Social, Legal and Ethical Responsibilities - Essay Example

Principles of management APPLIED RESEARCH (McDonalds Corporation) Park Internet Campus A paper presented to the School for Arts and Sciences and Distance Learning in partial fulfillment of the requirements for the degree of Baccalaureate Principle of Management Park University Month, Year TABLE OF CONTENTS Page INTRODUCTION 3 BODY International Business 3 Social, Legal and Ethical Responsibilities 4 General Planning & Strategic Planning 5 Operating Management and Plans 6 Organizing Work and Synergism 6 Organization Structure and Chart 7 Work Team Utilization 7 Staffing 8 Employee and Manager Development 8 Motivating Employees 9 Leadership and Management 9 Managing Conflict and Stress 10 Managing Change 10 Controlling 11 Appraising and Rewarding 11 Operations Control 11 CONCLUSION 12 REFERENCES 13 Introduction McDonalds Corp., based in Oak Brook Illinois, is the world’s number one fast food chain, serving about 49 million customers daily. More than 70% of McDonald’s restaurants are owned and operated by independent local people. At the end of 2006, the company had 31,046 restaurants in 118 countries out of which 18,685 are operated by franchisees, 4195 by affiliates and 8166 are operated by the company. McDonalds, the leading global food retailer, serves 52 million people each day. Apart from their own chains they also have partner brands like which include Boston Market and Chipotle Mexican Grill. It is one of the most well known and reputed brand and holds a leading share in the globally branded quick service restaurant segment of the informal eating out in virtually every country where they have a presence. It has achieved this distinction through efficiency in its operations and proper functioning. International Business Approximately 70% of McDonalds restaurants worldwide are owned and operated by independent local men and women (Wikipedia). McDonald’s offers flexible menus with different tastes and different sizes to fit every active lifestyle. It has a global presence with successful expansion into 120 countries and they serve nearly 54 million customers each day. By 2001, they had 30,093 restaurants all over the world with sales of $24 billion. They offer both counter service and drive through service. McDonald’s follows a different business model from other fast food chains. In addition to the franchisee fees, supplies and a percentage of sales, they also collect rents partially linked to sales. Their international operations are very significant to them because a sizeable portion of revenue is generated through franchisees. While the US and Europe each account for 35% of the revenues, France, Germany and the UK collectively account for 60% of the total revenue (Orji, 2005). In Australia, China and Japan, they have 50% owned-affiliate account under the equity method which account for nearly 50% of the revenues. These six markets are the major markets for the company. Social, Legal, Ethical Responsibilities While fast food meals based in burgers and fried chicken have been considered convenient, they have also been considered to be unhealthy. One of the reasons for the vast number of allegation against McDonald’s is that processed convenience foods contribute to obesity (Schröder & McEachern, 2006). This has led to several litigation proceedings against McDonald’s. This demonstrates that they have not been socially conscious in their dealings. There have been other allegations that McDonald’s have indulged in deceptive acts that lures people to eat with substantial frequency. McDonald usually does not disclose the nutritional information for their food and as well as the adverse health effects associated with consumption of foods considered being high in cholesterol (Ritter et al., 2003). Their advertisements entice children and lure them towards unhealthy eating habits which are considered unethical. McDonald’s make the nutritional contents in food readily available on their website but not in their restaurants. This is taken as an intentional act to lure consumers because consumers are impulsive buyers, according to Schröder and McEachern. While McDonald’s defends that its products form an overall balanced diet, a consultant to the World Health Organization claims that they are encouraging the use of a style of food that is closely associated with the risk of cancer and heart disease (Kellner, n.d.). They even target advertising at children associating with popular films and pop culture artifacts, with an intention to attract young customers who would persuade their parents in to buying them food from McDonald’s. McDonald’s has frequently been accused of resorting to unfair and unethical business practices. While McDonald’s has often been accused on various grounds, the beef-fries controversy in 2001 revealed the negligent and the irresponsible way that is unexpected of a global player of the magnitude of McDonald’s (Mukund, 2002). The vegetarian group, mostly Hindus, won the litigation against McDonald’s and received $10 million dollars from the company. General Planning and Strategic Planning They offer a uniform menu at all locations and emphasize on low value prices. McDonald’s demonstrates that its global presence is its greatest strength. McDonald’s continuously lays emphasis on delivering a superior customer experience. It is the market leader in both domestic and international markets. Because of its enormous size it is in a position to absorb risks and pitfalls that come with operations in such a large scale. It has strong brand recognition and its sales increase merely based on the brand. Despite the wide variety of food