The organization in which the operation to be studied is one of the world? s largest chain of fast food restaurants, known as McDonald? s. The unofficial business first began in 1940 by Dick and Mac McDonald in California, with the official first McDonald? s restaurant opening in 1955 in Illinois America, founded by Ray Kroc (McDonald? s, 2008) but the organization has now expanded worldwide into many international markets and has become a symbol of globalization. McDonald? is a service organization and its products mainly include a variety of different kinds of burgers, chicken products, French fries, soft drinks and milkshakes, breakfast menu and desserts. Many stand alone McDonald? s fast food restaurants have both drive through services and counter services, some restaurant also have indoor or outdoor playgrounds in McDonald? s around suburban and city areas. The organizations vision is to be the ? world? s best quick service restaurant experience? (Shafqat, 2008, p. 1), which involves running a restaurant that provides excellent quality, service, cleanliness and value.
McDonald? s also introduced McCafes because of the high demand trend for coffee shops, this is an example of how well accomplished the organization is. To sum up McDonald? s is the world? s largest chain of fast food restaurants, and currently leading in the fast food market. Description of operationThe operation which exists in McDonald? s and to be the main focus in this project involves service. It is the most important part which occurs in this fast food restaurant and it involves the process of taking orders and getting these orders ready for customers.
In brief, the first part of the process in this operation begins at the front counter where orders are taken from customers (this is necessary because of the new system in place, burgers are not pre made anymore but are only made after customer has confirmed their order), there are approximately 3 staff here. The other part, which is the majority of the operation happens in the kitchen in making the order, from my research and interviews the following is a rundown of this process. After the orders are computed in, the front counter screen is connected to the kitchen? screen which shows the orders, this is called the ? KVS?. The staff in the kitchen must react to these orders within approximately 5 seconds, trying to complete 1 – 2 orders at a time, where there are 3 orders or more an extra staff member is allocated to the assembly line. There are 3 people standing in the kitchen assembly line, this is where burgers are made, the first person is in charge of toasting the buns and is called the ? initiator? , the second person is in charge of putting the ? fillings? in the buns and is called the ? ssembler? (if there are 3 plus orders then the extra person helps out this assembler), the final person called the ? chaser? puts meat patties in the burgers, and then puts burgers in their box or wrappers. There are 1 to 2 people making the meat patties on a grill (grill product person), they only grill beef, bacon and ? chicken and onion mix? for the deli product, they place 10 patties on the grill at a time and when it is done they put approximately 20 patties on a tray and store it in the ? UHC? to keep warm.
When it is not busy the people doing the grill also do the frying (fries product person), when it is busy there is 1 person especially in charge of this. They only fry chicken patties, fish patties and chicken nuggets, again after the frying is done the patties and nuggets are put in a tray and these trays are stored in the UHC. There is 1 person in charge for the deli products to prepare the lighter choice deli meals. There are 2 people in charge of the drive thru, the first person takes the order and the second one called the ? runner? puts the orders in a bag ready to give to the customer.
For French fries, firstly there are 4 fry baskets, 2 fryers with oil (2 fry baskets for each fryer), secondly, there is a large container which holds the frozen chips called a ? fry hopper?. The fries product person puts the fry basket under this fry hopper, presses a button and the chips automatically fill up the fry basket ready to be fried, this basket is put in the fryers and the staff pushes the ? timer? button, when this timer beeps the chips are taken out and drained for 5 to 10 seconds. Once this is done the cooked chips are held in a warmer in the fry station with salt sprinkled over ready to be packed.
When the burgers are complete they are put in the production bin ready to give to customers. The purpose of this operation is to prepare the specific food meals that are ordered by the customer to satisfy their hunger and provide the pleasure of good quality food in exchange for money, thus building profit. The size of this operation consists of approximately 12 people as explained.? Part 1: AnalysisOperations objectivesFor this McDonald? s operation, there are two very important operating objectives which include customer satisfaction and resource utilization.
Customer SatisfactionThe customer satisfaction objective in this operation involves factors such as the following:? Determining the customers wants in terms of specification, timing, price, quality and flexibility. ?Making sure what is being offered is not conflicting with the interest of stakeholders. ?Meeting customer satisfaction with customer expectations? The concept of customer satisfaction it has to be understood that the first requirement for the customer is that the product or service must meet his/her specification and second that it will meet time and cost requirements.? Race & Wright, 2008, p. 20)The term specification ? is the essential requirement? (Race & Wright, 2008, p. 20). It relates to providing customers with what they expect to receive or are prepared to accept. Some of the examples of what customers in this organization will be expecting from the operation include a friendly service by staff, food received has to be the right type ordered by customer, quality of food is good, fresh and made hygienically. Therefore this operation is fulfilling all these requirements in order to move closer in achieving McDonald? goal of satisfying customers. Time and cost are also important requirements. ?The product or service has to be available at a time that is acceptable to the customer, and the price must be reasonable? (Race & Wright, 2008, p. 20). In New Zealand McDonald? s target is to complete customer orders and serve it to them within 2 minutes from order time, any delay of this is not regarded satisfactory by the operation and the customer may receive a complementary voucher or upsize of their meal, or even a free item such as an apple pie as a result.
The prices of food meals in McDonald? s is partly affected by competition of other fast food restaurants such as Burger King, the operation also makes food that is affordable by everyone, as the price of a burger can range from $1. 90 to $4. 40, which makes it very reasonable. These requirements are designed to meet the customers basic needs, McDonald? s have also added value to their operation by providing ? additional quality service attributes? (Race & Wright, 2008, p. 21) which can be appreciated by customers.
