A

PROJECT REPORT

ON

“Transformation Impact on Operations Management of

Mcdonalds”
SUBMITTED

To

CENTRE FOR ONLINE LEARNING

Dr. D. Y. PATIL VIDYAPEETH, PUNE

IN PARTIAL FULFILMENT

DEGREE

OF

MASTER OF BUSINESS ADMISTRATION

BY

MR. SURAJ CHAWLA

PRN: 2205022200

BATCH - {2022-2024}

1
 Dr. D.Y. Patil Vidyapeeth’s
CENTRE FOR ONLINE LEARNING,

Sant Tukaram Nagar, Pune.

DATE-
CERTIFICATE

This is to certify that Mr. Suraj Chawla

PRN – 2205022200

has completed his/her internship at.

His project work was a part of the MBA (ONLINE LEARNING)

The project is on “Transformation Impact on Operations Management of

Mcdonalds” Which includes research as well as industry practices. He was very sincere

and committed in all tasks.

Course Coordinator Director

-------------------------- ---------------------------------

( Prof. Ganesh Shinde) (Prof Safia Farooqui)

2
 DECLARATION

This is to declare that I have carried out this project work myself in part fulfillment of the

M.B.A Program of Centre for Online Learning of Dr. D.Y. Patil Vidyapeeth’s, Pune –

411018

The work is original, has not been copied from anywhere else, and has not been

submitted to any other University / Institute for an award of any degree / diploma.

Date: - Signature: -

Place: Name: Mr. Suraj Chawla

3
 ACKNOWLEDGEMENT

I wish to express my sincere gratitude to Prof. Ganesh Shinde for providing me an

opportunity to do my project work in “Transformation Impact on Operations

Management of Mcdonalds”. I also wish to express my gratitude to the officials

and other staff members of “” who rendered their help during the period of my

project work.

I would also like to extend my gratitude to Prof Safia Farooqui the Director of

Dr. D. Y. Patil Vidyapeeth Center for Online Learning for providing me the

opportunity to embark on this project. My sincere thanks to mentor Akshada

Gaikwad for guiding all the time for project.

Finally, I would like to thank my parents and friends as well as CA. who helped

me a lot in finishing this project.

Mr. Suraj Chawla

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 INDEX

S.NO TOPIC PAGE

NO.

1 Executive Summary
6
Chapter 1: Introduction (Company Profile &

2
General Introduction of Topic)& Objective, Scope
8

and Purpose of Study

3 Chapter 2: Literature Review 34

4 Chapter 3: Research Methodology 46

6 Chapter 4: Data Analysis 50

7 Chapter 5:Suggestions/Findings 59

8 Chapter 6: Conclusion 61

9 Bibliography 63

9 References 73

10 A-Questionnaire 75

11 Scope for future study 67

12 Photography 68

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 EXECUTIVE SUMMARY

To sustain its viability in a competitive market, the McDonald’s Corporation

sets its overall goal of “making its customers happy.” To reach this broad goal,

McDonald’s mainly focuses on competitive bases of speed, cost, and nutrition. The

corporation also recently created dramatic strategy changes to its stores internal

processes by introducing the Made for You System, and McDonald’s also created a

Revitalization Plan which encompasses all areas of the business to make its customers

happy.

Quality management at McDonalds is one of the major factors that make the

corporation one of the most successful fast food restaurants in the world. The

corporation uses computerized information systems and strict corporate quality

standards to maintain quality at their restaurants. To enforce the standards, the

corporation undertakes exhaustive inspections on each restaurant two times per year.

Also, thorough training processes ensure that all McDonald’s employees have the

proper knowledge to meet the corporation’s standards, which will in turn make their

customers happy.

Many suppliers aid McDonald’s success by supplying their raw materials

efficiently and on time. McDonalds reassures that their product is fresh by choosing

suppliers near the restaurants, to minimize transport time. To ensure quality of products

and reduce cost between the restaurants and their suppliers, the McDonalds

Corporation publishes specific guidelines to ensure that the restaurants receive the best

quality materials.

McDonald’s ensures consistent products by enforcing strict standards and

frequently inspecting its suppliers. The corporation participates in a very efficient

supply chain network. The corporation also takes advantage of long-term relationships

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with suppliers to ensure consistent products. McDonald’s also takes active steps to

avoid bad products and reduce overall costs.

Forecasting is in large part down by the corporation as their responsibility to the

franchisees and share holders. McDonald’s uses qualitative forecasting methods by

gathering information from customers, employees, and experts, via written surveys and

other correspondence. Forecasting has given the corporation opportunity to excel in

creating new innovations, creating localized meal selections, and generally making the

customer happy.

In summary, the entire McDonald’s corporation revolves around its goal to

make its customers happy. McDonald’s works toward this broad goal with strong

competitive bases, quality management, an efficient supply chain with quality products,

and continuous forecasting.

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 CHAPTER 1

INTRODUCTION

8
 INTRODUCTION

1.1 Introduction

McDonald’s, founded by Ray Kroc, is now one of the most popular fast food

restaurants across the world. They’ve proudly served more than 46 million customers in

59 different countries and currently have more than 30,000 different locations

worldwide (“Food Service”). The fast food industry is booming at a rapid rate,

especially the health conscious food options. With this in mind, McDonald’s has a

strategic plan to stay on top of their competitors by providing consumers with

affordable prices, great service, and more healthy meal options. McDonald’s is

competitive in many categories, including price, quality, management and employee

training. Consumers trust McDonald’s products because they use many of the same

trusted brands that families buy at local grocery stores. The only difference is that their

shopping cart is a whole lot bigger. This report details McDonalds’ competitive

strategy, quality management, raw materials, forecasting, and supply chain.

OPERATIONS COMPETITIVE STRATEGY

Main Competitive Bases

McDonald’s Corporation competes in a challenging market segment by

providing need-satisfying products to customers. In this segment, ineffective

competitors often fail without proper strategies (Kerin). To sustain its viability, the

McDonald’s Corporation employs an effective competitive strategy to make it stand out

against competitors such as other fast food restaurants. Although McDonald’s competes

on several bases, including speed, cost, and nutrition, their strongest priority is “making

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customers happy” (“McDonald’s Worldwide” 3). The company recently made drastic

changes to its process by introducing the Made for You system (Chase).

Speed

McDonald’s competes on several bases mainly to make their customers happy

by providing speedy, affordable, and nutritious foods. Through extensive market

research and survey, the organization discovered that its customers desire speed as one

of the restaurants’ top priorities. Therefore, McDonald’s vision aims to “provide fast,

friendly and accurate service” (“McDonald’s Worldwide” 5). McDonald’s realizes that

specific targets are necessary to measure the performance of speed, and continuously

takes relevant measurements to compare actual performance with desired targets

Specific measurements are detailed later in this report in the “Quality Management”

section. To achieve efficient service times, the company utilizes proven, standardized

training processes for its employees and new drive-thru layouts to reduce service times.

Along with speed, McDonald’s also competes by offering prices at a low cost.Cost

To offer high quality products at low cost requires efficient processes

throughout the entire McDonald’s organization. Once again, this goal is built into their

vision statement when they claim that “We will be the most efficient provider so that

we can be the best value to the most people” (“McDonald’s Worldwide” 5).

McDonald’s incorporates several avenues to provide great value to its customers:

 One strategy that the company has employed for many years is the value meal.

The value meal allows customers to buy a sandwich, french fries, and beverage at a

discount when purchased together. McDonald’s restaurants offer seven to twelve value

meals, both for their lunch menu and breakfast menu.

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 More recently, McDonald’s began offering a dollar menu, consisting of many

individual items costing only $1.00 each. First tested in southern California, the dollar

menu has proved to be very successful and has been since incorporated to many

individual stores (Zuber 2).

 Some individual franchise owners choose to offer daily specials of special menu

items, such as “$0.39 hamburger Wednesdays,” or other similar specials. Big Mac

Mondays are a popular regional promotion.

Nutrition

McDonald’s third main competitive base is nutrition. The organization

understands that health trend is an increasingly popular trend therefore; the

organization has recently focused extraordinary efforts to promote their new nutritious

choices. Although not specifically built into the organization’s vision, McDonald’s has

already introduced many options to achieve this goal:

 In the United States, “Go-Active” meals have been offered within the last few

years. These meals include a salad, bottled water, and a “step-o-meter” to help

customers keep track of how many steps they take a day.

