McDonald Corporation - Its Global Strategy - Case Study Example

McDonald Corporation - Its Global Strategy Introduction The biggest challenge for a multinational is to maintain its global strategy in the stint of diversity as they hit different foreign lands. The same was the biggest challenge for McDonalds when they launched into India. They faced severe Public relation crisis and it was a very difficult to come up with a solution in such a country. Some of the key variables in this relation were the suppliers, customers, government and the Global Brand image of the company itself. “McDonald Corporation was created in the year 1955, when Ray Kroc opened his first restaurant in Des Plaines, Illinois. He soon realized this success could be duplicated across the United States and beyond, if consistency and quality could be maintained”. In 1957, the company adopted Quality, Service, Cleanliness and Value as its motto. Over the decades, McDonald's corporation has grown to a $ 25 billion company and is the world's leading food service retailer with more than 30,000 restau­rants in 119 countries serving 27 million customers each day. With such high customer base and the industry they cater too, it becomes very challenging to maintain the Public Relation standards as per each country norms. This industry strives on the type of public relation one creates with the customers and various stakeholders. The globalization, WTO, the facilitates that many governments offered for foreign organizations to enter to its markets, the availability of many suppliers worldwide for many goods and services, all these factors and other factors in behind encouraged many organization to expand globally, this wide expansion made the responsibilities of the operation management more comprehensive and complicated, operation management means design, execution and control the organization operation through convert the resources into desired goods or services with aim to implement it based on the business strategy. Background When McDonalds started their operations in 1948 the menu consisted of cheese burgers and hamburgers, pie, potato chips and beverages like milk, soft drinks, coffee. The cost of hamburger at that time was mere 15 cents. Now it is the largest food chain all over the world. By 1965 McDonalds had 700 restaurants. McDonalds all over the worlds are aligned by Global strategy of plan to win. This strategy focuses on price, people, customer experience, promotion and place. It is a publicly traded company and around 80% of the McDonalds restaurants all over the world are operating on franchisee basis. It competitors consist of Sub Way, burger king, Wendy’s and YUM which run some of the very famous brands like KFC, A&W, Pizza Hut and Taco Bell. McDonalds is the industry leader in terms of sales, market cap, employees, gross and net margins. The main cited reason of McDonald’s success is the quality standards they have been able to maintain all over the world despite having location constraints at some of the places. They have consistently developed new menu items thereby always attracting new sets of customer and giving enough reasons to old customer to be attached. With this challenging cut throat competition, public relations are becoming very critical for quick restaurant industry. A psychological competition right now in US is the criticism these industry is facing from large obese population. This is especially true for the concept of value meals which provide extra large portion of unhealthy foods. The nutritional value of the quick restaurant segment has sparked many a campaigns and few legal actions. According to New York City department of Health a law was passed in 2008 making it mandatory for quick restaurant to post all the calorie related information against the food item on the menu boards. One of the biggest outcries has been the promotion of this food habits among the socio economic classes and the direct correlation of the obesity among the people. In response McDonalds introduced new and healthier item in the menu and shifted its marketing. With this background McDonalds entered into Singapore as a very famous brand to cater. McDonalds Profile In 1957, the company adopted Quality, Service, Cleanliness and Value as its motto. Over the decades, McDonald's corporation has grown to a $ 25 billion company and is the world's leading food service retailer with more than 30,000 restau­rants in 119 countries serving 27 million customers each day. Macdonald is known as fast food company worldwide, it has over 32,000 restaurants worldwide, approximately 75% of MacDonald's restaurants operated via franchise, therefore the nature of MacDonald business guided its performance to pay attention to the quality objective with aim to reduce the costs, as long as it exist in several countries and each country different from each other in terms of taxes row materials, suppliers etc, pay attentions to the speed objective which is the core of its business, pay attention to the flexibility objective, the exist in different nations strongly required to able to change and flexible based on the host country culture and custom. The organizational transition structure of McDonalds is as follows: Organizational/Strategic Objectives Quality is the mirror of any organization, customers could judge about the organization based on the level of the organization quality, therefore the first step to attract customers is through quality objective which is in somehow is to guarantee that customers will return back again, in this part MacDonald provided high quality products and services though standardize all its branches, and therefore MacDonald obtained customers satisfaction additional to made the operation more easy for the staff, for example MacDonald deal with over 20 bakeries to standardize the products in all the united states in terms of color, flavor etc , the target of standardization is not only to aim to standardize the food in all restaurants but also to reduce the possibility of mistakes and therefore reduce costs too, another part of the quality objective that MacDonald provided which consider as rare in