The operation recognizes it is important to identify that customers expect reliable consistent services, adding value can be viewed as increasing services (additional services) making something worth more at little or no cost, to improve customer satisfaction. Some examples of how this has been implemented in the operation being discussed is that customers are able to add their own toppings in burgers such as tomato or lettuce, this is called ?special order?. Adding value to customer services by upgrading staff training programs, staff are encouraged to complete ? rew certificate operations (MFY)? book training, this is an extra training staff get which is not compulsory but voluntary, and helps to increase knowledge about customer satisfaction. Providing quality services such as friendly staff and upgrading their system of only making fresh orders is also an example. These are values which have been added at little or no cost to the organization but increases customer satisfaction as it can be something appreciated. ?A stakeholder is anyone who has an interest in what an organization does.? Race & Wright, 2008, p. 24) McDonald? s stakeholders include suppliers, shareholders, local community, creditors, management, customers and employees. The organization avoids using certain processes in their operation which can harm stakeholders because these people are the direct customers, and without them ? the need for the service will disappear.? (Race & Wright, 2008, p. 24). So it is important that McDonald? s have firstly identified their stakeholders and secondly consider the affect? of the operation on these people, while maintaining sustainability in regards to keeping their interests on the more positive side as this is also directly linked with customer satisfaction. McDonald? s has its own ways to ensure that the quality of the operation satisfies customer expectations. The concept of gap analysis is very much in play. The measurement of customer satisfaction with service, can be done by using the gap between the customers expectation of performance and their perceived experience of performance. This provides the measurer with a satisfaction ? gap? hich mainly relies on the market functions. ?If the market functions does not correctly interpret the requirements of the customer then there will be a gap between the level of satisfaction the organization believes it is providing and what the customer believes he or she is getting.? (Race & Wright, 2008, p. 29) In regards to the operation in concern, McDonald? s have addressed this issue in a number of ways. Some examples of these are that McDonald? s advertises or displays pictures of burgers and showing what is inside them so customers know what they will get after its made by the operation.
The organization also provides training of processes involved in the operation to staff, to fill customer satisfaction so they can have the right knowledge of how the operating works, such as making the food order promptly and in the right manner to meet customers? expectations. ?Resource UtilizationThis is the act of allocating and using resources professionally and efficiently to reduce costs and help the company reach its best operating level. Resource utilization is an important operating objective for this operation.
Resource utilization is about the operation using its resources efficiently. Resources should be prioritized and allocated to the areas where they are most needed, ? The important resources are those which are most necessary to satisfy the customers? essential requirements of specification, time and cost?. (Race & Wright, 2008, p. 32) Non value adding activities should be eliminated to improve efficiency. The resources involved with this operation in the McDonald? s restaurant include the following:? People ?
Employees in the operation, Managers in the operation, Specialists involved in the operation. ?Capital resources- Building. ?Fixed Capital- Cash registers, toaster, apple pie warmer, grill equipment, KVS Screen, frying equipment, UHC storage, drinks machine, cooler machine, counter(s). ?Inventory-Raw materials:(lettuce, tomato, onions, pickles (gherkins), ? pre-mixed? chicken in onion in packets, cheese, vegetable oil. Patties: McChicken patties, Filet-O-Fish patties, Chicken royle patties, Chick? n McCheese, Chicken McNuggets, Beef patties, Bacon and Frozen chips).
Items/other goods:(headsets, books for training, plastic gloves, cleaning equipment, burger boxes/wrappers, chip packets, drink cups, tray liners, takeaway bags, apple pies, salt and pepper, drinks, buns, sauces: BigMac sauce, mayonnaise, tartar, mustard and tomato ketchup)Breakfast Items: (eggs, hot cakes, muffins, bagels, hash browns, sausages, butter, jam, plastic forks and spoon). Relative priority of objectivesIt is very clear that this operation in McDonald? s has a strong focus on customer satisfaction, because it is a service industry and the operation is providing a service so ? esource utilization is subservient to customer satisfaction.? (Race & Wright, 2008, p. 33). Resources being used efficiently is still a high priority, but if the operation did focus on total efficiency it would conflict with customer satisfaction as this would mean there will need to be only minimum time to be spent on customers, no spare spaces would be allowed, customers will always be queued so staff are fully employed and so on. ?Often resource utilization will be in harmony with customer satisfaction? (Race & Wright, 2008, p. 4), the operation tries to match their resources available to suit customers requirements but sometimes this will not always be possible to achieve, if resources such as beef patties are no longer in stock and customer wishes to order a hamburger than conflicts can arise. ?Often existing resources will not completely mesh with the achievement of total customer satisfaction.? (Race & Wright, 2008, p. 35). The prime objective is customer satisfaction in this operation but efficient and effective use of resources is also vital.
Without resources this operation will not exist, but without customers there will be no reason for it to exist. In the operation frame of completing orders for a customer McDonald? s aims to balance the two conflicting objectives of resource utilization and customer satisfaction. ?Operating system structuresThe old operation system in McDonald? s would have had the SOD system structure only. This is not the case anymore because now, for example burgers are not made in anticipation of demand, they are only made when the customer makes the order so the structure has changed, plus this operation mainly involves the service structure.
However, this manufacturing structure is still present in the operation, such as with the making of chips and meat patties, which gets stored in the warmer in anticipation of demand, if the demand does not eventuate after a while these are thrown away. Thus in a way the SOD structure is involved, and is as follows:V O CThe service system structure that will apply to this new operation system will be SQO.
The following is a diagram of this type of structure:VOC VThe reason this type of system structure has been chosen because firstly, it is providing a service and secondly with this operation it must be accepted that sometimes there is spare capacity, keeping in mind sometimes queues of customers will form and sometimes they will not. The service function of this fast food restaurant operation now is very similar to normal restaurants. If no customers arrive then the people involved in the operation will become an unused resource. This ? push? system structure is the closest to matching the service operation.
Comments on the limitationsThese types of basic structures are limited because in reality the operation will employ a combination of structures. Not basic but specific types because there will always be improvements and structures will always tend to add more symbols and become more sophisticated. So it is limiting because of the fact that it may be the closest system structures for the operation in concern but not 100% specific, overall it is far too basic to have such structures in such a large organization? s key operation. Process Design?
