McDonalds Corporate Career - Essay Example

McDonalds Corporate Career McDonald’s is the leading global fast-food retailer with 30,0001 restaurants in 1191 countries. Nevertheless, the company has responded to changes caused by globalisation as well as technological developments. First of all, due to globalisation the company is able to expand its operations worldwide as well as serving 522 million global consumers each day. Furthermore by achieving technological advancements, such as the Internet, the company is able to establish its e-business, in which it provides information about its company and products with the aim of achieving a better relationship with its global suppliers, global consumers and its global shareholders. Moreover due to free flow of labour, McDonald’s has established a culturally diverse workforce to maintain a better relationship with its culturally diverse customer base. Additionally, due to globalisation, McDonald’s is able to purchase it supplies around the globe, which enables the company to obtain the best and cheapest ingredients, contributing to a better and cheaper product for the community. It rather applies a mass market approach, since it targets children (with Happy Meal, etc), teenagers and adults (with one-dollar-menus, etc.) and also people who are on a diet and older people (with healthy meals such as salads, yogurts, etc). McDonald’s has many competitive advantages. One of the main is that it operates globally (McDonald’s is the largest fast food chain in the world3), not like its competition such as Taco Bell, and thus it is easier for McDonald’s to reach a higher amount of customers and hence obtaining larger profits. Additionally, it also provides cheap menus (such as one-dollar-menus) as well as healthy meals, which enables McDonald’s to reach a wider amount of target market and hence makes it easier for the fast-food company to serve more customers. Moreover, since 2003 nearly 40%4of its restaurant operates non- stop, thus customers, especially those who have night-shifts, will choose McDonald’s as other fast-food chains don’t offer this service yet. This report will analyze how increased competition as well as technological advancements have affected the organization and recommendations how to respond to and deal with the challenge. Discussion, Interpretation, Analysis The food industry has received many competitions, as the fast food industry has been losing market share to fast casual dining restaurants3. The National Restaurant Association forecasts that fast-food restaurants in the U.S. alone will reach US$1423 billion in sales in 2006, whereas the fast casual dining industry is expected to generate $173 billion3 in sales. It may be caused, since fast casual restaurant (such as ‘Five Guys Burgers and Fries’, ‘Jerry’s Subs and Pizza’) offer higher quality of food and a more developed atmosphere3. Thus its work pattern has changed. As mentioned earlier, almost 40% of its operations have been operating 24/7 since 20034; and it has been proven successfully since it has 4 McDonald’s 24/7[online]. http://www.businessweek.com/magazine/content/07_06/b4020001.htm, 5.2.2007, ‘cited 23 March 2008’ boosted profits by 4.5%4 or $900,000 per year4. This results in offering flexible working hours for employees, hence they are better able to balance between work and study or family; thus improving job satisfaction and productivity. Moreover, due to longer operating hours, McDonald’s needs more employees, hence reducing unemployment. Higher employment benefits the government, since it needs less spending on welfare; less outflow means a lower deficit and improved foreign investor’s confidence, which might increase the demand of the currency; leading to an appreciation. But on the other hand, McDonald’s prefer to have casual and temporary workers employed, as they are cheaper (lower recruitment and other “on costs”( doesn’t require superannuation, etc.). In fact, three-quarter5 of its workforce are part-time employees and 12%5 of all teenagers are employed for McDonald’s in the US. While reducing employer’s costs, it is difficult for employees to obtain a permanent, full-time job, since they miss out training and developments available to full-time employees, which makes is difficult for casual employees to obtain full-time employment, thus leading to a fluctuative income and a lower standard of living, since they are less able to satisfy their wants and needs. Moreover, employees might see their employment not as a job opportunity but only as a temporary job; thus they might not put their whole effort and productivity in place. 