COMPARATIVE MANAGEMENT PROJECT

Submitted by: Saad Bin Salim. Ikram Ur Rehman. Numan Butt. Waleed Mazher. Usman Sikander.

CONTENTS:

History. Vision Statement. Mission Statement. McDonalds Pakistan Management. McDonalds USA Management. Conclusion.

HISTORY
In 1937, Patrick McDonald opened "The Airdrome" restaurant on Huntington Drive (Route 66) near the Monrovia Airport in Monrovia, California. Hamburgers were ten cents, and allyou-can-drink orange juice was five cents. In 1940, his two sons, Maurice and Richard ("Mac" and "Dick"), moved the entire building 40 miles (64 km) east, to West 14th and 1398 North E Streets in San Bernardino, California. The restaurant was renamed "McDonald's." It is often erroneously thought that McDonald's originated standardization in the production and service of fast food, but it didn't. The company did, however, contribute greatly to that standardization. In 1948, Mac and Dick McDonald introduced the "Speedee Service System", which helped to further the principles of the modern fast-food restaurant. However, they were preceded in this by two decades by William Ingram and Walter Anderson, founders of the White Castle hamburger chain. In addition to being the first to standardize the production of hamburgers at their restaurants, Ingram's and Anderson's White Castle System created the first fast food supply chain to provide meat, buns, paper goods, and other supplies to their restaurants, pioneered the concept of the multistate

Hamburger restaurant chain, standardized the look and construction of the restaurants themselves, and even developed a construction division that manufactured and built the chain's prefabricated restaurant buildings. The McDonalds' Speedee Service System and, much later, Ray Kroc's McDonald's outlets and Hamburger University all built on principles, systems and practices that White Castle had already established between 1923 and 1932. After the McDonald brothers realized that most of their profits came from selling hamburgers, they closed down their successful carhop drive-in to establish a streamlined system with a simple menu of just hamburgers, cheeseburgers, French fries, shakes, soft drinks, and apple pie. The carhops were eliminated to make McDonald's a self-serve operation. Mac and Dick McDonald had taken great care in setting up their kitchen like an assembly line, to ensure maximum efficiency. In 1953, the McDonald brothers began to franchise their successful restaurant, starting in Phoenix, Arizona and Downey, California; the latter is today the oldest surviving McDonald's restaurant. In 1954, Ray Kroc, a seller of Multimixer milkshake machines, learned that the McDonald brothers were using eight of his hightech Multimixers in their San Bernardino restaurant. His curiosity was piqued, and he went to San Bernardino to take a look at the McDonalds' restaurant.

believing that the McDonalds' formula was a ticket to success, Kroc suggested that they franchise their restaurants throughout the country. When they hesitated to take on this additional burden, Kroc volunteered to do it for them. He returned to his home outside of Chicago with rights to set up McDonald's restaurants throughout the country, except in a handful of territories in California and Arizona already licensed by the McDonald brothers. Kroc's first McDonald's restaurant opened in Des Plaines, Illinois, near Chicago, on April 15, 1955, the same day that Kroc incorporated his company as McDonald's Systems, Inc. (which he would later rename McDonald's Corporation). Once the Des Plaines restaurant was operational, Kroc sought franchisees for his McDonald's chain. The first snag came quickly. In 1956 he discovered that the McDonald brothers had licensed the franchise rights for Cook County, Illinois to the Frejlack Ice Cream Company. Kroc was incensed that the McDonalds had not informed him of this arrangement. He purchased the rights back for $25,000, five times what the Frejlacks had originally paid, and pressed forward. McDonald's grew slowly for its first three years. By 1958, there were 34 restaurants. In 1959, however, Kroc opened 68 new restaurants, bringing the total to 102 locations.