Principle IssuesKey resources are those which are most important and it can be decided by factors like the most used, most costly or most in demand. The key limiting resource in this operation can be identified as including the staff, which is limited due to kitchen size, actual building, limits the number of people and machinery, the raw materials, limits the number of customers, grill and frying equipment, limits the number of food (patties) each time it can make, cash register limits the number of orders it can take each time. CapacityIn measuring capacity it is vital to identify the key resource.
Capacity involves ? the study of anticipated demand patterns for the medium to long term, and the organizing of resources to meet this demand? (Race & Wright, 2008, p. 161). Capacity issues are involved with this operation because of uncertain and fluctuating demand, this operation can get very busy all of sudden sometimes at unforeseen times. The organizing resources in this operation includes being able to attain the required resources as identified, so the operation can carry out its function, by also training staff and developing ways to meet changes in demand. Due to the variability in time taken to satisfy each customer, no matter how good the planning of resources, queues will build up, disappear when there is lull, and then reappear? (Race & Wright, 2008, p. 168). The following are also issues with capacity this operation has. Variability of arrivals is a concern, in this operation there is no reservation system to manage when customers will arrive, so the number of customers arriving and the length of time between customer arrivals is not constant and there is always concern of when customers will enter or not enter McDonalds to place their orders.
Service times is also a concern in this operation, because the operation might take longer to serve some customers than it does with others, this is not constant either and if the operation is rushed, customers might believe the level of service is not up to standard or if customers wait they may become dissatisfied. ?SchedulingLike capacity, scheduling is also an issue for this operation, ? scheduling relies on the accuracy of forecasted demand? (Race & Wright, 2008, p. 180). The main aspects of scheduling are what, when and how much.
With this operation, when customers orders are taken it is vital there is sufficient level of resources available at that given point in time, if the operation fails to schedule some resources for example beef patties or McNuggets and that is what the customer wants, then this will cause conflicts to arise and there will be dissatisfaction or maybe even loss of customers. Having too less of a resource during high demand period can also lead to the same outcome. So it is important in this operation scheduling is prioritized and therefore important to schedule resources with some ? nticipation? of orders, in regards to demand. Conflicts can also arise if the responsiveness of staff in the kitchen slows down, this can affect the timing of the finished order, it may take longer for the order to be made affecting scheduling, and delivery to the customer may not be satisfactory because it will contradict the expectations of customers and what the operation is prepared and able to offer. Again, this is why scheduling is an issue in this operation and needs to be managed well. InventoryInventory issues with this operation is also involved. The concern will be with not running out of material, as any retailer or restaurant knows, a stock out generally results in a lost of sale? (Race & Wright, 2008, p. 194). The issue here is with surplus stock of materials, because in this operation being studied, this can lead to some major problems, mostly risk costs are involved here. Risk costs can include taste changes, in this operation there is only 1 person in charge of deli lighter choice meals because it is not so popular, if tastes towards this product changes rapidly then issues will arise.
The operation will need to change its current system and allocate more staff to this section, the raw materials in stock would need to be analyzed to see how much raw materials for deli and other meals are available, if there is a lot of stock material which is against customer tastes then that food may go past the ? use by due? date, it may even deteriorate. This can turn into a major issue for this operation because it always need? s to rely on the raw materials to make food for customers. Therefore the inventory will need to be well managed to make sure surplus stocks of materials can remain balanced.
Areas that offer opportunity for improvementAreas that offer opportunity for improvement are limited because of the new system McDonald? s have in place. Although in capacity management, the operation can improve if service times for each customer are made similar, so the length that all customers wait and get served by are very close and so there is no inequality to some customers who end up waiting longer than others. The operation can also improve in scheduling if it knows ? when? and the numbers of ? how many? ustomers will be arriving, so they can be more prepared and are able to manage busy times more efficiently. With inventory, areas that can be improved are the stock of materials, this operation tries to fulfill requirements of customer satisfaction but in return there is a lot of raw materials that go past ? due dates? or turn bad so it needs to be thrown away, if this can be managed more efficiently it will make costs cheaper and the same money may be used to increase wages of staff to help increase motivation and materials in stock will be more efficient itself as a result. Quality managementSummary of how quality is managed in this operationQuality management in services is how well the service does what the customer thinks it is suppose to do, how quickly, correctly and pleasantly employees are able to provide that service. Quality in this operation is managed through various ways, the main ways involve leadership, employees, competition and resources. This operation in McDonald? s has a strong quality culture, which is why it is so successful.
Leadership brings quality because it is management who is responsible for the running of the whole operation, there is always a person in charge who will communicate to staff, ensure that everything is done correctly and that certain procedures are followed. Management takes responsibility to control problems. For example, managers make sure there is enough staff available, if an employee calls in sick the manager will adjust the operation by bringing in extra staff or following the right plan for the situation or organize alternatives solutions as needed.
Management also give various training to staff to make sure they have knowledge of how to provide that extra quality service and are informed of regulations which exist in this operation. For example, management encourage staff to participate in completing the ? crew certificate operations (MFY)? book training, this is not compulsory but voluntary for staff to take and learn more about customer service and the organization which helps towards providing quality services in this operation, the completion of this book gives staff a national certificate in hospitality which is NZQA recognized so it is motivating to complete. Also McDonald? believes supervision is essential to prevent mistakes from happening which could cause conflicts. Employees play a big part in providing quality because it is them who have direct interaction with customers and who make the actual food for customers, in this operation staff are the key to good quality service. Staff also provide quality by performing tasks according to their job description and manual procedures, an example of quality assurance. For example, each staff in McDonald? s knows the proper way to communicate with customers and each other, and knows how to use the different work stations in the kitchen such as the frying station.
Employees at McDonald? s are motivated, hold values and teamwork in order to contribute their part in reassuring quality exists in this operation, while taking responsibility for the quality of their own work, such as monitoring time to serve and keeping to schedule. Competition also plays an important role in this operation. For example, McDonald? s have changed their old system of making burgers before orders, instead now they only make burgers when the customer orders it, so it is fresh and helps in their vision of being the world? s best fast food restaurant.
