McDonalds Competitive Strategy - Assignment Example

McDonald’s Strategy Subject Name and Code Semester and Year Each Student’s Name and ID Table of Contents Table of Contents 2 Statement of Authorship and Group Declaration 3 Question 1: Company Overview 4 Historical Background of McDonald’s Restaurant 4 McDonald’s in USA 4 Question 2: McDonald’s Competitive Strategy 5 McDonald’s Competitive Strategy 5 Miles and Snow’s Strategy Typology 5 Question 3: JIT Manufacturing at McDonald’s and Cost Management Systems 6 Just-in-Time (JIT) manufacturing philosophy at McDonald’s 6 Just-in-Time and Company’s Cost Management Systems 7 References 9 Statement of Authorship and Group Declaration “Except where reference is made in the text of the assignment, this assignment contains no material published elsewhere or extracted in whole or in part from another assignment submitted for the award of any other degree. No other person’s work has been used without due acknowledgment in the main text of the assignment. Further, we declare that all individuals of this group have contributed equally to the development of this assignment”. Signed (insert full name only) and date: Question 1: Company Overview Historical Background of McDonald’s Restaurant McDonald’s was established in 1940 at 1398 North e Street in California and was established by two brothers: Richard and Maurice McDonald (Surhone, Timpledon and Marseken 2010). In 1948, the brothers introduced the “Speedee Service System” revolutionized the fast food restaurant. “Speedee” was premised on a McDonald’s mascot with a chef’s hat that was fitted on top of a hamburger shaped head (Jakle and Sculle, 2002). In 1967, the mascot was replaced, and Ronald McDonald became the mascot and it was filed as a U.S. trademark. In mid-1961, the name “McDonald’s” was trademarked in US and the same year the “M” symbol logo was file. The first franchise was established in 1955 by Ray Kroc in Illinois and was demolished in 1984 after numerous remodeling (Russell and Cohn, 2012). Kroc was an aggressive business man and conflict resulted between the brothers and Kroc resulting in Kroc purchasing McDonald. The headquarters of McDonald is located in Illinois, and some of the products offered include desserts, breakfast items, soft drinks, French fries, chicken sandwiches and hamburgers (Surhone, Timpledon and Marseken 2010). McDonald’s in USA In the United States of America, the revenue that McDonalds generates is $8.85billion while the advertising is around $1.43 billion. In addition, customer satisfaction index score is 71% while there are more than 14,267 retail outlets in USA. In general, the US fast food industry generates revenues of $191.03. Based on the revenues, the size of McDonald is 4.6% in USA (Statista, 2015). Question 2: McDonald’s Competitive Strategy McDonald’s Competitive Strategy Businesses have to define their market conclusively and accurate to understand competition. It includes identifying competitors and their respective strengths. McDonald’s has many competitors with each trying to share the market (Jakle and Sculle, 2002). McDonald’s competitive strategy is premised on ensuring the current market is retained while new markets are created. The competitive strategies are premised on three goals to improve on competitive gap (Russell and Cohn, 2012). It includes innovation in addition to value, enhancement of in-house experience, and creating a unique process when an individual visits McDonald’s making it less controlled and routine in nature (Surhone, Timpledon and Marseken 2010). In addition, the products are competitive in nature when it comes to both pricing and quality diversity. Miles and Snow’s Strategy Typology Miles and Snow define four business strategies, which are defender, prospector, analyzer, and reactor. Defender strategy – aggressive marketing and quality services has allowed McDonald’s to defend its market (Russell and Cohn, 2012). This has ensured the company has defined its ninch market and capitalizes on their defense strategy such as use of JIT technique in fulfilling the requirements of consumers. Prospector strategy – McDonald’s has continuously improved and innovated its products and services to retain and attract new consumers. For example, the speed at which consumers are served and how the processes occur within the outlet has improved over the years. Question 3: JIT Manufacturing at McDonald’s and Cost Management Systems Just-in-Time (JIT) manufacturing philosophy at McDonald’s JIT is a demand pull, which is different from the traditional approach that is push (Surhone, Timpledon and Marseken 2010). The JIT manufacturing philosophy is production of produce when it is required, and production is dependent on the customers’ demands (Russell and Cohn, 2012). The demand pulls the required products and ingredients through the manufacturing process rather than the push activates the process (Jakle and Sculle, 2002). Each component pulled is depending on the succeeding operation: the quantity should satisfy the requirements of succeeding operation. There is no production until a time when a succeeding process signals need for additional products. Materials and other