MCDONALDS PAKISTAN: McDonalds Pakistan is part of the Lakson Group of Companies; a leading business house in Pakistan. McDonalds first restaurant opened its door to the people of Pakistan in September 1998 in Lahore. This launch was met with unprecedented enthusiasm from the citizens of Lahore, who are known for their liveliness, vigor and penchant for quality food. Karachi opened its first restaurant a week after Lahore. Ever since we opened the doors of our restaurants both in Karachi & Lahore, we have been proud to provide our customers the same great taste, outstanding value and superior service that is synonymous with the Golden Arches all over the world. There are now 21 restaurants in 7 major cities of Pakistan. (8 in Karachi, 1 in Hyderabad, 8 in Lahore and 1 in Faisalabad, 1 in Sialkot, 1 in Islamabad & 1 in Rawalpindi)Today millions of Pakistanis place their trust in McDonalds every day- trusting the company to provide them with food of a very high standard, quick service and value for money. So next time you walk into one of our restaurants, please remember, McDonalds Pakistan is here now, to put a smile on your face, each and every time you visit us.

VISION STATEMENT
"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."

MISSION STATEMENT
Be the best employer for our people in each community around the world * Deliver operational excellence to our customers in each of our restaurants; and * Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology. Try to fulfill our customer, automatically our profit will improve.

MANAGEMENT IN PAKISTAN
MACRO ENVIRONMENT:

Economic Environment. Political Environment. Demographic Environment. Technological Environment. Social Environment.

ECONOMIC ENVIRONMENT
Organizations in the fast food industry are not excused from any disputes and troubles. Specifically, they do have their individual concerns involving economic factors. Branches and franchises of fast food chains like McDonalds has the tendency to experience hardship in instances where the economy of the respective states is hit by inflation and changes in the exchange rates. The customers consequently are faced with a stalemate of going over their individual budgets whether or not they should use up more on these foreign fast food chains. Hence, these chains may have to put up with the issues of the effects of the economic environment. Particularly, their problem depends on the response of the consumers on these fundamentals and how it could influence their general sales. In regarding the operations of the company, food chains like McDonalds tend to import much of their raw materials into a specific territory if there is a dearth of supply. Exchange rate fluctuations will also play a significant role in the operations of the company. As stated in the paragraph above, McDonald stores have to take a great deal of consideration with reference to their microenvironment. The companys international supply as well as the existing exchange rates is merely a part of the overall components needed to guarantee success for the foreign

operations of McDonalds. Moreover, it is imperative that the company be cognizant of the existing tax requirements needed by the individual governments on which they operate. This basically ensures the smooth operations of the McDonalds franchises. In the same regard, the company will also have to consider the economic standing of the state on which they operate on. The rate at which the economy of that particular state grows determines the purchasing power of the consumers in that country. Hence, if a franchise operates in a particularly economically weak state, hence their products shall cost higher than the other existing products in the market, then these franchises must take on certain adjustments to maintain the economies of scale.

POLITICAL ENVIRONMENT:
The operations of McDonalds are affected by the government policies on the regulations of fast food operation. Currently government is controlling the marketing of fast food restaurant because of health concern such as cardiovascular and cholesterol issue and obesity among the young and children in the country. Government also controls the license given to open the fast food restaurant and other business regulation needed to follow such as for a franchise business. Good relationship with government in giving mutual benefits such as employment and tax is a must for the company to succeed in any foreign market. McDonalds also

protects its workers by ensuring all the hiring, compensation, training or repatriation is according to the Pakistani Labor Law as stipulated. Since it is apparent that the company is expanding continuously, it is wise to deal directly with the proper authorities in the respective markets that they intend to operate in. This way, a good way of establishes good relationship with the government. It is advisable that the company rests on the good graces of the government on which they will be penetrating. To do this, all they have to do is accomplish all the prescribed acts and satisfy all the prerequisites for doing business. The company must also be acquainted with the law in order to know what their responsibilities and their possible liabilities.

