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ASSIGNMENT COVER SHEET

PROGRAMME : BSC (hons) in Marketing
SUBJECT CODE AND TITLE : MKT 2144 Marketing Channels

LECTURER : Dr Evelyn Toh Bee Hwa ASSIGNMENT DUE DATE : 8/11/2023

STUDENT’S DECLARATION
1. I hereby declare that this assignment is based on own work except where acknowledgement of sources is
made.
2. I also declare that this work has not been previously submitted or concurrently submitted for any other
courses in Sunway University/ College or other institutions.
[Submit “Turn-it-in” report (please tick √): Yes / No___
NO. NAME STUDENT ID NO. SIGNATURE DATE
1. Bryan Liew Keng Hua 21047246 Bryan
2. Lee Xin Rui 21032024 XinRui
3. Lea Chin Sii Lyin 21050851 Lea
4. Toh Kean Fong 21046461 KF

Email-Address/ Addresses (according to the order of names above):

1. 21047246@imail.sunway.edu.my 2. 21032024@imail.sunway.edmy

3. 21050851@imail.sunway.edu.my 4. 21046461@imail.sunway.edu.my

APPROVAL FOR LATE SUBMISSION OF ASSIGNMENT (if applicable)

IF extension is granted, what is the revised due date? ______________________________________
Signature of Lecturer: ___________________________ Date: _______________________________
Marker’s Comments:

Marks and/ or Grade Awarded: ____________________ Date: ______________________________

TABLE OF CONTENT
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No Content Pages

1 Cover Page 1-3

2 Introduction 4

3 Pre-pandemic distribution routes 5-6

4 Current distribution routes 7-8

5 Internal Challenges that McDonalds faced 9

- Company

6 External Challenges that McDonalds faced 10 - 14

- Customers
- Political
- Economic
- Social
- Technology
- Legal
- Environment

7 Pre-pandemic Distribution Strategy 15

- Direct distribution
- Franchise
- Drive thru
- Employee training (SLDN)
- Kiosk
8 Current Distribution Strategy 16 - 17
- Digital – QR
- Deliveries
- Omnichannel
- Supply Chain Management
- Three-legged stool approach
9 Competitors Strategy 18

10 Do you think strategies implemented will help McDonalds to 19

sustain long run?

11 Internal Challenges that Affecting McDonalds 20

- Internal management
- New AI technology

12 External Challenges that Affecting McDonalds 21

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- Supplier network
- Individual preference
- Chicken Shortage

12 Recommendations 22 - 23

13 Plagiarism 24
14 Reference list & Appendix 25 - 35
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Introduction
Mcdonalds is an American multinational fast-food chain, that was originally founded in 1940 in
San Bernardino, California, as a restaurant run by Richard and Maurice. However, its
transformation into the global corporation we know today began in 1955 when businessman Ray
Kroc joined McDonald's as a franchise agent and eventually bought the restaurant chain from the
McDonald brothers (Chia et al., 2020).

A unique aspect of McDonald's Malaysia is that all of its restaurants are certified Halal, which
means that their food and ingredients follow to Islamic dietary rules. McDonald's Malaysia is the
first Quick Service Restaurant in Malaysia to be recognized as Halal by the Malaysian Islamic
Development Department (JAKIM) (McDonalds, 2023). This Halal certification ensures that the
food and ingredients served in McDonald's Malaysia align with Islamic dietary principles,
catering to the specific dietary preferences and requirements of the Muslim population in the
region.

Following that, we will take a look at Mcdonald's distribution routes, PESTLE framework
challenges, logistics, distribution strategies, and recommendations. We may gain a deeper
understanding of Mcdonald's current situation and provide suggestions for its future success by
thoroughly examining these subjects.
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Pre-pandemic distribution routes

A supply chain is a group of people and businesses in charge of producing a product and
bringing it to the consumer. The chain's links start with the raw material producers and conclude
when the van delivers the finished product to the final consumer (Hayes, 2022). Mcdonald's
suppliers for chicken products are Dindings Poultry Processing Sdn Bhd (DPP) and Huat Lai
Resources Berhad (HLRB) which both are halal certified by JAKIM (Jabatan Kemajuan Islam
Malaysia) (Mcdonalds, 2023). McDonald’s uses a complex supply chain that mostly depends on
outsourcing to deliver their raw materials to every branch. This approach includes transporting
their raw materials in refrigerated trucks to maintain the freshness and quality of the food during
the transport process. Within their supply chain, McDonald's efficiently makes use of a network
of diverse suppliers and third-party logistics (3PL) providers. McDonald's can guarantee a
consistent and timely flow of ingredients to its restaurants by collaborating with multiple
suppliers and outsourcing certain logistical tasks, like transportation and distribution. This helps
them to consistently provide the same high-quality products to their customers. (Setiawan &
Ellitan, 2023). The refrigerated truck will then send the raw materials to their warehouse which
are used for dry, chilled, and frozen food storage. These warehouses are specially built to ensure
that every storage compartment has a perfect temperature, protecting the products from possible
spoilage brought on by external factors like changing weather and climate conditions (Setiawan
& Ellitan, 2023).

