McDonald's Corporation overview and business operations

McDonalds Corporation

McDonald's and the obesity problem

As the world is rapidly developing, people dwell in the age of speed and advanced technology. Since time is the most important requirement in order to achieve their duties, people are in a continuous search for extra time, or time efficiency. As a means of satisfying consumers' needs, many companies have developed products which seek to fulfill their wishes. Among these, we can mention the fast-food industry. The firms that are comprised within this environment supply already cooked products which are prepared in only a couple of minutes. They taste very good and they appeal especially to children and teenagers who are also attracted by the promotional campaigns. Because the prices of the items are affordable, even considered cheap by some of the customers, their demand is always high.

However, despite the time benefits that they offer, these products have some side effects. Firstly, some of the ingredients that they contain are non-healthy at all. Secondly, regarding the way they are cooked, we can refer to the French fries which use the same oil for each series of products. Time after time, this oil is reheated and, thus, its composition changes, it acquires all types of unhealthy substances. Thirdly, some companies place into their products some substances which create dependency. They are used in order to leave the client wanting to consume more and more food; he is never satisfied with only one item. Lastly, all these negative aspects lead to bad effects on the consumer's health and are also intermediaries in his fattening process, leading to obesity.

McDonald's is the most familiar company which serves fast-food. All the ideas specified above fit the brand perfectly. "It is the leading global foodservice retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 119 countries each day" (McDonald's website).

B. Analysis of Corporate Strategy

Dick and Mac McDonald opened their first drive-in restaurant in 1941, relying on carhops -waiters who went from car to car- to take orders from patrons parked in the restaurant's large lot. In 1948, the brothers abandoned their popular format and introduced self-service windows, 15-cent hamburgers, French fries, and milk shakes. They standardized their preparation methods (in what they termed the "Speedee Service System) with exact product specifications and customized equipment" (McDonald's Corporation). Their success was noticed by Ray Kroc who became their national franchising agent. From the first restaurant opened in San Bernardino, California in 1948, the franchising chain absorbed some core values: limited menu, fast service and low prices and transmitted them to all the restaurants. Unlike his competitors who sought to maximize their revenues, Kroc focused on optimizing its activity by trying "(i) to make sure McDonald's products were of consistently high quality, (ii) to establish a unique operating system and, (iii) to build a special set of relationships between the McDonald's corporation, its suppliers, and its franchisees" (McDonald's Corporation).

Therefore, the company established even the methods used by the suppliers in order to obtain the products. It got involved in every detail of its business; it cared about each and every aspect of the production cycle. Another competitive advantage was the fact the restaurants offered only a 10 items menu. Therefore, the company was able to provide with the same taste and the same products to the entire chain, regardless of the country or location of the restaurants. The standardization continued with a manual of about 750 pages which was released in 1957 and covered the entire system of production. Each item had clearly specified requirements which regarded the quality of the ingredients, their quantity, the dimensions of the finite products and the time entailed.

In addition to the food served, the company was very careful about the service and the cleanliness of the eating places. Regular checks were being done to each place, even by the managers who graded them. For more than 30 years, McDonald's stood for QSCV (quality, service, cleanliness and value).

In regard to the franchisees, Kroc treated them more as partners than as sources of income. With an eye on the specific requirements, he also gave them the chance to develop some new products or some regional advertising campaigns. The company had a beneficial working relationship with its suppliers, managing to develop some successful products such as: French Fries, Chicken McNuggets and Egg Muffin. However, despite the triumph, McDonald's also experienced a fall in the U.S. business after about 35 years of activity. The consumers were becoming more conscious of nutrition and dietary options, and, thus, about the choices which affected their health.

In order to keep pace with the market trends, McDonald's got involved in "new venues for its restaurants, such as schools, sporting arenas, museums, airports, and hospitals. It also developed new smaller restaurants, less expensive than its traditional designs, which could service customers profitably in "seam" areas between existing McDonald's restaurants" (McDonald's Corporation).

