Mcdonalds Organizational Analysis - Research Paper Example

 McDonald’s Organizational Analysis McDonald’s began as a small restaurant. Initially, the company only operated within the borders of the United States. The heads however decided to venture into other nations and regions outside the United States in 1967, and this was met with huge success. The company has since the beginning placed emphasis in technology, promotion, good ethics and concern for the environment, diversity in the workforce, and franchising, all which have made it maintain a competitive advantage among its competitors. Technology has always been at the center of the McDonald’s company making it top among competitors, and giving it the ability to always provide hot and fresh food, while promotional activities have helped in marketing products and expanding the market share. A diverse workforce has been a great base for gaining and maintaining a huge and diverse customer base and franchising has enabled company sustainability and profitability in business. This paper gives an overview, strategic organization, mission and vision, and the current business strategy level of the McDonald’s Company. Today the company has thousands of franchised units and has expanded that it is not only a hamburger company, but it has also become a real estate company. Keywords: McDonald’s, Strategic, Franchise, Mission, Vision, Market, Products 1. Current situation 1.1. Introduction and Overview of McDonald Company. McDonald Company was created in 1937by Richard and Maurice McDonald, at a tiny drive-in restaurant east of Pasadena, California (Tassiopoulos, 2008). It’s a multinational company with head offices in 52 countries. Its first franchise was in 1954 by a man known as Roy Kroc, who was given an exclusive deal to franchise McDonald in America. There are over 11,000 restaurants in over 60 countries serving 22million customers. McDonald Company has expanded that it is not only a hamburger company, but it has also become a real estate company (Tassiopoulos, 2008). Since 1954 McDonald has gained 22427 franchised units. McDonalds expansion outside the United States began in 1967, and “by the early 1990’s, it had 3,600 operations in 58 countries” (Julian, 2006, p. 644). The company began with French fries, hamburgers, cheeseburgers, and soft drinks. Over the years, the company has also introduced other products, with some being successful in the market and others lacking customer approval. Among the successful products are the Fish sandwich, ready to eat salads, Chicken McNuggets, McFlurry desserts, and McMuffin, while those that lacked approval include the pasta, pizza, fajitas, fried chicken, McLean Deluxe sandwich, and the Deluxe and Arch Deluxe burgers (Julian, 2006). Technology has always been at the focal point of the McDonald’s company making it top among competitors, and giving it the ability to always provide quality products. The company has also been very aggressive in engaging in promotional activities aimed at marketing the products and expanding the market share(Julian, 2006). The company has maintained good values since its establishment, especially in protecting the environment. Julian points out that “one notable effort: wrapping hamburgers in paper instead of plastic resulted in a 90 percent decrease in waste” (2006, p. 645). The diversity in the workforce of McDonald’s has been a great base to gaining and maintaining a huge and diverse customer base. People with disabilities, as well as those of all races and ethnicities are represented in the company. Equal representation of both genders has also been key in the company through a plan that it launched centuries ago known as the diversity strategy. Career development workshops mainly focusing on women, and diversity training has always been offered ever since the introduction of the strategy. According to Pride, Hughes, and Kapoor, “McDonald’s encourages the hiring and training of employees with diverse ethnic backgrounds. Hiring a diverse mix of employees helps the company to serve a diverse customer base” (2008, p. 313). In McDonald’s franchising, most of the owners or operators enter into the system by purchasing an existing restaurant, either directly from McDonald or from McDonald owner operator. Most of them enter from purchasing it from McDonald. McDonald Company has built an operating strategy based on consistency in quality through a limited product range. The franchising strategy that the company is using has brought a lot of profit. One may wonder why the McDonald’s prefer to have more franchised businesses than company owned, but this will be answered later in the research (Tassiopoulos, 2008) 2. Strategic Posture The strategic posture in any business refers to a set of decisions, which expresses how management intends to achieve a firm’s long term mission and vision. Many companies have failed because of a failed strategic posture. For any company to prosper, the chief executive officer (that is the C.E.O.) is the key decision maker. There are techniques that companies follow to succeed (Hendrickson & Psarouthakis, 1998). A strategic posture assures growth and profitability in a company, because all the missions and visions of the company are well defined. 2.1. The strategic history of the McDonald organization Since its establishment, the McDonald’s company has applied various strategies in its operations. McDonalds has so far applied the market penetration, market development, product development, and diversification strategies. This has been by engaging in promotional activities to increase market share among present customers, attracting new customers, emphasizing on customer likes and dislikes by modifying and creating new products, looking for new markets where new products can be introduced in order to increase sales. The organization of McDonald’s restaurants in all countries appears to be very similar. Where differences do exist, they appear to have minimal impact on the corporation’s basic American operating system. The McDonald’s employment hierarchy is as follows: Crew: majority of the employees fall under this category. Their jobs are such as working on the till, cleaning tables and emptying bins, garnishing burgers, monitoring fries, and bread machines or the grill. These employees are hourly paid (Royle, 2000). Training squad: these are of a higher rank than the crew though they are paid hourly. Their work is to train the crew; they are also supposed to know all the stations and to monitor the work of the normal crew using an operating checklist (Royle, 2000). Area leader and floor managers: only those who are above eighteen years are promoted to this rank. They are also hourly paid and are supposed to be capable of working a shift alone. They distribute cash register drawers full of money and deal with customer complaints (Royle, 2000). Salaried managers. They include the restaurant managers, first and second assistant and also the trainee assistant. They are employed on a permanent contract and usually appointed by the regional management (Royle, 2000). 