McDonald's gathers information from multiple sources into a single database. Reports within this
database, allows Mcdonalds to easily and quickly update data, get a monthly spending report,
search for important information, analyse data (Kolesnikova, 2018). Effective management
within McDonald's service restaurants relies on the information and resources. It is essential for
the management to have access to accurate and up-to-date data regarding their employees,
ensuring that they can make accurate decisions and optimize their workforce performance.
Additionally, Mcdonalds depend heavily on a reliable and efficient supply chain, which ensures
a consistent supply of high-quality raw materials to meet demand from customers while reducing
waste. To meet these goals, Mcdonalds uses databases to lower the possibility of critical
documentation being lost, avoid errors in purchasing of raw materials, automate several
operational procedures. The Access database system implemented by McDonald's helps them by
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reducing the time required to access important data on raw materials, products, suppliers, raw
material supplies, and employee information (Kolesnikova, 2018). In the shortest amount of time
possible, the manager can work with new data by entering it into the database. Access database is
also important to McDonalds which enable them to pay their suppliers on time to sustain a long-
term relationship with their suppliers (Setiawan & Ellitan, 2023).

Outbound logistics plays a vital role in ensuring the smooth and efficient delivery process of raw
materials from a centralized distribution system to the final customer (Setiawan & Ellitan, 2023).
To get the raw materials to the restaurants, McDonald's uses cargo trucks. Therefore, scheduling
and auditing are important. The production line, processing orders, and recording of payments at
the cashier are all managed by the information system. Furthermore, the food's freshness and
warmth are preserved during transportation is mainly due to the quality of the packaging,
emphasising the significance of effective outbound logistics in providing a reliable and pleasant
customer experience.
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Current distribution routes

For the past two and a half years, the pandemic has kept a large number of Malaysians indoors.
Lack of labour also had an impact on the poultry business, managing logistics and transportation
became more challenging. Transportation of goods was made harder, and it was difficult for
workers in the logistics sector to travel to work. Due to the strict lockdown, production and
logistics have been suspended. The had an impact on logistics, as transportation and movement
restrictions triggered shipment delays and cancellations. Significant supply chain bottlenecks
were caused by this interruption, especially when items were being transported across borders
(Musella, 2023). This has affected supply and demand for various kinds of goods because store
owners and retailers are limited by restrictions. The food distribution system has been
significantly impacted by the shortage of labourers and truck drivers during the lockdown (Singh
et al., 2020). Regarding import and export activities, it was discovered that there was a
significant 51.5% decrease in air freight transport in 2020 (Rahmat & Khoo, 2022). There is no
denying that the crisis between Russia and Ukraine has affected the economy, especially when it
comes to fuel prices. Malaysian RON 97 fuel prices have increased dramatically, rising from
RM3.27 on February 24 to the current RM3.75 (Hariz, 2022). The sudden spike in fuel prices
and the consequent rise in transportation costs have placed a significant burden on their
businesses (Aman, 2022).

