This is an exciting and interesting essay to write for a number of reasons. For one it s an honour to make a research on one of the most profitable societies of the world, for second because the kindness of McDonald s employees and the precision of McDonald s Web site, are perfect sources for all kind of information that can help analyse through Porter s value chain, all the aspects of its value creation.
In the late 1940s, Dick and Mac McDonalds were searching for a way to improve their little drive-in restaurant in San Bernardino, California, U.S.A.; they invented an entirely new concept based upon speed service, low prices, and big volumes. Word of its success spread quickly, in 1952 they had more than 300 franchising inquires a month from all over the country. McDonald s is now the largest and best-known foodservice retailer and one of the two best-known and powerful brands in the market. With more than 24,500 restaurants in 115 countries, some of those operated by the company, some by franchisees or by affiliates operating under joint-venture agreements. The global market potential is still huge: yet on any day, even as the market leader, McDonald’s serves less than one percent of the world’s population. The restaurant chain plans to expand their leadership position through convenience, superior value and excellent operations. The effort to increase market share, profitability and customer satisfaction has produced high returns to shareholders: a compound annual total earning of 21% over the past 10 years. McDonald s vision is to dominate the world-wide foodservice industry. Universal dominance means setting the performance standard for customer satisfaction and increasing market share and profitability through successful fulfilling McDonald s convenience, value and execution strategies.
A precise way of considering McDonald s role of operations is through Porter s value chain analysis. The Value chain breaks down the firm into its strategically relevant activities, in order to understand the behaviour of costs and the existing or potential sources of differentiation. A firm gains competitive advantage by performing these strategically important activities more cheaply or better than its rivals.
For a company which feeds some 38 millions clients every day, finding a reliable quality supplies is a major factor for success. McDonald s has solved the problem by making food supplies part of their success. McDonald s distributors are strategically to be accessible to the each restaurant and carry practically everything, from meat and potatoes to lightbulbs. Coca-Cola, the right well-known drink, has been with McDonald s from the beginning supplying beverages. McDonald s is increasingly using its leverage to capitalise upon global purchasing practices. New restaurants throughout Europe feature tabletops from Belgium; chairs, floors and tiles from Italy; doors from Austria etc. all using low-cost, quality suppliers.
McDonald s new Made for you preparation food system will allow it to serve hotter, fresher food. When a burger is being created the bottom bun and the meat is heated up together in the microwave, than the cheese, ketchup, mustard and pickles are being put on and covered up with the other half of the bun. The whole finished burger is then wrapped up into special paper and market with the time. New cookers are being added which grill the burger meat faster. Everything is then put in special storage cupboard, which additionally holds the food warm for no more than 10 minutes, after that the burger is eliminated. When the customer orders his/her food is straightaway served.
The quest for variety to satisfy the growing number of customers was attracting ultimately led to new items being added to the Classical menu (hamburger, cheeseburger, milkshake and coffee, soft drinks and fries). Now there is a wide range of products that have been introduced throughout the years: Quarter Pounder (1972), Chicken McNuggets (1983), Egg McMuffin (1973), Big Mac (1963), etc. In addition many new products are always under development in McDonald s test Kitchens for evaluation in selected markets. The menu is often enchanted with promotional products to add variety on limited time bases. The group constantly examines their menus around the world in light of changing customer s taste, as well as local customs. In addiction to traditional favourites, customers will find special menu offerings in some countries outside the U.S. Examples include the popular Teriyaki Burger in Japan and vegetable Nuggets in India. Also in a large Muslim populations, such as Malaysia and many Middle East countries, their menu is Halal, prepared in keeping with Muslim guidelines. Research indicates that customers feel a unique emotional bond with the chain, the idea of a visit to them triggers a feeling of anticipation and excitement unlike in any other restaurant. Customers come to McDonald s for signature products they can t find anywhere else. In addition many families visit the restaurants because of their unique ability to put smiles on their children s faces. Happy meal combine wholesome food whit a toy; Ronald McDonald is a special friend; play places provide safe and fun recreation and the alliance with Walt Disney Company let the children s shout even more.
