MODULE ASSIGNMENT COVERSHEET

MODULE CODE

ILP 305

PART 1 Student Name: Chan Pei Ling Student Number: s1014122 Module Tutor: Mr. Daniel Lee Module Title / Assignment Number: Strategic Global Operations Date Due / Submission Date: 18th November 2011 Extension Date (including authorising signature): Words Count: 1,892 words excluding references The submission of this assignment is a statement that it is compliant with the Universitys assessment regulations, and that it does not infringe the Universitys research ethics principles. You are responsible for ensuring that the assignment is submitted in its entirety, and are advised to number pages in the format Page x of y (e.g. Page 3 of 12). PART 2 For completion by the Module Tutor: Feedback with reference to assessment criteria and suggestions for improvement.

Tutors signatureDate Second Marker (if appropriate): .Date Provisional Mark Subject to approval by the Board of Examiners

Question 1 Do an analysis of the operations management of McDonalds. Operation management is the activity of managing the resources which are devoted to the production and delivery of products and services (Nigel, 2007). It can be defined as the planning, scheduling and control of the activities that transform inputs into finished goods and services (Santosh, 2010). Besides that, operations management concerns making the most efficient use of whatever resources an organization has so as to provide the finished goods or services that its customers need in a timely and cost effective manner (Barnett, 1996). Organizations exist to provide products and services which can be purchased by other organizations, therefore, planning and services is one of the most important operations in any organizations. Product planning is a process used to identify and develop new products (Smith, 2011). Product planning is a key operation in McDonalds. In order to fulfill the needs of customers, the company keeps on adding new products to its menu because the customers change their preferences constantly. In addition, the increasing of healthy requirements, make the McDonalds change its menu items healthier. The company also depends on different seasons launch new products, for example, provide hot coffee in winter and milkshakes in summer. After develop the products, organizations need to have process development to make and support the product. Those organizations need to identify suitable processes which can achieve the level of requirement in output at right quality standards. McDonalds operations manager implements the process planning in cooking food items. The ingredient is prepared by the method which can helps them to maintain the speed and the quality of the food. Besides that, McDonalds also make consideration in health, safety and hygiene when they make a process planning. Layout is the arrangement of facility to provide working, service and reception, storage and administrative areas. The layout is one of the reasons because it can achieve low cost method and increase overall capacity and productivity (Bicheno, 2002). For example, McDonalds has a proper layout of the equipment in the kitchen, it can ensure the preparation of quality food in less time. Besides that, its layout also considers the healthy and safety issues. The company also keeps in mind the cost of production because it is the other factor which can depends on the layout. Inventory also is another important factor. When the company has best method of inventory control, they can expect the demands of the products. Different company may choose different methods of inventory control, but all of them are to ensure can

satisfy customer needs and make profit. McDonalds inventory is managed by FIFO method (First in First out). It is because they want makes sure the raw materials are fresh and not easy perishes. The delivery of inventory is three or more times per week, depends on the requirement of restaurant. Besides that inventory stored in freezer with proper packaging, it can ensure freshness of the ingredients. Quality management is to maintain the quality of goods and services because it is important to keep the good reputation of the company. Company can adopt quality check procedure to maintain the quality of the products and services. McDonalds need to ensure the quality of them is the best, because the legal requirements of the quality of food served is important and keep the good reputation to earn over the years. However, maintain the quality of food is not easy. Therefore, McDonalds carry on a number of practices to make sure the quality of food is served.

Question 2 Explain how the four perspectives of operation strategy would apply to McDonalds. Four perspectives are Top-down, Bottom-up, Market requirements and Operations resource capabilities. Top-down is the influence of the corporate or business strategy on operation decisions. Bottom-up is the influence of operational experience on operations decisions. Market requirement is the performance objectives that reflect the market position of an operations products or services, also a perspective on operations strategy. Operations resource capabilities is the inherent ability of operations processes and resources also a perspective on operations strategy (Nigel, 2007). McDonalds is the worlds largest chain of fast food restaurant. McDonalds has built it competitive advantage on operational excellence. Ray Kroc, the founder of McDonalds revolutionized the restaurant industry in the United Stated. Through sophisticated production and delivery system, it made everyone possible can buy the same French fries in everywhere. McDonalds offer consumers by low price, limited menu and fast service (Joanne and Caroline, 2006). In 1960s, McDonalds based on two thrusts to fulfill their growth strategy: franchisees pay the company a percentage of sales and franchisees and tenants pay rent. McDonalds owns many of stores under their network, so can receive additional revenues on sales. McDonalds based on their growth strategy on the real estate component by purchasing more restaurants. It provided significant financial leverage.

