McDonald’s

Corporation
By Group – 6 “A”

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1. What attracts you to McDonald’s? Explain McDonalds Value proposition. How does
McDonald’s operating system deliver the value proposition?

The same experience that included pleasant fast service and inexpensive food was the distinguishing point of the
golden arches from other quick service restaurants.
The operating system ensures consistency and uniformity across all the outlets, their quality of food and service
remains same.
The operating system concentrated on four areas to deliver the value proposition, namely :
• Improving the product
• Developing outstanding supplier relationship
• Improving equipment
• Training and monitoring franchises
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2. Which CHARACTERISTICS OF
McDonald's production system have
been most important in building its
record of success and growth in the
industry?
Their uniform operating system, taste and
service in every McDonald’s outlets at every
time.
McDonald’s was very particular in quality of the
raw materials they used and very concerned with
their suppliers.
Their concern over the franchises and make
them to feel as one of their partner and to work
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towards prospective.
3. Explain how McDonald’s developed its supplier base. How did the relationship
with suppliers help the organization to achieve growth ?

In its quest to improve and enlarge its supplier base, McDonald revolutionalised the
entire relationship between corporation, supplier and franchisees.
• Kroc brought a supplier loyalty that the restaurant business had never seen.
• By meeting McDonald's strict standards and price requests, suppliers were
guaranteed future volumes from a mammoth restaurant chain.
• McDonald never chisel on price. They were rather more concerned about quality of
product
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Cont.…

• It treated every supplier with due respect even when they became much bigger
unlike other firms who look suppliers as someone to wall on.
• an improved supplier and corporation relationship provided the company with
the desired product without delay and thus speeding up the McDonald's service.
• This improved handshake further provided the firm with ample space to
experiment with its food processing techniques

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4. Compare McDonald’s operations strategy with a typical restaurant, specifically with
respect to how it grew over the years.

 McDonald’s chain featured:

speedy service.

low prices.

a limited menu.

 Distinction between McDonald and it’s competitors:

McDonald’s products were of consistently high quality.

A unique operating system.

A unique set of relationship between McDonald corporation, it’s suppliers and it’s franchisees.

Whereas it competitors just focused on recruiting franchisees and identifying the lowest cost suppliers.
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Cont…
 McDonald’s operating system ensured

 consistency and uniformity

Same quality of food and service across outlets and in every visit

• McDonald’s operating system operated on 4 areas which differentiated it from other restaurants:

•Improving the product

•Developing outstanding supplier relationships

•Improving equipment

•Training and monitoring franchisees

Initially the operating strategy was restricting menu items to 10 unlike other restaurants who served a variety of

items.

Restricting menu to 10 items gave McDonald specialisation and uniformity on their products and a competitive
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advantage over competitors and other restaurants.

Cont…

•The eating habits and demographic trend changed a lot during course of operation of McDonald and so did it’s

operating process.
• To compete with other restaurants,McDonald :
•expanded it’s drive through lanes from one to two for speedy service,

•introduced a new meal- breakfast between 7a.m to 11a.m and generated entirely new business for a different set

of customers who were in hurry and have less time. Later it accounted for 15% of restaurant sales
•Since McDonald had a unique relationship with it’s suppliers, they were also loyal in terms of the quality of

product they supplied to McDonald. Even if some changes or modifications were required, they agreed to that.

This added to McDonald’s competitive strategy when it upgraded it’s operations so that due to change, it’s profit
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doesn’t gets affected neither does the quality of products for which they are known
5. Explain how McDonald’s effectively linked its operations to its
competitive strategy?

•McDonald perfected it’s operating procedures and equipment to accommodate it’s

workforce and increasing items in menu without compromising on speedy service.
•They became best at what they did- hamburgers and speedy service inspite increasing
numbers of products in menu- which gave them the image and recognition.
•McDonald’s have developed a number of new building prototypes, from drive-through
only models to compete with other restaurants and competitors.

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6. Explain McDonalds approach to innovation (in terms of bringing new products to
market) with examples.
McDonald's served 20 million customers everyday, so in order to cater to needs of such a huge mass it
needed constant improvisation and innovation be it in their products or services because of the quick pace
of the industry.
Some of it’s approaches to innovation are :
a. They had very particular specifications for it’s products and they put meticulous attention to detail and
careful analysis of quality and procedures.
• meat for example had 83% lean chuck from grass fed cattle and 17% choice plates from grain fed
cattle
• For fries they accepted potatoes with 21% starch content, for this staffs visited produce suppliers with
hydrometers.
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b. They captured opportunities from the limitations.
• They introduced a new meal, breakfast and for it’s launch they designed a new product namely Egg
McMuffin.
• For Chicken McNuggets,they went on to find an efficient way to cut chicken into bite-sized,boneless
chunks.

c. They took bold moves to address the concerns coming in-front of the organization
They collaborated with EDF to assess their environmental concerns
• They came up with the idea of Brown Bags, which were 100% recycled bag And they used unbleached
materials for that.
• They mandated a 35% of recycled content for corrugated boxes.
• They introduced a thinner paper-based wrap on the basis of performance criteria including environmental
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standards.
7. What are the primary new challenges McDonald’s faced in the 1990s? How have
competitors been able to successfully enter McDonald’s marketplace?

