Business Decisions: McDonald's - Essay Example

Business Decisions: McDonald's 1. Salient facts about McDonalds McDonalds is a leading food chain business worldwide; operating 32,000 global restaurants in more than 117 countries. McDonalds employs 1.7 million worldwide; franchises 75% of its business and manages the rest of restaurants. It offers standard framework for its operation, uniform set of menus, universal pricing and restaurant façade (Corporate Info.) 2. An example of each of strategic, tactical and operational decisions which might be/have been taken by McDonalds, the chosen business and explanations why these decisions are respectively strategic, tactical and operational. The Encyclopedia of Business and Finance refers to the strategic, tactical and operational decisions as functions of decision making often done at different levels of management. Strategic decisions are long term decisions that affect the entire operations of the company and most often decided upon by top management. In 2010, strategic decisions of McDonald done at the corporate level are to strengthen its brand position around the world. The core strategy was set on people, products, price, place and promotion in order to keep the brand relevant in meeting the needs of people. Examples of strategic decisions of McDonalds is to run better restaurants, improve operations excellence around the world, better training, and enhanced service to make it easier for managers and crew to serve customers efficiently (McDonalds 2010 Annual Report). The strategic decision also includes introduction of new product offerings to enhance menu appeals. Tactical decisions are those decisions typically done by the middle managers to help move the company closer to the strategic goals. For example, in the reimaging of the restaurant interiors and exteriors, the middle management may pick the appropriate suppliers to execute the design. Middle management can also choose local advertising agencies to promote the product. Middle managers can also implement employee incentive plans suitable to its local operations to boost morale and sales. A tactical decision found in McDonalds marketing model is to adapt to diversity in culture, adapt to the tastes and eating behavior of the country they are in. For example, McDonalds adapted to the Indian culture when they did not serve beef and pork in its menu, and offered instead chicken and vegetables to Indian customers (Erin, P. 2007). Operational decisions are the day to day activities implemented by the lower level of management. Typically, this includes scheduling of work of employees, handling conflicts of employees and purchasing of materials needed daily. New areas of McDonalds require extended store hours such as early breakfast or late dinner, as required. It is the duty of the lower level of management to work on the schedules of the employees. Maintenance of the premises is also one of its day to day operational decisions. 3. Identify examples of information likely to be needed to take each of the decisions identified in task 2 . For strategic and tactical decisions you should be able to find referenced examples. For an operational decision it will be possible for you to make reasoned speculations based on your understanding of the business processes undertaken in your business. Information is relevant for decision making, and certain information and processes of its gathering becomes an important aspect of a business analysis. For strategic decisions, information needed is the external and internal environment factors that might affect global operations of McDonalds. External environment are political, economic, social and technological factors that pose as threats for business (NetMBA). In political analysis, certain factors are beyond firm’s control, and mostly these concerns are related to the stability of the country, trade regulations and tariff, favored trading partner, wage legislations, mandatory employee benefits and product labeling requirements. In the economic analysis, management looks at the economic system of the country, as presently, we have the closed economy and the open system of the market. Other economic factors that weigh on the analysis are infrastructure quality, skill level of work force, unemployment rate, labor costs, economic growth rate and the discretionary income. Social analysis looks at the demographic profile, class structure, education, culture, entrepreneurial spirit, attitudes and leisure interests of people. For instance, social behavior and culture became a problem of McDonalds in India because people there have different taste orientation (Erin, P. 2007). In the same way, information about social behavior of people in local regions and other religions are needed as they may have an impact on its operations. In technology, company looks at the technological development, its impact on the value chain structure and its impact on product offering. Internal environment information is likewise needed because it involves capital and human resources that are needed to support the strategic goals set by the company. Tactical decisions need information gathered from external sources within the region of operations. In our previous example, middle management needs information on the supply chain as to the appropriateness, quality, timeliness of delivery and other specifications that should be integrated in McDonalds system. McDonalds also looks at information that middle management provides such as innovative ideas that could help the company be integrated in the region and in so doing, meet the customers’ preferences and needs. More often, tactical decisions involve information on convenient locations, store opening hours, menu preferences and social behaviors of customers in the region. For example, middle management provided self-order kiosks in Spain, Germany and France; meaningful information from this level also helped in the expansion of drive-thru customer order system in over 3,000 restaurants (McDonalds Annual Report 2009). Information needed for operational decisions are municipal ordinances that regulates working hours, holidays, wages, feasts and celebrations that needs scheduling of work. For example, the next Olympic Games are scheduled at 2012 in London. Information about the plans and schedules of games and practices, the expected numbers of sports fans coming to the event are needed so that scheduling of work plans are done at this point. Logically, a big event such as Olympic Games requires well ahead plans as to maintenance, procurement and hiring of additional personnel. As one of the sponsors of the Olympic Games, the third level of managers attends meetings and represents McDonalds (Around the Rings. 