MacDonalds Company in the UK - Overview of the Incident - Case Study Example

MacDonald’s Company Student’s Name Instructor’s Name Subject Details Due Date Contents 1.0 Outline 2 2.0 McDonald’s Company Incident 3 2.1 Overview of the incident 3 2.2 Contributing Factors 4 2.2.1 Technology 4 2.2.2 Downsizing 4 2.2.3 Personalization of Customer Services 5 2.2.4 Economic Forces 6 2.2.5 Government Policies 6 2.3 How the Company handled the Incident 7 2.3.1 Integration of technology 7 2.3.2 Market Research 9 2.2.3 Restitution of Communication 9 2.2.4 Meeting Customer Demands 10 Reference List 11 McDonalds Company 1.0 Outline Agency-client relationships is a key determinant in the performance of any company. This kind of relationship enables agencies to establish an active business environment with their clients. To make this relationship useful, there is the need for effective and accurate communication that meets the needs for both parties. More often than not, clients are influenced with the way that the agencies they conduct business with handle their concerns. On the other hand, agencies are moved with the way that clients present themselves. Bad agency-client relationships are normally created by miscommunications which erode the integrity and confidentiality established in a business there before. Additionally, bad agency-client relationships can be as a result of appalling economic forces such changes in technology, government policies and internal administrative decisions. In this essay, McDonald’s Company in UK, that is a leading restaurant chain, will be used to examine how the economic forces aforementioned led to poor agency-client relationship and how it was able to revive. 2.0 McDonald’s Company Incident 2.1 Overview of the incident In 2015/2016, the company experienced an acute decline in financial performance as compared to the previous years. In the financial period 2015/2016, the number of customers reduced drastically from 1,101,878 to 5,675,210 (Cummins et al. 2016, p. 308). The net profits for the company reduced by 10 percent comparing it to the yearly increase of 2.5 percent in the previous financial periods (Cummins et al. 2016, p. 308). A cross examination of this problem revealed that the management disregarded the need for positive agency-client relationship and thus most customer demands were not met. One of the factors that led to customer turnoff was the issue of technology. It was established that its rivals such as Estrella Damm had met customer demands by use of technology. Due to a bureaucratic communication structure, the customers were unable to channel their concerns to the management for consideration. Additionally, government policies such as Brexit pulled away customers of which the company did not take any measures to control. As a remedy to cover the Brexit effects, the company decided to downsize its operations which further caused inconveniences among customers. 2.2 Contributing Factors 2.2.1 Technology McDonald's Company has been among the restaurants that are slow in technology, in comparison with their competitors such as Estrella Damm who have already broken the grounds. For instance, the customers expressed the need to facilitate the payment process to avoid delays. They also demanded a platform where they would be served with digital menu boards, entertained with gestures enabled games and services facilitated by online coupons. As per their experiences from other companies that offer these services, digital menu boards would allow for quick customer service. Reports indicated that three out of five customers who were interviewed by the marketing department revealed that their orders and services were being delayed due to complex manual signage (Thompson et al. 2014, p. 155-179). Gesture enabled games would be required for interactivity and entertainment. There was also the need to fit the restaurant chains with digital computer devices where customers would play computer games and keep themselves busy. This would ensure that customers keep visiting the restaurant. Online coupons would be used in dinner tables thus giving the customers a marvelous dinner experience. This would also ensure that tables turned faster. 2.2.2 Downsizing McDonalds' need to downsize its operations was also accompanied by challenges. As an immediate decision to cover the effects of Brexit, the management resolved to restructure its operation. According to Dey (2016, p. 13-14), most companies would opt to use this strategy to reduce operational expenses and minimize wastage in the company. In McDonald, the move was not welcomed by most employees who were not able to adapt to the changes. Difficulties in adopting the new technology and bureaucratic procedures within the company challenged the normal business activities. The company opted to simplify its onsite support and maintenance for it to operate effectively and efficiently (Ghobadian & O'Regan, 2015, p. 87). This was as a result of customer influence as most of the services were manually offered. The quality of customer services could not redeem it from the technologically influenced customers. To deliver better customer services, the company opted to use technology. During this period, the company was faced with the challenge of meeting labor and production costs. Customers needed highly effective and efficient services. 