MCDONALD'S CASE ANALYSIS REPORT Case

McDonald's has grown significantly from the early days of having a single outlet to the current status where it has more than 26,000 restaurants which are located in 120 countries. The company no serves 15 billion customers every year with sales topping 40 billion dollars. It has, however, not been smooth sailing for McDonald's since the company has suffered from serious problems as a result of the company's decision-making being shaky and many of their products and their marketing strategies have failed terribly. One such strategy that failed was the one that involved the Arch Deluxe sandwich which was targeted at adults. The company ran a massive campaign to increase its sales which was a serious flop. Further to this, the company faces steep competition from rivals such as Burger King which keeps the management constantly on their toes trying to come up with new and innovative ways to help McDonald's gain and maintain their competitive advantage. The problems faced by the company were analyzed in detail to provide this case analysis report which is divided into three major sections. The first section gives a brief background of the problems faced by McDonald's while the second section is a discussion of the major problems which McDonald's is facing. The last section offers suggestions on how these problems can be resolved and a strong evaluation of each of the recommendations mentioned. This case analysis report is structured as descriptive case analysis and will only convey information to the reader. However, the information provided will be detailed and substantial to enable the reader to understand the problems faced by McDonald's and how they can be resolved for the future of the company or organization.

Background information

This analysis is conducted with core competence as the major concept under analysis. Prahalad and Hamel (1990)

define core competence as the collective learning inside an organization which creates the capacity for the organization to coordinate the diverse skills in the organization and also integrate different forms of technologies in order to gain competitive advantage. The authors argue that companies must first identify which their core competencies are and how they provide the company with potential access to a wide market base which makes a significant contribution to the benefits of the consumers and the company's competitive advantage as a result of competitors being unable to copy the strategies under use by the organization. The authors also state that a company must also reorganize its strategies in order to evaluate the opportunity for strategic alliances which provide them with a competitive advantage and/or focus on their development internally as a source of competitive advantage.

McDonald's has engaged in fierce competition with its major rival, Burger King, which has led the companies in a constant race to deliver food that is hot and value-priced. The marketing strategies in use by the two organizations have been quite similar with none willing to accept to be outdone by their competitor. Though the targeting strategies for the two organizations are quite different with McDonald's aiming at providing their customers with value for money, cleanliness, and outstanding quality and service, and Burger King being aimed at ensuring consumer satisfaction through their high flexibility, since their target consumers overlap, this is the major source of the competitive rivalry in the industry.

McDonald's strategic context

The definition of strategic context given is that it is a combination of three factors which help company managers to by Tushman and Charles a O'Reilly (2002)

understand the various opportunities and hindrances that fall before the organizations. The first factor is the environment in which the organization operates while the second is the resources that are available to the organization. The last factor is the history of the organization which shows the development of the organization and the changes that have taken place over the years. The authors also state that once the company or organization has made its strategic choices, it is able to understand its strategic context in order to define the critical tasks that should be undertaken and ensure that these critical tasks are in line with the culture, people and activities in the organization. Strategic choices can be incorrect and may act as critical tasks off the organization's target. They may also be misaligned relationships and lead to dramatic changes to the organization over the years. Swank, 2003()

McDonald has undergone many drastic changes over the recent years with the most recent being the adoption of the "Made for You" system of hamburger production which has the objectives of improving the response time of providing service to customers, giving a greater allowance for customized orders by customers and improving the freshness and quality of the food by measuring the temperature of sandwiches, crispness of lettuce or sogginess of buns. Though this improvement was quite costly to the organization, it has allowed McDonald's to gain greater competitive advantage, provide better services to the customers and better their market position. It has also greatly changed the history of McDonald's which did not encourage customized customer orders at first. The management must have realized this was an important consideration for customers and thus the need to incorporate a system that allowed them to be able to give greater flexibility to customer orders.

Core analysis

Inefficiencies in production

During the early years of the design of the McDonald's hamburger production system, the company majorly focused on the efficiency and consistency of the quality of products sold to consumers. The company aimed at providing uniformly high quality to consumers who were served low-cost fast foods in a friendly and clean environment. However, this system required many of the company's staff to be on the lookout for traffic coming into the store to avoid backlogs which caused customers to wait longer than their usual time. Considering this system needed as many as five people to operate in the grill area during the busiest times with many other stations requiring double or even triple number of employees, there were few who could keep an eye on the incoming traffic at the store. In addition to this, bin workers had to spend a major part of their time on shift watching the incoming traffic and matching it against the bin inventories in order to build sandwich suppliers and prevent customers waiting for long periods. McDonald's production system also created a lot of loopholes which led to huge losses as a result of many food items that stayed too long being discarded. These may have been the major reason for inefficiencies in the McDonald's hamburger production system.

Longer wait times

Over the past couple of years, the trend in the fast food industry has been focused on combining speed with convenience and quality. The company has, however, over the years failed to achieve their speed target of less than 2 minutes waiting time per customer. The company has come quite close to this target though they have failed to make their waiting time less than 2 minutes. This has caused the company to be beaten by Wendy's which is the only store that provide services to customers with a shorter waiting time than McDonald's. The inefficiencies earlier cited in McDonald's production system contribute greatly to this difference in wait time between them and competitors. However, McDonald's has managed to beat Burger King though by a minimal margin which is an indicator that McDonald's production system is much better than that of Burger King.

