McDonald’s Balanced Scorecard Terra O’Brien

From its first store opening in 1948 in San Bernardino, California, McDonald’s has

encouraged a vision of quality service, products and innovation (McDonald’s Corporation,

History, para.1). Since its beginning, McDonald’s has worked hard to differentiate itself and

adjust to a market that has become increasingly fast-paced. McDonald’s adaptation of a balanced

scorecard has made it what it is today. By focusing on key areas of the scorecard, McDonald’s

can continue to improve and build on its vision and improve customer satisfaction, employee

satisfaction, internal business operations and ultimately its financial position.

Being in the fast-food industry, McDonald’s has a hard time differentiating itself from its

competitors. This is likely McDonald’s biggest obstacle in its industry strategy. Competition

such as Wendy’s, Burger King, KFC, Subway and even Taco Bell provide a challenge for

McDonald’s and make it harder for profit potential. Although stores such as KFC, Subway and

Taco Bell don’t necessarily provide the same products, they do provide competition in the area

of cost reduction. Health consciousness has also become another factor in regards to competition.

Customers may feel like making healthier choices, such as sub sandwiches or salads at Subway

(McDonald’s Corporation, History, para. 9). McDonald’s has tried to rise above with

introduction of healthier menu items and a more active Ronald McDonald and cutting out

characters such as the Hamburgler that promoted an unhealthy lifestyle of obesity (McDonald’s

Corporation, Overview, para.6). In an effort to increase differentiation and innovation,

McDonald’s introduced McCafe, selling premium coffee beverages at competitive prices,

rivaling coffee chains such as Starbucks (Chain Leader, para.1&3). These new division of

McDonald’s offers new and existing customers different products and a whole different

experience that will set them apart from their competitors.

 McDonald’s uses many suppliers around the world to provide products to all their

restaurants. Suppliers from McDonald’s include Golden State Foods, Martin-Brower, J.R.

Simplot, and coffee bean growers from around the globe including Central and South American

and Indonesia (McDonald’s Corporation, para.2) (Chain Leader, para. 3). All McDonald’s

restaurants use the same products from the same suppliers. You can get the same Big Mac

whether you are in Rochester, MN or Beijing, China. This is the foundation in which

McDonald’s wants to encourage consistency among restaurants (Speizer, 2006). McDonald’s

relies on their suppliers to give them the highest quality products. Producing and shipping these

products across the globe is some of these suppliers whole business (McDonald’s Corporation,

Overview, para. 2). If McDonald’s was to lose even one supplier it would have to change one or

more of its product lines and perhaps its menu all together, sacrifice quality products or change

the items that McDonald’s customers are used to. This gives suppliers a large amount of

bargaining power. McDonald’s can use the five-industry analysis tool to assess its strategy. By

eliminating the possibility of losing business to competitors, losing suppliers and being aware of

equivalent products and potential entrants into the market, McDonald’s can continue to

differentiate itself and maintain its relations with suppliers, employees and customers.

McDonald’s creation and distribution of its products are not necessarily unique or

different. McDonald’s operates on a cost leadership strategy, encouraging lower prices for

commonly produced goods. Although McDonald’s operates on the basis of cost leadership,

Michael Yoshikami , chief investment strategist at YCMNet Advisors believes that they should

also encompass a sense of product differentiation (Speed=Profit, 2009). Mr. Yoshikami states,

“McDonalds is a mass-scale product, but they have to operate as though they’re a premium

product to keep gaining market share” (Yoshikami, 2009). By creating a strategy of low costs

and a superior product, McDonald’s will have a competitive advantage among its competitors.
Also, the introduction of healthier menu items and McCafe give McDonald’s the differentiation

that Yoshikami is referring to. Customers are aware of McDonald’s ability to produce high-

quality fast food at low prices. Now McDonald’s can begin to build a powerful empire based on

customer service, employee satisfaction, financial perspective and internal business operations.

McDonald’s offers valuable training to store managers at Hamburger University in Oak

Brook, Illinois (Speizer, para.1). At Hamburger University, 5,000 to 7,000 managers are trained

every year in several different areas of operations at McDonald’s (Speizer, para.6). The goal of

the training programs and the McDonald’s corporation is to provide consistency in service and

quality in all 120 countries that McDonald’s restaurants can be found (McDonald’s Corporation,

Overview para.1). Focusing attention on the managers to push for consistency, integrity and

McDonald’s vision is what will give the company a competitive advantage in the industry. In

addition to six satellite universities operated around the globe, McDonald’s Hamburger

University provides training, advanced management training and developed a sound tracking

method to ensure success among the trainees (Speizer, para.9,10,11) . Competency exams are

given to students and follow-ups are done to evaluate the effectiveness of the training. Mystery

shoppers are also used in McDonald’s to ensure that the vision of McDonald’s is being upheld

and that training programs at Hamburger University remain effective (Speizer, para.11).