components arrive in time to be available for the proceeding process. McDonald’s has capitalized this strategy in the production process. For example, a customer orders a hamburger, the chef picks one from the stock e.g. racks, the server makes the hamburger for the customer keeping an eye or the rack and requests for additional burgers when the quantity has decreased. In addition, the manager also orders additional ingredients when the inventory becomes low (Lipman and Hayton 2013). This means that the action of the customer triggers the pull system where by the hamburger maker starts the process of producing the customer’s order (Russell and Cohn, 2012). Conversely, in the traditional method, the caterer estimates the amount of steaks and bread required for a specified period of time, determine the time required to cook the stake and estimates roughly the amount required within certain period to fulfill the requirements of the customers. The JIT in the case of McDonalds starts with the customer ordering for a burger, the burger make picks ingredients from the rack, prepares the burger, and then serves the customer: this process is repeated for all the customers. Just-in-Time and Company’s Cost Management Systems JIT is important because it prevents overproduction (Surhone, Timpledon and Marseken 2010). In traditional methods, products are produced before they are required, and information based on estimates is not accurate to prevent overproduction. In the case of JIT, the product is produced based on the requirements orders from consumers. For this reason, overproduction is avoided (Jakle and Sculle, 2002). This reduces the costs since nothing is overproduced, and there are no additional costs that can be experienced (Russell and Cohn, 2012). Products should be moved at a faster rate since dead stock is a cost to an organization (Surhone, Timpledon and Marseken 2010). Traditional methods require businesses to keep voluminous stock since it cannot estimate the requirements of consumers. In addition, storage of stock requires unnecessary effort that may result in additional costs (Lipman and Hayton 2013). For example, unnecessary effort that is associated with ergonomics of walking, lifting, reaching, stretching and bending may result in injuries that can influence the cost of production negatively. It also involves the inventory. Excess inventory increases lead times, consumes space, shop floor related problems and inhibits communication. Inventory is an expense to an organization and without clear inventory strategy, the organization runs into losses (Russell and Cohn, 2012). Hence, JIT reduces costs to an organization. JIT reduces chances of defects occurrence. Quality defects result in scrap and rework, increased inspection, rescheduling effort, customer goodwill loss, and wasteful costs due to the nature of the system (Jakle and Sculle, 2002). In addition, underutilization of employees may occur because of the failures and defects that should be managed. Defects are costly to a business, and every business aims for a situation whereby wastages are avoided (Russell and Cohn, 2012). This can be achieved through the use of JIT in structuring the process, reducing costs that may be incurred. Quality is an integral component in fast food industry. JIT philosophy is built for quality control and also associated with lead time because of the small lot sizes allowing the downstream operations to provide quality problems related feedback (Jakle and Sculle, 2002). For example, if a quality issue is received, it is easier to manage the process since the products are fewer and easier to manage. In addition, the batch with problems can be kept aside while newer batch is used for the time being (Surhone, Timpledon and Marseken 2010). Quality and costs are directly related because complaints from customers can be disastrous to the profitability of the organization. For this reason, considering on quality means that the organization would reduce costs associated with addressing quality complaints (Teets, 2012). JIT integrates and creates a communication process between functions such as production, design, purchasing and marketing (Surhone, Timpledon and Marseken 2010). Each department has a responsibility and a role to fulfill within an organization. Integration of these different processes ensures the organization makes appropriate decisions towards fulfilling the obligations of the organization. References Franz, K and Smulyan, S 2011, Major Problems in American Popular Culture, London, Cengage Learning. Jakle, J and Sculle, K 2002, Fast Food: Roadside Restaurants in the Automobile Age, London, JHU Press. Lipman, R and Hayton, J 2013, Restaurants and Recipes for the Hcg Diet, New York, eBookIt.com Russell, J and Cohn, R 2012, Wacky Adventures of Ronald Mcdonald, New York, Tbilisi State University. Statista. (Feb., 3 2015). Statistics and facts on McDonald’s. Retrieved from http://www.statista.com/topics/1444/mcdonalds/ Surhone, L, Timpledon, T and Marseken, S 2010, Wacky Adventures of Ronald Mcdonald, London, VDM Publishing. Teets, C 2012, Golden Opportunity: Remarkable Careers That Began at McDonald’s, London, Cinder Mill Press Read More