 Other countries have seen similar healthy options. The United Kingdom saw

fresh fruit bags, containing apples and grapes, as an alternative to french fries

(“McDonald’s Worldwide” 12).

 Not only does McDonald’s care about its customers, but it is also considerate of

its employees’ health. In Europe, the organization worked with external nutritionists to

develop an “Employee Guidebook” which contains tips and nutrition information for

healthy lifestyles (“McDonald’s Worldwide” 13).

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 McDonald’s has assembled their Global Advisory Council on Balanced

Lifestyles. This council consists of exercise & obesity specialists, environmentalists,

and other professionals to ensure that McDonald’s takes appropriate steps in helping its

customers achieve optimal health.

 The company is also utilizing technology to their advantage. The current

McDonald’s website lets a user select any combination of menu items, place the items

in the online bag, and conduct a nutritional analysis on their selections. The user can

break down the analysis even further than a menu item, down to individual condiments,

including ketchup, pickles, etc. (“Bag a McMeal”).

Not only has the company introduced many steps to ensure nutrition, but it will

strive to continue the trend toward nutrition. McDonald’s plans to: add additional

healthy menu options (fruits and vegetables); increase nutrition awareness among

McDonald’s employees; and conceive new ways to deliver nutrition information to its

customers, as well as other actions (“McDonald’s Worldwide” 13).

Strongest Priority

“At McDonald’s, Umaking customers happyU is what our business is

all about. And we know it takes a lot to make that happen. We work hard to provide

every customer with a choice of meals and an experience that exceeds their

expectations.”

The preceding statement is the quote which introduces McDonald’s Worldwide

Corporate Social Responsibility Report (2004). Although the company strives to

compete on several bases, their ambient goal is making customers happy. They reach

this goal through a variety of efforts. McDonald’s visionary goal is to continually

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improve their organization. To achieve this goal, McDonald’s in-store managers

conduct frequent inspections of their store, and the corporation also conducts thorough

inspections several times per year. For long term improvement, the McDonald’s

Corporation introduces new ways to measure performance and food safety. Continuous

improvement is detailed in the “Quality Management” section.

In summary, McDonald’s strives to reach its goal of making customers happy

through their normal competitive bases of speed, price, and nutrition, and they also

ensure customer satisfaction through continual improvement of their operations.

Strategy Changes

Made for You

McDonald’s organization recently underwent drastic strategy changes to better

serve their customers. Under their previous system, the company would make several

sandwiches at once, and hold the sandwiches in a warming bin until purchased by a

customer. Under this system, management had to precisely predict how much food

had to be put on hold. Precise prediction had to be used because if there were not

enough food placed on hold, this would create the problem of increase waiting times

for customers, and too much food would cause waste of expired items. McDonald’s

dramatically changed their strategy in order to stay competitive with other fast food

organizations.

In 1999, McDonald’s spent $181 million to introduce their Made for You

system (Chase). Under this new system, standard food items are not held in a bin until

they are sold. In the Made for You system, modern technology greatly assists

McDonald’s operations. When a customer places an order, the sandwich items are

immediately displayed on a computer monitor in the kitchen and a tone sounds to alert
13
the kitchen staff. Upon a new order, an employee in the kitchen will toast the bun, and

assemble the sandwich accordingly. Standard items simply list the name of the

sandwich, while customized orders list the sandwich name and the desired condiments.

Once the sandwich is assembled, it is presented to the food loading area, where a

different staff person retrieves the sandwich and completes the order by adding french

fries, desserts, etc. The system works the same for front counter orders as well as drive-

thru orders (Phillips, Kenny).

Unfortunately, the introduction of the Made for You system did not transition

smoothly. McDonald’s watched its customer satisfaction drop for the three consecutive

years beginning in 1999 (Chase). After further research, they realized that although the

new system provided fresher food, it was not as quick as the previous system. Instead

of reverting back to the old system, McDonald’s continues to fine tune Made for You

and add new options to help the system work faster.

Revitalization Plan

In order to cope with the first ever quarterly loss that resulted from inefficient

use of the Made for You system (Chase), McDonald’s has devised a new plan to

increase profits. Previously, the corporation emphasized adding more restaurants to

increase sales, but the new plan places emphasis on increasing sales at existing

restaurants. The new plan will reduce spending, to enable more cash to shareholders

through dividends and share repurchases (Cantalupo 1). Specific goals of the

revitalization plan are to:

 Attract new customers

 Encourage existing customers to visit more often

 Build brand loyalty

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 Create enduring profitable growth

The main goal is to increase sales by creating an exceptional customer experience.

McDonald’s plans to achieve this goal by focusing on its people, products, places,

prices, and promotions.

Menu

Along with changes in their process strategies, McDonald’s has flirted with

menu changes as well. Last year, they created a “new taste menu,” where they offered a

new sandwich which was offered for one week. The purpose was to offer customers a

variety of options to satisfy peoples’ desire for variety. However, the new taste menu

proved to be ineffective. Some customers would fall in love with an item, but it would

only last one week, and they would be frustrated that they couldn’t purchase their new

beloved favorite sandwich.

More recent changes to the menu have proved effective. McDonald’s realized

that many of today’s customers seek healthy food options, and the corporation has

offered items accordingly. As mentioned under “Competition Bases,” McDonald’s now

offers a wider variety of nutritious items and provides information to help its customers

as well as employees make informed healthy choices.

McDonald's is a multinational fast food restaurant chain, that was initially

opened by two brothers Dick and Mac McDonald as a Bar-B-Q restaurant in 1940. The

brothers later relaunched the restaurant, adopting the franchise business model and

selling the rights to the business a few years later (corporate.mcdonalds.com, n.d.).

Since then McDonald's has opened around 34,000 restaurants in 118 countries, serving

more than 69 million people every day worldwide (mcdonalds.com, n.d.). In 2017 it

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was listed as the largest restaurant chain in the world by revenue and it is also the

fourth largest employer in the world (Stimage, 2018).

For a large organisation such as Macdonald's to remain competitive for almost

80 years, they require efficient management of their operations. Operations

management is the activity of managing the resources that create and deliver services

and products. (Nigel Slack, 2016).

This report analyses McDonald's operations management.

The 'Input-Output-Transformation' Process Model of McDonald’s

Operations are processes that take in a set of input resources that are used to

transform or are transformed themselves into outputs of products and services (Nigel

Slack, 2016). The image above shows McDonald's input-output process. A process has

two sets of inputs, transformed inputs and transforming inputs. McDonald's takes in

raw food products and customers as transformed inputs. These are the inputs that are

changed in the process. The raw materials such as burgers, chicken nuggets etc are

16
transformed into meals for customers and the customers are transformed from hungry

to full.

McDonald's transforming inputs are its staff and the facility’s equipment. These are the

inputs that assist in the transformation process. The staff provide customer service and

cook the food; and the equipment e.g. fryers and grills are used to cook the food.

McDonald's inputs and outputs are like those of a Michelin star restaurant, what

differs is the level of skill required by staff and the quality and quantity of the raw food

products. A Michelin star restaurant requires staff with more skill. For example, the

chefs must be professionally trained, and the waiters and waitresses are trained in table

service. While McDonald's staff are not required to have had any formal training.

McDonald's main outputs are food products however they also produce services in the

form of customer service in store. With their recent inclusion of table service, they have

more of a restaurant structure in order to improve their customers experience.

McDonald’s and the Four V's

The four V's stand for volume, variety, variation and visibility. These four

attributes help define the differences between operations. This is how McDonald's

operations are different compared to a Michelin star restaurant.

Volume

McDonald's sell a large volume of burgers. For them to achieve this they have

broken down their production processes into repetitive small tasks that are quick and

easy to carry out. Their equipment is also designed for batch cooking and storage of a

large amount of food. In addition, most of McDonald's raw food is delivered chilled

and frozen, in large quantities; which reduces the frequency of deliveries.

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 In contrast a Michelin star restaurant makes food to order in small quantities.

They could have their food delivered fresh as often as every day, their recipes are more

complex requiring more time and although some dishes may require batch cooking,

most dishes are prepared individually.

Variety

McDonald's have very little variety. Unlike a Michelin star restaurant that can

list a new menu item depending on the ingredients available in the kitchen McDonald's

menu is fixed. Customers can have items added or removed but the menu itself remains

the same. The McDonalds menu may have new burgers added during certain seasons,

but this is usually an item that is well planned for and the changes are usually the same

every season, so staff know how to assemble the burgers already.

