and it can offer a lot of flexibility to fulfill the needs and preferences of customers. It has trained staff in order to become more flexible. Thus, it can affect its performance objective, i.e. flexibility. Improving the quality can increase the cost of production at McDonalds (Godsmark, Garvey, & Dismore, 2011).

Thus, it can be said that all the performance objectives of the company are interconnected with its structural and infrastructural decisions of operations strategy. If the quality will be enhanced, cost will be decreased and with the improvement in time, it will lead to the more flexibility. By fulfilling the quality and cost objectives, al other objectives can be attained very easily. In this way, some specific actions will result continuous improvement of all the performance objectives at the same time (Jaulus, 2017).

Conclusion

From the above report, it can be concluded that McDonalds is at the top position despite of competition. The company has faced intense competition, but it is successful in dealing with that competitive pressure. The company is using effective strategies and changed its operations strategy, so that it can enhance its position in the fast food industry. The strategic decisions of operations strategy of the company are useful in attaining its performance objectives. The performance objectives include quality, speed, flexibility, dependence and costs. Operations management of the company is very effective that is supporting it in enhancing its business processes. Thus, it can be resulted that McDonalds is continuously growing in the fast food industry by introducing new and innovative products. It is considering the needs and preferences of customers and introducing new products, so that it can increase its customer base all over the world. Moreover, the company is making efforts for gaining higher competitive advantage over its competitors.

References  

Anderson, M.A., Anderson, E.J. and Parker, G. (2013). Operations management for dummies. John Wiley & Sons.

Aviv, Y., Lariviere, M. & Terwiesch, C. (2009). "Operations management", Management Science Journal.

Brown, S., Bessant, J. R., & Lamming, R, (2013). Strategic operations management. Routledge.

Dawson, P. and Andriopoulos, C. (2014). Managing change, creativity and innovation. Sage.

Fitzsimmons, J.A., Fitzsimmons, M.J. and Bordoloi, S., (2008). Service management: Operations, strategy, and information technology (p. 4). New York, NY: McGraw-Hill.

Godsmark, C., Garvey, M. & Dismore, H., (2011), Starting and Running a Restaurant For Dummies, USA: John Wiley & Sons.

Jaulus, R. (2017). Change Management: McDonalds’ burger moves aside in favor of Quinoa and salads. Retrieved from https://ww Jaulus, w.nggconsult.com/change-management-mcdonalds-burger-moves-aside-favor-quinoa-salads/.

McDonalds, (2010). About McDonalds. Retrieved from https://www.aboutmcdonalds.com/mcd.

McDonalds., (2012). McDonalds Corporate Social Responsibility and Sustainability Report. Retrieved from https://mcdonalds.com.au/sites/mcdonalds.com.au/files/MCD_CRS_Complete.pdf.

New, S., (2015). McDonald’s and the challenges of a modern supply chain. Harvard Business Review.

Paul, R., & Roy, S. K., (2014). Case Study 11: Marketing of Services: The McDonald’s Way. In Marketing Cases from Emerging Markets (pp. 99-112). Springer Berlin Heidelberg.

Thornton, L. E., Ball, K., Lamb, K. E., McCann, J., Parker, K., & Crawford, D. A. (2016). The impact of a new McDonald's restaurant on eating behaviours and perceptions of local residents: A natural experiment using repeated cross-sectional data. Health & place, 39, 86-91.

Untaru, E., & Ispas, A. (2013). Why do young people prefer fast-food restaurants? An exploratory study: Journal of Tourism, (15), 27-34.

West, D. C., Ford, J., & Ibrahim, E. (2015). Strategic marketing: creating competitive advantage. Oxford University Press, USA.

Xu, Y. (2014). Understanding CSR from the perspective of Chinese diners: the case of McDonald’s. International Journal of Contemporary Hospitality Management, 26(6), 1002-1020.