5 Business Process Parspentive Caker and Bititci(2001)[online]. Human resource management in McDonald’s http://jpkc.szpt.edu.cn/english/article/Human%20Resource%20Management.htm, ‘cited 21 March 2008’ Furthermore, this 24/7 system increased profits by 4.5%4 per year, thus benefiting employers, shareholders and investors. Moreover since, its profits have increased, demand and thus the value of shares will increase. With a larger amount of shares being purchased, means more investments and thus more funds available for investment, which McDonald’s can use for purchasing additional machineries, developing its quality of services and food, etc in order to be more competitive. Increased competition force McDonald’s to be more competitive and customer-oriented. One example is, that it offers cheap meals, such as the ‘one-dollar-menu’ or certain menu packages which contains complete set of meals at a cheaper price compared if buying individually, etc. It also developed standard of business conduct, “The Golden Arches” 6 in which it states that “P” for people is its main focus6. It has been shown effectively, since it possesses 45% of the market share6. Moreover, due to having greater pressure to be internationally competitive, McDonalds implements a more narrow management structure7, with one manager per store and employment is only divided into three categories: crew workers, managers and owners. Nevertheless, the company also uses a team structure7. Both systems aimed at promoting greater flexibility as well as reducing costs. Thus the employer and employee, benefit, since on the one hand employees have greater responsibility and autonomy, which in turn increase their managerial skills; while on the other hand reduces costs for employers due to employing a smaller workforce. 6 The McDonald's Corporation's Standards of Business Conduct, http://www.licenseenews.com/ethics9.html, extracted from http://www.mcdonalds.com/corp/invest/gov/standards_of_business.html, ‘cited 21.March.2008’ 7 Business Process Parspentive Caker and Bititci(2001)[online]. Human resource management in McDonald’s http://jpkc.szpt.edu.cn/english/article/Human%20Resource%20Management.htm, ‘cited 21 March 2008’ Nevertheless, technological advancements support the process of being more competitive. The company is able to establish its e-business, which improves communication with its stakeholders, especially with its customers. A better established customer relationship leads to a better image and perception. A research also showed that 1 dissatisfied customer tells 11 others which then tell 5 others8. A closer relationship also enables the business to get updates of changes in consumer’s tastes, opinions, dissatisfactions, etc. Hence the company is able to respond to it and thus is better able to satisfy customer’s wants and needs; leading to higher sales and profits. McDonald’s is able to use technologically advanced machineries, such as drive through technology with a speaker and a well-lit menu to relay the message to the cooks9 , which enables workers to improve its productivity as well as updating their skills and knowledge. To deal with the change, implementing several roles of management may be strategic. Change means risk. Risk is disliked by employees, as they are required to move out of their ‘comfort-zone’ (Inertia of management), afraid of loosing career prospects or opportunities for promotion and also afraid of de-skilling, require to acquire new skills(think they are unable to learn the new skill, thus negative attitude towards the change occurs, thus job satisfaction and productivity decreases). Exercising interpersonal roles, such as being a leader is important. A leader motivates employees by communicating with subordinates. 8 Chapman (October 2005), Business Studies in action-HSC course 3rd edition topic 3, chapter 10 9 (1992). Oak Brook. Good neighbors [online] http://www.free-essays-free-essays.com/dbase/4e/mul59.shtml, [online], ‘cited 26 June 2007’ Communication is important, since employers must clearly articulate the purpose of the change and ensures employees that the goal of the change is achievable. Announcing these points, trust will be built among employees. Informational role may be also helpful in managing the change, such as being a monitor. A monitor receives information from a wide variety of sources to gain a better understanding of the business and its environment. This could be achieved by asking opinions of employees regarding the change and also by surveying the performance of the company by asking customers; to ensure that the change has not worsened its performance. These inputs will help the business to manage the change more effectively in order to ensure employee and customer satisfaction. Acting as a disseminator may also assist in managing the change. A disseminator shares information with selected employees within the business; such as by letting employees know the results or effects of the change. As an example, employees have responded positively to the change and have successfully fulfil the objective of the change and as a result, the service and performance of the business has improved. With communicating facts, employees might not be afraid of change in the future and are also more motivated in achieving the goals. In order to get those facts, being an entrepreneur is essential. An entrepreneur conducts review sessions, undertakes evaluation analysis as well as organizes research. By exercising these actions, employers have then access to the results of the change and thus are able to present them to their employees. Applying management functions is as well strategic. Planning is the process of setting