Therefore, to maintain the quality and freshness of their products, McDonald's employs a Just-In-
Time (JIT) order and delivery system, which guarantees that food is reached exactly when it is
needed (Setiawan & Ellitan, 2023). McDonald's employs a Just-in-Time (JIT) system that
changes its food preparation steps by delaying cooking or assembly of an order until it is placed
(UKEssay, 2015). One of the main advantages of this strategy is that McDonald's employees no
longer feel under pressure or overburdened when dealing with customised or special orders
because they have a lot of experience in making burgers exactly how customers want to. This
efficient production method benefits both McDonald's and its customer by reducing waste and
operational expenses while guaranteeing that the food is fresher and more customised to the
tastes of the consumer.
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In order to guarantee food availability and accessibility, all COVID-19-affected nations were
forced to implement stricter measures to stop and prevent the infection by reevaluating their agri-
food policies (Tan et al., 2023). Since the start of the Movement Control Order (MCO),
McDonald’s Malaysia has increased its food safety and hygiene measures to ensure the health
and wellbeing of its People and Customers (McDonalds, 2020). McDonalds and its suppliers
were forced to put additional safety measures and protocols into place to safeguard the health
and safety of their employees. These included social distancing, improved sanitation, and
personal protective equipment which might slow down manufacturing and distribution system.
With the launch of its contactless delivery service, McDonald's has introduced several safety
measures and enhanced social distancing practices for riders and customers (McDonalds, 2020).
Before entering McDonald's premises, riders must wear masks, sanitize their hands, and undergo
a daily temperature check. A designated crew member will sanitize and clean each rider's
delivery bag before packing the food. separated the pickup locations in McDonald's restaurants
for customers using Grab Food and Foodpanda from those using McDelivery Service (MDS).
The new measures include sealing take-away bags with temperature readings, riders contacting
customers upon arrival at the delivery spot, food drop-off at an agreed safe location, and riders
maintaining a minimum one-meter distance from customers to minimize contact with customer
(McDonalds, 2020).
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INTERNAL CHALLENGES that McDonalds faced

Company : Recruiting and retaining their employees

According to Ghazali (2010), fast food industry faced vital challenges in recruiting and
retaining their employees based on the trends of the world; where not only McDonalds is facing
these challenges but also their competitors. Hence, McDonalds has made amendments in their
recruitment and retaining strategies which is also a key to prevent labour turnover. A study by
said that McDonalds’s should devise particular incentives to promote high performance to
guarantee that employees work efficiently to fulfil customers’ demand and achieve customer
satisfaction (Oh, 2023). For further illustration, McDonalds has implemented a National Dual
Training System (NDTS) which is use for training and skills development for their employees
which will also help in building a positive image of McDonalds. NDTS is an 18 month training
programme where 70% are practical training in the restaurant and 30% are theoretical lessons,
social and religious classes are provided additionally (Rohiat et al., 2023). According to Jabatan
Pembangunan Kemahiran (2018), those who have completed NDTS and the final assessment
will be awarded the Malaysian Skills Certificate (SKM) Level 2 and Level 3 which allows them
to be employ by McDonalds. In addition, monthly allowance of RM1200 and hostel allowance
provided for selected apprentices during this training period which makes a comparison of other
company who offers lower allowance or non-pay for their trainees (Rohiat et al, 2023).
Moreover, the theme practice of “People First” (focus on the well being of employees and
customers), “Support system” (provides job and learning opportunities) and “Continuous
Improvement” (quality improvement, strategic career planning, training and standard
improvement) was found in McDonald’s training system where it aims to increase customers and
employees satisfactions, lower the operating costs and increase market share (Rohiat et al.,
2023). Also, retaining employees by training and cultivating them could train their employees to
make important decisions such as dealing with suppliers directly or decide which menu to be
publish. Moreover, McDonalds have a list of responsible and ethical recruitment principles to
follow, and making it available to their third-party contractors to educate and encourage them to
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develop similar policies and procedures for their own business operations (McDonalds, 2022).
To sum up, the National Dual Training System (NDTS) offered, practices that they
implementing and systematic recruitment process has successfully attract the society to work
with McDonalds while retaining the quality one to avoid high employees' turnover.

EXTERNAL CHALLENGES that McDonald’s faced

Customers : Health conscious and price sensitive

Heart attacks are on the rise among young adults which is not only a concern for the elderly. A
Study on coronary artery disease (CAD) among Malaysian youth found that almost 70% of
participants aged 15-24 have at least one cardiovascular risk factor (Murugesan, 2022). This
result has led younger generation started earlier to increase awareness on the importance of
healthy eating habits because diabetes, hypertension and high cholesterol are major factors that
contribute to heart disease. Hence, Mc Donald’s who offers fast food that often in high calories,
saturated fat, sugar, and sodium which increase the risk of heart disease and other health
problems will refrain customer from purchasing (Mayer, 2023). In order to dive in the health
conscious market, McDonald’s needs to come out with healthier food that will suit their appetite.
Besides McDonalds are promoting ‘Balanced, Active Lifestyles by providing nutrition
information of their meals to help the public to plan a balanced diet, as shown in figure 1 in
appendix.