McDonald s is recognised as one of the best marketers of the world, investing some hundreds of millions of dollars every year for advertising and promotion of its image. In 1967 the franchisees created the Operators National Advertising (OPNAD). Fund by pledging to contribute 1 % of their individual restaurants sales to a national co-operative advertising program in addition to the 2 or 3 % they were contributing to their local advertising-co-operatives. McDonald s has always shown bits of real life in their commercials that seems to have became a standard for them. Their marketing efforts go far beyond advertising, including special food promotions, games, videos, cassettes, tapes, videos, CDs that we couldn t get anywhere else for the value. Because of the diversity of customers that go to McDonald s, they developed segmented marketing programs as various key audience. McDonald s is the sponsor of such important worldwide sporting events as the Olympics and the World Cup soccer, car racing (NASCAR), Basketball (NBA) and many more. Men are also drawn to McDonald s because of their unflagging support of our neighbours around the world. This begins with franchisee involvement in their communities and extends to Ronald McDonald House Charities. The brand is also sponsoring the Dinoland exhibit at Disney s Animal Kingdom in Florida and has various showcase restaurants in each Disney attraction resort. This means a well organised psychological bombing aimed at all kind of people, from every race and social class where the golden arches result to be the overall winner.
McDonald’s Corporation is dedicated to the selling of hamburgers, a common job especially in the U.S. To survive in the communal market McDonald s delivers Quality, Service, Cleanliness and Value (QSC&V). This chain is also well known because of its consistency in delivering a customer experience that has value far beyond good food at a great price. But probably the most attractive side of McDonald s activity is the training that stands as background in every single employee. McDonald’s corporation started his fortune training people on how to be kind, fast, precise and effective: it has been an absolute pioneer in this field. This year is the Hamburger University’s 37th Anniversary. Hamburger University is McDonald’s worldwide management training centre located in Oak Brook, Illinois. Designed exclusively to instruct personnel employed by McDonald’s Corporation or employed by McDonald’s Independent Franchisees in the various aspects of the business. All training programs begin with one essential ingredient: The Basics of McDonald’s Operations. Because of McDonald’s international scope, translators and electronic equipment enable professors to teach and communicate in 22 languages at one time. McDonald’s also manages ten international training centres, including Hamburger Universities in England, Japan, Germany and Australia. Today, more than 50,000 managers in McDonald’s restaurants have graduated from Hamburger University, located in a 130,000 square foot, with a faculty of 30 resident professors. McDonald’s believes that his quick-service format would be lost if service at the order desk was not courteous and efficient, to avoid this problem some detailed video tapes have been created to train every single worker who had to have direct contact with the customers. The tapes cover every aspect of dealing with the customers during his 15 seconds at the counter. Crewmen are instructed to initiate each order with a polite question: May I have your order, please? The success of these service methods cannot be questioned. Competitors soon realised the benefit of classroom instruction too. Now all major fast-food chains have training schools. Yet, non-has come close to matching the resources McDonald s continues to devote to formal instruction.
The Hamburger University even includes a 154-room lodge where students live during training. Given its commitment to uniform standards, the McDonald s System hardly seems to provide room for individual initiative. In fact, one of the least understood characteristic of the system is that its fascination with uniformity exists side by side with its lesser known-but equally strong-respect for creativity and judgement of its franchisees. Without the freedom of franchisees and suppliers to exercise their businessperson instincts, to test their own ideas on new products and procedures, and even to challenge the corporation head-on, McDonald s might still have attained its celebrated uniformity, but a terrible price. It would lose the creativity those divers franchisees and suppliers provide. It would, in short, lose touch with the marketplace. Approximately 80% of McDonald’s restaurant businesses world-wide are owned and operated by franchisees. Each McDonald s restaurant runs on the standard basis given by the big McDonald s headquarters: approximately 2,800 employees provide a wide variety of support functions to the 24,500 McDonald’s restaurants through a network of divisional, regional and local-country offices. The chief way to control his restaurant is done in many ways. I think that the most effective way, is the MBWA (The technique of managing by wandering around) to make personal inspection on Q.S.C.& V..This effective technique, done by regular visits is the one most used by McDonald s chiefs to control directly their manager and the other employee s work.
McDonald s Annual Report 1998
McDonald s Web-site: http://www.mcdonalds.com
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