DEMOGRAPHIC ENVIRONMENT
McDonald's created Pakistani version of burgers which are made from beef, mutton and chicken. All foods are segregated vegetarian and non-vegetarian, due to the fact that Muslims are also vegetarians. McDonalds strategy of positioning itself as a family restaurant with an emphasis on local menus and local values seems to be working well in Pakistan. But to what extent McDonalds can continue its growth in Pakistan remains uncertain. McDonalds is more than just another American fast food chain. It carries a symbolic load of AmericanismsAmerican variant of capitalism and its overwhelming domination over the global economy. It is

also a symbol of American cultural imperialism. For this reason, McDonalds operations in Pakistan, like other parts of the world, will continue to face opposition from religious fundamentalists, environmentalists, protectionists, animal rights activists, and antiglobalization protestors. However McDonalds keeps on making necessary changes in the menu and the franchises according to the changing tastes and perceptions of the people. Further more changes are also made and managed according to the gender and age aspects.

TECHNOLOGICAL ENVIRONMENT
McDonalds generates a demand for their own products. The companys key tool for marketing is by means of television advertisements. There are similarly some claims that McDonalds are inclined to interest the younger populations more. The existence of play spots as well as toys in meals offered by the company shows this actuality. Other demonstration of such a marketing strategy is apparent in the commercials of they use. They employ animated depictions of their characters like Grimace and Ham burglar. Other advertising operations employ popular celebrities to promote their products. The like has become endorsers for McDonalds worldwide loving it campaign. Moreover, the operations of McDonalds have significantly been infused with new technology. Elements like the inventory system and the management of the value chain of the

company allows for easy payments for their suppliers and other vendors which the individual stores in respective markets deal with. The integration of technology in the operations of McDonalds tends to add value to their products. Basically, this is manifested in the improvements on its value chain. The improvement of the inventory system as well as its supply chain allows the company to operate in an international context.

SOCIAL ENVIRONMENT
Articles on the international strategies of McDonalds seem to function on several fields to guarantee lucrative returns for the organization. To illustrate, the organization improves on establishing a positive mind-set from their core consumers. McDonalds indulges a particular variety of consumers with definite types of personalities. It has also been noted that the company have given the markets such as Pakistan, an option with regards to their dining needs. Pointed out that McDonalds has launched a sensibly valued set of food that tenders a reliable level of quality for the respective market where it operates. Additionally, those who are aged just below the bracket of thirtyfive are said to be the most frequent consumers of McDonalds franchises. The multifaceted character of business nowadays is reflected in the harsh significance of the information on the subject of the existing market. This procedure is essentially identified in the field as market research. Information with

regards to the appeal and potential fields of the market would double as obstructions to the success of the company if this area of the operations is neglected. In the case of McDonalds they establish a good system in determining the needs of the market. The company uses concepts of consumer behavior product personality and purchasing decisions to its advantage. It is said to have a major influence on the understanding of the prospective performance of the organization in a particular market.

MANAGEMENT IN USA
MACRO ENVIRONMENT:

Economic Environment.

Political Environment.

Demographic Environment.

Technological Environment. Social Environment.

ECONOMIC ENVIRONMENT
As a business entity, McDonalds needs to face a lot of economic variables outside its company or its macro environment. Dealing with international sourcing for its material McDonalds should be aware on the global supply and currencies exchange. Remember, McDonalds imports most of its raw material such as beef and potatoes due to local market cannot supply in abundant to meet the demand of its product. Any upside of currencies especially dollar will be impacting its cost of purchase. Working on the local country, McDonalds must face government regulations on tax of profit where it gains from the operation and other tax such as entertainment and restaurant service tax. Each country may have different scale or types of tax available and McDonalds should follow the regulation of USA if it wants to continue the operation. The economic condition and growth of the country also is an important indicator to the demand of products that McDonalds offered. As the food priced slightly above normal foods, not many people will have the income range to consume the products. Moreover if the economy is bad and income precipitate is affected, the demand of McDonalds product will certainly going down. On the other hand the good economy also means disposable income is more and people can spend more on more expensive food at fast food restaurant.