This has been changed because of competition, McDonald? s wanted to stay ahead in the fast food restaurant market and has come up with this new idea to keep them closer to their goals. Competition is also the reason McDonald? s introduced their deli light choice meals in this operation, so that extra quality can be provided to those customers who are health cautious. Resource is another aspect which adds quality to this operation. Resources are managed efficiently in the sense that McDonald? s very rarely runs out of raw materials. When a customer wants something that is on the menu, they will get it.
This shows another quality aspect which is so well managed in this process, as the operation is always ready to make any order as required. Machines are always up to date and regularly cleaned and checked for faults, in this operation all the resources that are necessary are not only available but are available in terms of high quality standards. For example, raw materials all come in packets, are always fresh and kept in coolers. Machines that are used for the operation are always cleaned after its use and they are thoroughly inspected for faults, especially before turning on which is a compulsory requirement.
Part 2: Improvement ChangeImprovement change that might affect operation -ExperimentA change that will affect this operation will be that of an experiment. The change will consist of bringing in a new food menu, which could also be considered a snack. Currently the only types of food being made in the operation apart from breakfast are burgers, nuggets, chips and the only type of healthy meals are deli choices. This change will introduce bringing in a small special seafood menu which will include oysters, mussels, prawns and fish, these 4 types of food will be steam cooked but the customer will have a choice to get these fried.
These will come in a small box including a choice from the normal sauces available. To be more specific, if customers order oysters they will get 4 oysters steamed or fried with sauce, if customers order mussels they will get 4 mussels steamed or fried with sauce, if customers order prawns they will get 4 prawns steamed or fried with sauce and if customers order fish it will not be the normal patties, it will be small fish cubes at a reasonable size (the size of sugar cubes) approximately 8 of these with sauce, all of these will come in their own special McDonald? box. This change is suppose to be an upgrade to the usual McNuggets being served all the time, it may even be a great substitute because seafood can prove to be more healthy and thus, more popular. In terms of pricing it will be very reasonable, because the reason for the change will not only be profit but much more, this will be explained later. This change will affect the operation because staff will be introduced to a new food product, there will be a requirement for new training, new raw materials and maybe even introduction of a new machinery as a result. Reason for changeThe reason for this change will not really be profit, although the focus will be to make money but this will not be the main point of this change, it will be specifically for the reason to help this operation extend McDonald? s dominance in the fast food market. This introduction will increase the organizations reputation and open doors to a whole new diverse of customers and become a positive change. This operation has already proved fast food restaurants are not always about fatty foods with the introduction of healthy lighter deli choices, but an organization such as McDonald? must look for continuous improvement in small steps in order to achieve their long term goal of providing quality service to customers, thus achieving customer satisfaction. This can be better explained by the Japanese concept of ? kaizen? which means ? improvement? , this suggests ? the philosophy is the doing of little things better to achieve a long-term objective? (Race & Wright, 2008, p. 269). The operation must think of unending improvements, while keeping the organization? s long term goal in mind.
Is the change actually an improvementTo know if this change has actually been an improvement or not there must be a review of measurement of control, ? control refers to determining progress in achieving the plan and taking corrective action as deviations to the plan occurs? (Race & Wright, 2008, p. 282). Once the standard for this change is set, the feedback of actual performance can be collected. Profitability is another measurement which can determine if the change is positive or not, if this change makes sufficient profit then it may be successful.
Market performance is another measurement which can be looked at to see if the change has been an improvement or not, over here the measure is for the actual sales and their growth in concern to identifying who are the biggest customers for this ? change? , and if these customers are increasing their spending on this operation or reducing spending. Customers can also be surveyed to see what they think of the change. Resource utilization and budget can be measured also to check for improvement, whether if the budget for this change is too much to handle and resources for the change are being wasted or not, if so then how much.
These measures will give a good idea of whether the change has been an improvement or not. Part 3: Implementation and Ongoing PerformanceActions that will be taken to implement the changeThe most important step that must be taken to implement the change is planning. The first step in the planning process involves establishing goals and objectives, while setting priorities. The goal and objective for this change can be defined as successfully increasing the variety of products being made by McDonald? s, in order to move ahead of competitions in the market and providing increasing customer satisfaction.
Priorities need to also be set, in this case focusing on the current products are more important than this change because this change is the ? experiment? , not the main focus of the operation. The second step in planning involves competency of the organization. This research will be reviewing external influences such as political, economic, technology and competition factors in order to make decisions about the ? change?. Political:? laws and regulations also serve to protect an organization.? (Race & Wright, 2008, p. 53).
The introduction of the new seafood products must be made sure it is done legally, with the right forms and applications filled in, before the making and selling of the product. The new resources and machinery for preparing the seafood must make sure it meets health and safety requirements. These steps must be fulfilled not only in NZ but in foreign countries too, because McDonald? s is such a large franchise. The organization must make sure it finds out the legal procedure for introducing a new product in other countries too.
Economic:Demand in the market for this new seafood introduction will be vital, because it will determine the public? s taste towards the change (for or against) and how the change has affected competitions in the fast food industry. This can also affect economic growth, moving it out or inward. This demand will also decide if employment in the organization? s operation will need to increase. Technology:? try to delay decisions to change until the new technology is tried and proven (and cheaper)? (Race & Wright, 2008, p. 54). For the option of seafood being served steamed or fried is very relevant here.
