POM ASSIGNMENT

ASSIGNMENT ON STARBUCKS AND Mc donald’s

strategic and supply chain management

Submittd by- Kumar Saheb Nunia

Sec- A Roll No.- 25
PGDM1ST 19-21

Submitted to- Dr. Indraneel Mandal

Starbucks rode the baby boomer trend in the 1990s, the swelling ranks of mid-age
professionals that created the need for a “third place,” an “affordable luxury” where people
could share and enjoy a cup of coffee with friends and colleagues, away from work and
home. The chain has inserted itself into the American urban landscape more quickly and
craftily than any retail company in history, and has forever changed the way Western
companies market themselves to consumers, with a four-fold strategy:
1. Right market segmentation. The company has stayed with the upper-scale of the coffee
market, competing on comfort rather than convenience, which is the case with its closest
competitors, McDonald’s and Dunkin Donuts.
2. Execution. The company continues to focus on its original product bundle that includes
good coffee, quality service, and a nice environment to hang around.
3. A superb leadership. Company founder Howard Schultz, who continues to come up with
innovative products to expand the company’s product portfolio, leads Starbucks.
4. China expansion. As is the case with the Japanese, Chinese people live as extended
families in small houses. This means that there is a strong demand for Starbucks as a “third
place.” Last year, Starbucks opened 500 new stores in China, bringing the total to 1500.

McDonald’s
McDonald’s rode the baby-boomer trend in the 1960s, the swelling ranks of teenagers and
the rising female labor force participation, supplying a fast and inexpensive menu. In the
1970s and the 1980s, McDonald’s rode the globalization trend by transferring the American
Way of Life to many countries around the world. At the same time, McDonald’s adapted to
the social context of each county by franchising to locals.
In the 1990s and early 2000s, McDonald’s transformed its corporate image by launching the
“Fast and Convenient” campaign that involved the radical adjustment of the company’s
product portfolio to emerging food industry trends—the refurbishment of McDonald’s
restaurants to achieve a banded, updated, and more natural dining environment.
The “fast” and “convenient” elements of the McDonald’s concept were supplemented by the
“healthy” and “more natural” element, by adding salads, fruits, and carrot sticks to the
menu.
In nowadays, McDonald’s continues to broaden its product portfolio by offering high
quality coffee and healthy drinks (either through its traditional restaurants or the Cafés),
competing head to head with Starbucks and local cafeterias—benefiting from local trends
like austerity in Europe.
McDonald’s further benefited from a sound franchise business model—a form of collective
entrepreneurship that allows its franchisee-members, management and shareholders to share
the risks and rewards from the discovery and exploitation of new business opportunities.
McDonald's model has become the norm for other franchise organizations, as discussed in
previous pieces here.

STRATGIC OPT. AND SUPPLY CHAIN MANGMT:

Facilities
McDonaldÕs operates efficient storage facility network, comprising centralized high-
volume storagefacilities with the capacity to cover supplies for around 200 restaurants.
Although McDonaldÕs hasoutsourced the majority of its production, backwards vertical
integration is still fragmentally present.Production is mainly performed by suppliers, with
postponement of final assembling of sandwiches orroasting of potatoes in outlets

Inventory
McDonaldÕs applies 20 daysÕ rolling horizon with its suppliers, whereas stores are
replenished 3 timesper week with cycle inventory not exceeding 100 SKUs. Unique
centralized stockmanagement system allows tracking historical store sales, promotions.
Since the introduction of the system in 2004, forecast horizon reduced to 1 week in
comparison with several weeks to months beforeits introduction

Transportation
Unlike the facilities, transportation network of McDonaldÕs runs through agile pipeline,
given thecontinuous replenishment practice. Given that perishables require certain
temperature limits, on onehand, and on the other, considering the strict operational standards
of the company. 3PLs operateMcDonaldÕs cold chain with special temperature adapted
trucks.

CONCLUSION:
Due to the shift in consumer preferences towards healthier foods, since the beginning of
2014McDonaldÕs has been going through per store sales decline (Patton ,2014). To address
this strategydrift, the following practices, exercised by Starbucks, may be adopted by
McDonaldÕs:- improving of corporate image by introducing an entirely healthy menu or a
differentiated menuthat would target different consumer groups (Mourdoukoutas,
2013);- acquisition of a brand, offering healthy menu. In this sense, McDonaldÕs has
made atremendous mistake by selling off its equity in Chipotle (Yagalla, 2014). ItÕs worth
mentioningthat McDonaldÕs has initially invested in the development of this chain of fast
food restaurants,transferring its knowledge, thus building a new strong
competitor.- possible differentiation of distribution
channels that would imply the development of CPGsthrough alliances or development of an
e-channel.- Further improvement of customer experience and store ambiance.Starbucks
could improve its supply chain performance by adopting successful aggregate
sourcingimplemented by McDonaldÕs. Given the rapid global expansion of Starbucks
stores, such solution wouldallow Starbucks achieving further efficiencies and improve the
satisfaction of its franchise partners.I would also recommend Starbucks further elaborate its
partnership with franchisees in order to increasethe number of franchised stores, since
further global expansion of own stores will make theircoordination complicated. Starbucks
has previously faced similar issues with growing operatingexpenses due to random
outsourcing and rapid expansion.