GROUP ASSIGNMENT

McDonald’s Business Model

Submitted by: Submitted to:

Aagya Mishra Gyan Bahadur Tamang
Aasha k. Singh
Abhinabh Bahadur Shakya
Nurbhu Tshering Gurung DATE: 31/01/2019
ACE INSTITUTE OF MANAGEMENT
Sanjeela Joshi
BBA-Bi Sec: A
1. Consider the design of a McDonald’s building, what does it look like, why?

McDonald’s restaurants are moving away from primary colors and fiberglass
booths. As part of the fast-food giant’s $2.4 billion project to redesign its iconic
restaurants, McDonald’s are becoming community centers, with interiors
reconfigured with seating zones for chilling out, working, casual dining, and group
events. Exteriors of U.S. branches are following a prototype called “Arcade,”
which has a modernist white blocky facade, sharp angular yellow awnings, and a
stylized single-arch sculpture. The project involves revamping 400 domestic and
1,600 international outlets; another 1,000 new restaurants will be built using the
new designs. McDonald recognize their responsibility for ensuring that.

Their ambition is to have the most resource-efficient restaurants possible, using the
minimum amounts of energy and water, and maximizing the use of renewable
energy.

In March 2018, they became the first restaurant company in the world to address
global climate change by setting a Science Based Target to significantly reduce our
greenhouse gas emissions.

The Company will partner with Franchisees to reduce greenhouse gas emissions
related to McDonald’s restaurants and offices by 36% by 2030 from a 2015 base
year in a new strategy to address global climate change. Additionally, the
Company also commits to a 31% reduction in emissions intensity (per metric ton
of food and packaging) across its supply chain by 2030 from 2015 levels. This
combined target has been approved by the Science Based Target initiative (SBTi).
Read more about McDonald’s Climate Action.

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This includes working with Franchisees on being more innovative and efficient in
restaurants through improvements such as LED lighting, energy efficient kitchen
equipment, more sustainable packaging, and recycling.

They’re currently developing comprehensive global restaurant sustainability

standards, including a strategy on restaurant refrigeration management and water
use.

McDonald’s building has a golden arch representing M for McDonald. The

fascinating story of McDonald’s success cannot be completed without the mention
of its famous logo design.

Those Golden Arches are one of the most popular things on the surface of Earth.

There is no denying that the McDonald’s logo has a significant role in creating its
brand image.

The logo of McDonald’s has been revamped several times before it went through
the final iteration in 2003.

However, the famous arches remained part of its design since 1968.

Today, it is an integral part of the brand identity of McDonald’s and makes up the
major part of its logo design.

The rich history of McDonald’s logo has many more exciting stories.

McDonald’s uses the Golden and Red as primary colors in its logo design.

The Golden color represents the famous arches of its first franchised restaurant,
while the red color represents the food industry of this company.

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The synergy of both of these colors creates the great brand identity of McDonald’s.

The McDonald’s logo uses the McLawsuit font in its name.

2. Consider the design of service that McDonald’s give?

McDonald’s value proposition is that their food is served quickly and of constant
quality across different places and countries. The planning and organizing of
McDonald’s business resources had revolved around their value proposition when
they re-innovate their service design in order to ensure their success. While doing
so, they probably had

McDonald’s Business Model Canvas

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3. How to they produce their product? Focus on burger.

McDonald's has been shedding new light on its heavily-criticized food sourcing
and processing practices, as it seeks to revive lagging sales.

In the face of growing consumer demand for transparency, the Big Mac chain has
launched marketing campaigns in the US, Canada, and Australia to answer
consumer- submitted questions such as, " "Does McDonald's import beef from
other countries?"

Most of the beef that McDonald's uses in its U.S. restaurants is raised domestically,
"although they import a small percentage of our 100% beef from suppliers in
Australia and New Zealand to supplement our U.S. purchases,

4. How do McDonald decide what products to offer?

McDonald is passionate about the food and take great care that what they serve
every day is safe, great quality, offers choice and is produced in a responsible
way. They use real, quality ingredients to elevate the taste of our food and the
spirits of people who enjoy it all over the world.