products offered, they guarantee uniformity in both service and standard at all their outlets. They ensure this when appointing franchises and joint venture agreements. McDonalds keep testing new menu on an ongoing basis and sells a variety of other products during limited time promotions. To cater to the international market they have had to slightly alter their menu. While in Israel Big Macs are served without cheese in several outlets, in India they serve vegetable McNuggets and a mutton-based Maharaja Mac (Vignali, 2001). In Germany they sell beer while in Turkey chilled yoghurt drinks are available. They sell Teryaki burgers in Japan and vegetable burgers in the Netherlands. McDonalds, for each country, have a rigorous pricing process that determines the price for that particular market (Briohny, 2006). They have a value-based approach to pricing as they want to give the best value to the customers for what they pay. Operations Management and Plans McDonalds follows the just-in-time (JIT) where they do not begin to cook or reheat unless the customers have placed specific orders (Dotmarketer, 2005). Due to sophisticated burger-making technology (including a record-breaking bun toaster) they are now able to deliver immediately so they wait for the order to be placed. This system allows McDonalds to adapt to demand a little bit better. This means lower inventory to be carried as they can produce on demand. It also means lower holding costs and JIT allows them to exploit the savings. It also leads to a drastic reduction in safety stock. JIT reduces the lead times and variation in lead times in order to help reduce safety stock. Organizing Work and Synergism The fast food industry is based on the Taylorist principles of mass production where the work is routinised, dull and standardized. It is low skilled, low paid and offers few career opportunities. Even though work in the fast food industry is considered a low-profile job, workers at McDonalds feel they develop general work competencies and maturation skills like reliability, strong work ethic, responsibility, concentration, punctuality and diligence (Allan, Bamber, Timo, 2006). Organization Structure and Chart Since most of its restaurants are franchised, they do not have a director in charge of international operations separately. Instead, they have different heads in charge of specific regions. For instance, they have a President – Europe supported by four different Presidents in charge of Eastern, Northern, Southern and Western Divisions. To handle other regions they have President – Asia/Pacific, Middle East and Africa. Work Team Utilization Working in the areas like fast food promotes team working and reinforces the identification of the workers to the organization to one another. This practice of moving workers around jobs and tasks as per needs is known as functional flexibility (Dyer, 1998). This allows for movement and redefinition of working time. Since McDonalds offered low wages, they could move workers around jobs and functions but this benefits the organization and is no way employee-centered. Flexibility for workers promises improved working conditions and varied and interesting jobs. Staffing McDonalds has often been the target of anti-globalization protesters. At the end of 2003 it employed more than 1.6 million people and is considered to be America’s largest job training program. They claim to make the world a better place and claim to respect and value their employees, but reports suggest that pay and working conditions are far from being ‘overwhelmingly positive’ (Royle, 2005). Work at McDonald’s is low-paid, hard and often unrelenting. As labor turnover is very high, workers seldom get beyond the basic wage or qualify for additional benefits. Wages have not moved with inflation and being market leaders they depress the wages for the whole sector. This amounts to violation of employees’ rights. In Germany they have been accused of slave labor where the workers are constantly on call and dare not question the management. In US they employed foreign students and promised good pay but they deducted practically the entire amount as rent, medicare and social security despite the fact that these students were exempt from such payments. To reduce the labor costs, they even electronically adjust the employees’ clocking-in times. There have been numerous complaints about health and safety regulations. Since managers are under pressure to reduce costs, they seldom respond to the employees’ complaints. All these amount to gross exploitation of labor Employee and Manager Development Since McDonalds outlets are owned/operated by local men and women, the local people are trained in how to conduct the business as per the company’s norms. Having the local people ensures the right balance between local autonomy with worldwide quality and service standards (McDonalds, 2006). The local owners know the local business environment and are connected with the interests and concerns of the local communities. All decisions like purchasing of goods and services, hiring and managing the local people are left to the owners /operators in the local region. Even though they are decentralized, they ensure that the core values, principals and standards are adhered to. Motivating Employees They consider the managers and employees as the heart and soul of business. Since their spotlight is on customer service, they have to keep their employees motivated. "To create, maintain and sustain an environment in which people can feel motivated” is their way of working (Liddle, 1990). Employees at McDonalds are self-motivated. They conduct regular employees’ surveys and