Next, Malaysia shoppers such as individual consumers or purchasing agents are price sensitive
(International Trade Administrator, 2022). This is due to the food prices in Malaysia has raised
by 3.9% year-on-year in September 2023, especially the meat from 3.4% to 5.8% which cause
the increase of price in McDonald’s (TradingEconomics, 2023). The higher the price of food, the
more price sensitive the consumers are. Moreover, according to Bernama (2022), the increase of
food and fuel prices has caused inflation in Malaysia; which increase the price sensitivity among
Malaysians. Therefore, consumers seek for cheaper alternatives or substitution. Even though the
price of chicken has increased from RM19.9 to RM25.90 per kg, it is still cheaper than fish.
Also, it is unavoidable that the price are increasing, but consumers’ salaries remain stagnant
unfortunately. Hence, people prefer to eat at home nowadays (S Bedi, 2022). In TheSunDaily
(2023) paper, fast food supposed to be convenient and cheap, but it’s getting more expensive;
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Najib Razak raised his concern over McDonald’s surge in prices in his Facebook post where the
most visible price change in McChicken that used to be the more affordable in the menu, has
increased 86% from RM5.00 (2017) to RM9.29 (2023), which is very visible. Thus, the food
inflation has result consumers to be price sensitive towards McDonalds.

Political : Implementation of RM1500 monthly minimum wage & amendment of food labelling

According to (BusinessToday, 2022), the PGM 2022 the implementation of Malaysia’s RM1500
minimum monthly wage per month has taken effect on May 1. This has impacted McDonald’s
business decisions, which include prospects of price hikes at McDonald’s Malaysia’s outlet. This
is a pressure for McDonald’s on the one hand. On the other hand, the labour shortages in a high
wage demands of market has force McDonald’s to rise up their pay in order to recruit people.
Moreover, NewStraitsTimes (2023) mentioned that employees have raised their concerns on the
rising cost of living and labour shortages as they are recovering from the economic crisis caused
by Covid-19 pandemic, and the increase of minimum wage has been slow. The article also said
that RM1500 is not enough to live in Klang Valley and the sum barely covers their food rent and
other necessities for a single person; Bank Negara Malaysia also reported that the living wage for
a family with two children in was RM6500 in 2023 while RM2700 in 2016; in comparison, the
poverty line has been set at RM2208 (Singh, 2023). Even though RM1500 pay is low,
McDonalds is still able to retain their employees by doing the practice of “People First”. For
example, NDTS is supported by McDonalds Youth Opportunity program aims to reduce barriers
to employment for young people by providing RM1200 per month for students, which is a win-
win situation where McDonalds could have a competent crew and manager (Rohiat et al, 2023).
This has shown McDonalds has put in major effort to motivate their employees by providing
incentives such as good pay rates and better career prospects and skills development (Timsal et
al., 2016). Hence, people will choose to work with McDonalds despite RM1500 being the
minimum wage to survive in a city.

Moreover, according to ChemLinkedTeam (2023), the Food Regulations 1985 on nutrition facts
label requirements has amended by government. Specifically, the label on sodium content is
mandatory and the sugar content such as monosaccharide and disaccharide must be declared in
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their packaging. The reason is to encourage public to be informed content of the food they are
consuming and reduce salt and sugar intake, so they could make a healthier choice in their diet
(Foodipedia, 2021). Therefore, McDonalds has to be aware of these changes and implement in
their food packaging as government have been more strict to the regulations in nutrition labelling
& calorie content which will affect how McDonald’s formulate their menu items by offering a
healthier choice to their customers.

Economic : Food inflation

The ringgit has weakened against US dollar and Singapore dollar. Malaysia’s inflation, as
measured by the consumer price index (CPI), increased 2.3% in April 2022 from a year earlier,
led by higher food prices, according to Department of Statistics Malaysia (MOSM). The increase
in food inflation, which contributed the highest (weightage) to the overall weight of the CPI,
remained to be a major contributor to inflation (Chung, 2022). The pressure of inflation is felt by
many, especially in the logistics sector and their operating cost will rise due to the imported raw
materials (NewStraitsTimesBusiness, 2023). Delivery and freight prices alongside warehouse
storage charges have been increasing (The Malaysian Reserve, 2023) which makes higher cost of
raw materials for McDonald’s.

Social : SDG 5: Gender quality

The public has been focusing on sustainable development goals by enhancing gender equality
(SDG 5) in their working space, and McDonald’s effort in diversity and inclusion is not visible
by the public. According to UNDP (n.d), the 2030 agenda conjure up an image of a world where
“every woman and girl has the same rights and opportunities, with no legal, social and economic
obstacles in their way so they can be empowerment and succeed”. Thus, is it important to
achieve the agenda of “leaving no one behind”. Globally, McDonald’s promote itself for
promoting diversity and inclusion by establishing the McDonald’s Malaysia Women’s
Leadership Network (MWLN) to foster an environment where women have the opportunity to
grow and succeed (myStarjob, 2015); but Malaysia was ranked 103 out of 146 countries under
gender equality index 2022 (UNDP, n.d) which is still left behind other countries. Hence, it is
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challenging for McDonalds to show their initiative in promoting gender quality as the gender
equality index is low in Malaysia.