2010). 4. Give at least 4 documented examples of competitor intelligence which are likely to be of interest to your company. The purpose of conducting competitor intelligence is to know well ahead the plans of the competitors so that McDonald could prepare strategic plans to counter it in the market. First example of competitor intelligence is in knowing its competitors and analyzing its profile. Information on competitors’ performance is generally found thru its published annual reports and analysts statements found in stock exchange information. Top competitors of McDonalds, according to Hoovers report are the Yum Brands, Burger King Holdings and Doctor’s Associates Inc. A comparative analysis of McDonalds and its competitors will also give information about its profitability, growth, capabilities. From there, a ratio will show us on where McDonalds stand in position from competitors in the industry and in S & P index. (Hoovers.com) For instance, sales growth of McDonalds is 4% in 2010, which is comparatively lower than the industry competitors that is 5.30%, and much lower than the S & P 500 index of 11.70% Second example is ratio comparisons. As ratios are compared, the managers of McDonald can have a better idea on whether competitors are gaining significant market share of the hamburger market. At this context, strategic intelligence should be conducted to gain foreknowledge of the competitor’s plans so that McDonalds can prepare counter measures to protect their own share of the markets. Strategic intelligence should also include vertical references like knowing the firm’s major customers, suppliers and partners. Third example involves use of tactical intelligence that includes data on competitors’ terms of sale, price policies and knowing the competitors’ plans in differentiating their products. Such factors sometimes include plans for introduction of new products, sales promotions and other strategic plans of competitors. This information is most often valuable to middle managers in their day to day operations. The fourth and final step of the competitor intelligence cycle is the counter-intelligence tactics that should be done by McDonalds. Most likely, competitors are also interested on the plans of McDonalds, because logic explains that if you are interested in competitors, they are also interested in yours. The final step affirms the need for security of information and technology. 5. Explain why B2B (not B2C!!) e-commerce is of (potential) importance to your company, with specific reference to its activities. McDonalds tends to benefit from the growing popularity of business to business e-commerce transaction because B2B turns out to be a platform for manufacturers, traders and suppliers . It is also gateway for visitors and potential customers to find critical information about the company, its products and offerings. B2B internet marketing process is a growing trend of business transactions that do away with intermediaries, thus it lessens costs. It is efficient as it requires direct communication between the manufacturers and the business that will be using the product. B2B provides opportunities for collaboration of business practices between customers and suppliers, and to get into the new markets in the most efficient and least cost process. Wisegeek defines business-to-business e-commerce as “any internet-based information or product exchange between companies” Swing, Gordon & Purchase estimates B2B transactions worldwide to be worth $2.7 trillion by 2004. Unfortunately, latest figures cannot be provided because of lack of published data. A B2B transaction covers almost all types of business products and services that are used by business to produce other products that are then sold. Examples are raw materials that can be ordered by McDonalds thru on line suppliers that will be used in their hamburger production. About 75% of McDonalds’ operations are developed thru franchises, and a B2B developed transactions can reduce intermediaries and reduce operational costs. As McDonalds operates globally, a network of its own supply chain can be developed thru the B2B internet system. The supply chain is one of the most important segments of McDonalds’ operation because its needs precision in terms of quality and delivery. References Around the Rings. 2012. London 2012 sponsors happy with Olympic Preparations. 10 Nov. 2012.http://www.aroundtherings.com/articles/view.aspx?id=35939 Corporate Info. http://www.mcdonalds.com/us/en/our_story/Corporate_Info.html Encyclopedia of Business and Finance. “Decision making” http://www.enotes.com/business-finance-encyclopedia/decision-making Erin, PETRIN 02 April 2007. Where’s the Beef? Meatless McDonalds burgers in India. http://www.cbsnews.com/stories/2007/04/02/asia_letter/main2640540.shtml Encyclopedia of Business and Finance. “Decision making” http://www.enotes.com/business-finance-encyclopedia/decision-making Erin, PETRIN 02 April 2007. Where’s the Beef? Meatless McDonalds burgers in India. http://www.cbsnews.com/stories/2007/04/02/asia_letter/ain2640540.shtml Hoovers.com. Overview: McDonald’s Corp. http://www.hoovers.com/company/McDonalds_Corporation/rfskci-1.html msnmoney. Key ratios: McDonalds Corporation. http://moneycentral.msn.com/investor/invsub/results/compare.asp?symbol=MCD McDonalds 2010 Annual Report. Viewed 13 April 2011 Read More