McDonald’s mission is to serve safe and delicious food to our customers each and
every day. Food safety and quality are at the core of everything we do, from farm
to fork.

Why it matters?

McDonald states:

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‘Food is at the heart of our business and we take pride in serving familiar, fun-to-
eat favorites that our customers enjoy. We’re constantly improving our food by
setting ever higher goals for taste and quality, all while introducing new
offerings. Together with our suppliers, we leverage our combined expertise and
passion for McDonald’s food to drive toward constant improvement.’

Food safety is the absolute number one priority at McDonald’s.

We work with leading food companies, academia, and regulatory agencies on

advancing food safety standards and practices globally, including serving on the
board of the Global Food Safety Initiative since 2008.

McDonald strive to offer a diverse menu to give their customers the meal and
snacking options they need for their entire family. They believe customers should
have easy access to nutritional information to help them make informed food
choices when they visit our restaurants.

Every day, families visit McDonald’s restaurants to share moments and create
lasting memories around meals that appeal to both kids and parents. We believe
we can make a difference for families by focusing on Happy Meals and are
committed to leveraging our scale and global reach across our System to make a
lasting impact.

Product Development Strategy for McDonald's

 Permanent Product Strategy

McDonald's features several products on their menu that are permanent and do
not change. Examples of this include their basic hamburger and cheeseburger, the
Big Mac and the Quarter Pounder. After the initial development, these items

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remain on the menu for extended periods of time without undergoing significant
changes. This strategy ensures that there is always something familiar for
consumers on the menu.

 Temporary Product Strategy

In addition to its permanent product offerings, McDonald's regularly develops

temporary products. The McRib, for example, is a product that is offered only
seasonally. The Big Ocean burger is an example of a burger that was developed
as a temporary product, offered only for a few months in 2007. The purpose of
this product development strategy is to give customers something new to
experience on each visit and to experiment with new items that may become
permanent.

 Local Product Development Strategy

As McDonald's has expanded internationally, it has created several products to

meet consumer demand in the local markets. In the Netherlands, for example,
they have developed the McKroket, a burger featuring a typically Dutch kroket, a
deep-fried, ragout-filled patty. In the Canadian province of Quebec, McDonald's
offers poutine, a traditional dish of French fries, gravy and curd cheese. Even in
parts of New England and Atlantic Canada, they have developed the McLobster,
their version of the local lobster roll sandwich. This strategy ensures that local
customers have foods to fit their tastes.

 Local Adaptation Strategy

In addition to developing new products for local markets, McDonald's will also
use an adaptation strategy whereby they take a product and modify it to fit local
tastes. In India, for instance, the Big Mac has been modified into the Maharaja
Mac which contains no beef, in keeping with local diets. In Greece, the Big Mac
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has been adapted to use a pita bread instead of a bun. Even the McLobster has
been adapted to the McCrab in some U.S. markets where crab is a common food.

Therefore, in this way McDonald decides what products to offer to their

customers.

5. What are the main considerations, in your opinion on product offering for
McDonalds?

McDonald always strives to provide products which demanded by their loyal

customers. McDonald always prioritizes on excellent customer service, product
quality, hygienic and cleanliness in their restaurants. McDonald successfully
launched New Chicken Legend Burger and fried chicken in competing with KFC
for their bestselling chicken bucket. The company also launched a broad range of
healthy products such as organic milk, salads, and vegetarian burgers. The sales
price of the McDonald’s product reflects the targeted customer’s decision to
purchase the benefit which it related in pricing rationale to value, profit, and
volume of the product. McDonald has always maintained their product quality
when there is cutting cost to compete with another fast food chain.