Technology : Self-service kiosk

The emergence of covid-19 has accelerated the rate for business to adapt to new and innovative
strategies to remain resilient in times of crisis. Due to MCO, many businesses have
acknowledged the benefits online business as 40% increased their focus on online sales and 70%
of business expect their revenue to grow in 2021 (BusinessToday, 2022). This has forced
McDonald’s to change their business operations to adapt with the trends and advancement of
technologies. To further illustrate, McDonalds always keep an eye on the changing demand from
the consumers and notice the long queues at the counter (Tsai and Geetha, 2019). This is where
they rolled up its self-service kiosk that can help improve service quality by minimizing the
wrong order taken, also skipping the queue at the counter to improve effectiveness and save time
because people are living in the fast-track lifestyle everyday where time is money (Asma, 2021).
Furthermore, other advantages can be obtained from the self-service kiosk, such as avoiding
contact with the service crew, improve order accuracy, allows customization options,
multilingual support, payment flexibility and multilingual support; it has shifted their consumer
behaviour by increase an average order size by 20%, and order value increase by 30% (Ashfaq,
2023). Even though they adapt well in the MCO period, but they still need to keep up on the
latest trends to sustain their current customers and welcome the new generation of customers. In
other words, self-ordering kiosk helps McDonalds to save business expenses by hiring someone
during peak season in hiring a cashier and this technology requires minimal maintenance (Team
Grubbrr, 2022).

Legal : Syariah Law

Malaysia is an Islamic country where majority of the populations is Muslim. In order to capture
the market, McDonalds are bound with syariah law which stated all food served must be Halal
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by working with local businesses, government and suppliers throughout their operations. Their
chain was rewarded with a halal certificate, indicating total absence of pork products. (Abdelali
& Ngah, 2019). The process of raw material to distribution to their customers have to be halal
certified which are bound with the syariah law. They make sure the foods they deliver are 100%
halal by ethical sourcing through clean preparations (McDonalds, n.d). This has caused
McDonalds to be more cautious and stay on guard on their food preparation and sourcing of new
raw materials to prevent community sentiment and lawsuit on non-halal food being serve like the
case in 2011 where McDonalds advertised its items as halal that were not, has make the company
reached a $700,000 settlement in response (Guorino, 2015).

Environment
Globally including Malaysia, it was reported that one third of planet-heating gases are contribute
by the food production with the use of animals for meat has caused twice the pollution of
producing plant-based food. To illustrate, the food production includes use of farming machines,
fertilizer sprayed, and transportation of products has caused 17.3bn metric tonnes of greenhouse
gases a per year and it is still increasing. In specific of animal based food production, chicken
meat contributed 1.25bn metric tonnes while beef is the most, 4.25bn metric tonnes (Milman,
2021). Hence, McDonalds has to take initiatives to minimize the harm of their business to the
environment. In compliance with McDonalds (2019), it targets to open 200 green restaurants by
2025 by procuring energy efficient and renewable energy equipment to reduce the harm that they
caused in food production. It’s Malaysia first full-fledged sustainable drive thru restaurant in
Setia Alam with sustainable features like used cooking oil to biodiesel, Capture Jet + Restaurant
Air Balancing, roofting system integrated with Solar Photovoltaic, thermal solar water heater and
other features to reduce the greenhouse gas emissions. Additionally, McDonalds not only
managed to reduce 400 tonnes of cardon dioxide through its green technology solutions, but also
saving RM300,000 energy bills in advance, which kills two bird in one stone. By reducing waste
through packaging, McDonalds has utilized 100% sustainable fibre packaging in all its restaurant
and making sure the carryout bags are made of 100% recycled materials. In addition, the ‘Say
No to Straw’ campaign by McDonalds had successfully reduced 55 million pieces of straws
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nationwide. As a result of the effort made in packaging by McDonalds, it has reduced 276 tonnes
of plastic per year (McDonalds, 2019).

