Introduction:

McDonald’s is the world largest chain of fats food restaurants with more than 30000 local

restaurant serving 52 million customers in more than 100 countries each day.

McDonald’s primarily sells hamburgers, cheeseburgers, chicken products, french-fries,

breakfast items, soft drinks, milkshakes and desserts. More recently, it has begun to offer

salads, wraps and fruit.

Each McDonald’s restaurant is operated by franchise, an affiliate, or the corporation itself.

The corporation revenues come from the rent, royalties and fees paid by the franchisees, as

well as sales in company-operated restaurants. McDonald’s revenues grew 27% over the three

years ending in 2007 to $22.8 billion, and 9% growth in operating income to $ 3.9 billion.

History:

The business began in 1940 with a restaurant opened by brothers Dick and Mac Donald in

San Bernardino, California. Their introduction of the “speedee service system” in 1948

established the principles of the modern fast-food restaurant. The original mascot of

McDonald’s was man with a chef’s hat on top of hamburger shaped head whose name was

“speedee”; speedee was eventually replaced with Ronal McDonald in 1963.

The present corporation dates its founding to the opening of a franchised restaurant by Ray

Kroc,( in Des Plaines, Illinois on April 15,1955) who took over the small scale McDonald’s

corporation franchise in 1954 and built it into the most successfully fast food operation in the

world. Kroc later purchased the McDonald brother’s equity in the company and led its

worldwide expansion and the company became listed on the public stock markets in 1965. (a
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hundred shares of stock costing $ 2.250 dollars that day would have multiplied into 74,360

shares today, worth approximately $ 3.3 million on December 31,2006). In 1985 McDonald’s

was added to the 30 company down Jones industrial average.

With the expansion of McDonald’s into many international markets, the company has become

a symbol of globalization and the spread of the American way of life.

Internal and external factors affecting McDonald’s:

There were three factors that were chosen to outline the success of McDonald’s corporation.

The first factor is globalization, which is define as closer contact between different parts of

the world, with increasing possibilities of personal exchange, mutual understanding and

friendship between "world citizens". Diversity, the difference among people and cultures, is

the second factor. The final factor is ethics, which can be defined as a set of principles of right

conduct. This paper explains how the McDonald Corporations uses the factors to conduct

business around the world.

In today’s society, corporations and enterprises are expanding their businesses in the global

markets. Globalization is necessary for success and survival in the worldwide market;

however, global competition is not easy. By the end of the twentieth century, the list of

Fortune 500 companies was no longer only United States corporations due to an increase in

international companies joining the list. As a leading food service retailer, McDonald’s joins

those corporations with restaurants in 119 countries. Important strategic decisions are a key

factor to their success with consideration for both internal and external factors. When

considering the foreign market, companies need to consider there are risks. There must be

local marketing to appeal to the local consumers and also to build relationships and trust.
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Therefore, the strategic planning for marketing has to be effective. McDonald’s caters its

menu in other countries to the cultures of the regions. For example, in India, the non-

vegetarian menu includes chicken and fish items only. Beef is not on the menu in India

because are considered sacred. Global marketing decisions are no different than those made

domestically but the decisions are unique to each country. Furthermore, operating on a global

scale allows a company’s employees to experience working in different cultural

environments. This is a good marketing strategy for recruiting employees. McDonald’s has a

global core curriculum for its restaurant management.

McDonald’s commitment to diversity is established on the foundational belief that diversity is

not just a moral and ethical issue, but also a business issue. Due to the global expanse of

McDonald’s business, diversity has become an integral part of the internal company culture.

McDonald’s has over 30,000 restaurants around the world, which means franchise

owner/operators, employees, and customers represent just about every culture, religion or

ethnicity on earth. In addition, McDonald’s promotes the use of local suppliers and based on

their policies of diversity, expects and retains suppliers that have a similar diversity culture.

Knowing and understanding the local customs and traditions of the communities where

McDonald’s has established businesses, integrating people from these communities into the

company, and adapting locally to the tastes and cuisines of the community, has made

McDonald’s the leader in their industry.

In the United States alone, McDonald’s has won numerous awards and received national

recognition for diversity. According to McDonald’s website, www.mcdonlads.com, awards

include; PUSH-Excel Corporate Partner Award, Corporate Achievement and Image Award,

Nullities Corporate Award, Corporate Vision Award, and the Circle of Inclusion Award.