Variation

Most McDonald's stores are open for 24 hours, this means there are times of the

day when demand is high and others when demand is low. To add to this, during lunch

time, after school and public holidays demand increases.

McDonald's manage this high variation of customers by having more staff on

duty during busy times. Their employee contracts are usually zero-hour contracts and

so they can send staff home if it is not busy.

They also operate on shift basis and by overlapping the shifts during busy hours

they ensure that more staff come in just as it gets busy and the other staff leave when it

dies down. The batch cooking equipment also allow for them to vary the amount of

food that is produced at a time and hot food storage can be increased or decreased as

required.

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 A Michelin star restaurant has very little variation, due to the table reservation

system and the high-class customers.

Visibility

This refers to the extent of which a customer is involved in the operations of a

business. McDonald's has no visibility. Their food may be customised, but their

customers have no part in the design of their food. A Michelin star restaurant may have

some visibility in the event of them hosting a wedding or special event, where the

customers may take part in the design of the menu, the restaurants decor and even the

staff’s uniforms during the event.

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QUALITY MANAGEMENT

Speed

One of the major quality management control factors includes minimizing the

time that processes are done; this ensures an effective and efficient operations. Many of

these processes are done through the use of advanced information technology, through

calculating the time of the processes or even making a database to observe procedures

and make improvement to their processes. One specific measurement is called Total
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Time in Line (TTL) which calculates the total time customers spend in the McDonald’s

line, from the time the customer begins ordering until the time they get their food. TTL

measurements are calculated the same way whether the customer is eating inside or

ordering through drive through. The target TTL is 90 seconds. See “Appendix 1” for

our group’s construction of a TTL Control Chart for a McDonald’s store. (Phillips,

Eddie).

Along with measuring TTLs, other programs are utilized to make the speed of

the service more efficient. The Made for You system uses the Kitchen-Video-System

(KVS) to support fulfilling speedy orders. The Made for You system allows the order

taker to enter or delete the orders on a touch screen that lists sandwiches, as well as

individual condiments, in a way that eases the data entry process for the worker. As

soon as any food is ordered, from any register, the necessary food items are displayed

on a computer monitor in the kitchen. The kitchen staff immediately begins to prepare

the food, and then erases the orders from the screen as the food is finished. Similar to

TTLs, the time is measured between when an item is first displayed on the monitor, to

the time when it is served. McDonald’s continuously monitors these kitchen times in

order to ensure that the Made for You system is working as efficiently as planned. See

“Appendix 2” for our group’s construction of a KVS Control Chart, and “Appendix 3”

for the data we were provided to construct the charts. (Phillips, Eddie). Technology not

only measures performance values within the organization, but it also assists in the

drive through area. When a drive through worker is taking an order, it is displayed

automatically on a screen available to the customer outside, called the Customer Order

Display (COD). The customer can review the COD and correct any mistakes, thus

making the ordering process more precise. More precise orders eliminate time wasted

from correcting mistakes (Phillips, Kenny).

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 Maintaining the speed and accuracy of the processes in McDonald’s is also

done through less technological techniques. McDonald’s uses different colored

packages to help the employee recognize the different types of food; colored wrapped

sandwiches makes it easier to distinguish what is wrapped beneath. For example, a

cheese burger is wrapped in yellow colored paper and a fish fillet is wrapped in blue,

while a hamburger is wrapped in white paper. Special ordered sandwiches without

standard condiments come in red and white paper, with a paper receipt attached which

details the items on the sandwich (Phillips, Eddie).

Quality Inspections

Food safety is one of McDonald’s top priorities. Every restaurant is required to

check food temperatures, expiration dates, and other food safety hazards several times

throughout each day of operation. The corporation sends a standardized Food Safety

book to every store which includes a comprehensive list of every item that needs to be

measured. Cooked food temperatures are measured to ensure that all food is cooked

properly before served. Refrigerated and frozen foods are also checked to make certain

that they do not get too warm and are not spoiled. Expiration dates are checked on

foods frequently, if the item is expired than it is discarded. Equipment is also measured

to ensure that it is functioning properly. Also included in the safety checks is the water

temperature in the restroom sinks, workers must be caution because water that is too

hot can burn customers. Food safety checks are performed several times throughout the

day (Phillips, Eddie). Periodic corporate inspections, both announced and

unannounced, are one of the major quality management controls at McDonald’s. The

McDonald’s Corporation applies two major inspections on each restaurant per year.

One is called Field Operations Review (FOR), and the second is called System

Observation Review (SOR). Restaurants have two opportunities to pass the tests. If the
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store fails to pass the inspections on a second attempt, the corporation takes over the

store and brings in better employees to ensure that the proper processes and equipment

are being used properly. Both inspections are extraordinarily thorough and they are

based on a point system, and points can be taken off for many different reasons. For

example, points can be reduced if the credit card system is too slow, if the store’s walls

have cracks, or even if the restaurant performs processes that slow the serving time

(such as accepting personal checks for payment). Points will also be lost if employees

are not dressed according to regulations, including wearing name tags (Phillips,

Kenny). During a corporate inspection, the restaurant must also provide a food safety

log of recorded entries to ensure that proper food testing is completed frequently and

properly (Phillips, Eddie).

Along with exhaustive corporation inspections, in-store managers also

personally inspect their restaurants on a frequent basis. One example is the manager on

duty’s task of completing a “travel path” every thirty minutes of his shift. During a

travel path, the manager personally checks every aspect of the restaurant, including: the

lobby area where customers eat; the restrooms; the grill area behind the counter; the

walk-in refrigerators and freezers; the stock area; as well as the entire perimeter outside

the restaurant

(Phillips, Eddie). During the travel path, the manager also confirms that the Food

Safety checklist has been completed and that all measurements fall within the specified

range. Through completing travel paths, management continuously checks every aspect

of the restaurant throughout the day.

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 Even though many of the quality management processes in McDonald’s are

done through the use of information technology, other quality management factors such

as maintaining the five P’s forces (People, Product, Price, Place, and Promotion) are

essential in any business. Consequently, McDonald’s Corporation uses these related

forces in the sense that each P creates a chain affect on each other. The following is a

list of methods using the P forces.

The first force is the people working in the McDonald’s chains, which are

represented by service, hospitality, and pride. The staff employed in McDonald’s are

continuously trained and kept in the company to reduce the cost of training short-term

inexperienced workers. Moreover, the training process has been improved to include

online e-learning tools for the restaurant staff. Maintaining the workers in the company

is very important to McDonald’s and the corporation rewards workers who do

outstanding services. This form of incentive is motivational to the workers (Cantalupo

4).

The second force is the products which include the quality, taste, and price of

the goods sold. McDonald’s is trying to establish flexibility with the changing tastes

and preferences in the market, Moreover, they are also seeing growing interest in

premium product and wholesome food choices. The quality and safety of the food is a

main entity in maintaining the quality of the food at McDonald’s (Cantalupo 4).

The third force is place which is represented by the clean, relevant, and modern store

environments. Whether it was in the main restaurant area, the kitchen, or even the

restrooms, the company ensures the safety and comfort for the consumers and staff

24
workers. The company intends on having the gold standards for cleanliness (Cantalupo

5).

The fourth factor is price, which is presented in the productivity and value. The

value of the product is increased when consumers gets high quality products for lower

costs. Therefore, McDonald’s Corporation ensures that its customers receive the

highest value of food for the price they pay (Cantalupo 5).

The fifth factor is promotion which is presented in marketing, leadership, and

trust. The company has already earned its reputation for good quality food so they just

focus on customers cares. They do this through community involvement and their

social responsible towards the environment. This process will gain the trust of loyal

customers and keep them for life (Cantalupo 5).

