McDonalds Corporation

Prepared by: Group:1

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McDonald has 12,611 quick service restaurants in world wide.

Consistency is the factor that distinguishes McDonald from the other competitors in the
quick service industry

The corporate emblem symbolises Pleasant, fast service and tasty, inexpensive food (to
both competitors and customers)

The eating habit of the customers are changing against of fast foods.( As demographic
trends are changing ). Competitors are attacking McDonalds.

McDonalds has been so successful only because of its legendary operating system.

Through this the company have been making financial benefits also. (With an average return
on equity of 25.2 %)

The annual growth rate was 24.1 %. But the sales per unit volume have dropped in the year
1991. This made the management to think whether the current operating system is well
enough to bring - uniform quality and Service at every store and suited for the current
challenging situation of McDonalds.

The major challenge that the top managers faced is - To what extend McDonalds change
its operations strategy to accommodate the growing needs for the flexibility and variety in
the products. Was it tweaking or a dramatic change that would support the companys
volume growth objectives?

The standardized food preparation method of McDonald is termed as Speedee service

system and was first started by Mr.Dick and Mac MacDonald.

MacDonald used exact specification and customised equipment for preparing each
product.

Ray Kroc in 1954 founded the McDonalds chain

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The main features of the chain was limited menu, low price and fast food service.

Many of the competitors were able to provide similar products like McDonalds but they
only focused on recruiting the franchises and were not focused on the low cost suppliers .
For McDonalds Kroc focused on

Consistently high quality products

Establish unique operating system

To build a special relationship between company and its suppliers and franchisees.

McDonalds operating system was to ensure consistency and uniformity across all outlets.
Operating procedures guaranteed customers the same quality of food and service visit after
visit store after store.

McDonalds operating system concentrated on 4 areas:

o Improving the product

o Developing the outstanding supplier relationship
o Improving equipments
o

Training and monitoring of franchisees.

Most restaurants in the 1960s and 1970s offered variety of menus as result they
were not able to give standardised service.

Turner developed an operations manual in 1957 and by 1991 reached 750 page
documents. It describes how to make each and every product to cooking food
serving it , selecting the potato and meat for cooking.

In 1991 the company conducted a quality service and cleanliness (QSC)

performance evaluation program by 332 company service consultants to evaluate
the performance of each franchisee.

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o McDonald studied each and every component of its operation to learn what
worked and what failed to determine how best to offer consistently good
service and food .

McDonalds doesnt consider suppliers as someone to walk on .

McDonald always focused on quality stuff from suppliers hence many of the top end
suppliers refused to tie up with MacDonalds.

Focused only on quality and will not do any bargaining on price.

Franchisees were considered as partners.

Operating philosophy was that partner would make money before the company did,
and insisted that corporative revenue come not from the initial franchisee fees but
from the success of the restaurants themselves.

MacDonalds infused an

entrepreneurial spirit in its partners.

McDonalds have used latest technology to preserve its raw materials potatoes

They opened their stores from 7:00 am serving breakfast and coffee- which was
not a regular practice by other competitors at that time.( Usually all Shops only open
at 11:00 am.)

More new products were introduced in to menu with the help of suppliersMcDonalds introduced Egg Mc Muffin as a breakfast item in its breakfast menu
which was actually an invention of its franchisee.

They had empowered the meat supplier to give them chicken. (keystone)

Operating system always focused on uniformity among the franchisees and

suppliers

In order to meet the competition they have set up small outlets (which is less
expensive) in places like schools and colleges air ports museums etc.

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They provided value menu- (Happy meal) together with franchisees introduced
salads etc in menu for nutrition- (fat free meat).

Variety and value food was become the major challenge of McDonalds.

They always focused on adopting operating strategies that is flexible of adapting to

the needs of the customers.

Limited menu, fast service, low price brought them to success.

McDonalds also tried to incorporate environmental policy in its evolving

operational strategy.

We can say that McDonalds during the initial stage onwards gave equal importance to its
suppliers and franchisees. Operating system was designed in such a every stake holder is
like a partner. Many part of the chain were done by the franchisees like cooking. They have
a standard operating procedure to make the food to each and every services delivery.
They were closely watching the customer preference and have made many changes in food
menu and shop operating time. They made strategic decisions very flexibly without losing
their core value of speedy service, low price. For meeting the competition they reacted very
flexibly to each situation by taking appropriate strategic decisions which was the secret
behind McDonalds success.

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