(Joanne and Caroline, 2006) Ray Kroc based on his four fundamental principals: Quality, Service, Cleanliness and Value to developed tangible goals and specific operating practices to carry out his vision. 65% of McDonalds restaurant and about 75% of its revenues are generated from United State and Europe (Jing Han, 2008). To maintain its market leadership in fast food industry, McDonalds keep their major markets at the same time expanding their business into the other emerging markets. At the same time, McDonalds needs to fulfill different consumer groups in different areas by different taste and requirements. Through different regional structure, McDonalds can not fulfill the local consumers needs in different geographical areas but also pursuing maximum local development. They develop and produce different types of products in different region by different prices. The vice chairmen of McDonalds Jim Skinner said that if you are looking for a command center with one push button that operates our restaurant in every corner of the world, you wont find it (Jing Han, 2008). But consumers can find same service, cleanliness and value in everywhere. Besides that, McDonalds targets their similar consumers into segment to fulfill their different requirements by fast service, affordable price and good standard hygiene, so in most countries they provide similar main products like beef, chicken and bread potatoes. To fulfill different consumers needs in different countries, McDonalds keeps launching new products for their regional consumers. From the previous years, fast food industry started with heavy discounting where high volume compensated low margins. However, because the increasing of commodity costs and lower real wages, it causes McDonalds require higher profits. McDonalds surrendered the strategy of sacrificing profits for market share by reduce price to increase sales volume. They started to increase their menu prices across half its system. Besides that, McDonalds changed their strategy, they implement monopolistic price policy by tied up the relationship with customers (Claudia, 2001). The company used low price and promotion to attract customers and increase margins of company. Now, the margins of McDonalds belong to the highest in the fast food industry. International growth makes McDonalds lack of managing its franchises, to solve this problem, McDonalds determined to appease dissatisfied franchisees, they stopped assessing franchisees according to national standards in 1993. This pulls down the quality of McDonalds distribution network, and reduce the companys competitive advantage. According one studies Quick Service Restaurant which is issued by magazine show that average waiting time at McDonalds drive through is longer than at Wendys (Joanne and Caroline, 2006). The initial quality of its service had been changed

by low speed service and inconsistent quality. However, service quality and speed was typically high since the companys founding was affected, which also caused by an alignment problem with corporate identity.

Question 3 Critically discuss the characteristics of effective planning and control systems that are pertinent to the effectiveness of planning and control in McDonalds. Planning and control is the reconciliation of the potential of the operation to supply products and service, and the demands of its customers on the operation. It is the set of day-to-day activities that runs the operation on an ongoing basis (Nigel, 2007). Although McDonald is the largest fast food chain restaurant, they face one of the major challenges is stock management. Most important in stock management is creating a balance between fulfill customers needs and minimize waste at the same time. McDonald reduce waste by predicted the demand accurately so the products do not have to be thrown away usually and accurate stock control of the raw materials (The Times, 2007). However, McDonalds need to increase the range of new product it offers when consumers taste change, so it is the greater challenge to reduce wastage. In previous time, stock ordering was the responsibility of individual restaurant managers. Managers order stock based on their local knowledge. For example, if this weeks sales figures showed the restaurant sold 100 units of burgers and net sales were rising at 10%, they would expect to sell 110 units next week. However, this took up managers time and such method no take account of school holidays. After that, in 2004, McDonalds introduced a specialist central stock management function. It can build the local event into the new planning and forecasting system to predict the demand of finished menu (The Times, 2007). A stock control chart shows the balance of orders for new stocks against sales. The system is depending on figures for expected sales. Restaurant manager will record opening and closing stocks of key food items everyday. They record all other items by weekly. The store computer system identifies any stock count deviations from the last stock count so managers can investigate. The raw materials of McDonalds are delivered to the restaurant between 3 and 5 times a week. When raw materials arrive together on the lorry the product can be store by three sections: frozen, chilled and ambient. During work-in-progress, the

restaurant will combine that cheese, onions before the customer orders the products. Big Macs and filet-o-fish are finished product that ready for immediate sale to customers. At McDonalds, all raw materials, work-in-progress and finished products are handled on a FIFO (First In First Out) basis. It is means raw materials are used in the order they are received. It can make sure the stock is always fresh because the products are sold in the order they are made. Ray Kroc the founder of McDonalds designed training programs to develop the kind of controls needed, and remain the best in the fast food industry. To develop a well control manual, McDonalds give training instructions ranged from the cooking time for French fries to expected standards of cleanliness for rest room. To ensure employees followed the provisions, Kroc hire inspectors visit outlets and grade their operations. Besides that, Kroc demanded that suppliers conform to high standards. McDonalds inspectors sometimes ready to cancel contracts if found anything abnormal. McDonalds also keep closing tabs on suppliers and conducting laboratory tests on the ingredients. In addition, McDonald sold franchises one outlet at a time when Burger King is not. When operators demonstrated willingness and can live up to McDonalds standards, just consider for franchises. McDonald also makes sure franchisees give their labors incentive to work hard. The vision of Kroc is nationwide standardization, no matter where the customers in, they will enjoy the same level of services. One of the major factors help company extent is maintains strong controls over most aspects of its operations. These control help McDonalds develop a competitive edge in the form of high product and service consistency.

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References Han, J. (2008) International Journal of Business and Management. The Business Strategy of McDonalds, Vol. 3, November 2008, p 74. Roch, J. and Boivin,C. (2006) The case of McDonalds . Available from :< http://www.usherbrooke.ca/ceot/fileadmin/sites/ceot/documents/Publications/Actes_ de_congres/Floride_2006.pdf> [Accessed 10 November 2011] Roch, J. & Boivin, C. (2006) Corporate Identity and Strategic Change. The Case of McDonalds, pp4-5 [Online]. Slack, N., Chambers, S. and Johnston, R. (2007) Operations Management, 5th ed. Madrid: Pearson Education Limited. S.E. Smith. (2011) Available from :< http://www.wisegeek.com/what-is-productplanning.htm> [ Accessed 10 November 2011]. Smith, D. P. (2011) McDonalds Turns the TV On. Qsr Magazine, October, p1. The Times 100. (2007). Managing stock to meet customer needs. pp84-88.