Training

As the people aspect of the 5 P’s shows, McDonald’s realizes that its employees

must understand their duties in order to fulfill the organization’s goals. To ensure that

all employees properly perform their assigned duties, McDonald’s invests greatly in

their training program. The company continues to receive prestigious awards for their

leading- edge training, including the “Employer of Choice Award” from the Restaurant

Business Magazine (“Restaurant Management”). New crew members go through a

thorough orientation process consisting of several videos, followed by several days of

direct one- on-one training by a trainer. After employees feel comfortable with the

operations, they

may be promoted to Crew Trainers. Crew Trainers undergo further training for

specialized processes such as the grill area, front counter, drive-thru, and other areas.
25
Shift supervisors are the next step in the organization, followed by Second Assistant

Managers, followed by First Assistant Manager, and the top manager at each

McDonald’s restaurant is the Restaurant Manager (Phillips, Eddie). For a graphical

representation of a typical McDonald’s in-store hierarchy, see “Appendix 4.” Training

never stops at McDonald’s, no matter which position an employee holds. Some current

employees describe McDonald’s as the “best training company in the world” (Phillips,

Kenny).

To improve the Made for You system, McDonald’s recently introduced a

strategy called “Shift into Overdrive,’ and this strategy focuses on helping shift

managers work more efficiently. All McDonald’s restaurants are required to send at

least one manager to participate in the new training program (Phillips, Kenny). This

training mainly focuses on the human aspects of Made for You, ensuring that the

system is being used as design. Since the new system requires seamless work from

several people, the entire team must work together for the system to work quickly to

provide food to customers.

Finally, to ensure the quality of the operations, McDonald’s conducts surveys

periodically to get feedbacks from customers (Phillips, Eddie). As shown throughout

this section, the McDonald’s Corporation has been doing a very good job at keeping the

quality of its products and services, whether it was through using computerized

equipment or to train their human resources.

RAW MATERIALS

The Arrival & Maintenance Our group conducted an extensive interview with

Ronald Lessnau, an owner of several McDonald’s restaurants located in Denver. See

26
“Appendix 6” for the full interview. Through the intense process of choosing and

manufacturing raw materials, McDonald’s customers can be assured of a quality

product. Whether arriving via truck or train, raw materials are delivered fresh and ready

to use everyday. To ensure that this freshness is passed onto the customer, each arriving

package is personally inspected for damage during its travel. In addition, the condition

of delivery trucks are also taken into account to make sure that meat was untainted due

to a filthy meat cooler. The meat cooler should always be set at 10 degrees below zero

and the meat should remain at a constant temperature of 34 to 38 degrees. While some

inspections are known, others are random to ensure that quality is consistent from one

delivery to the next.

Grade “A” Beef and Other Meats

All beef cooked at McDonald’s is of Grade “A” quality and 80%-82% lean.

McDonald’s not only supports humane slaughtering of animals but also refuses to

purchase dairy cows over 5 year old due to the toughness of their meat.

Upon the arrival of meat, received from Otto & Sons, Inc. in Chicago, a two

hour supply is taken directly to the grill side freezers which stand at a constant

temperature of 0 degrees. Once placed on the grill, the meat is cooked at a specific

temperature to assure the meat holds the proper internal temperature to meet the

requirements of food safety and yet hot enough to hold its natural juices. Cooked

hamburger patties and other meat products are stored in a humidity controlled cabinet

until usage to ensure that patties remain hot and moist. The preparation time of a

hamburger should not take longer than 90 seconds and only 35 seconds after the

hamburger bun itself has been toasted. This allows each customer to receive his/her

meal in the timeliest fashion.

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Produce

McDonald’s hires agronomists which can spend up to two years assisting

farmers grow perfect russet potatoes, 6-inches long, that produce a finished french fry

which is appealing both in looks and taste. In addition, many produce items, including

lettuce, have specifications that are two pages long. With this many guidelines in place,

McDonald’s can guarantee that they are delivering to their customer the best

ingredients possible. The produce delivered from Condie’s in Salt Lake City to the

Evans and Colorado McDonald’s restaurant arrives via railroad to ensure that freshness

is maintained. Upon inspection, should any produce not meet the correct internal

temperature, the refrigerator is either immediately altered or the items are discarded.

SUPPLY CHAIN

Examination of Supply Chain

Food quality is a very important aspect at McDonald's restaurant. Further

explaining the “Raw Materials” section, the corporation seeks fresh lettuce and

tomatoes, quality buns and potatoes, pure ground beef, select poultry and fish and

wholesome dairy products. McDonald’s ensures that their products are guaranteed to be

the best quality before serving to their customers. McDonald’s has many suppliers who

play a vital role in providing quality products to McDonald’s customers. Many

Midwestern McDonald’s restaurants utilize the same supplier for products, including:

meat, produce, dairy, and other products.Many McDonald’s receive their raw meat

from Otto & Sons Corporation, located in Chicago and Oklahoma (Lessnau).

McDonald’s take time and responsibility to conduct extensive research on their meat.

For example, the corporation announced plans that call for its suppliers worldwide to

phase-out of animal growth promotion antibiotics that are used in human medicine.

28
They reassure consumers that they are providing beef that hasn’t been injected with

steroids. For produce, many Midwestern McDonald’s locations receive their produce

from Condie’s, located in Salt Lake City, Utah. They receive produce shipments as

often as three to four times a week to ensure freshness. McDonald's shakes, McFlurry

Desserts and reduced-fat ice cream are made from fresh quality cream, whole milk,

skim milk and condensed skim milk, all of which are supplied from Robinson Dairy.

Robinson Dairy is located in Colorado Springs. Due to the proximity of the Robinson

Dairy to the city of Denver, many Denver McDonald’s receive dairy shipments quite

often.

McDonald’s gets it supply of tea and Danish pastries from Sara Lee, and they

receive their catsup from Hunts and Heinz. McCormick provides its spices and some of

their sauces, and they receive their blend of Arabica coffee beans from South America.

Although many restaurants share the same supplier, McDonald’s also has many

independent suppliers which were unnamed due to confidential data. See “Appendix 7”

for an illustration of a McDonald’s supply chain.

Supply Chain Efficiency

McDonald’s enjoys a very efficient supply chain because they incorporated an

electronic Foodservice Network (eFS Network). In an eFS Network, a company which

operates an independent Business to Business (B2B) marketplace facilitates sales and

purchases to the foodservice industry. The main eFS Network, based in Chicago, is

open to all segments of the industry - from foodservice suppliers and distributors to

multi-unit operators. It helps to maximize Internet based efficiencies and saves its

participants money across the entire supply chain. The eFS Network's neutral web-

based marketplace has helped to streamline information flow between participants as

29
well as promote industry-wide technology standards. It features both a public exchange

that will promote connections between participants in the foodservice industry and

private exchanges that enable confidential customer-supplier interactions. The

exchange focuses on U.S and Canadian foodservice distribution, which is a $150

billion industry. In summary, McDonald’s takes utilizes all advantages offered by the

eFS network.

Quality along the Supply Chain

Recognizing the importance of the supply chain in maintaining quality is one of

McDonald’s strengths, and therefore McDonald's aims to create long-term relationships

with a limited number of supplies. Suppliers are usually monitored to ensure that they

can meet McDonald's required standards. Repeat orders mean that suppliers can be

confident of survival and growth, while McDonald’s consistently enjoys standardized,

high quality products. McDonald's stresses its strict standards based on quality, value

and cleanliness. McDonald’s also keeps track of the origin of each product, which

enables the company to control every link in its supply chain.

As mentioned throughout this report, food safety is very important to the

company. To ensure that the restaurants serve safe food, McDonald’s undertakes

extensive animal welfare audits to ensure that each of their suppliers adhere to their

rigged standards for animal treatment and care. They do this by conducting

unannounced audits, up to 100 per year, at various farms and supplier facilities.

Overall, McDonald’s

creates advantageous long-term relationships with suppliers, and ensures safe food, to

fulfill its goal of making customers happy.

Share Costs
30
 McDonald’s share cost between their suppliers and the corporation is much

lower than other fast food restaurants. This is due to the fact that they have

specifications and specialist who assists the suppliers in planting or producing the raw

materials before it is shipped to the restaurants. By enforcing strict standards for food

quality, McDonald’s lowers the cost between suppliers and themselves by preventing

any food being shipped which does not conform to standards. By giving attention to the

suppliers and presenting the standards ahead of time, McDonald’s will reduce the share

costs between them. This planned reduction in costs helps achieve McDonald’s

competitive strategy of providing low cost to the customers.