Challenges faced in 1990’s :

•To what extent should McDonald’s change its operations strategy to accommodate the
growing need for flexibility and variety in products?
•To what extent would environmental concerns compromise McDonald’s traditional
strengths and complicate an already challenging competitive situation?
•Could the lessons learned in the recent collaboration with the EDF help McDonald’s as it
sought solutions to the continuing competitive challenge
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Cont…

Competitors had an easy entry to McDonald’s market because they imitated its strategies to
capture market share.
•Giants like Chili’s and Olive Garden catered to customers searching for full service and
greater variety, and that too at more competitive prices than McDonald’s, which focused on
only a handful of dishes.
•Sonic and Rally’s offered drive-through service only and specialized in delivering burgers fast.
•Taco Bell featured 26 Mexican items with costs under $1. It also shifted its food preparations
to outside suppliers to reduce kitchen space in outlets.
8. How has McDonald’s operating system changed over time to achieve competitive
advantage over rivals?
Striving to be cost leaders: Prices cannot be matched by rivals.
•The speedy delivery of the food.
•Strong global presence and largest market share in fast-food industry.
• They have been in the fast food business for a longer time than their rivals

Increased advertising and marketing budget.

New revenue streams are created

 Franchise Fees

 Franchise Royalty Fees

 Services provided to Franchises

Training fees
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Rebates from suppliers

Optimal efficiency business operations

9. What are McDonald’s choices for the future? What options should it consider to return to
the growth of the past? Should it introduce family dining?

• Consistency and quality through standardization

• Allowing autonomy to franchisee

• To provide autonomy to franchisee

• Provide greater variety of offerings and service.
• Imitate its customers strategy
Should it introduce family dining?

🠶 Yes, it should introduce family dining.

🠶 It is very much in demand.
🠶 It can provide a very strong customer base.
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10. Why do you think McDonalds went in for collaboration with the EDF when it was already
having the McRecycle USA program? Do you think the collaboration increased the challenges
for the company?

Inspite of McDonalds already existing McRecycle USA program, McDonald collaborated

with EDF which would eventually lead to increase in the credibility of McDonalds towards

safety of environment.

Consumer’s growing concern for the environment opened new

doors for McDonalds. Apart from other competitive pressures, a new challenge evolved i.e

protecting the environment. McDonalds saw it as an opportunity i.e the chance of knitting a

responsible environmental policy into its evolving operations strategy.

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Cont…

McDonalds collaboration with EDF could offer some concrete methods by which operations
could adapt to the benefit of the environment. EDF was one of the nation’s most respected and
effective public-interest organisation working to protect the environment. EDF recognized
McDonald substantial existing initiatives in recycling and its crucial role as an industry leader.
McDonalds recognized EDF’s expertise in solid waste management and the importance of
seeking expert opinions. EDF and McDonalds collaboration will help EDF to explore a
variety of different strategic alternatives and for approaches which will help in finding
solutions and produce results for the environment.

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Cont…

Yes, the collaboration increased the challenges for McDonalds in many ways.
The joint task force delineated 42 distinct initiatives revolving around the environmental hierarchy of
reduction first, reuse second and recycling third and the challenge was McDonald’s could not simply
tinker with the packaging of it’s products. It’s effort to reduce solid waste could not disrupt any unit’s
service, couldn’t involve numerous suppliers at a time and required sufficient flexibility to accommodate
franchisees operating in different regions.
Some percentage of the 42 initiatives failed initially.
Adopting new ways had their own cons. They took time and lots of experiments before they were
included into the operation system so that it won’t affect the quality and consistency it provides across
it’s outlets and not compromising on the profit percentage as well.
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11. Explain the activities of the waste reduction task force for reduction
of solid waste.

Yes, the collaboration increased the challenges for McDonalds in many ways.
The joint task force delineated 42 distinct initiatives revolving around the environmental hierarchy of
reduction first, reuse second and recycling third and the challenge was McDonald’s could not simply
tinker with the packaging of it’s products. It’s effort to reduce solid waste could not disrupt any unit’s
service, couldn’t involve numerous suppliers at a time and required sufficient flexibility to
accommodate franchisees operating in different regions.
Some percentage of the 42 initiatives failed initially.
Adopting new ways had their own cons. They took time and lots of experiments before they were
included into the operation system so that it won’t affect the quality and consistency it provides across
it’s outlets and not compromising on the profit percentage as well. 19
12. Can the lessons learnt in the recent collaboration with EDF help McDonald’s as
it sought
solutions to continuing competitive advantage?

Yes, it will help McDonald’s as,

 Although the initial reaction would not have meant that the Consumer
felt very good about McDonald's after the benefits of the new packaging
were passed on to them through an advertising campaign and booklets
available at each restaurant.
 
 The new improved packaging system has enabled them to provide better
driving and delivery services without compromising the quality of their
product.

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THANK YOU!