objectives and deciding on the methods to achieve them. Thus planning is essential, as the business need to know where it wants to be and how it will get there. Planning is also helpful as it clearly states the objective and thus employers can ensure that the objective is realistic and communicate that to employees. It also makes it easier to achieve the goal, as steps for achieving it, is clearly stated. Leading is also important. Leading is the process of influencing people to work towards the set objectives. This may be achieved though effective communication (i.e. grievance procedures), attractive rewards (intrinsic and extrinsic), training and development and a non-discriminatory workplace. With conducting these actions, employees are more committed and encouraged to achieve the objectives. Controlling is essential as well. Controlling is the process of evaluating and modifying tasks to ensure that the set objectives are being achieved. This is extremely important, since the company needs to know whether its previous actions has been successful and if not, hence it must take immediate action to guarantee that objectives will be achieved. This can be done by undertaking performance appraisals, customer surveys, etc. Feedback is an important source of information, as it is directly pointed to the organisation; hence the business is better able to evaluate and monitor its strategies. Nevertheless, another method of gaining information can be achieved by undertaking a market research process. The first step is to determine information needs, which means that the problem is clearly and accurately stated to determine what needs to be measured and the issues involved. In this case, the problem is increasing competition. Thus, for example, the company should analyze the competitive advantages of its competitors and also needs to create a SWOT-analysis (Strength, Weakness, Opportunity, Threats) in order to develop strategies to minimize its weakness and deal with threats as well as managing its strength and opportunity to improve the business’s performance. The second step is to collect data from primary and secondary sources. Primary data are facts and figures collected from original sources. In this situation, it would be strategic to exercise questionnaire data collection, such as interview, surveys and questionnaires. These feedbacks give the company direct opinion of its target market and thus it is better able to modify its strategies based on its customer’s needs and wants. Observational data collection may be another option; it could be done electronically (by using camera, tape recorder or counting machines) or personally (researcher poses as a customer in a store). Secondary data are information already collected by some other person or organisation. It should undertake secondary internal data source, such as research reports, financial statements, sales figures, etc. These figures will serve as a source for comparison of performance before and after conducting the research. Additionally, it should also carry out secondary external data source, such as the internet, magazines, government and industry reports. These statistics may not be directly pointed to the organisation, but they are cheaper and quicker to obtain. The last step is to monitor performance, such as comparing performance after and before the research; to ensure that objectives have been achieved. Nevertheless, some ethical issues in undertaking research are involved. One illustration is by using camera and tape recorders. Some people might perceive this action as disturbing their privacy. Thus, the company should mention first that it is conducting some research and whether the customers agree to do so. The company could also offer some reward for customers who have take part of the research. Due to increased competition, as mentioned earlier, McDonald’s widely use casual workers. One unethical example is that part-time employees in China are only paid 5.3 Yuan per hour10, whereas the local regulation set a minimum pay of 7.5 Yuan per hour10. Firstly, it would reduce workplace morale, job satisfaction and productivity of employees. Thus, constantly changing staff may happen, hence increasing absenteeism as well as turnover levels. As a result, costs would rise. 10 Olivia Chung. 20.4.2007. China’s part time McWorkers exploited. http://www.atimes.com/atimes/China_Business/ID20Cb02.html, ‘cited 29.6.2007’ Secondly, customers might see McDonald’s as unethical and might reduce consumption levels, which means less customer base and thus profits for the employer and shareholders. Thirdly, it will not only worsen the image of McDonald’s in China but as well around the globe. Thus, a conflict between shareholders and employers might occur. Employers might refuse to increase wages, while shareholders forcing them to do so. This occurs, since if image is worsened hence confidence level would fall, reducing share demand and prices and thus profitability. To prevent this, McDonalds should pay wages that meet the minimum standard and also offer additional rewards, such as spending a certain percentage of profit for training and