These awards and recognitions are not the result of a surface attempt to appease the critics.

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They are the result of McDonald’s embracing and integrating diversity into their company

ethos as an asset and an ally.

McDonald’s realizes that having diversity as an asset greatly enhances the profitability of the

company. Diversity is a direct reflection of a company’s interpersonal relationships. These

relationships, if positive, result in a rewarding venture. Conversely, if the relationships are

negative, the company’s morale declines and if not addressed, leads to the deterioration of the

company. This deterioration directly impacts the company’s income and the community’s

acceptance of the business. However, McDonald’s leadership encourages diversity through

their policies and programs. McDonald’s proven success with leveraging the advantages of

diversity can be attributed to their core value of ethics.

McDonald’s success is built on the foundation of personal and professional integrity. From

the beginning, McDonald’s has based its reputation on trust and dependability, and their

commitment to the community made them a household name. Founder Ray Kroc, believed in

giving something back to the community in order to make the world a better place.

Throughout the 1970’s, McDonald’s became involved with a lot of charity work. In 1974

established a charity called Ronald McDonald House. The purpose of this program was to

provide temporary housing for the families of seriously ill children receiving treatment at

nearby hospitals. Since the 70s, more than 10 million families around the world benefited

from the comfort provided by Ronald McDonald Houses.

In addition to their community involvement, McDonald's has a long-standing commitment to

environmental protection. Restaurants around the world have innovative programs for

recycling, resource conservation, and waste reduction. The environmental achievements of

this corporation have been recognized by organizations such as the Audubon Society,

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Conservation International, Keep America Beautiful, the National Recycling Coalition, and

the U.S. Environmental Protection Agency.

McDonald's is also an equal opportunity employer. As an equal opportunity employer

McDonald’s ensures that employees and job applicants are selected, trained, and promoted

without discrimination to race, gender, sexual orientation, age or disability. The company

promotes their employees based on their relevant skill, talents, and performance. In support of

this McDonald's promotes and sustains a working environment, which is free from unlawful

discrimination, harassment and bullying. Employees are regarded as members of a team

where everyone's opinion is valued and respected. The Human Resources department

monitors the effectiveness of the discrimination policies at regular intervals and takes

corrective action as necessary to ensure that they being complied with. Employees who feel

that they have been treated unfairly are encouraged to use the remedies outlined in the

Company's handbooks. McDonald’s ethical standards, as well as their strategies for

globalization and diversity are instrumental to the overall success of the company.

(http://www.freeonlineresearchpapers.com/external-internal-factors-affecting-mcdonalds)

SWOT analysis:

1.Strengths: -McDonalds has built up huge brand equity. It is the No. 1 fast-food

company by sales, with more than 31,000 restaurants serving burgers and fries in

almost 120 countries. Sales, 2007 (11, 4009 million), 5.6% sales growth.

-Good innovation and product development. It continually innovates to retain customers in the

business.

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- The McDonalds brand offers consumers choice, reasonable value and great service.

- Large amounts of investment have gone into supporting its franchise network, 75% of stores

are franchises.

- Loyal staff and strong management team.

2.Weaknesses: - Core product line out of line with the trend towards healthier

lifestyles for adults and children. Product line heavily focused towards hot food and

burgers.

-Seasonal

-Quality issues across the franchise network.

3.Opportunities: -Joint ventures with retailers (e.g. supermarkets).

-Consolidation of retailers likely, so better locations for franchisees.

-Respond to social changes - by innovation within healthier lifestyle foods. Its move into

hot baguettes and healthier snacks (fruit) has supported its new positioning.

-Use of CRM, database marketing to more accurately market to its consumer target

groups. It could identify likely customers (based on modelling and profiles of shoppers)

and prevent brand switching.

-Strengthen its value proposition and offering, to encourage customers who visit coffee

shops into McDonalds.

- The new “formats”, McCafe, having Wi-Fi internet links should help in attracting

segments. Also installing children’s play-parks and its focus on educating consumers

about health, fitness.

- Continued focus on corporate social responsibility, reducing the impact on the

environment and community linkages.

- International expansion into emerging markets of China and India.

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 4.Threats: - Social changes - Government, consumer groups encouraging balanced

meals, 5 day fruit and vegetables.