The current machines can be used to fry these types of food but for steaming, the operation will need a new machine. Currently there is no means to having a steamed machine, after this implementation it will be necessary to find a good steaming machine to cook this food. It is important that new technology for this reason is bought in without exceeding the budget and to keep up with the rapid change in technology that is occurring in the world, so the operation has the ability to compete in today? s markets. Competition:? at the very least the organization has to meet the services provided by the competition? Race & Wright, 2008, p. 53). It is important that competition in the fast food business is recognized and thoroughly examined of what services they offer. Customers in today? s world are all well informed and so finding out as much about McDonald? s competitors is essential, in NZ some of the major competitors would include Burger King, Wendy? s and Oporto. By analyzing these competitor? s systems, setting the level of service and quality to be offered to customers becomes much easier and simple to do. The main reason for this experiment and change improvement is to get ahead of competitors, because this ? hange? will be a service no competitor is yet offering. ?Opportunities and threats are external to the business, and strengths and weakness are internal aspects? (Race & Wright, 2008, p. 76). It is fair to identify strengths of the operation, which could be a strong teamwork culture, and identifying weaknesses, such as lack of intention for continuous improvement. An opportunity could arise from this ? change? to move McDonald? s into a direction which no other fast food business can achieve with their current system. A threat could be that this ? change? ould move the organization backwards. But it is not sufficient to list these aspects, the main point is to decide what can be done to benefit from strengths, erase weaknesses, utilize opportunities and turning threats into opportunities. This will help in the planning process to implement change? The third step is to develop strategies to enable the business objectives to happen? (Race & Wright, 2008, p. 77). The goals and objectives of this ? change? have already been defined, this part involves analyzing ways in how to achieve those goals and objectives.
Therefore, the necessary actions which will be required, will be to thoroughly analyze the external influences and their factors. After all the legal process is complete, the economy, technological and competition aspects are taken into account, McDonald? s needs to make a specific strategy, ways in which to complete the objective and achieve goals. Once all three steps from the planning process are complete, action plans will need to be made. An example of this is locating a McDonald? s restaurant where the change can be implemented and the experiment can begin.
Therefore, after the completion of the planning process, the actions can be put into place and the ? change? must be monitored regularly to assess the progress and determine if objectives and goals are achievable. Considering the affects of the changeCustomer service:The new seafood menu will improve customer service because the operation will be able to make and offer customers with a wider selection of food choices. This will be a healthy substitute to McNuggets, it will have a similar price. This will mean an increase in providing customers with excellent service, and thus an improvement in customer satisfaction.
Resource utilization:There will need to be more resources to manage which will include, more staff for the operation, more machinery to cook, and more raw materials such as oysters, mussels, prawns and fish cubes. In relation to this, resources being managed is not the only aspect in concern, making sure this does not exceed the budget is also of concern. As a result of this experiment the organization may need to priorities their resources again to meet customer essential requirements. Capacity:The anticipated demand patterns for McDonald? customers can rapidly alter because of the introduction of a new menu, this will add more variation to the pattern and thus making it harder to analyze and predict demand patterns. The organization and management will need to make sure sufficient resources are available to meet this changing demand. Service times and variability of customer arrivals may become both better or worse as a result of this experiment, for example staff may not be able to cope with a new menu and there might be delay with serving some customers. Inventory:There could be major problems in the inventory as a result of the ? hange? , because of the new raw materials (new seafood) that will be needed and used. There is a high probability that the new raw materials may not be used efficiently, because this is new in the inventory, management may not know how much will be needed. If demands are high, it may fall less but if demands are low for the change then surplus of stock can occur, which the risks of this have already discussed. Scheduling:This area will also be affected. As there is a new menu for the organization, management will need to re schedule the resources available.
If management fail to schedule the correct amount of raw materials for the new food then conflicts can arise. The schedule may need to be reorganized as well. The time limit of finishing orders may change, it may take longer to make the seafood orders, because scheduling relies on forecasted demand, the demands can change rapidly as a result of this experimentation. The order of processes in the operation may need to be shuffled as well because the new menu could be made by the ? initiator? (1st person in assembly line) or ? chaser? 3rd person in assembly line) instead of hiring new staff. Quality:The effects on quality can be drastic because of new changes in an organization. Management will need to become familiar with the new procedures the ? change? will bring, and they to become familiarized with this fast so they can keep the excellent strong quality culture that already exists. However, as a result management may need to allocate extra supervision for regular checks and help to ensure everything is conducted properly and mistakes are not made, as with a new type of menu the chances of this are high.
Implementation of a new training procedure will be required so employees become aware of the new seafood meal, in regards to cooking it and preparing it correctly, while being able to answer any questions customers may have about this. The allocation of more staff to the operation may also be necessary as resources must be efficiently utilized. What will be needed to maintain a consistent performanceIn order for the operation to maintain a consistent performance customer satisfaction must be balanced with resources being utilized efficiently. the prime objective of an organization is customer satisfaction through the provision of a consistent and sustainable product and level of service? (Race & Wright, 2008, p. 35). The objectives and goals need to be clear so the organization have an idea of what is expected and where to go, the ? vision? must be clear ? A vision depicts the aspirations of the company, a desired and attainable picture of how the company will appear in a few years? time? (Race & Wright, 2008, p. 46).
Good managing policies will be required for the organization to stay responsible and efficient, it will also be important the planning, implementing and control of the actions toward the ? change? does not exceed the budget limit. Issues with capacity, scheduling and inventory will need to be analyzed thoroughly because this will play a big part to having a consistent performance, for example arranging new resources and setting time frames to achieve objectives, such as the length of time to get the seafood menu ready for customers will be vital in providing consistency.
The organization needs to also provide the right type of environment so staff at all levels can become self-motivated, staff also need to be fully prepared for this ? change? , as they will play a key role in contributing to maintaining a consistent performance ? in service industries the most important element for success in an organization is the people? (Race & Wright, 2008, p. 331). McDonald? s need? s to try and keep the positive culture that already exists, strong communication within the operation and organization, as well as the right people involved in the process will be required and essential.
It may even be important for management to decide which areas to measure performance on, because this will help the organization to find out which areas maybe causing irregular performance and also to positively advance policies. For example, market performance should be measured to understand who are the biggest customers for this ? change? , and are they increasing or decreasing their spending on it, this can be used to decide what needs to be done to maintain a consistent performance.