development. By doing this, commitment to equal employment opportunity occurs, hence improving its image. Conclusion Recently McDonald’s has faced increased competition. However, it could deal with it due to many factors. Firstly, it offers a 24/7 service and also operates on a global basis, which makes it easier to reach a larger quantity of customers. Secondly it applies product differentiation, by for example developing healthy and cheaper products. This again attracts more customers. Additionally, technological advancements have as well support the process of being more competitive. The company is able to establish its e-business, which enhances communication with its stakeholders, especially with its customers; leading to higher profits. Moreover, McDonald’s is able to use technologically advanced machineries, such as drive through technology, which enables workers to improve its productivity as well as updating their skills and knowledge. Furthermore exercising several management roles and functions has supported McDonalds to encourage employees to respond positively towards the change. As well, research contributed as an important part of McDonalds’s success. Nevertheless, this change has created an unethical issue. The use of casual workers has exploited workers by receiving wages that doesn’t comply with the regulation. Thus to better deal with weaknesses and the change, this report will outline several recommendations. Recommendations *Developing a culture of change- encouraging teamwork The company should hire change agents. Change agents support the change and develop strategies to encourage employees to agree to the change. Change agents can be members of the management team, employees of the business or outside consultants. A team structure assists the establishment of a closer relationship between the manager and the employees, hence they are then better able to cope with the change. *Change models The business should use a force field analysis. The force field analysis identifies, analyses and balances the driving and restraining forces. With applying this system, McDonalds is able to discover what supports and what restrains the change, hence it is better able to make full use of its driving force and develop strategies to minimise the restraining forces; in order to manage the change more effectively. *Providing training and development Offering training and development not only encourages staff commitment and productivity, but also improves the company’s performance. Having training and development available, supports employees to learn and deal with the change. Research showed that completing training programmes is not compulsory in China11 in order to minimize cost. But in the long run, it will rather add than reduce costs, since employees tend to have a shortage of skills, which could worsen the quality of its job satisfaction and thus service. Therefore McDonald’s should make training programmes in all operations compulsory to allow the company to experience sustainable growth. As a result, employers are satisfied with their employees and might offer wage increases or other non-monetary rewards; which on the other hand makes employees happy and wee change as a positive opportunity; contributing to a better employment relationship. *Rewards management Research showed that wages of part-time workers are low11 and wages for Swing Managers (first managerial position in the hierarchy) is only slightly higher than those of crew members11. Thus McDonald’s should implement an equitable reward system and link rewards with performance in order to create a productive workplace and encourage employees to contribute towards the business’s objectives; resulting in satisfaction from both parties, hence better working relationships. 11 Business Process Parspentive Caker and Bititci(2001)[online]. Human resource management in McDonald’s http://jpkc.szpt.edu.cn/english/article/Human%20Resource%20Management.htm, ‘cited 21.March.2008’ *Communication Communication is very important, especially in change. The company should announce the purpose of the change as well describe the change itself. This prevents employees to feel alienated towards the change. Feedback (such as grievance procedure) is also essential, as it enables the business to know what employees like and dislike about the change; and hence it is able to develop strategies to reduce the dislikes in order to manage the change more effectively. *Flexible remuneration agreements and implementing share plans McDonald’s should provide profit sharing or/and productivity sharing and share plans, such as giving 2-4% of its profits to employees who has achieved sales or/and productivity higher than its target. This encourages employees Higher wages to positively respond to the change to focus on achieving the objective of the change, for example by maximising their productivity, while employers gain benefits from having high level of productivity due to lower cost of production and thus might offer them additional intrinsic or extrinsic rewards. Since both parties are satisfied, hence a better employment relationship occurs. Read More