FORECASTING

Aspects of Forecasting

McDonald’s continually receives information from customers, employees, and

the industry that effects short, medium, and long term decision making. Different kinds

of information are received from all levels of the corporation and are used to learn more

about the market movement and advertisement structure, including basic everyday

processes in production and packaging of goods for the targeted markets. Forecasting is

done in large by the corporation, as part of their responsibility to the franchisees and

McDonald’s shareholders.Through our interview with Mr. Lessnau, we learned details

concerning the basics of McDonald’s business and hierarchy. However, we were not

able to obtain in-depth information that is used for their budgeting, marketing,

advertising, detailed forecasting, and innovations of new products because it contains

confidential contents. This is due to the scrutiny from people looking for flaws, bad

business conduct, and other degrading allegations concerning of McDonald’s.

Everything we received was cleared at the corporate level.

31
 Forecasts are vital to McDonald’s organization and significant management

decisions. Forecasts provide the basis for budgetary planning, cost control, planning

new products, process selection, capacity planning, and facility layout. Typically,

McDonald’s uses a qualitative type of forecasting. The main information used in

forecasting the stability and future growth of the corporation is by the number of

customers going in and out the door and all voiced opinions.

Listening to Customers

A major component of forecasting is listening to customers. Different medians

of communication exist for customers to relay there ideas, opinions, concerns, and

problems to the McDonald’s Corporation. At a particular location, a customer has

access to employees, managers, and owners to voice their opinions and concerning their

likes and dislikes about the particular restaurant. Often, McDonald’s managers and

owners use open ended questions to allow customers to expand on what they want to

discuss. McDonald’s offers a nationwide, toll free 800 number for customers to use

when the corporation has fallen short of their expectations or when a restaurant makes a

mistake with their order. Internationally, McDonald’s has a website that is not only

interactive and informative throughout the 59 nations they supply to, but is a place for

customers to voice their opinions and complaints. As Ronald Lessnau exclaimed, “We

listen!”

At the corporate level, qualitative forecasting can be seen even with the limited

information we received. The McDonald’s market research department records data by

talking with customers to find out how they like or feel about a particular ad campaign

or a specific commercial. The product development department uses input on

32
developing a new product or changing how the new product is prepared, priced, or

packaged.

Forecasting Success and Failure

McDonald’s has been extremely accurate in forecasting trends or needs the

customers want and request. Mr. Lessnau states, “McDonald’s, in the past has helped

customers deal with their changing lifestyles.” An example of this is when the Egg

McMuffin, the first hand held breakfast sandwich by Herb Peterson, was introduced for

the first time. “It took 10 years for breakfast to be successful at McDonald’s and now

McDonald’s cracks more farm fresh, grade “A” eggs daily than the largest institution in

the United States, the US Military.” Although the corporation is usually accurate,

consumers know that McDonald’s sometimes has shortcomings and is not always

correct in projections. Even with using a qualitative forecast, the future is not always

clear so see. Twelve years ago, due to the favoring focus group survey responses for

healthier products, McDonalds developed and marketed the McLean Burger. It

contained only 7% fat and was the most tasteful low fat burger on the market, costing

53 cents a pound more then the normal beef. Unfortunately, it did not sell. After the

McLean burger’s introduction, customers decided that the product was too expensive

and did not taste as good as other sandwiches. Perhaps the failure of the McLean burger

explains

McDonald’s slow reaction to the current low carbohydrate diets. Ronald

Lessnau also gave examples of when qualitative forecasting influences how he fixes

errors of past business decisions at his establishment. Decisions have been made on

information gained from surveys, interviews, history of products, and questionnaires.

One particular McDonald’s restaurant has extended their hours as a result of many

33
comments. Also, years ago one region reduced some of the seasoning in the chicken

products, and based on interviews and focus groups that region returned back to the

original product and did not take the change national. Mr. Lessnau also described that

some Denver, Colorado locations went back to 99-cent double cheeseburgers years ago

because of feedback they received in focus groups that were conducted as part of their

normal market research. As Lessnau explained, “Sometimes you can prevent a good

idea from going bad by talking to those closest to the customer, your sales people.” The

data collected for these long terms and every day business decisions were from

employees as well as customers.

34
 CHAPTER 2

LITERATURE REVIEW

35
 LITERATURE REVIEW

Company overview

McDonald's is one of the largest fast-food chains in the world. Two McDonald

brothers opened the first branch in 1948. (McDonald’s, 2020). The restaurant's initial

menu consisted of hamburgers, cheeseburgers, fries and soft drinks to deliver cheap

food to their customers as soon as possible. In 1940, Richard and Maurice MacDonald

moved the sandwich kiosk several miles to San Bernardino, California. They named the

restaurant "McDonald's Bar-B-Que". Their menu consisted of 25 dishes, most of which

were grilled. Their restaurant was one of those restaurants where people sat in their cars

in the parking lot, and the waiters took their orders and delivered the food to them.

In 1948, the two brothers realised that their most significant profit came from

selling hamburgers. They changed their menu, this time, including only hamburgers,

cheeseburgers, potato chips, coffee, soft drinks and apple cakes(McDonald’s, 2020).

They made major changes to the restaurant in the first year. Fries and milkshakes have

replaced potato chips and apple cake in the menu. Moreover, the restaurant changed

from serving food in the car to a self-service. They also designed their restaurant

kitchen to be the most productive. The restaurant was renamed McDonald's and

reopened a few months later(McDonald’s, 2020).

36
 Nevertheless, Ray Kroc's acquaintance with the two brothers paved the way for

McDonald's business expansion. Ray Kroc, a Milkshake blender dealer in 1954,

discovered that eight of these devices were used in the restaurant's San Bernardino

branch. He became curious and went to McDonald's restaurant. Crack suggested to the

McDonald brothers that they set up branches in other countries as well. The two

brothers were initially a little sceptical. Still, eventually, Kroc was able to convince

them to take over their overseas branches' management and operation. Under a

contract, they agreed to give half of each per cent of sales to the McDonald brothers.

The restaurant opened its first branch in 1955 near Chicago(McDonald's, 2020).

McDonald's restaurants grew slowly over three years, reaching 34 in 1958. In 1959,

Crack opened 68 new restaurants, bringing the total number of branches to

102(McDonald's, 2020). The company continued to grow until Crack bought a $ 2.7

million stake in the McDonald Brothers in 1961 and paid 1.9 per cent of annual sales to

the two brothers, making it the most successful restaurant chain in the United States.

By 1991, about 37 per cent of the restaurant's massive sales came from overseas

branches. In 1967, the restaurant opened its first foreign branch in British Columbia,

Canada. This trend continued until the following years. In the early 1990s, it was able

to open more than 3,600 branches in 58 countries such as Japan, Canada, Germany, the

United Kingdom and France(McDonald's, 2020).

In 2020, McDonald's with 38,695 and 205,000 worldwide achieved annual sales

of $20.8B, making McDonald's one of the largest fast-food chain restaurants in the

world(Forbes, 2020).

The Drivers of Change

37
 Change is inevitable in the business world, and is one of the leading forces of

improvement, strength and progress. For a global and large business like McDonald's,

change is doubly essential. Firstly, McDonald's operates in different countries with

different laws and cultures. Secondly, this business has been operating continuously for

several decades. These two reasons can make McDonald's business one of the

businesses that need leading change strategies. From this perspective, understanding

the driving motivations for change can be helpful. Understanding the drivers of change

can prepare companies for the changes that an organisation may face. Without this

understanding, a business may find itself where it has built the "perfect" system, yet

nobody willing to use it. Customer adoption goes hand-in-hand with how well the

business leader understands the need and process of change, and how well that process

is communicated throughout(Lambertson, 2018).

To understand business changes, it is essential to discover the factors that drive

that change. Because it can help in adopting the right strategy for change, this is very

important because if there is internal inconsistency or a misunderstanding about the

scope of the need for change, implementing that change is difficult for everyone

involved(Lambertson, 2018).

The "Drivers of Change Model" illuminates what creates the need for change,

especially transformation change, and depicts these drivers' sequence(Anderson and

Anderson, 2002). As Dean Anderson and Linda Ackerman Anderson (2002) explain,

there is a demand-response relationship between these different catalysts. However,

many forces are repetitive and can interact.

The “change drivers model” shows that “change in larger external domains,

such as change in environment or market, requires a change in more specific areas of

38
business strategy and organisational design” (Anderson and Anderson, 2002). This type

of change requires a change in human spheres of culture and the behaviours and way of

thinking of individuals. External areas including the environment, market, business and

organisation are more familiar to business leaders. In contrast, internal areas such as

culture, behaviour and mindset are new to most people but just as essential. (Anderson

and Anderson, 2002).