How the changes will affect the role of the peopleThe change will basically give people who are involved in the operation more responsibilities. The people in the operation will not only have their regular job tasks to complete but will need to handle some extra work, such as using extra machinery, using new raw materials, cooking the new menu of seafood, supervising other people to see if they are doing it correctly, all apart from their regular tasks and also maybe having to serve more customers if the change is successful.
The priorities of these people will need to be altered slightly, because this is an experiment their main priority will still exist with the normal everyday food being sold but it still needs to be adjusted so they can add this new job task to their list, this could mean they might need to reorganize work responsibilities and personal responsibilities. For example, employees and managers in this operation will be required to undergo more training programs made to fit the change, and so they may even be required to be able to work longer hours to fulfill this, in order to learn the processes of how to manage the new operation.
Today McDonald’s operates in the global quick service restaurant industry business. McDonald’s was the pioneer of this business and it was McDonald’s which made the quick service restaurant business a global industry by creating a huge global commercial empire. Currently McDonald’s ranks 114th in the list of Fortune 500 companies and thanks to its pioneering processing and standardized approach to the commercial production of fast food, McDonald’s has placed the quick service restaurant industry amongst the big economic driving force industries such as steel and automobiles.
Raymond Kroc the founder of McDonald’s had the vision of a chain of fast food restaurants in every American State and in the world as well. He wanted his fast food restaurants to serve quality food according to fixed standards and specification. When Kroc started business in 1955 there were other well established fast food chains in United States, amongst the most widely known were A&W, Dairy Queen, Tastee -Freez, and Big Boy, Burger King then known as InstaBurger King was just starting out.
There were many things which separated McDonald’s from its rivals. Raymond Kroc’s goal was to create world wide fast food chain whereas the rest of the major fast food chains were not so enthusiastic about expansion. Other fast food chains which operated on a franchise basis viewed their operators as customers and only reaped benefits without providing much guidance relating to operation, promotion, sales strategy, financing and food processing. Raymond Kroc xtended his hand to operators of franchised McDonald’s restaurants by treating them like trading partners in every respect of the business. This close relationship with operators ensured that McDonald’s restaurants in any State in the United States would serve food according to fixed specification and quantity. Raymond Kroc did more than by just give advice regarding process management he allowed his operators to exercise their innovatory skills relating to every aspect of the franchise business.
McDonald’s had set new standards for the fast food industry by selling a branded service not just patented food recipes and formulas. (Greatest Business Stories of All Times) McDonald’s trademark competition edge was its process management approach in which the company literally put hamburgers on the assembly line. For McDonald’s outlets to succeed they had to attain perfection by breaking the labor into parts and fine tune every aspect of hamburger manufacture. This approach is being imitated by companies all over the world not just fast food companies.
McDonald’s even has a Hamburger University which is actively engaged in developing efficient food assembly processes and teaching and training McDonald’s employees, no other fast food chain goes to such lengths to ensure product consistency. John Love, a McDonald’s chronicler wrote, “Ray Kroc’s genius was building a system that requires all of its members to follow corporate-like rules but at the same time rewards them for expressing their individual creativity. (Greatest Business Stories of All Times) McDonald’s was the first fast food chain which launched a central advertising campaign and built advertising icons in the shape of Ronald McDonald the McDonald clown. McDonald’s advertised in network television and radio which made its franchise even more popular. Later on the McDonald’s Golden Arch would display the yearly sales figure on them. The character Ronald McDonanld is so popular that he ranks second in recognition to santa claus among children of 4 to 7 years of age.
McDonald has also sponsored players and the American All Starr Basket Ball teams. Among the sponsor list of McDonald’s are names like Michael Jordan and Magic Johnson. When McDonald’s started operations in foreign countries like Uk, Germany and Japan they had to adopt to the local environment, McDonald’s did this by not only improving and changing its strict product line but also changed its promotion strategies for example in Japan McDonald is known as Makudonaldo and in one promotional campaign in
Ireland McDonald’s proclaimed, ‘Our name may be American, but we’re all Irish’. (Greatest Business Stories of All Times) McDonald’s global strategy can be summarized as strict quality and consistency standards, innovation and continuous development, central promotional campaign and adaptability to local environments. McDonald’s has not only made an impact on the American culture but has also created an American symbol; McDonald is now synonymous with everything American. McDonald’s operates more than 31,000 outlets in 121 countries in the world.
Over the years McDonald’s has diversified their restaurant interests by operating fast food chains under other brand names such as Aroma Cafe, Boston Market, Chipotle Maxican Grill, Donatos Pizza and Pret A Manager. One of the unique features of McDonald’s business model is that it extracts huge revenues from the real estate business, unlike its competitors McDonald’s owns many of its outlets and collects rent for their use. McDonald’s faces stiff competition from global operators of fast food chains such as Burger King, KFC, Subway, Wendy’s and YUM!
Burger King for example runs more than 11,500 outlets in United States alone and 55 other around the world. An area of concern is that most of Burger King’s and KFC and Subway’s sales strategies involve self service, drive through, patented burger recipes and other food items. All this is very similar to McDonald’s, in fact it would not be wrong to say that other fast food chains have adopted the McDonald style of operational management and sales strategies quite successfully. Now McDonald’s not only faces competition at home from similar fast food chains but also faces competition abroad.
Companies like KFC have utilized the McDonald model of product perfection and consistency while offering similar restaurant environment. When McDonald’s introduced the play zone for kids other fast food restaurants followed. Imitation of sales, operation and promotional strategies seems easy but no other fast food company can compete the strong brand image created by the McDonald’s corporation. (Full Company Description) The primary competitive advantage McDonald’s has over its competitors is the constant emphasis on innovation and consistency.
McDonald’s ensures this by setting quality assurance labs worldwide which involves ongoing product reviews and on site inspection of suppliers facilities. While it is true that McDonald’s hires inexperienced staff but it also trains them vigorously for handling and preparation of the company’s products. Training for customer service is also provided by McDonald’s. The standardization of McDonald’s operation is very advantageous for McDonald’s as it not only provides cost standards for outlets it also enables cost efficiencies, moreover outlets can compare there sales ratios with other outlets of similar shop floor space.