McDonald’s pre pandemic distribution strategy

McDonalds Malaysia focuses on direct distribution which they process raw materials from
suppliers and directly sale the finished product to customers. McDonalds Malaysia uses intensive
distribution strategy where they focus on selling their products in all geographic outlets in
Malaysia to ensure their products are more visible and available to consumers which includes
having 24/7 opening and dining experience (Garcia, 2023). In 2019, Malaysia has over 290
McDonald’s outlets operating (Hassandarvish, 2019). To support their intensive distribution
strategy, McDonalds Malaysia are investing RM1.35 billion into franchising expansion to
increase their total outlets to 500 operating outlets by 2026.

McDonalds Malaysia has also distributed their products through drive thru. In 2018, McDonald’s
has over 167 drive thru at their outlets which they plan to increase another 20 drive thru outlets
by 2019 which is backed by a RM200 million investment (McDonalds, 2019). This has provided
convenience for consumers to access McDonald’s goods without leaving their vehicles and
which saves time compared to queuing in a physical store. This distribution strategy was deemed
successful as 50% of all McDonald’s sales came from drive thru in 2018 (McDonalds, 2019).

To manage the increase in outlets and drive thru operation efficiency, McDonald’s Malaysia has
also collaborated with the Ministry of Human Resource Malaysia under the National Dual
Training System to provide apprenticeship programs to recruit more staff to increase their
operation efficiency. (Dsd, 2018).
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McDonald’s Malaysia has also implemented kiosk machines to reduce ques. These machines
have touchscreen interfaces and allow customers to make customisations to their burgers and
even allow various payments method such as cash and cards. This allows quicker and increase in
sales as their using online systems to manage their orders which is more efficient than physical
order counters (Yap, 2017).

This is deemed an effective of McDonald’s Malaysia distribution strategy as pre pandemic they
were more keen on physical distribution to deliver their final products to consumers. This can be
reflected in their sales of over RM3 billion (Nathan, 2019).

Mcdonalds post pandemic distribution strategy

McDonald’s have also changed how their distribution strategy ever since Covid-19 pandemic.
McDonald’s Malaysia has shifted their operation focuses to 3D which are Digital, Drive thru and
Delivery. They started implementing technologies through partnerships into their distribution
strategy. For example, McDonald’s have partnered with Maybank to implement promotion
where consumers can claim free chicken McNuggets when using Maybank cards or Maybank
app QR payment to make purchase in drive thru outlets (Maybank, 2023). This is much safer as
it can be contactless payment while ensuring there social distancing in McDonald’s strategy.

McDonald’s have also changed how they distribute their products to consumers. Instead of
relying on physical distribution, McDonald’s have use e commerce and deliveries to deliver food
to consumers. During pandemic, there were tighter restriction which restrain consumers freedom
to leave their homes and therefore majority of people prefer to order online deliveries (Mui et al.,
2022). Because of this, McDonald’s have focused more on their online deliveries through the
McDonald’s app and formed partnerships with delivery platforms such as Foodpanda and
GrabFood (Ogbu, 2021). They have focused on expanding their delivery points and even
doubling on their delivery riders to their customer reach. McDonald’s also aimed to ensure their
Mcdelivery system are available in 90% of all outlets by 2025 (Marketing Initiatives, 2018).
Mcdonalds Malaysia has also partnered Loginext which is a automation system company which
provides Mcdonalds with AI technology for automation systems integrated into Mcdonald’s app.
Logitech has atomised Mcdonalds online ordering process as well as providing advanced route
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optimization as well as providing accurate ETA for deliveries (Loginext, 2022). This helps
improve Mcdonald’s retail distribution efficiency of products to consumers while enhancing
customer digital satisfaction.

McDonald’s has also focused on omnichannel by introducing the ‘order and collect’ feature on
MacDonald’s app which allows consumers to effortlessly order and pay for their food through
their mobile phones and select where or a fixed pick-up time to collect their food. This provides
convenience as consumers do not need to queue up physically or through drive thru while
making orders and payment just by using the McDonald’s app (Othman, 2022). Othman also
mentions that Mcdonalds app has grossed over 9 million downloads since its launch and that
‘order and collect’ feature has boosted customer engagement through app interface. In the fast-
food industry, omnichannels implementation can help boost customer engagement which leads to
repurchase intentions and brand loyalty (Phang et al., 2021).

