McDonald’s Company Case Analysis

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Introduction

This paper aims to assess the effects of the operations strategy and its different perspectives on the company’s success. The focus of the assessment is the McDonald’s company as this company is, for the most part, open with the operations strategy making it easy to evaluate the effect it has on the overall success of the corporation. As McDonald’s is undoubtedly an extremely successful company, the main focus of this essay will be to analyse how operations strategy contributes to that success and what elements of that strategy still require refinement.

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Importance of Operations Strategy

The operations strategy includes all the aspects of the day-to-day business operation and decision-making which can have an adverse effect on the overall performance of the company (Lederer 2). The main aims of the operations strategy are minimising the costs and maximising the efficiency of the business process. An operations strategy can be considered successful when it provides the company with an advantage over its competitors and helps develop the overall strategy of the company. When developing and implementing an operations strategy, the most important part is to make sure that management doesn’t simply govern the operations, but takes feedback and analyses the results. According to Slack, this analysis can be performed from four different perspectives.

Top-down perspective

Top-down perspective on the operations strategy concerns business as a whole and can be called corporate strategy as it pursues the goals pertinent to the overall strategy of the company (Hill 26). McDonald’s is extremely strict when it comes to managing its operations. Despite being a franchise, the control over the franchisees is unrelenting. Company regulations cover every detail in the day-to-day operation of the restaurant. All of the company restaurants are standardized and operate in largely the same way. The guidelines for the directors are very strict, and deviation is punishable by penalties, including the license being revoked. The franchisees are required to finish a 9-month long training course before they are trusted with a restaurant. Such drastic measures serve to preserve the company brand and safeguard McDonald’s public image. As McDonald’s brand is universally known, it is important for the board of directors not to put it at risk. This leads to the company using one of the most strict and punishing top-down operations strategies in the business. An approach like this also means that any new ideas and improvements can be easily implemented in all of the company restaurants after they have been tested and proven which assures that every McDonald’s works as efficiently as possible within the set rules and guidelines. The system is of course far from ideal. Such strict control means there is little opportunity for the franchisees to test out anything on their own or tailor their place to the tastes of the local public. This potentially can harm the output of the restaurants dealing with demographics vastly different from the initial American one and slow down the progress of innovations inside the company. However those problems are addressed as McDonald’s does not ignore other perspectives on operations strategy.

Bottom-Down Perspective

This type of perspective on the operations strategy focuses on improvements to the operations building an overall strategy (Slack, Chambers and Johnston 19-22). Essentially it means taking the experience of your field workers into consideration when building the strategy for the company. This is arguably the most important approach to the operations strategy. In such a practical field it is impossible to improve without considering the actual experience of the employees. McDonald’s understands that perfectly. For example, several recipes initially introduced only in the specific restaurants ended up in the menus all over the world due to their popularity. Namely, Filet-O-Fish was initially introduced in Cincinnati, where Roman Catholics, practicing abstinence from meat on Fridays were common. Now the sandwich is a staple for the company making it a perfect example of the bottom-down perspective on the operations strategy. It is probably the most evident example of the company paying attention to the separate restaurants and being lenient and even encouraging when it comes to innovation on the local level. This demonstrates that McDonald’s manages to avoid the pitfall mentioned in the previous paragraph, as they promote innovation, as long as it fits into the image of the company. While the strict guidelines probably still limit some of the more ambitious innovations, it is clear that the company pays close attention to the activities of the separate restaurants and notes which improvements can be implemented worldwide.

Market Requirements Perspective

This perspective represents the company trying to satisfy the requirements of its market. McDonald’s operates on the global market which means it has to deal with the requirements of all of the local markets at once. It is a complicated task. Besides different tastes and preferences in different countries which all need to be accommodated, the situation is further complicated by the differences in the local laws and regulations. To cope with all of the specifics of local markets McDonald’s uses a network of local subsidiaries, which represent the company’s interests in their respective regions. They gather information and support the franchisees to ensure that the restaurants cater to the local markets, and the business is run in compliance with the local laws (Standards of Business Conduct 30). The restaurants vary depending on the region. The basic operations strategy remains the same, but the details differ greatly. For example, in the Islamic countries the company offers menus which comply with the strict dietary code of Islam. The Isreal-based branch of the company includes both kosher and regular restaurants to cater both the Orthodox population and the guests of the country. In China, McDonald’s runs both conventional restaurants and smaller food kiosks which are appropriate for the overpopulated country. In the fast food industry, the decisions aimed to fulfill the market requirements are very evident. Changes in the menu, as well as changes to the form of the restaurants, are all dictated by the local specifics. McDonald’s is no exception. Despite the strong tendencies to unification, the fast food network makes a lot of adjustments to their operations strategy based on the requirements of the local market and cultural specifics.

