Another objective of McDonald is to achieve their target financial performance; this would be to achieve a high turnover and increase the amount of net profit.
Task 2
Structure in simple terms, can be defined as the way things are set out in an organisation. Therefore, all businesses including McDonalds have their own organisational structure which “… consists of groups and individuals working together to achieve the aims/objectives of the organisation”.
Organisations are structured in a variety of ways, dependent upon their objectives and culture. The structure of an organisation will determine the manner in which it operates and its performance. Structure allows the responsibilities for different functions and processes to be clearly allocated to different departments.
The wrong organisation structure will hinder the success of the business. Internal factors such as size, product and skills of the workforce also influence the organizational structure. As a business expands the spans of control will widen. The higher the level of skill each employee has the more the business will make use of these skills across the organization and hence save costs.
An example of a hierarchal organisational structure is given below for reference;
Source: Online http://www.learnmanagement2.com/hierarchical%20structure.htm
Most the McDonalds stores are franchised to individuals/groups in return for a royalty payment and a percentage of their profits for trading under their name however many of the stores are owned by the corporation itself. The figure published on McDonalds websites informs us that 78% of the stores are franchised whereas the remaining 22% are owned by the corporation itself. In general, I believe that McDonalds as a corporation have adopted a hierarchal structure; but each store would be following a different yet similar structure within the framework of the hierarchal structure. All the stores would carry out exactly the same process but the method in which they deliver the service could be different. It would depend on the franchisee on how he controls the business; however there are certain aspects which the franchisee cannot alter i.e. the McDonalds trademark (M) including but not limited to the layout of McDonalds. As the above diagram shows, the most ‘influential’ person in the organisation is the Chief Executive/Managing Director (Mr. Jim Skinner) who makes the strategic decisions at the top level of the hierarchy and below him are his subordinates i.e. regional division managers which report back to him about the company’s progress or important issues that need to be investigated.
Furthermore, each employees or crew member’s responsibility is clearly defined and the business seems to be centralised i.e. most important decisions being taken by the senior management. Within this structure, the path to promotion is clearly defines i.e. a person will initially start from the bottom i.e. counter sales assistant and then they will have to ‘earn’ their way up to the top to get a senior rank/authority. Moreover, the employees of this type of structure are likely to be loyal to their managers in order to be promoted.
McDonald's individual stores that are franchised would likely to have a flatter structure. There is one manager who is in control of the assistants and employees; s/he takes all the decisions for that particular store and s/he is in charge of the main functions. This makes it very simple for the staff because all they have to do is sell/make the products. Through this way the employees can pay attention towards the customers. But the McDonald's corporation is likely to have a hierarchical structure. McDonalds is a big company with lots of different departments which need to be organized very well, because if the employees aren't directed in the right way they won't perform their jobs correctly.
On the other hand, organisational culture can be defined as “…. set of beliefs, customs, practices and ways of thinking that they have come to share with each other through being and working together. Culture varies greatly between organisations and some business can be ‘warm’ and ‘friendly’ whereas some can be ‘hard’ and ‘unfriendly’.”
Adapted From: Aims, Objectives, structure/culture PowerPoint presentation on Moodle.
McDonalds operates according to four values; quality, service, convenience and value. Part of their organisational culture is the delivery of uniform quality of food and service wherever the branch is located. The good reputation of the company and the expectation of an exceptional customer service no matter what branch people eat is a marketing strategy of McDonalds. However, I believe that the company must be allowing for some leeway for innovation so that each branch can perform things a bit differently to increase the reputation of the company and hence linking it back to McDonald’s culture of efficient practices.
Below are the values/principles (culture) associated with McDonalds;
McDonalds place the customer experience at the core of what they do.
McDonalds are committed towards their stakeholders.
They believe in the McDonald’s System.
McDonalds operate their business ethically.
McDonalds give backs to the community.
McDonalds grow their business profitably.
McDonalds strive continually to improve.
The mission/vision statement & the aims/objectives of McDonalds will affect the structure and culture of McDonalds to a great extent. Initially, McDonald’s key objective of serving the customers good quality food links in with their culture (values) which is that McDonald place customer experience at the core of what they do. This will result in repeat business and hence improve the profitability of the business which is another value (culture) of McDonalds. Another key objective of McDonalds is to be a socially responsible company; this has again affected their culture to a great extent. McDonalds gives back to the community via their own set up charity i.e. Ronald McDonalds House charity.
It is evident from the case study that McDonalds invest money wisely i.e. they have invested in existing companies like Donatos Pizza. This again is reflected in their culture, which informs us that McDonalds are committed towards their shareholders. Another aim of McDonald is to provide customers with outstanding quality and make every customer smile; this is again reflected in their culture (values) as the website informs us that McDonalds strive to improve continually. Therefore, as the company is innovating and continually making improvements, it would satisfy more customers who were maybe previously dissatisfied with a particular aspect.