encourage networking among groups. They allow the employees to manage their shift commitments. Leadership and Management McDonalds is recognized as a top company for leaders. They provide opportunities to people through out the system and around the world. They follow the transformational leadership and it is designed to realign people’s perception of the company into one that is health conscious and an advocate of healthy diet, lifestyle and exercise. In the pace that things change, they view strategy and leadership as two sides of the same coin. They have a strategic agenda which “starts with vision, mission, and distinctive profile, continues with strategy in the sense of a hinge between outside and inside, and ends with action and results” (Strategic Direction, 2006). Managing Conflict and Stress Managing stress is a problem at McDonalds as the employees are overworked. They also have to change between departments. They have thus given the employees the freedom to manage shift commitments. They expect this to be a de-stressing factor and would give the employees motivation and enjoyment at work. This is fundamental to any business because a happy employee means happy customers. They have even announced an innovative new initiative in the UK where members of the same family working in the same location can exchange shifts without prior notice or needing to seek the manager’s permission (Management-issues, 2008). These are stress removers. Managing Change Change management and crisis response at McDonalds has been applauded. When the CEO died suddenly in 2004, the stocks of the company crashed. The company responded within 72 minutes by appointing a new CEO (Garcia, 2006). The media and the analysts focused on the future rather than the tragedy. This swift decision gave immediate reassurance to employees, franchisees and investors for having a knowledgeable leader and that company would maintain continuity. They had a clear succession in place and they could move swiftly. Its prompt action prevented the turmoil that delayed announcement would have caused. Controlling With the help of BusinessObjects, restaurant managers can now quickly get the information they need and spend more time on the floor with staff and customers. This helps them to retain the position as the world’s best quick service restaurant. Appraising and Rewarding To recognize outstanding staff for their work ethic and dedication to excellence McDonalds gave its employees a unique opportunity. They are committed to employee recognition and development. The McDonalds National Employee Scholarship Program recognizes and rewards the accomplishments of the student-employees who excel in their studies, who serve their communities and those who strive to satisfy their customers. They also offer long term incentives to both reward and retain the key employees who have shown sustained performance and who can impact long-term value creation at McDonalds (McDonald, n.d.). In addition to the base pay, they also pay performance linked bonus to the employees. The top 1% of individual performers worldwide receives the President’s Reward and the Circle of Excellence Reward is given to the top teams worldwide to recognize their contribution. Operations Control They attain operational efficiency in maintaining consistency of product, quality and service delivery (Business Objects, 2008). They have set key performance indicators (KPI). The performance of each of their restaurant is monitored by Operational Consultants who are responsible for the performance of up to ten restaurants – both franchisee and owned. The consultants and the managers have access to previous day’s report by 8am the next day. This enables them to target activity on problems or under-performance in a particular restaurant. They also have a performance management scorecard for restaurants. They proactively manage the new products so that sales of new products are ensured at the same time the previous or existing products do not suffer. They use business intelligence from Business Objects (an initiative known internally as SEER) and the rapid access to information ensures proactive management and improved business understanding. Conclusion McDonalds demonstrates the working of a company that is continuously innovating and is constantly on the rise. It has achieved economies of scale in its operations and has the widest reach globally. They have a presence in almost any country and their products are uniform all around the world. With some changes in their marketing mix, they cater to individual country/region’s tastes and requirements. They have achieved efficiency in their operations and functioning but as far as employees are concerned, their staff turnover is very high. Despite all their attempts at rewards and performance linked bonus, the staff is dissatisfied and overworked. They are able to manage the international operations in a very efficient manner as they appoint franchisees in most places rather than having their own units. They are truly living up to as world’s best quick service restaurant. References: Allan, C., Bamber, G. J., & Timo, N., (2006), Fast-food work: are McJobs satisfying? Employee Relations Vol. 28 No. 5, 2006 pp. 402-420 Briohny (2006), Briohnys report, 06 Feb 2008 Business Objects, (2008), McDonalds Measures and Manages Performance Success with Business Objects, 27 February 2008 Dotmarketer, (2005), McDonalds, a guide to the benefits of JIT, 27 February 2008 Dyer, S., (1998), Flexibility models: a critical analysis, International Journal of Manpower, Vol. 19 No. 4, 1998, pp. 223-233 Garcia, H. F. 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