Dean Anderson and Linda Ackerman Anderson (2002) defined these drivers as

below: Environmental: The environmental driver is the dynamics of the larger context

in which organisations and individuals operate. These forces include social, commercial

and economic, political, governmental, technical, demographic, legal, and

environmental forces.

Marketplace Requirements for Success: This driver includes the total customer

needs that determine what is needed for a business to succeed in its market and meet
39
customer needs. Besides covering the real needs of goods or services, this driver also

includes needs such as delivery speed, customisability, quality level, need for

innovation, and level of customer service. Changes in market requirements are the

result of changes in environmental forces.

Business Imperatives: As one of the drivers of change, Business Imperatives,

determine what a company needs to do to succeed strategically, given the changing

needs of its customers. These may require a systematic review and change in its

mission, strategy, goals, business model, products, services, pricing or brand. Basically,

business Imperatives are related to the organisation's strategy to meet customer needs

successfully.

Organisational Imperatives: Organisational Imperatives refer to factors that

must change in the structure, systems, processes, as well as technology, resources,

skills, and even staff of the organisation in order for the organisation to implement its

strategic business needs successfully.

Cultural Imperatives: Cultural Imperatives refer to how norms change, or the

collective way of working, working, and relationships in a company must change to

support and guide the organisation's new plan, operations, and strategy.

Leader and Employee Behavior: Collective behaviour is the creator and

exponent of organisational culture. Behaviour goes beyond obvious actions and

explains how people change their lifestyles to create a new culture. Therefore, the

leader and the employee's behaviour indicates how leaders and employees should

behave differently to create the organisation's culture to successfully implement the

new plan.

40
 Leader and Employee Mindset: Mindset includes worldviews, assumptions,

beliefs, or mental models that make people behave or act like them. Becoming aware

that each of us has a mindset that directly affects our behaviour, decisions, actions, and

results. Mindset is often the first fundamental step in building the individual's capacity

and the organisation to transform.

Different types of change

Strategic change: This type of change involves extensive and long-term changes

that take place throughout the organisation. Strategic change is a transition to a new

situation than defined in the vision, mission, and grand strategy. This type of change in

the context of external competition, economic, social environments, internal resources,

structure and Organisational culture happens (Naghibi and Baban, 2011).

Operational change: Operational change is related to the operation, systems, and

technologies that have an impact on the order of work within a part of the organisation

and have a more significant impact on behaviour in compare with strategic change(De

Toni and Tonchia, 2005). On the other hand, Dean Anderson and Linda Ackerman

Anderson (2002) classified different types of change into three categories:

Developmental change: Developmental change is related to improving skills,

knowledge and performance. It also keeps people changing, always growing, agile, and

diligent toward a new level of performance. The motivation for this type of change in

the organisation is an improvement. There are two basic presuppositions in any type of

development change: a) People can be motivated. b) If they receive training,

motivation, and appropriate resources, they will definitely improve.

41
 Transitional change: Transitional change is about redesigning strategies,

systems, and technology processes. The orientation of this type of change is a broad

focus on structure, technology, and project-oriented tasks. The purpose of creating it is

to solve a problem. Transitional change means replacing something utterly different.

This type of change begins when the organisation managers realise a problem that has

not been followed up. Richard Beckhard and Reuben T. Harris (1987)) determined

three transitional change stages: a) Current state b) Transition state c) Future state. One

of the vital aspects of transition change strategies is to clarify the fundamental

difference between the current state and the desired situation. This operation set is

called "impact analysis", which assesses human and organisational impacts and

provides essential information for creating a proper change plan and reducing human

harm. The work analysis determines what aspects of the current state will benefit the

future state and what aspects should be left out altogether.

Transformational change: It is the most complex type of change and means a

fundamental change from one state to another. In this type of change, the mental form

must change, and the direction of this change requires change in culture, behaviour, and

mental form. In this kind of change, changes in the market and the environment are

crucial that deep and rapid progress in individuals' worldview is necessary to realise

that the new situation has replaced the current operation.

In another view, change is divided into four categories based on the “Extent of

change”, as well as the “nature of change”, which are “Incremental change”, “Big bang

change”, “Transformation” and “Realignment”(Balogun et al., 2008). According to

these element businesses can choose the proper strategy, which illustrates in the figure

below

42
McDonald’s Change strategies

At McDonald's, change has a long history of the business. The first record of

changes at McDonald's back to 1948 when the McDonald brothers realised that 80 per

cent of their sales were just hamburgers, and " the more they hammered away at the

barbeque business, the more hamburgers they sold" (Love, 2008). They closed their

restaurant for three months and rebuilt their business into a self-service restaurant

where customers could make their own favourite sandwich. As a result of these

changes, they fired 20 of their waiters and replaced the restaurant's metal utensils with

paper containers and cups. As a result, there was no need to hire people to wash the

dishes. They simplified their menu and increased the number of options to nine. This

change in strategy, in two years, doubled their profits (Gilbert, 2008). In fact, in those

years, the marketplace requirements forced the McDonald brothers to redesign and

change their business and services. These changes, which are considered an operational

change, were made according to new market requirements and customer needs

estimates. This historical example of McDonald's operational change back to the years

when the restaurant was confined to a city in the United States and had not yet gained

43
worldwide fame, so it cannot be compared to what McDonald is currently facing.

Because both the scope of the company's operations has expanded and new and

complex issues have arisen globally that require a more sophisticated and advanced

change strategy, but from a perspective that reflects the antiquity of change at

McDonald's It is important.

Business conditions in the New World have put McDonald in “the turnaround

situation” over the years. A turnaround situation occurs when a company's performance

deteriorates to the point that it requires a fundamental change in strategy and possibly

structure and culture (White, 2004). If a business is not aware of these changes, it can

lose its competitive advantage over competitors and eventually lose its market share.

In McDonald’s, the turnaround situation came about due to the rapidly expanding speed

around the world and the change in people's attitudes towards fast food, which is now

considered by many to be unhealthy food. Also, the enormous growth in competition in

the fast-food industry and some organisational stagnation and management failure are

other reasons for McDonald's turnaround situation (White, 2004). One of McDonald's'

turnaround situation was in the 1990s when many McDonald's plans and their

advertising campaigns failed. McDonald's extensive branches were established around

the world to become an enemy of the brand. Newer branches were taking customers

away from older branches, and that was hurting McDonald's revenue. In 1998, it was

for the first time since 1965, when McDonald's shares went public, its revenue was

declining, and McDonald’s had to lay off many of its employees.

The turnaround situation can have various consequences for businesses. This

situation can force a business to consolidate and divestment, change its business model,

change key personnel, or change its strategy. Besides, it can lead to a change in the

44
structure or even a change in the culture (White, 2004). At that time, McDonald's used

various programs and strategies to get out of the crisis. For example, Improve its

current business model by reducing prices and speeding up services.

McDonald's also launched a $ 20 million advertising campaign to recreate its

brand image. The changes also included a change in the company's management and

the previous CEO returned to the company. McDonald also closed several stores and

closed restaurants in three countries to compensate for financial losses and increase

profitability. Besides, McDonald's introduced a new range of new foods and products

(White, 2004). However, all these changes that took place at that time were operational

changes that did not lead to a change in the strategy, structure and culture that governed

McDonald's.

On the other hand, in recent decades, people's lifestyles have changed, and healthy

eating concerns have increased. This lifestyle change is a significant challenge for

McDonald's, as its menu is full of fatty and unhealthy foods. The change forced

McDonald's to include vegetarian foods in its menu and use less fat in food preparation.

For example, following the rise in child obesity and criticism of McDonald's as one of

the largest fast-food restaurants, McDonald's launched a campaign to promote healthy

eating and exercise, targeting children and adolescents (Rowley, 2004).

McDonald's activities have also come under crisis in recent years as

environmental concerns have grown. As people became more aware of the importance

of protecting the environment, McDonald's also decided to minimise plastics in

packaging and containers and use recyclable materials. In addition to health and

environmental issues, this change is crucial because it can change McDonald's brand's

image into an environmentally friendly business(Xu, 2014). In this regard, McDonald's

45
driving “Climate action” to find new ways to reduce emissions, dispose of waste from

nature and conserve natural resources with the participation of franchisees, suppliers

and producers(McDonald’s, 2020). Although there have been critics of McDonald's

performance in environmental pollution, McDonald's has tried to set its policies and

standards to reduce greenhouse gas emissions and use of renewable energy, as well as

to contribute to the advancement of agricultural practices to introduce itself as the “first

global restaurant company to set a science-based target to reduce emissions”.