In order for McDonalds to ‘comply’ with their mission/vision statement identified previously, they would need to set their structures accordingly i.e. as McDonalds want to be their customers favourite dining out restaurant, they have ensured that staff and the management are working together effectively in order to prepare a meal for a customer quickly without any kind of mistake e.g. giving a customer a wrong product.
Moreover, from the vision/mission statement of McDonalds it is clear that the company’s main focus of attention is the customers and therefore in order to facilitate the demand of customers; this means that McDonalds needs to hire more staff and hence their mission links with the structure.
Task 3
McDonalds, which is a global firm, have many needs as business.
Customer Satisfaction i.e. product quality & speed of service.
Achieving their financial targets i.e. high turnover and increasing their market share.
Meeting the health and safety regulations.
Meeting food hygiene standards e.g. quality of food.
Well trained staff that are efficient.
Open as many outlets as possible in different countries including some European countries where they do not currently have their restaurant e.g. Albania & Armenia.
Providing a good return to their shareholders.
Maintaining their good reputation and this will have a positive impact on the goodwill.
Being a socially responsible company that looks after the community and environment.
Adapting to the customers needs i.e. constantly introducing new products to meet the needs of their customers.
McDonald’s original philosophy, which was laid down shortly after World War 2, was;
“Everything prepared in advance, everything uniform. All geared to heavy volume in a short amount of time”.
In order for McDonalds to succeed with their philosophy, they have to satisfy customers’ expectations. For example, when a customer enters the store they expect McDonald’s products to be of a superior quality and some individuals expect the products to be healthy for the health conscious individuals. Moreover, the speed of service is a key issue for McDonalds; people are not willing to wait for a long time in the queue or for their food to be prepared. However, in the case study we are informed that the waiting time of 15 minutes is not unusual in the Eastborough restaurant. This issue requires investigation and in order to solve this problem, McDonalds, at that particular restaurant could take on more staff at peak periods in order to cope up with the surge in demand.
McDonalds have many key features through which they deliver services to their customers. Initially, McDonald’s deliver their service through transforming the inputs into outputs i.e. the raw materials (e.g. raw chicken breast) being transformed into an output (cooked chicken breast) and then being delivered to the customer. Furthermore, each McDonald restaurant (corporation owned or franchised owned) have the same McDonald layout, with the trademark of McDonald (M). This allows convenience for both the customers and the employees but most importantly it is the efficiency and speed of delivery which would have a positive impact upon the customers. The production area and tills are designed with convenience in mind for both the customers and employees for quick service.
Serving the customers is done the same way in every McDonald and below is a flowchart to illustrate on how the customers are served for a typical order for a Big Mac, coffee and fries;
Another method by which McDonalds deliver customer service is thorough ‘production planning’. This involves a manager preparing a daily chart of projected sales by hour throughout the day, which together with the previous three week’s sales along with the sales for the same period last year are inputted onto the computer, which proposes the bin levels by product. A surge or fall in demand is acted upon; if there is a surge in demand i.e. school children coming to the store after their school has finished, then employees are contacted via telephone to see if they are available or not. In busy periods, every employee is asked to work more ‘slickly’ and employees are allocated to the jobs in which they perform most efficiently known as ‘aces in their places’. On the other hand if there is an excess of staff then the manager will ask if someone wishes to go home. Furthermore, in order for McDonalds to effectively deliver their service, they use the computer in planning ‘manning levels’; which depends upon the sales prediction in that particular week. From the table in the case study (Exhibit 6), we can notice that the busies period for the Eastborough restaurant is Saturday lunchtime, when the require 48 staff on site to perform their respective duties.
Another way through which McDonalds deliver their service is through using techniques such as ’selling up’ and ’suggestive selling’. The initial involves asking the customer if they require a larger portion i.e. fries or if they require any additional item whereas the latter involves suggesting to the customer the nearest extra value meal.
Further, production control techniques are in place in order to handle the high volume of sales and ensure a fast service. Production control involves the production person, at the start of the day, to check the bins and request the products required from the grill area and the chicken station. To guarantee that the food is fresh and piping hot, the food which has been in the bin for more than 10 minutes is removed and discarded. This is often done through using a purpose designed clock.
Another way through which McDonalds deliver their service is through preparing the products according to the carefully detailed rules. For example, the fries must be left to defrost for 45 minutes before frying them in order to minimize the amount of water reaching the fry fat. Moreover, the fries must be cooked for three minutes, plus or minus five seconds and fries with an holding time of more than 7 minutes should be discarded. To ensure that staff are aware of these rules, there is an Observational Check List (OCL) which details precisely the steps to prepare a product.
Lastly, another method of delivering service is through Staff Training; good teamwork and routines are set for dealing with customers. Staff are expected to reach a level of expertise, designated 5-star, within 5 months for a full time worker or 10 months for a part time worker. The level of expertise is assessed through the OCL and each quarter an external audit is carried out which grades a particular restaurant on the OCL scores obtained. However, annually the restaurant is subjected to a more intensive audit known as the ’Full Field’ which reinforces McDonalds motto of QSC&V(quality, service, cleanliness and value).