Resource-Based Perspective

The resource-based perspective on the operations strategy refers to the way the organization develops its operations and resources (Slack, Chambers and Johnston 19-22). The biggest challenge that McDonald’s faces in the resource field is the employee turnover. While the exact figures are hidden by the company, the working conditions have been rated poorly by the 2015 poll conducted by the jobs website Glassdoor (Burn-Callander par.4). This implies that the level of dissatisfaction among the workers is high and McDonald’s programs which were supposed to make the working conditions better and employee involvement in the operation of the company deeper, did little to improve the situation. McDonald’s invests heavily into the training programs for the managers and even the regular workers go through extensive tutoring, including classroom hours and tests. That means that every lost employee is highly detrimental to the company. Still, worker retention remains one of the biggest problems McDonald’s faces with no clear answer in view, despite millions of dollars being spent in search of a solution every year (Burn-Callander par.8). As for the food itself, the company has a well-established and maintained network of factories. Each of them supplies restaurants in a specific region. The factories work with local suppliers who are constantly tested by McDonald’s, to make sure the quality of the products is appropriate. Expanding their factory network is one of the keys to the company expanding into new regions.

The Hayes-Wheelwright model

The Hayes Wheelright model includes four stages of the operations strategy implementation. On the first stage, the strategy is of a detriment to the business, sub-par compared to the competitors, and the main focus is avoiding doing any harm to the company overall. On the second stage, the strategy is neutral, not holding the company, but giving it no competitive advantage. On the third stage, the operations strategy begins to contribute to the overall business strategy and company success. On the final, fourth stage it sets a new margin for the market, not only helping the company using it but improving the industry in general (Slack, Chambers and Johnston 19-22). From the start, McDonald’s introduced some innovative ideas on the operations strategy front. Even before becoming a major network, the founders worked hard to streamline the kitchen operations and introduced an innovative self-service approach. These advancements allowed the McDonald’s network to grow rapidly over the years (Derdak and Pederson 108-109). Most of their competitors follow the innovations introduced by the company. It is clear that McDonalds’ operations strategy is on the fourth stage where it affects the market and gives the company a massive competitive advantage.

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Conclusion

McDonald’s is a successful and famous company. Their business practices have been proven to be efficient time and time again. On the operations strategy level, it is the same. The company has introduced an extremely efficient model of operations based on strict control and adherence to the company standards. This approach made McDonald’s successful back in the 1960s when their streamlined kitchen operation allowed the company to service clients much faster. The operations strategy was the backbone of its success. Alongside expert marketing, the operations strategy brought McDonald’s to the top of the fast food industry. However, the approach has its flaws. The reliance on the common brand and common image makes small-scale innovation almost impossible. Big investments into the education of every worker make high turnover rates extremely problematic. While McDonald’s operations strategy is proven and time-tested, there is always room for improvements, which undoubtedly will affect the whole fast food industry as McDonald’s remains the trend-setter to this day. The first sign of the changes to come is the first McDonald’s Next restaurant which opened in Hong Kong. The place shows a deviation from the standard, time-tested operations strategy, introducing new elements, like a salad bar and customisable burgers (Haridasani par. 2). The changes mostly affect the image of the McDonald’s franchise, but a shift in operations paradigm is also evident, as the company is changing its list of services and production process. These changes are the result of the corporation underperforming in 2015. This example shows that any operations strategy, no matter how refined, can always be improved.

Works Cited

Burn-Callander, Rebecca. “Employees send McDonald’s to bottom of top 10 ranking of fast food chains”. The Telegraph. 2015. Web.

Derdak, Thomas, and Jay P. Pederson. International directory of company histories vol. 67, Farmington Hills, MI: St. James Press, 2004. Print.

Haridasani, Alisha. “Big Mac with a side of quinoa? Inside the world’s first McDonald’s Next”. CNN. 2016. Web.

Hill, Terry. Operations Management: Strategic Context and Managerial Analysis, New York City NY: Palgrave Macmillan, 2000. Print.

Slack, Nigel, Stuart Chambers, and Robert Johnston. (2009) Operations management, New York City, NY: Pearson Education. Pearsoned. Web.

Standards of Business Conduct. Oak Brook, IL: McDonald’s Creative Services, 2011. Print.

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