6. How do you think McDonald’s secure supply of their material, specifically

food and what specifications do you think they apply?

McDonald’s has hit upon hard times in recent years. Its revenues have been
inconsistent for a while now, while an internal memo revealed by the Wall Street
Journal last year, found that just one in five millennials says they have ever tasted a
Big Mac. The fading fast food giant’s quest to make itself relevant again has seen
new products tossed out with an alarming frequency, with everything from all day
breakfasts to a push for fresh ingredients all dominating the news around the

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company over the last year. Such attempts have left it looking increasingly
desperate. And this year holds even more challenges, with upward wage pressure, a
strong US dollar, and a general trend for healthy eating all expected to seriously
impact its bottom line.

However, there is a great deal to be positive about. Throughout its troubles, there
has been one constant - the excellence of its supply chain. In 2016, it returned to
the number 2 position in Gartner’s Supply Chain Top 25 for the fourth year in a
row, its sixth year in the top 10. This is an achievement made all the more
impressive by the scale of the task. McDonald’s caters for 69 million customers
daily in 36,000 restaurants across 100 countries, and they do so while contending
with the company’s goal of never being short of an item a customer orders and
restrictions around when deliveries can be made (they can’t deliver during
breakfast and lunch hours because having the trucks outside may put customers
off). McDonald’s supply chain success lies in a long-term supply chain strategy
created by founder Ray Kroc.

His system rests on a simple ‘win-win’ proposition for all parties - its employees,
the owner/operators that run the restaurants, and its supply chain partners. The
three are known as the three legs of the stool. Kroc believed that if he ensured that
restaurant owner/operators and suppliers were all successful, it would translate into
success for him. The onus has - and still is - on whether a decision represents long
term value, not on costs, and that improves things for all parties, not just on
individual components.

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Many of its supply chain partners have been around since the very beginning, with
Kroc having sought suppliers who had the same long-term vision he did. This has
nurtured an atmosphere of trust and enabled them to work together and innovate to
keep costs as low as possible. McDonald’s largest distributor, for example, is the
Martin-Brower Company LLC, a supplier with whom they have had a relationship
since 1956. Having started delivering paper napkins to Kroc’ s first restaurant in
Des Plaines, Illinois, it now delivers supplies to almost all of the company’s 15,000
locations in North America. Each of its distribution centers provides warehousing,
transportation, and logistics services to between 250 to700 restaurants, often
making at least two deliveries to each restaurant a week. Integral to ensuring this
happens is a high priority on communication and collaboration between all parties.
The company constantly tracks everything, sharing all data with partners and
franchise owners, including daily point-of-sale data for each item, restaurant stock
levels, and inventories, among other metrics. Gartner noted in its reasoning behind
placing McDonald’s second on its list that: ‘Overall, the McDonald’s corporate
supply chain team excels at orchestrating the upstream supply network. It promotes
and acts as the conduit between outsourced vendors, suppliers, corporate stores and
franchise partners. It uses council meetings to collaborate with suppliers on new
product innovation and technology, as well as on plant safety. Base expectations
with suppliers are managed through a standard supplier performance index, but the
differentiator is more cultural and behavioral, as partners tend to put the
McDonald’s system first when sharing product and process innovations and
staffing support teams with top talent.’ This close relationship has seen it overcome
a number of crises that could have crippled a lesser company. The bird flu
outbreak, for example, impacted about 40 million egg-laying hens in 2015, but
through close collaboration with the egg suppliers, the restaurant was able to lock
in adequate supply at a higher quality rating than the overall industry and ensure
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constant pricing. The company’s response to the horsemeat scandal that engulfed
Europe’s food industry in 2013 also drew praise, most notably from the Elliott
Review, the British government’s official investigation into the horse meat
scandal. McDonald’s response to the scandal was to exercise full transparency,
working with its partners to issue a series of promotional films that clarified the
provenance of its beef for its customers to address their concerns.