The Covid-19 epidemic, on the other hand, is another situation that has changed

business conditions and put many businesses in crisis. In this situation, McDonald's,

based on its change management strategy, has tried to adapt to these changes. The

company is trying to turn the pandemic crisis into an opportunity, and as McDonald's

CEO announced they expect to be a winner in a landscape transformed by COVID-19

(Kowitt, 2020). McDonald's strategy for the pandemic situation is called “Accelerating

the Arches” and is not just focused on its food products, but is in line with its strategy

to focus on 3D’s. These 3D’s include “digital”, “drive-thru” and “delivery” which are

based on McDonald's “growth pillars”. The company is working to increase the speed

and convenience of shopping, test drive-thru pickup lanes for digital orders and a

restaurant concept that offers only drive-thru, delivery, and takeaway(Kowitt, 2020).

Besides, technological change is another area that has challenged businesses.

The type of response to these changes and the extent to which they benefit can affect

the expansion or regression of a business. In terms of adapting to technological

changes, McDonald's has also been trying to adapt its business based on the new

situation. McDonald's continues to invest in digital technology and the growth of

research and development activities in new technologies to ensure that it is one step

46
ahead of the pace of change and becomes the fastest fast-food chain in the digital

age(Fleming, 2019).

All of the given examples for McDonald's exposure to global change show that, in

general, McDonald's strategy for coping with these changes has been adapting strategy

in most cases. This adaptation has also occurred in the face of changing global

conditions and due to regional and local situations.

McDonald's adapting strategy has made the company so flexible that it has

made different changes to its menu based on people's food culture and tastes in

different countries. Based on the examples given of McDonald's exposure to various

changes over the past decades, it can be concluded that the most crucial factor in the

continuation and development of McDonald's business is adapting to new conditions

and changing programs and products based on new needs.

CHAPTER 3

RESEARCH METHODOLOGY

47
4.1 Research Methodology

Research implies look for learning. It goes for finding reality. It is the scan for

information through goal and orderly strategy for discover answer for issues.

Consequently, explore is a procedure of efficient and inside and out examination or

pursuit of a specific point, subject or territory of examination supported by gathering,

calculation, introduction and translation of important information. An examination

finding may offer ascent to new issues which may require additionally look into. So an

exploration prompts another examination.

Objective of research

48
 The fundamental target is to discover the viability of strategic administration

and furthermore to discover how the representatives do their function in Future supply

chain.

Research Methodology

Research technique is a strategy that can be utilized to take care of the

examination issue. It gives different advances that can be embraced by the specialist in

concentrate his examination issues. It incorporates the exploration as well as thinks

about the rationale behind those strategies. Research approach manages the destinations

of an examination think about, the technique for characterizing the exploration issue,

the sort of theory detailed, the kind of information gathered, strategies utilized for

gathering the and breaking down the information and so on. This sort of demand

incorporates a great deal of time, money and Energy. Remembering the ultimate

objective to find the reasonability of logistics organization in Future supply chain, we

need to take the data's just from the representatives of Logistics division.

So I think survey enquiry will be the most fitting technique for finding an

answer for my examination issue. In this way, I utilized evaluation request for the

investigation, as I am occupied with getting a reasonable technique to discover reality.

Logistics division in Future supply chain Comprises of 100 workers. So I took the

feelings of the considerable number of workers in this office with the assistance of a

poll. Along these lines I can unmistakably express that the adequacy of Logistics

administration in Future supply chain is astounding or not.

Questionnaire Technique

This is an imperative and extremely prominent technique for information accumulation.

This is embraced by people, associations and Government. In this strategy a poll is

arranged and sent to respondents. The poll when sent to the respondents, a demand is

49
made that the inquiries ought to be addressed and returned. The achievement of this

technique to a great extent relies upon the correct drafting of inquiries. Drafting survey

required a lot of aptitude and experience.

Development of Survey

Following advances are followed in building a poll.

1. Explaining the model and determining the factors to be estimated.

2. Framing of a survey

• Form of a survey

• Question grouping

• Question plan and wording

3. Pilot survey or Pre-testing

4. Strategies for managing questionnaire

Forms of Analysis

a) Descriptive Analysis

Descriptive or elucidating investigation is generally the research of distributions

of variables. The factors are related with the attributes of things under the study. In

such examination, there is the study of one variable, two factors or in excess of two

factors, yet to a great extent of one variable.

b) Inferential Investigation

The inferential investigation is about making inductions and determinations

from the discoveries of the study. It empowers us to settle on choices and reach

inferences from considers which could somehow or another be not plausible, in view of

extensive size of the universe or of high expenses of a registration review.

Statistical tools

1.Percentage Analysis

50
The motivation behind utilizing proportion or rate is to disentangle the issue of

examination. Rates lessen two appropriations to a typical base, in this way make

correlation straightforward.

2.Pie Diagrams

A pie table (or a circle diagram) is a round layout parceled into territories, depicting

degree. In a pie chart, the roundabout fragment length of each division (and hence its

point of convergence and district), is comparing to the sum it addresses. At the point

when edges are estimated with I turn as unit then various percent is related to a similar

number

51
 CHAPTER 4

DATA ANALYSIS

DATA ANALYSIS & INTERPRETATION

McDonald’s Operations Performance Objectives.

The following 5 performance objectives define what a company wants to achieve from

Cost

McDonald's compete on price, it is therefore essential for them to keep their costs low.

McDonald's costs are broken down as seen in the image below.

52
Since most of their costs come from food and labour, McDonald's operational

objectives would be to keep these costs as low as possible. Buying food in bulk helps to

reduce their costs through economies of scale is kept to a minimum. For example, the

saver menu burger packaging is a single sheet of paper.

Dependability

McDonald's objectives on dependability would be: to be open during the stated

hours. To have all items on the menu in stock and to have functioning equipment to

prepare the menu items. They work on achieving these objectives by having a stock

control system and multiple equipment where possible that act as a backup during

53
machinery breakdown. McDonald's also try and keep the restaurant open even when

carrying out store maintenance and only close if it is necessary.

Speed

McDonald's compete on speed. Their objectives are to reduce the time it takes

for a customer to receive their order from when they arrive. In order to meet their speed

objectives McDonald's have automated some tasks in selected restaurants, such as the

preparation of soft drinks. When an order is made, the drink order is passed to the

drinks machine and the drink is automatically prepared. This has helped to speed up

processes by reducing the number of tasks staff need to carry out. McDonald's also

installed self-ordering facilities inn order to reduce queues and human error which also

helps to speed up the processes.

Quality

Quality is not one of McDonald's competitive strengths. However, they still

strive to produce consistent food that tastes good by using 100% beef burgers, 97%

pork sausages, fresh eggs, fresh skimmed milk and fresh salad. They also have quality

centres across the globe that provide suppliers with training and assess product quality

for consistency and taste (corporate.mcdonalds.com, n.d.).

Flexibility

McDonald's have very low product flexibility, as they rarely add new items to

their menu. They also have low mix flexibility, because there is a limitation on how

much a customer can customise a burger. However, McDonald's do have Volume

flexibility, as they can serve a varying number of customers. Therefore, McDonald's

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flexibility objective is to be able to serve a varying number of customers quickly while

maintaining their quality

McDonald’s and the Business Life Cycle

The business life cycle defines the stages a business goes through, from inception to

decline. As seen in figure 3, after a business is introduced into the market it goes

through a growth stage and then a maturity stage before it declines.

The following data helps to determine where a business is in the business life cycle.

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The chart above is a six-year summary of McDonald's financial data. McDonald's

income has remained within a stable range for the past six years, which indicates a

stability in sales. This means the business is not growing rapidly, like it would be in the

growth stage.

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 This chart compares the largest fast food chains in the world by brand value in

million U.S dollars.McDonalds is the most valuable fast food brand of 2019 which

means It dominates its competitors and has the most customers. From this data we can

conclude that McDonald's is in the maturity stage.