Consistency is the goal of McDonald’s to reinforce the idea that every customer receives the best

service and quality meal each time they visit a McDonald’s restaurant anywhere in the world

(Speizer, 2006).

In an effort to increase their profitability, McDonald’s also has worked on improving

speed and efficiency in their restaurants. The plan to increase speed came after McDonald’s

introduced their wraps, which were slowing speed times, as the preparation of these items

required developing new techniques (Speed=Profit, para.1). Another driving reason to increase
the speed and efficiency in the restaurants was also due to slowing economic times, making it

more likely that customers will choose to dine at home rather than in a restaurant to conserve

money (McDonald’s Corporation, para.9). By ensuring that McDonald’s was producing the

highest quality food with exceptional speed and efficiency, the restaurants were giving

themselves the best chance at retaining their customers. Promoting cost leadership along with

quality service and products is what makes McDonald’s rise above its competitors

(Speed=Profit, 2006).

There are a few ways that McDonald’s is working on increasing their profitability. First

of all, product innovation takes place off site to allow for training and development. When a new

product is introduced, like the snack wrap, McDonald’s works to see if the product is worth

marketing or if it will slow production time too much (Speed=Profit, para.1). Warming trays

have also been introduced and tested to hold 50% more hamburgers (Speed=Profit, para.3). Soda

fountains are also being tested to fill automatically so drinks are filled immediately and

employees can multitask and not wait for the drink to be filled (Speed=Profit, para.9). In

addition, software and hand-held devices were in development to help short-circuit lines by

getting employees out from behind the counters, and simplify the ordering process

(Speed=Profit, para.3&10). All these improvements that are being tested will help cut seconds

off ordering and waiting times, streamline the drive-thru process and at the same time keep

customers coming back to experience a quality meal with exceptional speed and delivery time

(Speed=Profit, 2009).

According to the McDonald’s Quick Time video, the restaurant chain focuses on key

areas of opportunity from the balanced scorecard. From a financial perspective, McDonald’s

likes to focus on profitability and sales. From the customer perspective, mystery shopper scores

and drive-thru service times are the key areas of focus. From a learning and growth perspective,
employee commitment and turnover are the key focus. Store managers need to view all these

areas and more to maximize the potential of its balanced scorecard. I have created my own

balanced scorecard for McDonald’s on page 7, from the perspective of a store manager. First of

all, from a financial perspective, McDonald’s is focusing on profitability and sales. A store

manager would probably like to specify the areas that finances can be improved. Increasing

market share and speeding production and delivery times are what is going to maximize

McDonald’s productivity. Focusing on sales, McDonald’s needs to center its attention on cost

leadership, efficiency, and consistency. Customer perspective will need focus on many areas

including number of new customers, retaining existing customers, speed, pricing, quality and

service. A combination of these areas will make sure customers are having repeat experiences of

quality products and services and that those happy customers are telling their friends. Learning

and growth can focus on a number of important concepts. Employees need to have the

knowledge, training and development to succeed in the company and provide exceptional

customer service and training of new employees. Technology will play an important part in

giving employees the ability to work quicker and more efficiently and cut waiting times in line.

McDonald’s can also improve employee satisfaction by investing in its employees. This includes

sending managers to Hamburger University, rewarding their hard work and dedication and

following up to ensure that the training programs are still successful. From an internal-business

process perspective, McDonald’s can focus on order-delivery time, production and globalization.

Keeping the balanced scorecard effective in its operations around the globe is the key to

McDonald’s success. Focusing on the different areas of the scorecard, McDonald’s can ensure

that consistency, productivity and efficiency are always at the forefront of the business. By

maintaining customers and employees who are willing to work hard and are trained in the right

areas, McDonald’s will feel comfort in knowing that their vision is being upheld. The balanced
scorecard can be a powerful tool in any business. McDonald’s has demonstrated that their

balanced scorecard has been a key component to their success and that continued improvements

can always be made.

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Bibliography

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