Mcdonalds Malaysia has also focused on improving their supply chain management by using
inbound logistics by being fixed to a supplier for raw material such as Macfoods Services Sdn
Bhd for their chicken meat (Setiawan & Ellitan, 2023). Mcdonalds has also emphasised on the
‘three-legged stool’ in their supply chain management system. Mcdonalds, franchisers and
suppliers have worked together to deliver quality food, services and cleanliness to their
consumers (Mcdonalds, 2022). For example, Macfoods Services Sdn Bhd which has HACCP
Certification (Hazard Analysis and Critical Control Points) will only issue standardise quality of
processed chicken meat after approval from their Program Food safety management system
before being delivered to Mcdonalds. Mcdonald’s franchises will ensure proper operation
guidelines while providing good service and food to consumers. With each “leg stool” working
together, Mcdonalds was able to achieve over RM3.3 billion in 2021 (Malaysian Reserve, 2023).
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Competitor Strategy
Mcdonalds closest competitor is KFC as they target similar customer and have relatively similar
product lines such as lunch menus and breakfast sets. KFC also has a market share of 39.4%
which is second to Mcdonalds who have 45.4% leading the fast-food industry in Malaysia (Tan,
2022).

KFC is owned by QSR brands which vertically integrate their food operations. QSR owns other
brands such as Ayamas which have their own farm which is where KFC outsources its chicken
supply from (Mohd et al, 2019). Ayamas also have their own warehouse where they store their
chicken which allows flexibility to meet demands from other brands own by QSR. This helps
KFC to save costs from warehouse and storage facilities as they are sourcing their supply from
internal supplier compared to Mcdonalds who receive supplies from Macfood Services which are
external parties.

KFC also conduct selective distribution where they open outlets in selected locations to minimise
competition (Sangket, 2013).

KFC also developed their website to increase direct sales for their distribution. KFC has
partnered with ChyeJin, a web developer company to improve customer inference to and built
their e-consumer database (Chyejin, 2021). The interface is relatively easy to use and only
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display key information such as payment methods, delivery, menu in a systematic way to soothe
checkout process for users. This project was effective as during its duration from 2017 to 2021,
KFC managed to increase their sales by 20% with and increase from 5 to 16% in conversion of
customers adapting the website when purchasing from KFC.

Do you think the strategies implemented will help sustain the business in the
long run?

Yes, McDonald's strategies can be implemented for the long run according to (Hong, 2022),
despite dipping 4% in sales during the 2020 pandemic, McDonald experienced a 15% year-over-
year increase in revenue to RM 2.35 billion, showing a good sign that the company is returning
to growth in 2021. This indicates that they are using the correct strategy and McDonald set a goal
to achieve double-digit growth in 2022.

Moreover, McDonald's has partner with Tenaga Nasional Bhd (TNB) Malaysia and GSPARX
Sdn Bhd (GSPARX) to supply and install rooftop solar photovoltaic (PV) facilities in 100 of its
outlets by December 2024. This effort launched in June 2023 involved the installation of rooftop
solar PV facilities at 39 restaurants at a cost ranging from RM3 million to RM4 million.
McDonald's will oversee the 2.5MWp system for these 100 outlets, resulting in a reduction of
electricity costs by RM7 million. In line with the worldwide objective of reaching net-zero
emissions by 2050, these initiatives demonstrate McDonald's commitment to enhancing its
environmental and sustainability programs (Azuar, 2023). This shows that their strategies are
cost effective and striving towards sustainable development goals.
 20

In addition, according to Armstrong (2017), McDonald's is still strongly relying Three-legged

stool approach to keep their supply chain strong. This partnership is between franchise and
supplier, Suppliers and franchisees collaborate on sharing knowledge of products and processes
because they assume what works well for the System works well for them as well. One of the
company's fundamental concepts is to let suppliers use their own methods to achieve the end
product's quality and consistency. This method also allows McDonald expanded to over 36,000
restaurants in 100 countries, providing to around 69 million meals for consumer daily. Lastly,
McDonald's has been implementing calculated risks to address consumer concerns and focused
on the core principles of operating excellent restaurants. While Steve Easterbrook was appointed
President and Chief Executive Officer in 2015 (Armstrong, 2017).

Internal factors affecting the business in the future

There are many internal factors that can affect the business in the future, The first internal factor
that will be addressing are internal management in the company. According to (Min, 2022). The
level of service quality will affect consumer behavior and purchase intention toward
McDonald’s. For example, if a McDonald provide a bad attitude service, bad environment and
late meal service, will cost decrease of consumer buying intention. Mc Donald has a good
improvement, since they implemented the kiosk machine, which will always provide good
service.

In addition, Mc Donald announce it will provide a new artificial intelligence technology to

improve customer engagement, according to (Reporter, 2021) The customer experience platform
by Netcore was recently selected by McDonald's to improve online conversions as well as
delivery in Malaysia. The McDonald's management team has placed a lot of effort into the online
purchasing process. They hope to increase brand orders by leveraging Netcore's AI-powered
platform to enhance email delivery.
 21

External factors affecting the business in the future.