Operating a fully horizontal supply chain is highly effective, but it needs positive
relationships with suppliers to work. McDonald’s has shown that by trusting
supply chain partners and working closely alongside them, they will reward you.

McDonald are lean management, multi-layered supply-chain, cold chain and

Hub and Spoken system and effetely used for these business.

7. How do McDonald’s manage their staff? Consider the types of employment

and skills required.

McDonald’s focuses on building a strong brand and culture, as the company

understands the link between that and talent attraction. McDonald’s has a fun and
caring environment for their staff and they always look to train and develop leaders
from within and propel them ahead. McDonald identifies those who are aspiring
for a long-term career future in McDonald’s to join the company with a business
mindset, excellent service mentality and leadership qualities. Thus, they recruit and
offer them a series of training and development opportunities to develop them into
the next generation of leaders. McDonald’s believe that it is always important to
look for and hire people who are able to succeed current leadership team so that the
leaders can move on to their desired career progression in the future.

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McDonalds company has effective motivation system that makes it possible to
increase employee’s performance, and hence the company’s productivity. For the
current situation, the McDonalds situational approach applied by its administration
staff has turned out to be the most relevant. The administrators have used the
specific techniques on the basis of motivation theories. Having applied the
procedure of assembly line in food preparation, McDonalds has ensured the
standard quality of the production and the high performance. Besides, the company
has implemented effective motivation strategy that is based on the existing
motivation theories. Consequently, on the basis of the research we can say that
every company has its own system of behavior explanation and every critical case
should be examined as the McDonalds company case. Motivation theories, such as

Maslow’s theory and Self Determination theory should serve the basis for
elaborating a strategy which will direct managers force towards the aim, employee
satisfaction through intrinsic motivation and Maslow’s Hierarchy of Needs model.

There are: Crew Member, Maintenance, Crew Trainer, Manager,

Assistant/Department Manager, Store/General Manager. However, there are

several internal titles, that are not official which are mentioned below.

These are: Front Counter/Window, Drive Thru Order Taker, Presenter, McCafe

Specialist, Side 1/2 Initiator, Side 1/2 Assembler, Side 1/2 Terminator, Side 1/2
Bun Person, Grill Master, Fries, Fried Products, Dishes, Lobby Person, Prep
Person, Stock Person, and Truck Team.

Therefore, the above mentioned are the ways how McDonalds manage their staff
and the types of employment and skills required.

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8.Finally if not already considered, why have McDonald’s responded to the
healthy eating culture, fruit salads etc. available?

McDonalds’ food has been recognizing that junk food and unhealthy eating
habits lead to obesity. The movie “Super-Size Me” revolved around this theme.
What makes McDonalds’ food unhealthy? Fast food usually contains excess
calories, sodium, empty carbs, and unhealthy fats. According to Corporate
Accountability International, the negative effects of eating fast food includes
cardiovascular disease, type two diabetes, asthma, liver disease, and cancer. A
study conducted by the University of California, Berkley, linked the risk of obesity
to be 5.2% greater if a person lived near a fast food restaurant. Besides
McDonald’s, Burger King, Yum! Brands, and Wendy’s are also popular fast food
restaurants. The restaurant industry can be accessed by investors through the
Dynamic Leisure and Entertainment ETF and the Power Shares Dynamic Leisure
and Entertainment ETF.

Due to increasing pressure, McDonald’s has been focusing on introducing healthier

versions to its menu such as salads and wraps. It also has dedicated a page to menu
items with less than 400 calories. The healthy options consisting of a salad,
medium fries, diet coke, and a dessert add up to 860 calories.

McDonald’s hasn’t been successful at attracting customers with these healthier

items. There was a 0.2% same store sales growth at the end of 2013. The issue is
that McDonalds’ image is synonymous with junk food. This has overshadowed its
strategy to become a healthy food provider. Therefore, the above are the reasons on
why McDonalds responded to the healthy eating culture.

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