The more efficient the service delivery of McDonalds is the more likely will the needs of the business being met. In my opinion, McDonalds meet the needs of the business fairly effectively through delivering their services well. Firstly, customer satisfaction is achieved through providing customers with efficient & fast service which offers customers value for money. McDonalds use a stopwatch to observe the waiting times of the customers; the restaurant aims not tot exceed a maximum time for the customer waiting in the line for two minutes and a maximum waiting time of one minute for the order being placed. the case study informs us that a waiting time of 15 minutes is not unusual. This problem could be solved through taking on more staff at peak periods to meet the demand. Furthermore McDonalds could decorate the store and make the ambience livelier which would appeal to the customer and hence promote a welcoming environment. Furthermore, the techniques employed by McDonalds such as suggestive selling and selling up meet the financial target needs of the business, which also links in with the customer satisfaction issue. If the customer is happy with the service they have received, they are likely to come back to the restaurants, which would increase revenue for the firm. Word of mouth is also a strong technique which could help the business increase their sales. It is believed that if a person is satisfied with the service that they have achieved, they are likely to tell 4 people, however if they are dissatisfied with the service they are likely to tell 10 people. Therefore, it is vital that McDonalds satisfy their customers. Customer satisfaction shall also enable McDonalds to open more stores in countries where do not currently have their restaurants e.g. Albania & Armenia. The increased revue which would be as a result of efficient service delivery would have a positive financial impact upon the return for the shareholder; the more the revenue for the firm, the more dividend would be allocated to the shareholders.
Further, staff training methods are used by McDonalds e.g. OCL and the ‘5-star’ system is in place to meet the needs of the business, which is to have efficient staff members. Furthermore, staff training is important for the firm to carry out the processes effectively; staff need to know how to use the sophisticated machinery effectively so that they do not delay the customers order.
Task 4
During the past few years, there have been changes within the business, which has had an impact upon their operations and the community. Initially, McDonalds have revised their menu; McDonalds have introduced healthy living items such as pancakes, sandwiches, salads and now use quality cooking oil for their French fries that contain no trans fat, which is harmful for the human body. This was accomplished after pressures from many campaigners (i.e. London Greenpeace) and individuals for not selling healthy products for children and adults This change will have a favourable impact upon the community as it will help them choose a from a wide range of choice but most importantly it will promote healthy living.
McDonalds have purchased three popular businesses i.e. Donatos Pizza, Boston Market & a chain of Mexican restaurants. As mentioned in the case study, McDonalds need to make some additions to the portfolio i.e. look at each of the businesses menu and try to improvise the ingredients of certain products that have a adverse impact of the community’s health. For example, as they have acquired Donatos Pizza, they could perhaps use very low fat cheese which would contribute towards McDonalds their bit for the community.
Furthermore, McDonalds have introduced a ‘made for you’ system, with an investment of $400 million, which they believe will increase sales across their 12,700 US restaurants. From the annual report of McDonalds in 2008, it is clear that the rate if sales increase of McDonalds in USA have decreased from 5.2% in 2006 to 4.0% in 2008. This could be as a consequence to the adverse affect of the ’made for you’ service and hence the rate of sales have decreased. However, the total sales revue of McDonalds has been rising steadily every year and in 2008 their sales revenue was $23.5bn. Moreover, the number of McDonalds stores worldwide have increased from 31,406 in 2006 to 31,967 in 2008. Some of the investment was on latest technology that could heat the products in a minimum time frame, to reduce the waiting time. Consequently, after the introduction of the ’made for you’ system, McDonalds believe that the quality of their products have improved, but the waiting times have doubled and a waiting time of 15 minutes is not unusual. This could, in my opinion, have an adverse impact upon their sales as people would not be prepared to wait long periods as they expect food to be served quickly in a fast food restaurant. A valid example in the case study informs us that when hordes of people come in at one particular time i.e. end of school, there is an influx of many people at one time and made for you cannot be implemented efficiently due to time restrictions.
Another change implemented recently is the ‘McDonalds Experience’ where McDonalds have collaborated with Disney as well as introducing play areas for young children as well as inviting senior citizens to play bingo in some of their stores. This will have attract a wide range of age groups, from young to old people and hence it would help contribute towards the profitability for the firm through increased customer base
Moreover, McDonalds have initiated a concept known as ’Core offering’, which is incorporating regional changes in different countries. For example, in the US, McDonalds are planning to invest $400 million to renovate every McDonald which is older than 15 years. This would be costly for McDonalds in the short term, however in the longer term it will help generate more revenue and hence profit, through attracting more customers in the improved stores.
Lastly, McDonalds have tried to stay a reputable business through investments in sports coaching projects and this shows their commitment towards the social responsibility. This would appeal to the stakeholders as it would show them that McDonalds are taking initiative to promote healthy eating and exercising habits amongst children.