Therefore benchmarks for productivity can be set as well as targets for sales. Areas of weaknesses can easily be evaluated. Standardization in more than 30,000 outlets also promotes innovation. Outlets want to reduce their costs so it is in their interest to use as cost efficient procedures as possible without compromising on quality and any innovation in one outlet can be implemented for others. The Hamburger University also engages actively in market as well as product research and McDonald’s standardized food assembly procedures have been acclaimed as industry standards.
In 2003 McDonald’s was awarded the NSRS (National Skill Recognition SYStem award for French fries cooking. A McDonald’s Director stated, “We have always had our own procedures. We are now helping Spring Singapore to develop standard skills that will be used as a benchmark for the quick-restaurant business under the NSRS and we are proud to have been selected for this role. ” (Dhalival, Rev) Perhaps the biggest disadvantage to McDonald’s is its rigid standards which can never capitalize on changing consumer preferences.
McDonald’s offer a uniform food menu which in recent years it has amended according to local tastes and preferences, however, the new menus can not compete with restaurants which can offer new and exciting meals and react to consumer changes more efficiently. McDonald’s operation system form financial management to customer service is extremely cost and time efficient and to improve those standards the company is constantly looking to increase efficiency through innovatory procedures. McDonald’s has built up an enduring brand image and a taste for their food. However, McDonald’s only relies on its brand image to carry its sales.
Consumer responsiveness if measured against other fast food chains is not good considering the fact that other chains are extremely quick at bringing new products to market. McDonald’s performance is based on its brand image and exponential historic growth and of course the factor that McDonald’s is a status symbol in other countries because it is a representative of the American culture. With revenues of more than 18. 61 Billion and revenue growth of 11. 3% McDonald’s has the largest and fastest growing revenue figures and testament of its superior brand image. Full Company Description) Other companies can imitate McDonald’s operational strategies but they can not compete the invincible and resilient brand image of McDonald’s. McDonald’s is one of the most recognizable brands in the world serving millions of customers daily in a multifaceted environment of more than 120 countries. Ray Kroc established large scale operation from the ideas of the McDonald brothers. He founded McDonald’s system in 1956 with company land own franchises, treated as partners, implementing a business model founded in real estate operations with franchising was done through buying property and leasing it to franchisees.
His strategy was uniformity of operations, while being committed to quality, service and cleanliness. Throughout the years and evolving environments, many CEO have followed Kroc’s dream; some making beneficial decision, while some detrimental. This paper will examine ups and downs of this company and the critical issues that caused the falters in such an iconic company and what it can do to alter operation to regain market share lost with increased competition. Problems management is facing
The problems that McDonald’s is facing are the declining performance in the areas of customer service, employee turnover and order processing time. McDonald’s now has a customer service ranking that was not only the lowest among all national fast-food chains, an undesirable position it has held since 1994, but also lower than any U. S. domestic airline, and even lower than the U. S. Internal Revenue Service. They experienced a first ever quarter loss, revenue growth has declined, and same-store sales fell for 12 straight months.
The company’s current situation has been attributed to increased competition, poor management and marketing and a failure to respond to the changing needs of customers and franchisees. Cantalupo, CEO during the case time period, is now left with many challenges and problems. The company is also suffering form declining market share and a decrease in domestic sales. The most significant questions remained whether the changes Cantalupo had made were sufficient to provide McDonald’s with the core competencies necessary to build a sustainable competitive advantage in the global fast-food industry.
Competitive Analysis SWOT Strength- Much strength in the company is still present and exists on many levels. Though competition is tough and McDonald’s is loosing some of its sales and market share, it is currently ranked number one is sales and market share that are leaps and bounds above other competitors. It posts more than double the sales of Burger King, its nearest competitor and it hold more then half the market of BK. While it did loose 1. 77% of the market, it managed to keep more of the market than BK, whose numbers when down by 2. 26%.
Competition has lead to aggressive store expansions in the United States, leading to key strategic partnerships with well established firms like Wal-Mart and Walt Disney, providing a key competitive advantage. The foreign market is expected to grow $200 billion from 2002 to 2006, leaving a huge possibility for McDonald’s international operation. Because McDonald’s has the most international units, more than 5 times its closes competitor, it has a better chance of capturing that growth. Since 1998 it has added 1,287 international units and it saw sales growth of $1. 1billion.
The real estate division and the competitive advantage of making more money from current leased franchised locations is a huge strength and has spurred the company to build and open more stores than any other than in the business. After a franchise is established there are several ways in which McDonald’s continues to make income form each franchised restaurant. Monthly service fees are charged, determined as a percentage of total monthly sales. Revenue is also provided by rent the company charges for the property on which each franchise is located, since they own all property that every McDonald’s is built on.
This is a fundamental strength in that McDonald’s receives income monthly form rent on each property. They generate more revenue form rent than form franchising fees. McDonald’s real estate holding and rent generated form these holding have become an increasingly important component of the company’s value and income, also giving the company more control over what it can do on the land. In the majority of cases, restaurants are located on prime high-traffic areas, highly visible and easily accessible.
This ensures that all McDonald’s are in the best locations, though this land may not have been afforded by the franchisees had the company not stepped in. The company also makes money for real estate through the marketing of excess land, property and building on its website www. loopnet. com. Profits form rent and land represent a significant portion of the company’s value. McDonald’s has a very capable management team that has superb company experience. Most of the men have been with the company for their entire career, some ever since its inception, and know the ups and down of the fast food industry without question.
A lot of them started with the company as store manager and have worked their way up the corporate ladder. This permits them to know all steps in the chain and enables them to formulate important decisions with each step in mind. CFO Matthew Paull was the newest entry in 1993, but was with Ernst & Young prior gaining the financial experience necessary for the job. Weakness The prior strength could also be a weakness. Having all of their current, most influential, management’s career with the company leaves a breeding ground for complacency and the attitude of “this is the way things have always been done”.