POLITICAL ENVIRONMENT
The international operations of McDonalds are highly influenced by the individual state policies enforced by each government. For instance, there are certain groups in the United States that clamor for state actions pertaining to the health implications of eating fast food. They have indicated that harmful elements like cholesterol and adverse effects like obesity are attributable to consuming fast food products. On the other hand, the company is controlled by the individual policies and regulations of operations. Specific markets focus on different areas of concern such as that of health, worker protection, and environment. All these elements are seen in the government control of the licensing of the restaurants in the respective states. For instance, there is an impending legal dispute in the McDonalds franchise in Houston, Texas where certain infringement of rights and violation of religious laws pertaining to the contents of the food. The existence of Reddish in their menus in Texas is apparently offensive in the said market. There are also other studies that point to the infringement of McDonalds Stores with reference to the existing employment laws in the target market. Like any business venture, these McDonalds stores have to contend with the issues of employment procedures as well as their tax obligations so as to succeed in the foreign market.

DEMOGRAPHIC ENVIRONMENT
McDonald's primary target markets in USA are seniors, adults and teenagers however the most heavily targeted segment is children. Another trend in the demographic environment is the characteristics of families. No longer is mum, dad and children the norm. The number of married couples with children is declining while the number of one person and single parent households is continuing to increase, so the management is done accordingly and also which is in the best interest of the restaurant. As the population grows it also expands and shifts geographically. So in USA they keep on making new franchises in various areas and towns to keep the chain running and the restaurant business flowing steadily.

TECHNOLIGICAL ENVIRONMENT
For a fast food restaurant, technology does not give a very high impact on the company and it is not a significant macro environment variables. However McDonalds should be looking to competitors innovation and improve itself in term of integrating technology in managing its operation. In USA, supply chain management system is to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can make the management more effective and cost saving in the long term. This

makes customers happy if cost saving results in price reduction or promotional campaign discount which benefits them from time to time.

SOCIAL ENVIRONMENT
The changing lifestyles of USA due to development of American economy are taken into consideration. While more people are able financially to eat at more expensive outlet such as fast food restaurant, they have higher expectation. They want to have quality in services and more conveniences that can differentiate one restaurant from another. Young urban consumers want technology in their life and facilities such as credit card payment, wireless internet, cozy and relaxing ambient place, and other attraction for their hangout and eating. All these needs should also be taken into consideration. There is not much difference between cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For example in India people (Hindu) do not take beef, Muslim countries do not take pork, German like beers, Finnish like fish type of food menu, Chinese like to associate food with something good (for example prosperity), Asian like rice and Americans eat in big-sized menu. So far McDonalds has shown good efforts in localization of its menu to suit local taste but it

should constantly survey and learn about local culture to better understand and design the best product for them.

CONCLUSION
Debatably, the most significant contribution of this generation is the combination of globalization and internationalization in the businesses sector. Developments in the international setting have an effect on the more particular factors in the operations in individual organizations. Alterations could take place and require intense modifications to the operations such that it could have an adverse effect on the entire structure of the company. However, as indicated in the arguments and comments in this paper, this could be acquired by setting a certain level of flexibility in the organization. This level of flexibility is basically acquired through the acquaintance of both the internal and external environment of the company. Even though McDonalds may have been deemed as demigod in the fast food business in the international scene, what it preserves as revealed in its processes is the need for flexibility. The slight changes that take place in the market have an effect on the operations of the business in any case. This denotes that having the information on the effects of these alterations swiftly provides these fast food industry giants to take fine-tuning actions on their acts and still preserve their market position. As implied in the introduction of this paper, the markets of nowadays manifest a cutthroat rivalry with the individual competitors, recognized brands or otherwise.

Hence, any business in spite of the muscle of the brand name or the size of its reserves could not afford any failures in their individual markets.

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