front of many restaurants is providing customers with nutrition information, thus customers can select the meal that applicable to their health. Speed is the core of MacDonald objectives, to achieve speed objective MacDonald provide set of order channels such as drive-thru, home delivery etc, according to MacDonald CEO "McDonald’s that put the “fast” in fast food, and its speed continues to be a major factor in the iconic restaurant chain’s profits" (Restaurant news/Online). Flexibility which consider the secret of MacDonald Success in front of its traditional competitors, MacDonald almost managed to be flexible in all the markets its entered, the flexibility of MacDonald made kind of loyalty among customers and MacDonald due to the changes that MacDonald made it based on the customers cultures and taste, additional to the flexibility to supply from local suppliers of the host country, for example MacDonald added corn soup to the food menu in China, adopted slaughter by Islamic method in GCC countries etc, flexibility to reflect positively inside the operation through the readiness to response to any increase in the demands. Macdonald is one of the rare organization that succeed to balance between its operation strategic and customer demands, MacDonald combined order-winning and qualifying factors, in terms of order-winning which refer to the "customer as key reason of purchasing the product or service" [Aca10], MacDonald as we clarified previously its ability to be flexible for any changes based on the host county culture, in terms of the qualifying factors which refer to that "operation performance has to be above a particular level just to be consider by the customer [Aca10], MacDonald paid attention to the quality aspect, and strive to make all its brunches standardized, therefore MacDonald built hamburger university to teach the franchisers how to be on the standard. Therefore MacDonald operation process aligned with the strategic objectives successfully. Operations Process Due to the importance of the quality, speed, and cost MacDonald adopted decentralization methodology in its supply network, for example MacDonald in China deal with over 50 suppliers which covers 95% of the raw materials, another example show the (Chain Daily/Online) methodology of MacDonald supply network is MacDonald in United Kingdom, where MacDonald rely on the local market for its supply for almost 60% of the raw materials (Benfield /Online). Although MacDonald rely on outsource for most of its supplies but it maintained the quality part with aim to standardize the meal in all its branch locally and globally, thus MacDonald spent millions to found hamburger university, additional to the close training to the franchisers (AMI info/Online) with aim to ensure that its franchisers will provide the oriented level of quality additional to the closely monitoring and supervision (Slide share/Online). In terms of location of capacity MacDonald deal with Egypt Bakery Stores to supply part of African countries additional to Saudi market, Egypt Bakery Stores has selected by MacDonald due to the strong capacity, Egypt Bakery Stores has over 180 stores regionally (Egypt Bakery Stores/Online), in terms of MacDonald in China, MacDonald selected to start its business in China market particularly in Shenzhen the economic zone of China due to the facilitates that Shenzhen offered to the foreign firms such as cheap power, freedom to hire and fire, cheap manpower, low taxes etc (Paul, pp 478). In terms of the layout MacDonald aimed to have layout that meet its competitive needs, additional to utilize the space as possible as it can in professional and safety way (Operation management/Online). Utilizing Technology As we mentioned previously how MacDonald paid high attention to the standard and quality parts in several Dimensions, for example in Singapore in terms of the documentation work such as issuing and archiving documents, every branch of MacDonald required in quarterly basis to do archive for high volume of documents such as architects, surveyors, interior decorators and designers, and these documents include restaurant layouts, design guidelines, operating procedures, style guides for internal imagery, high resolution photographs and graphics libraries, to store all these documents MacDonald used to save it in CD's, MacDonald observed that this method in somehow expensive and difficult to control, therefore MacDonald deal with Aconex, Aconex offer high technology which allow all MacDonald branch to upload all the documents in one resource (website), thus with this technology MacDonald succeed to reduce costs and time, additional to facilitate a way to find the any documents easily. (Aconex/Online) Launch in Asia (Test Market-India) The biggest problem McDonald faced was during the launch of its product in India was the public image it was carrying as an International food chain and not matching Indian standards. There were concerns raised about how the burgers are made in McDonalds. Offering the cheapest burger in the world was not easy. In India, McDonald's offered a menu that did not had any beef or pork items as well as special product formu­lations for accommodating Indian culture and palate. Furthermore, all the vegetarian products, even the mayonnaise in vegetable burg­ers, were egg-less and 100% vegetarian. Additions to the menu have been a regular feature of McDonald's in India. The company in India conducted regular qualitative as well as quantitative studies, which tracked the target consumer lifestyle in India, a practice that had followed internationally as well. It was under these circumstances that McDonald's India went about creating the cold chain infrastructure for its restaurants in the country. As McDonald's always considers the quality of all its products to be of primary importance, it sets high stand­ards for its suppliers that are amongst the biggest in the food industry. World over, McDonald's always be­lieved in development of close relationships with suppliers and this is precisely what it has done in India. Variables Commitment Provided by McDonalds in India-building Suppliers within India “In keeping with commitment of sourcing almost all the products from local country suppliers, McDonald's tried to identify Indian business which shared the level of commitment and dedication in supplying its customers with the highest quality products”[McD07]. In the process, McDonald's actually en­couraged entrepreneurship, by introducing the local suppliers to its global suppliers. This associa­tion involved transferring in latest food processing technology, thereby leading to an improvement in quality standards and helping create world class manufacturing facilities in India. This was the first step towards creating the unique 'cold chain'. The Indian Value Proposition As providing value to the customer is the key, price sensitivity studies are conducted before de­termining the pricing. The rate of inflation is also reviewed. McDonald's definition of value was far broader than of most of the restaurants in its competition. The People and the Training-Critical to Employee Relations Service is the key element of McDonald's operations. Every employee strived in providing 100 % customer satisfaction for every customer in every visit. This included friendly service, along with accuracy of an order taking and anticipations of customer's demand. When the Indian joint venture was formalized, the MTs were given extensive job training in Indonesia. MTs in human resources, real estate and buildings were hired and global directors worked with them to train them in the necessary areas. This was done through interactions as well as through exposure with the customer through operation training within the restaurants for a fixed period of time. The organization also provides ample opportunities of overseas training to those displaying po­tential. The People and the Training When the Indian joint venture was formalized, the MTs were given extensive job training in Indonesia. MTs in human resources, real estate and buildings were hired and global directors worked with them to train them in the necessary areas. The projected sales of each restaurant determined its staffing requirements. On the average, every restau­rant has a staff of 40-60 people, including managers. Induction training was conducted at the time of an employee's joining the organization. This was done through interactions as well as through exposure with the customer through operation training within the restaurants for a fixed period of time. The organization also provided numerous opportunities of overseas training to those displaying po­tential. Developing the Supply Chain World over, McDonald's be­lieved in development of close relationships with suppliers and this is precisely what it has done in India. In the process, McDonald's actually en­couraged entrepreneurship, by introducing the local suppliers to its global suppliers. This associa­tion involved transfer of state-of-the-art food processing technology, thereby leading to an improvement in quality standards and helping create world class manufacturing facilities in India. This was the first step towards creating the unique 'cold chain'. Building the Brand Mc Donald's had posi­tioned its restaurant as a family restaurant that barred smoking as well as serving of alcohol on its restaurant. The results were apparent and resulted in a 48% increase in footfalls along with 30 % hike in the sales. In the same year, the company aired its 1V commercial for the Rs. 7/- soft serve cone cam­paign, thereby establishing the value proposition of the company. However, this research indicated that the people are unaware of the quality of food served by the McDonald's. This had led to creation of the advertising campaign by the company which started its focus on familiarizing customers with the quality of food served at McDonald's. Consumer research had also pointed that a large mix of offerings were required in the vegetarian menu of McDonald and the company consciously addressed this need of its customers. The company had also become aware of the fact that eating out, though gaining frequency was still primarily a family affair. Hence, it was attributed mainly to evenings and weekends. The 'Happy Price Menu' had come closer on the heels of the marketing initiative by the company "i'm lovin' it" which McDonalds had launched in Oct-03. The commu­nication about this new offering was funky and funny and tells that McDonald's is overall a great place, and at a best price – which restricted not only to its product, but also the experience. At the same time, it aims to make the service hassle-free and easy to use. Serving the Society “In keeping with its international policy of serving the society, McDonald's India has also partici­pated in and supported heath initiatives like the Pulse Polio Immunization program since 1998”[McD00]. In the same year, McDonald's also started Spotlight, an annual inter-school performing arts compe­tition to provide the students with an atmosphere for healthy competition. Last year, more than 300 schools participated in the event. In the near future, the company aims to focus on core markets, get the scale there and then look at further expansion. It plans to add 10 -15 restaurants each year [2004 & 2005] and estimates a total revenue growth of 40-45% over 2003. In the same year, McDonald's also started Spotlight, an annual inter-school performing arts compe­tition to provide the students with an atmosphere for healthy competition. Last year, more than 300 schools participated in the event. Relationship among Variables The key reason behind the success of McDonalds has been the integration of all key objectives and variables under one roof, and then aligning global strategy in the local format. They have used their extensive Public relations capability to build up a strong bonding among the variables. It has bought all the stakeholders at the same platform and assured success and benefit for each one of them. This in turned assured that all of them strive to achieve what McDonalds was set out to achieve when it came to India. References Aca10: , (A case of McDonalds, 2010), McD07: , (McDonalds in India, 2007), McD00: , (McDonalds food chain, 2000), Read More