-Focus by consumers on nutrition and healthier lifestyles.

-Competitive pressures on the high street as new entrants offering value and greater

product ranges and healthier lifestyles products. E.g. subway, supermarkets, M&S…

- Recession or down turn in economy may affect the retailer sales, as household

budgets tighten reducing spend and number of visitors.

-Pressure groups - environnemental.

Performance objectives:

1. Speed: the target time taken by McDonalds for serving customers is 90 seconds

after taking order.

2. Quality: - Good quality of food;

- Clean and decorative areas;

- Good quality of service;

- Staffs are friendly and happy to serve the customers.

3. Dependability: -serving customers on time before 90 seconds.

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 4. Flexibility: - McDonald’s restaurants in the world can satisfy every kind of

customers, like in India they make vegetables menus.

5. Cost: - an appropriate price for the level of the quality of the product.

Work flow process of McDonalds:

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 Order is
Placed
Of raw materials

Transport of raw materials=

Storage of raw
Materials

Prior
Preparation of
The varieties

Movement from the kitchen to the shelf=

Taking of order

Cash payment

Customers wait
Packaging
Done

Inspects whether the

Appropriate items
Are Placed
Movement to the customers for tables =

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 Supply network:
Second-tier first-tier first-tier second-
Suppliers Suppliers customers tier
Customers

Ink suppliers
Packaging
suppliers
Paper and
Cardboard
Supplier

Vegetables; fruits;
McDonalds restaurant franchisee consumers
Farmers cheese… suppliers

Water suppliers

Coke suppliers

Sugar suppliers

 Outsourcing: McDonalds outsourced some products like ketchup by HEINZ; milk by

nestle…

 Vertical integration: it is a Backward Vertical Integration because McDonald’s

expands its operations into industries that produce inputs to the McDonald’s products.

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4 V’s profile McDonalds VS Freezer Meals Company:

McDonalds freezer Meals Company

Low Volume high

High Variety low

High Variation in demand low

High Visibility low

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 McDonalds:

-Volume: low-medium volume.

- Variety: only sandwiches but by different ingredients (with beef; egg; chicken;

Vegetables…) example: Mcchicken; Mcegg; filet-o-fish…

-variation in demand: medium-high; it depends on traffic and on seasons with a decrease

of sales during holidays and week end.

-visibility: high, the process is total exposed to the customers.

Freezer Meals Company:

- Volume: high, the company produces a big quantity every day.

- Variety: medium-low; customers (supermarkets) choose only few different kind of meal.

-Variation in demand: low variation in demand.

-visibility: very low (the personnel never meet the end consumers).

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Type of business process of McDonalds:

- It is a batch process because there are a moderate volume, moderate variety, less flexible

equipment and less skilful workers that in a job shop environment.

Capabilities:
- McDonalds doesn’t have the same capacity of production all over the year; McDonalds is

better sold in summer and in holidays.

Conclusion:
-Even if McDonalds is the largest fast food in the world, it faces some problems like the bad

image that consumers have on their foods, especially when there are a new competitors who

offer nearly the same products with a better image.

- I think that this a huge problem for McDonalds because it will affect clearly it sells.

-McDonalds should advertise more and more their products and show the best quality to the

customers, and preserve good relations with Medias which can affect badly the image of

McDonalds if they start by writing or doing movies when they show bad things about

McDonalds.

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 Outlines

- Introduction

- History of McDonalds

- Internal and external factors affecting McDonald’s

- SWOT analysis

- Performance objectives

- Work flow process of McDonalds

- Supply network

- 4 V’s profile McDonalds VS Freezer Meals Company

- Type of business process of McDonalds

- Capability

- Conclusion

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 BM204 – Managing the Business

Assignment 1of 1

Coursework contribution: 50% of module total

Set by date: 18/12/08

Hand in date: 19/01/09

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 References

- en.wikipedia.org/wiki/McDonald's

-http://www.mcdonalds.com/corp.html

- http://www.mcdonalds.com/corp/about.html

- http://www.mcdonalds.com/corp/about/mcd_history_pg1.html
- http://en.wikipedia.org/wiki/History_of_McDonald%27s
- Operations Management (4th edition) by Nigel Slack; Stuart
Chambers and Robert Johnston.
-http://www.mcdonalds.ca/en/aboutus/suppliers.aspx

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