New creative ideas are not cultivated in such an environment. They many need to acquire some young, new management, which would better associate with the changing targeted consumer market. Because of the saturation of the U. S. fast-food market sales in the United States have gone down by $. 3 billion, though the number of U. S. units went up by 213 units since 1998. This shows that the addition of more units in this market is not going to help rebound sales and it only cannibalizes the existing restaurants. The addition of new outlets did nothing to boost sales for the company.
They only managed to amass more costs and expenses for the company, offering no value. McDonald’s customer service ranking had dropped considerably, quality was beginning to become inconsistent throughout the system, and the store decor in many locations was considered dated. All of these factors have contributed to the poor performance of the company brought on by poor customer service. The key contributing factor to McDonald’s declining performance is this low customer service. Elements contributing to this are employee turnover rate is higher than rival competitors, and slow service at the drive through window.
McDonald’s is only ranked fifth in the nation in drive through speed of service. This is detrimental to McDonald’s success because 60% of total sales are attributed to the drive through window services. Window service is 40. 7 seconds slower than Wendy’s. Not only is service time a problem, but as order are filled only 84. 41% of these order are correct. This places McDonald’s among the last of its competitors with a ranking of 19th in the industry. The relationship with franchisee has been a rocky one. Increased completion has led McDonald’s to continue aggressive store expansion in the U. S. seeking new outlets domestically at an elevated rate. Increased domestic expansion has led to the cannibalization of existing franchises; causing amplified friction between McDonald’s the corporation and its franchisees. Then to make matters worse, to ease the tension, they discontinued its Quality, Service, Value, Cleanliness (QSVC) store evaluation system. This was a poor management choice, with the customer service rating already deteriorating in comparison to other in the industry. This move would only further spur decline in customer service and continue to jeopardize an element that they are struggling with.
There must be a new way of remedying these relationships besides canceling programs that help to build on key issues of service. The innovation of new products to cope with customer’s priority of healthy eating habit has not been very effective at McDonald’s. Products like McLean Deluxe, fat-free apple bran muffins and salad shakers were not very good answers to this trend. These products failed to obtain customer support and were dropped form the menu. The way McDonald’s chose to integrate computer technology through its collaboration with Freddie Mac, a mortgage finance company, was also poorly executed.
This service was provided by installing computers in certain restaurants in order to provide customers with information about home ownership, courtesy of Freddy Mac Web site. The farthest thing from the average McDonald’s customers mind, while dining at McDonald’s, is home ownership. If they are going to provide services for their customers, like this, they need to implement it better. This is a case of a good strategy, but poor execution. Opportunity Opportunities exist for expansion of the real estate operation. They have a good thing going and are able to generate a lot of profits form this venture.
They should explore ventures in this arena outside the mere franchising agreement of their firm. They could do more with their website www. loopnet. com, along with better implementation of the Freddie Mac home mortgage collaboration. There is also an opportunity for advancement in the global market. The global food-service industry was expected to grow by more than $200 billion between 2002 and 2006. With 16,500 foreign units, Mc Donald’s has positioned itself in a perfect place to capture this international growth. There is strong opportunity to seek profits outside the already saturated U.
S. markets. There is much opportunity of McDonald’s to improve on the implementation of technology and innovation of products. Some of its competitors have done a better job with innovation of new healthier food that the customers like. Arby’s is a good example of this with its sidekicks and market fresh sandwich lines. McDonald’s not only has to come up with healthier products; they have to be innovative and find products that will sell and bring the customer wanting to return. McDonald’s also has the opportunity to expand on its brand related apparel and merchandise sector.
A growing portion of the revenue has come out of the sales of related brand merchandise. To boost revenue McDonald’s may want to look into expanding this area in not only outlet location, but also on the web. There is also an opportunity for McDonald’s to expand the operation of wireless capabilities at stores “Hot Spot” locations to appeal to their younger and more sophisticated target market. To go along with this venture, McCafes can be introduced in more stores to cover the consumer trend of flavored coffee drinks, cappuccino and espressos and appeal to the more sophisticated market that McDonald’s wants.
The company could also use the internet as a better source of marketing. With the customer segment that McDonald’s is trying to target, the Internet is the perfect avenue to be marketing the new and improved conditions that McDonald’s hopes to achieve through their newly implemented Plan to Win strategy and the “I’m lovin’ it” advertising campaign. Getting out there and advertising through the channels that your target market is currently adopting is a great way of capturing their business. In aiding in the improvement of customer service improvements, McDonald’s could look into incentive plans to boost employee performance.
One of the reasons stated for the poor customer service rating was higher than average employee turnover rates. If McDonald’s implemented incentive programs that rewarded employees for superior performance and customer hospitality, those numbers would skyrocket. There is an opportunity of better training of the current employees. Multi-tasking could be implemented to reduce the level of redundancy, which could then reduce the turnover rate with less boredom on the job. There is also opportunity for McDonald’s to differentiate themselves form their other competitors in the fast food market.
They need to give themselves that edge that will influence the customer to pick their restaurant above the others. Sonic has it with its nostalgic drive in atmosphere. Arby’s has it with its roast beef sandwiches and variety of sides. Subway has it with its healthy choice subs, but what does McDonald’s have that all the other burger joints don’t? The implementation and expansion of the McCafe operations would give McDonald’s that needed edge over other competitors. Threat The popularity of Subway and the “other sandwich” segment of the industry is a serious threat to McDonald’s and other hamburger chains.
With more and more people concentrating on health and weight loss there is only so many items McDonald’s can add to their menu, while keeping their core red meat segment the focus. Subway has found a way to tap into the core customer concern of weight loss through its advertisements capturing the weight loss of, “Jared”, their current spokes person. They are seizing the customer with the hope that eating their products will yield the same results as “Jared” and that is ve