Health of McDonald products

McDonald's has also had issues with health professionals, health advocates and other consumer activists who accuse the company of creating a significant production to the high cholesterol levels in the country as well as the frequent episodes of heart attacks, obesity and diabetes. This has caused the customers to have a negative perception of the company though they have strived to improve this over the years by assuring the public of the safety of their products.

Lack of flexibility

Another problem that faces McDonald's is the lack of flexibility in the company's menu as a result of their lack of accommodation for customized customer orders. Though the company has over the years allowed customers to give specifications of their hamburgers such as omission of lettuce or other products, these consumers have to wait longer than the other customers who take regular products. This shows that McDonald's current operations prevent the organization from creating allowances for consumers with customized orders to receive their products in good time.

Recommendations

McDonald's has been a success for many years as a result of its constant growth and expansion which has, however, made it difficult for the organization to grow its core competencies which include speed of service, quality and consistency. These core competencies are the focus of the recommendations given to McDonald's for the resolution of the described problems. By striving to improve their core competencies, McDonald's will be able to improve the customer service they offer to customers considerably as well as to satisfy their customers better Hammer & Stanton, 1999()

Improving production consistency

The big secret behind the success of McDonald's is that the company has long strived to embrace innovation and striving to achieve consistency in the operations of its outlets. Since the "Made for you" production process has been tested and assured to be a workable process for McDonald's this should be implemented on a storewide basis despite the huge upfront expenses to be incurred by the company. These upfront expenses will be compensated by the huge returns and improvements in quality of customer service that come from the company's use of this new production system Hall, Rosenthal, & Wade, 1993.

This will enable McDonald's to accommodate customized orders as a source of sustained competitive advantage as well as to reduce the service wait time to bring McDonald's to be a chief organization in terms of speed of service to consumers. This "Made for you" production system will also enable McDonald's to serve their consumers with greater flexibility by creating a standardized production system which ensures efficiency and consistency across all McDonald's branches.

Consumer targeting strategies

McDonald's target clients have been adults and the youth who the company has made significant to their product range. However, over the years, it has emerged that other younger consumers are beginning to appreciate McDonald's products from the early ages of 9 to 10 years. Thus it is recommended that McDonald's introduces play pens for children of these ages and even for the younger ones in order to create a larger target audience. McDonald's will also benefit from this by being able to accommodate families in their stores thus considerably increasing their target market.

Reevaluation of the company's strategic choices

In order for McDonald's to make good strategic choices, the company must come up with clear cut definitions of how they intend to create competitive advantage, target consumers, objectives, mission and vision. McDonald's already has most of these items figured out, however, the company needs to generate a broader expression of the organization's aspirations in order to identify the critical tasks which it needs to implement in order to achieve these choices. One of the major strategic choices is the inclusion of the younger population as a target audience for McDonald's in order to draw in a larger target audience. Secondly, as argued by Stalk, Evans, and Shulman (1992)

, McDonald's objectives, vision, mission and critical tasks will need to be reevaluated in order to create a new definition of the strategic context of McDonalds to identify new critical tasks and create a new vision that generates a comprehensive assessment of the strategic choices available to the organization.

Conclusion

McDonald's has had a long run and successful operations strategy that has involved innovation and experimentation but the lack of consistency in McDonald's has led the company to lose significant competitive advantage against its fierce rivals. The company benefits from its rich history which the company has had over the years and which have greatly supported the company's growth. The company has also faced changes in consumer taste which they have failed to accommodate by allowing greater flexibility to consumers through allowing them to place customized orders without having to wait for too long. The system that McDonald's had been using for many years allowed for customized orders though these customers had to wait for longer than the customers who requested regular orders.

McDonald's has also had to battle with negative publicity from health rights advocates and consumer activists who have tried to portray the company in a negative image as the leading cause of obesity, diabetes, and heart attacks in the country. The company has, however, worked hard to turn this bad image round to become a good image and this has enabled the company to remain competitive and profitable even during the economic recession.

By the company focusing on their core competencies which are the quality and speed of their service alongside their friendly pricing, the company can be able to gain competitive advantage. These core competencies should be the major focus of the company's strategic choices and critical tasks and will also guide the creation of the company's vision, mission, goals and objectives all which will guide the company towards success.

References

Hall, G., Rosenthal, J., & Wade, J. (1993). How to make reengineering really work. Harvard Business Review, November-December, 119-131.

Hammer, M., & Stanton, S. (1999). How process enterprises really work. Harvard Business Review, November-December, 108-120.

Prahalad, C.K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 79-91.

Stalk, G., Evans, P., & Shulman, L.E. (1992). Competing on capabilities: The new rules of corporate strategy. Harvard Business Review, March-April, 57-69.

Swank, C.K. (2003). The lean service machine. Harvard Business Review, 81(1), 123-129.

Tushman, M.L., & Charles a O'Reilly, I. (2002). Winning Through Innovation: A Practical Guide to Leading Organizational Change and Renewal. Boston, MA: Harvard Business School Press.