Moreover, external factors that will affect the business in the future are supplier network.
McDonald's has reliable supplies due to MacFood Services (M) Sdn Bhd processes all of the
beef products that McDonald's Malaysia uses with an Overseas Halal Certificate accepted by
JAKIM, this supplier is recognised as certified by the Department of Veterinary Services
Malaysia (Mcdonalds, 2020). McDonald's chicken supply seems reliable and consistent,
maintaining the highest quality for suitable consumption. Forming good and long-term
relationships with suppliers allow scheduling consistent deliveries which leads to better
efficiencies as both parties are familiar with each other systems, which improves efficiency and
reduce errors.

Besides that, individual preference is also one of the factors. As stated by Ge (2020), everyone
has unique preferences that will be influenced by their own tastes, ethical beliefs, and life
experiences. This affect Mcdonalds’ products as some of the customer would like to customise
their order, adding extra sauce, extra spicy and less sugar. Mcdonalds have solved this by
allowing customisations to meals on their app or physical kiosk machines.
 22

Lastly, according to Lynette & Abdul Rahman (2022), Malaysia has been experiencing an
extreme chicken shortage lately. The government set a ceiling price of RM8.90/kg for regular
chicken, which might go up to RM12/kg if the price was floated. McDonald's may have to pay
more for chicken, which increases McDonald's production cost. The company's overall
profitability may be impacted if its ability to absorb the rising costs results in reduced profit
margins.

Recommendations

The use of AI in supply chain increase significantly in 2020 following the exposure of the Covid-
19 pandemic (Gail, 2023). In Edwin et al., (2022) findings, it is essential to reduce food waste,
enhance food logistics, safety and delivery, and optimize the supply chain; artificial intelligence
(AI) and advanced technologies help in attaining these goals. The Ministry of Agriculture and
Food Industries (MAFI) encouraged the innovation of technology in operations to enhance more
efficient, sustainable and resilient agriculture and food processing, and animal feed.

McDonalds could modernize its agro-food processing through automation and technology
concepts like ‘smart farming’ or ‘precision agriculture’. Smart farming and precision agriculture
concepts means with the use of new technologies in agriculture and cattle production to increase
production quantity and quality by minimize the environment impact with the use of resources
could enhance the food security throughout the world (Iberdrola, n.d). This could enhance
 23

McDonalds’ supply chain by increasing the production rates, obtaining better quality, and
achieving better sustainability to the environment.

Moreover, the use of AI could do demand forecasting, warehouse automation, quality control,
streamline procurement processes, customer service, transportation management and route
optimization (Gail, 2023); which could help McDonalds to intensify its supply chain
management. To further illustrate, AI model extracts insights from big data including past
customer transactions, sales record, prevailing economic indicators to forecast the demand,
which allows a better collaboration of McDonalds with their supplier by sharing the forecast data
with them. The increase predictability of McDonalds enables them to avoid product shortages,
optimize inventory quantities and minimize surplus inventory to improve cost efficiency,
inventory control and higher customer satisfaction.

In transportation wise, the application of sensors and predictive maintenance AI models enable to
encounter defect items, check missing components or incorrect markings, evaluate product usage
and recommend the best maintenance schedules. For instance, Internet-of-Things (IoT) sensors
could help McDonalds to strengthen their quality control system by detecting the humidity and
temperature changes to ensure their meats are kept at the correct temperature (Burkhalter, 2020).

Lastly, AI in Ordertracker has the capability in altering the customer service in the McDonalds’
logistics and supply chain by allowing real-time tracking orders which can help customers to stay
informed on the location and status of their food delivery. By doing this, McDonalds is
enhancing the transparency of order and allowing customer to have a peace mind. To
demonstrate, Ordertracker uses AI and machine learning algorithms to forecast delivery times for
food delivery, enhance shipping routes, and provide live tracking notifications for their
customers (Stern, 2023).

To summarize, AI has the potential the enhance efficiency, revolutionize supply chain and
reduce costs for McDonalds. The utilization of automation, predictive analytics, IoT, and
Ordertracker are strengthening McDonalds’ demand forecasting, inventory management and
real-time tracking; at the same time reduce expenses, identify inefficiencies, ensure efficiency,
reduce waste and adapt to the market demands.
 24

Plagiarism
 25

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Appendix
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Figure 1: Nutrition Information of McDonald’s Meal

KFC vs MCD market share in the fast-food industry

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