Therefore, they are now focusing on retaining, regaining and converting

customers (mcdonalds.com, n.d.), rather than growing their customer base. They intend

to retain their customers by fortifying and extending their areas of strength. Which

include serving customers quickly and providing them with value at a competitive

price. This can be achieved by finding new ways to cut down on the time customers

spend waiting on food and keeping costs low by reducing wastage. Quality is not one

of McDonald's competitive strengths. That's why one of their growth strategies is to

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improve the taste and quality of their food in order to regain lost customers. This could

be done by reducing the amount of time prepared packaged food is kept in holding by

assembling burgers 'to order' and anticipating busy times in order to manage the

amount of staff on shift better so that they are not pressured and are able to assemble

and package food better.

McDonald's also intended to convert casual customers to committed customers.

They could do this by enhancing convenience for customers by having more locations

stay open for longer, expanding their delivery locations and having a separate faster

checkout for customers who are only buying coffee and drinks.

McDonald’s and the Four Stage Model of Operations

The four-stage model of operations consists of these four stages

1. internal neutrality:

This is the most basic level of operations, where operations implement business

strategy. For example, when McDonald's decided to begin delivering using Uber, they

had to adjust their operations in order to implement the new business strategy.

2. External neutrality:

This is when an organisation begins to compare its operations with those of its

competitors and can adopt best practices. McDonald's has passed this stage in most of

its operations as it now sets the standards that other fast food organisations compare

themselves to.

3. Internal supportive:

This stage is where an organisations operation is among the best in the industry and

they support the businesses strategy and help the organisation meet its competitive
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goals. McDonald's is under this stage in most of its operations as it is an industry

leader.

4. External supportive:

This stage goes beyond just supporting business strategy. This is where operations help

to develop the businesses strategy.

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CHAPTER 5

Findings

Findings

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 McDonald's is the largest fast food chain in the world with thousands of stores

in 118 countries. Its success can be attributed to the effectiveness of its operations

management. McDonald's operations, which can also be defined as processes, take in

food and customers as transformed inputs and staff and equipment as transforming

inputs to produce value for its customers.

McDonald's operations differ from similar operations in the volume of food

sold, the variety of their menu, the variation in demand and the visibility of their

operations to customers.

The performance of operations can be judged by their: Speed, variety, cost,

quality and dependability. These five operational performance objectives mean

different things for different businesses. For McDonald's speed refers to how fast

customers can be served. Cost refers to the unit cost of a burger. Quality refers to the

taste and consistency of food. Dependability means being open for the promised hours

and being able to serve all the items on the menu.

Lastly variety can be sub categorised even further to refer to the variation in the

number of customers that can be served, the amount of menu items or the extent to

which a customer can customise an order.

An organisations operation is developed to meet a business's goals depending

on where the business is in the business life cycle. McDonalds is a mature business

therefore their operations are designed differently from a business that is in its

introductory or growth stage.

Just as a business goes through a cycle, operations also go through a cycle. Initially

operations play a neutral role of fulfilling a business's objectives and meeting the

standards of competitors operations. Then as the business develops; operations begin to

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play a supportive role by assisting a business to meet its competitive goals and even

helping to develop the business's strategy.

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CHAPTER 6

CONCLUSION

CONCLUSION

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In conclusion operations management is the organisation of the activities that produce

goods and services. McDonald's operations can be compared to other operations using

the 4 V's. Its operations can be judged using the 5 operational performance objectives

and its operations are determined by the stage it's in, in the business life cycle.

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 BIBLIOGRAPHY

In this chapter the reference made from textbooks, journals, newspapers and

magazines are listed. The source of the internet and websites may also have mentioned

with correct address of the site.

Books Referred: Author Name

 ““Bag a McMeal.” Accessed online on October 26, 2004 at:

http://www.findarticles.com/ p/articles/mi_m3190/is_50_35/ai_80748686.

 Cantalupo, Jim. “McDonald’s Revitalization Plan.” October 29, 2003. Accessed

online on October 26, 2004 at < http://www.mcdonalds.com/corp/invest/pub/

revitalization.RowPar.0001.ContentPar.0001.ColumnPar.0004.File.tmp/

mcd_revit alization_plan.pdf>.

 Chase, R., Jacobs, F., Aquilano, N. Operations Management for Competitive

Advantage (10th Edition). McGraw-Hill Irwin; Boston; 2004.

 Howard, Lisa. “Suppliers.” June 19, 2003. Accessed online on November 8,

2004

at:<http://www.foodservice.com/news_homepage_expandtitle_fromhome.cfm?

passi d=6951>. Kerin, R., Berkowitz, E., Hartley, S., Rudelius, W. Marketing

(7th Edition). McGraw- Hill Irwin; Boston; 2003.

 Lessnau, Ronald, Current McDonald’s Owner. Personal Interview, October 28,

2004. “McDonald’s Worldwide Corporate Responsibility Report 2004.”

Accessed online on

 October 26, 2004 at: <http://www.mcdonalds.com/corp/values/socialrespons/sr_

report.RowPar.0002.ContentPar.0002.ColumnPar.0003.File.tmp/SR

%20Report_o utput_rev_ed.pdf>.

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 Phillips, Eddie, Prior McDonald’s Manager (1998 – 2003). Personal Interview,

October 27, 2004.

 Phillips, Kenny, Current McDonald’s Manager. Personal Interview, October 27,

2004. “Restaurant Management.” McDonald’s Restaurant Management Careers.

Accessed

 online on October 27, 2004 at: http://www.mcdonalds.com/usa/work/

manage.html.

 Zuber, Amy. “Big Mac, Big Value: McD to Lower Prices;” December 10,

2001.

 Accessed online on October 26, 2004 at http://www.findarticles.com/p/articles

 /mi_m3190/is_50_35/ai_80748686.

Websites & Search Engines.

1. www.futuresupplychains.com

1. www.bollore-logistics.com

2. www.bollore-transport-logistics.com

3. www.logisticssupplychain.org

4. www.freepatentsonline.com

5. archive.org

6. logisticsmagazine.com.au

7. www.managementparadise.com

8. www.marketingteacher.com

9. www.researchgate.net

10. www.blackwellpublishing.com

11. www.emeraldinsight.com
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12. www.scribd.com

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Advanced Strategies for

 Today’s Transformational Leaders. San Francisco, CA: John Wiley & Sons.

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Available at: https://researchportal.bath.ac.uk/en/publications/exploring-

strategic-change-3rd-ed (Accessed: 18 January 2021).

 Beckhard, R. and Harris, R. T. (1987) Organizational Transitions: Managing

Complex Change. Addison- Wesley Publishing Company.

 De Toni, A. and Tonchia, S. (2005) ‘Definitions and linkages between

operational and strategic flexibilities’, Omega, 33(6), pp. 525–540. doi:

10.1016/j.omega.2004.07.014.

 Fleming, M. (2019) McDonald’s turns to tech to build the future of fast food,

Marketing Week. Available at: https://www.marketingweek.com/mcdonalds-

digital-transformation/ (Accessed: 18 January 2021).

 Forbes (2020) McDonald’s (MCD), Forbes. Available at:

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 Lambertson, S. (2018) Change Management: Understanding the Type and

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 Scope for future study

Changing global conditions demand that businesses have the right strategy to

cope with new changes and conditions. As one of the largest restaurant chains globally,

McDonald's is one example of a business that needs an effective strategy to cope with

change. This paper is aimed to answer this question of what strategies McDonald's has

used to manage changes over the past decades?

The need for change in the organisation arises from various drivers, including;

“Environmental”, “Marketplace Requirements for Success”, “Business Imperatives”,

“Organisational Imperatives”, “Cultural Imperatives”, “Leader and Employee

Behavior”, and “Leader and Employee Mindset”. The history of McDonald's change

shows that at different times, each of these drivers has created the need for change in

McDonald; When the McDonald brothers closed their restaurant for three months in

1948 to redesign their business, and now in 2021, when McDonald's struggles with the

Covid-19 pandemic, tries to turn this challenging change into an opportunity for further

growth.

Also, different categories were presented for different types of change, and

according to the “nature of change” and “extent of change”, four strategies were

introduced, including; “adaption strategy”, “evolution strategy”, “reconstruction

strategy”, and “revolution strategy”. Examples of McDonald's exposure to change over

the years show that its strategy in change situations has been adapting strategy.

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McDonald's has tried to adapt to needs and changes, both globally and locally, and to

use the new conditions as a factor for further progress.

Photography

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