2.2.3 Personalization of Customer Services The consumers of various foodstuffs demanded for a more unified and splendid dining experience. This force for change was also propagated by other restaurant competitors such as Estrella Damm, who had commanded a high percentage of customer turnout. After conducting investigations, the company realized that if technology could be incorporated in their operation system, the labor and production costs will be cut down and the sales would be boosted up to 12% (Ghobadian & O'Regan, 2015, p. 87). There was also a constant outcry from the customers over delays in getting their orders, a factor which contributed immensely to the reduction of yearly profits by 10% (Cummins et al. 2016, p. 308) McDonald's Company faced a challenge to balance the clients' individual demands and the business financial performance. According to Thompson et al. (2014, p. 155-179), a poor agency-client relationship can establish itself when customer demands are not adequately addressed. The company’s management drew much attention on maximizing profits, as such it created room for other competing restaurants who invested in satisfying the customers' needs (Han et al. 2015, p. 93). During the period competing companies created a good customer base that led to a drop in McDonald's customers which in turn contributed to a decline in net profits. Unfavorable government policies among them, the increase in minimum wage rate of all employees contributed to the downfall of the company. The management had to determine new salaries for employees to comply with the requirement. A resolution to increase workers' salaries led to a decrease in the net profit of the company as this was not included in the annual budget of the company. 2.2.4 Economic Forces The economic forces that led to increasing in mortgage costs and requirements came with financial challenges. McDonald’s Company operates a wide range of branches in the UK which most of them operate on leasing. Particularly this led to the proportional increase in the price of all foodstuffs and accommodation services which in turn discouraged potential customers who sought similar services in alternative restaurants. Tentatively, they lost customers leading to low profits and wastage. Furthermore, the high rent rate was not addressed in their annual budget thus brought a negative financial outcome of the company. 2.2.5 Government Policies Rolfe & Hudson-Sharp, 2016, p. 15) have attributed the emergence of poor agency-client relationship to government policies within a particular country. In the McDonalds’s Company, the Brexit move had quite a number of implications. The vote led to surpassed migration of employees who most of them have an origin in Eastern Europe. The cheap labor provided was cut off unexpectedly and needed an immediate replacement that was offered at high salaries because of the urgency. The new employees increased the company's salaries expenditure thus a reduction in the net profit. Lang & Schoen (2016, p. 21) have shown that immediately after the announcement of the Brexit results, the pound sterling fell to the lowest level for the first time over the past 30 years. The significant drop in the currency value led to economic decline leading to unfavorable exchange rates in the UK regarding balance of payments. Furthermore, the Brexit caused other European travelers feel unwanted in the UK (Ramiah et al. 2017, p. 2508-2514). McDonald's majorly depend on both local and foreign tourists as their potential customers; the move led to a decline in the number of customers to UK restaurants. The Brexit vote brought more uncertainties in most hotel companies specifically in the UK. Most companies among them the McDonald’s were caught unprepared by the accompanying effects on industrial performance (Geppert et al. p. 10). 2.3 How the Company handled the Incident 2.3.1 Integration of technology The company's management cooperated with Fujitsu, a leading technological company in the UK to install technological services in the restaurants and offer necessary technical support. They both resolved to enhance the integration and redesigning of the CARE (Customer Aligned Regional) program. According to Šerić et al. (2014, p. 144-156), a CARE unit would enable a company to respond to various technological matters adequately. In McDonald, the successful implementation of this program required that each restaurant would be assigned a special group of engineers who would foresee and effect the necessary implementations. It was expected that the technological demand would be solved through knowledge sharing and regular preventative visits. Fujitsu was chosen because of its reputation and cost-effective model in handling technological matters. Hua et al. (2015, p. 109-120) advises that a special criteria should be used to ensure that only proficient agencies are chosen to provide technical support and advice. This company has demonstrated capability in matters of technical support in various organizations and companies. The CARE program would enable McDonald to increase reliability and uptime while reducing costs. The team also believed that the integration of various technological aspects would enable the restaurants to operate effectively. There was effective collaboration between the McDonald’s team and the Fujitsu engineers. The technological face of all McDonald’s restaurants changed after three months of careful research and planning. The solution to this problem was implemented in every franchise and restaurant in which the engineers worked. As an additional technological support, the team installed a "live" restaurant environment which would monitor the whole business activity in every restaurant. The CARE program was also facilitated by innovating a bespoke McDonald's app that would enable customers to access services from all spheres. This enabled the managers to obtain a comprehensive glimpse of how each of the restaurants operated in the UK. In gathering this operational information, the company managers would be able to handle future crisis and make business decisions effectively and efficiently (Hua et al. 2015, p. 109-120). Matters of hardware failure were equally fixed and the sharing of the company's best practices effected. With this new technological setting, the company was also able to obtain quality information that would lead to customer satisfaction and hence more profits. The CARE program provided the company with the platform through which it would effectively resolve issues and the ability to test new marketing strategies. The company management realized that technology had greatly affected its customer turnouts by impacting the dining experience for both the restaurateur and the customer. The teams drew various strategies and programs to solve this issue. 