2.2. Organizational mission and strategic vision The vision of an organization defines the desired or the intended future state of a specific organization or enterprise, in terms of its fundamental objectives or strategic direction. McDonald’s vision statement states that “McDonald’s vision is to be the world’s quick service restaurant experience. Being the best means providing outstanding quality, cleanliness, service, and value so that we make every customer in every restaurant smile”(Mohapatra & Singh, 2012, p. 305). McDonald’s vision statement has four factors that it tries to emphasize on. These are: Quality. McDonald sees itself as a service provider of good and reliable quality of products to all its consumers across the globe. Service. It looks to differentiate itself through the level of service it provides to all its consumers in the globe. Cleanliness. This is one of the factors that is emphasized in the vision statement. McDonalds sees that providing food in a safe, hygienic, and clean environment as a duty they have. Value. McDonald also endeavors in providing superior value to all consumers and value for the money that they pay for the food and services. McDonald’s mission: A mission defines the fundamental purpose of an organization or an enterprise, basically defining why it exists. Its mission is as follows: To be the best employer for our people in each community around the world. To deliver operational excellence to our customers in each of our restaurants. To achieve profitable growth by expanding the brand and leveraging in strengths through innovation and technology. The mission ensures a goal to be kept in focus, while playing to reach the ultimate vision of the organization (Mohapatra & Singh, 2012) 2.3. The current business level strategy Most organizations engage in growth strategies in order to increase profits and expand their business operations. McDonald’s current business strategy is the application of franchising strategy (Tassiopoulos, 2008). When we talk about franchising, it entails a comprehensive relationship in which one party (the franchisor)grants to another party (franchisee) the right to operate a business selling products or services produced or developed by the franchisor (Tassiopoulos, 2008). McDonald’s chain of fast food restaurant has more than 2000 outlets and only 25% are company owned. Reliance on extensive franchising is a strategy that the company seems to have adopted after experimentation. The franchise terms and conditions adopted by this chain is a typical franchise in general. These terms and conditions are so favorable that the most obvious outcome is a huge demand for a McDonald’s franchise, thus permitting the firm to select the individual franchises on the basis of strict criteria. In USA alone, every year there are well over 2000 applications for about 150 franchises. Such popularity is clearly related to the significant rent, that is, they get above normal profits from these franchises (Moschandreas, 2000). As seen earlier, the process of franchise selection is a subject to very strict rules and procedures. This aims at ensuring that the franchise has a huge stake in the company. It requires that the management of an outlet is not separated from its ownership, presumably to avoid managerial moral hazard problem. The franchises are required to mange their outlets, so as to be what the company calls owners operators. They are not allowed to finance more than 60% of their initial investments by debts (Moschaandreas, 2000). McDonald’s avoids giving franchises to professionals like lawyers, doctors, accountants, and others who deal with the public , because they see them as being very reluctant or not ready. The selected individuals undergo extensive training. The McDonald’s franchises enjoys both ex ante and ex post, and the existence of these two profits at the heart of the strategy facilitate the franchise selection, and also play a predominant role as an incentive strengthening mechanism (Moschaandreas, 2000). The reason why McDonald’s strategy is doing well is because the franchises are better motivated to perform well compared to employees. This is because, the franchises are not only required to contribute with personal labor, but also, they are not allowed to hold other franchises or other professions. All this ensures that the franchisee’s human and non-human capital is therefore directed or tied up to the prosperity of the restaurant they are running, and thus they are undoubtedly committed (Moschandreas, 2000). Reference List Tassiopoulos, Dimitri (2008). New Tourism Venture: An Entrepreneurial and Managerial Approach. Johannesburg: Jutaonline co.za. Julian, Gaspar. (2006). Introduction to Business. Boston: Houghton Mifflin Company. Maschandreas, M. (2000). Business Economics. California: Cengage Learning. Mohapatra, Sanjay & Singh, Ranjan Prasad. (2012). Information Strategy Design and Practices . New York: Springer Science + Business Media. Pride, William M., Hughes, Robert James & Kapoor, Jack R. (2008). Business. Boston: Houghton Mifflin Company. Royle, T. (2000). Working for McDonald’s in Europe: The Unequal Struggle? London: Routledge. Hendrickson, Lorraine Uhlaner & Psarouthakis, John (1998). Dynamic Management of Growing Firms: A Strategic Approach. Michigan: University of Michigan Press. Read More