2.3.2 Market Research The management resolved to conduct more market research. This is a strategy to collect data on the market trends, and diversified customer needs to make analysis and come with a viable solution (Dogerlioglu-Demir & Koçaş, 2015, p. 18). With the advancement of technology, the current market patterns have changed in that most services are becoming more personalized. The foodstuffs were diversified considering different eating cultures worldwide. This resulted in the recovery of many consumers and created a loyal client base with the company. Additionally, the good relations with the customers enabled them to gain more reliability and confidence to the nature of services they receive making the company regain its popularity in its operations. The management deployed risk assessment experts within the company. As recommended by Geppert et al. (2016, p. 10) the company resolved to hire specialists to conduct long life company analysis, the major roles included carrying out the sensitivity analysis to assist the company in assessing probable outcomes. This enabled it to identify possible risks that it may face ranging from economic forces and the inflation rates. This was also achieved through outlining possible challenges the company may encounter and allocating emergency funds to cater for unbudgeted occurrences. A move that led to the company regaining its financial performance. 2.2.3 Restitution of Communication Furthermore, the company took a major step in reorganizing its communication structure. Removing bureaucratic communication procedures that centralized management in the decision-making process. The Transactional Model of communication would be put into application to ensure that both parties are simultaneously play their roles (McLean, 2005, p. 10). Equally, the Constructivist Model of communication would be put in place to ensure that meaning is generated out of a business discussion (McLean, 2005, p. 10). The decentralization allowed employees to actively participate in the important decisions made by the McDonalds management (Šerić et al. 2014, p. 144-156). Selection of employee representatives lessened the burden of dispersing information by the management to employees. The implementation process became swift as all workers were equipped with the necessary skills in carrying out the operations. Additionally, the downsizing of the business led to manageable restaurant units which minimized wastage and operational costs leading to the increase in the net profit of the company. 2.2.4 Meeting Customer Demands Any restaurant requires online reviews to determine its global existence and the quality of its services. Social media and blogs dictate the manner in which the hospitality industry operate (Hua et al. 2015, p. 109-120). They are platforms in which patrons can share their dining experiences of which can spread publicity and awareness. The company needed advanced technological equipment for effective communication. To be in touch with patrons, the restaurants would require using social media and websites to post information about their locations and the services they offer. For instance, the company recommended that posting cooking videos would easily command a high rate of customers. Accuracy, time-savings, and portability are influenced by the convenience of mobility (Hua et al. 2015, p. 109-120). As the team discovered, these factors have raised the operation standards of competitors around which have been able to turn tables fast by reducing wait times. Through the use of such means, customers can order their meals from their destinations before they reach the actual restaurant facility. It was also realized that the company was not able to observe convenience as the menus in particular restaurants were not updated in time when seasons changed due to lack of effective technology. Reference List Cummins, S.C., McKay, L. and MacIntyre, S., 2015. McDonald's restaurants and neighborhood deprivation in Scotland and England. American journal of preventive medicine, 2016 Sep 8; 29(4), pp.308-310. Dey, K., 2016. The fast food industry in the UK. Analysis of McDonald's with PESTEL, VRIN and Porter's Five Forces. UK. Pp. 13-14. Dogerlioglu-Demir K, Koçaş C. Seemingly incidental anchoring: the effect of incidental environmental anchors on consumers' willingness to pay. Marketing Letters. 2015 Dec 1; 26(4):607-18. Geppert, M., Matten, D. and Williams, K. eds., 2016. Challenges for European Management in a Global context: Experiences from Britain and Germany. Springer. UK. pp. 10. Ghobadian, A. and O'Regan, N., 2015. A case study and interview with Jill McDonald CEO and President of McDonald's Northern Europe Division. Journal of Strategy and Management, 7(1), pp.87-100. Han, S.H., Nguyen, B. and Lee, T.J., 2015. Consumer-based chain restaurant brand equity, brand reputation, and brand trust. International Journal of Hospitality Management, 50, pp.84-93. Hua, N., Morosan, C. and DeFranco, A., 2015. The other side of technology adoption: examining the relationships between e-commerce expenses and hotel performance. International Journal of Hospitality Management, 45, pp.109-120. Lang, T. and Schoen, V., 2016. Food, the UK, and the EU: Brexit or Bremen? UK. pp. 21. McLean, S., 2002. The basics of interpersonal communication. Allyn & Bacon. Boston. pp. 10. Ramiah, V., Pham, H.N. and Moosa, I., 2017. The sectoral effects of Brexit on the British economy: early evidence from the reaction of the stock market. Applied Economics, 49(26), pp.2508-2514. Rolfe, H. and Hudson-Sharp, N., 2016. The impact of free movement on the labor market: case studies of hospitality, food processing, and construction. National Institute for Economic and Social Research. UK. pp. 15. Šerić, M., Gil-Saura, I. and Ruiz-Molina, M.E., 2014. How can integrated marketing communications and advanced technology influence the creation of customer-based brand equity? Evidence from the hospitality industry. International Journal of Hospitality Management, 39, pp.144-156. Thompson, J.L., Peace, S., Astell, A., Moynihan, P. and Macdonald, A., 2014. Food environments: From home to the hospital (pp. 155-179). Policy Press: Bristol, UK. Read More