Around 1990, the competition became fierce. Therefore, the company sought new ways of keeping the customers and attracting new ones. As a response to the people's desires of dietary food, the restaurants began to offer salads, chicken and muffins. In addition to that, working with Keystone and Auburn University, they managed to introduce the first-ever 91% fat-free burger, McLean Deluxe. Moreover, they brought in chicken fajitas and McDonald's Pizza. In 1991, they even worked on the pricing policy, reducing the prices in the case of some of the products.

While dealing with all these operating problems, the company was faced with another trend: the environmental protection. This came as an opportunity for the brand, which sought of introducing a responsible policy into its strategy. And they managed to implement it perfectly. Therefore, regarding their present activity, taking into consideration the life cycle of the products offered, they seek to acquire the ingredients from high-quality suppliers, and then they dispose of the remains trying to keep a safe, pollution free environment. "Since 1990, McDonald's has worked with Environmental Defense to reduce waste in our operations. We have learned to control solid wastes by: Reducing the amount of materials we use initially, Recycling what we can, Using products made from recycled materials. The many changes we have made have produced large savings in natural resources and reductions of waste. During the 1990's alone, we: Recycled 2 billion pounds of corrugated cardboard, Purchased more than $3 billion in products made from recycled materials, Eliminated several million pounds of packaging. During the 1990's, we significantly reduced electrical energy consumption in our restaurants by replacing conventional lighting with more energy-efficient fluorescent lighting. We were an early member of the U.S. Environmental Protection Agency's Green Lights program and a recipient of the agency's Green Lights Partner of the Year award" (McDonald's website).

Taking into consideration the marketing strategy, we can notice that McDonald's has a clear idea about its goals. It advertises especially to children and teenagers. Its product Happy Meal contains French fries, a hamburger, a drink and a toy, everything that a child wishes. It is a clear fact that children are attracted to toys. The toys offered vary in accordance to the movies or cartoons in trend at that certain period of time. The price is not that high in order to persuade the parents to buy it for their children. In this case, the differentiation strategy works very well because the product is unique on the market.

McDonald's tries to adapt its menu to the consumers' wishes. It has, therefore, introduced several meals which are low fat and contain fewer chemicals and more nutritive ingredients, such as vegetables. They seek to offer a wide choice to the customers, leaving them to be the ultimate decision-makers.

C.

Issues for Future Concern

The future concerns are a result of already debated aspects regarding the firm. It is obvious that the company will lose clients because of the obesity problem. Unless it finds ways to reduce the negative effects of its food, McDonald's should expect a decline in its revenues and also in its brand image. "In 2001 New York trial lawyer Samuel Hirsch filed a liability lawsuit against McDonald's alleging that his 5-feet, 10-inch, 272-pound client had become obese from eating at McDonald's and other fast food restaurants. The man had continued to eat at fast food restaurants despite two heart attacks. After dropping that lawsuit, Hirsch represented two obese teenagers who claimed that for several years they ate at McDonald's regularly and subsequently developed obesity-related illnesses" (Obesity and McLawsuits). This is only one of the cases addressed towards McDonald's. The future concern regards other complaints which may arise on the subject of obesity.

The U.S., government's interest about the obesity problem was aroused by a study which proved that Americans have become heavier. This study was released in February 2004 by the Centers for Disease Control and Prevention (CDC). As a result to the findings, McDonald's cut its super size meals out of the menus. Moreover, it "introduced "The Go Active" meal with a salad, water, a pedometer and an activity log, an all-white-meat chicken McNugget, and other healthier items. McDonald's, the International Olympic Committee, and the American College of Sports Medicine opened a Web site. McDonald's also introduced an educational campaign, Real Life Choices about how to track diets and put menu items into three categories: "Watching Calories," "Watching Fat," and "Watching Carbohydrates." McDonald's also provided nutritional information on its Web site" (Obesity and McLawsuits).

The Menu Education and Labeling Act (MEAL) was released by the House and the Senate in November 2003. Its requirements implied the disclosure "in a statement adjacent to the name of the food on any menu listing the food for sale, or by any other means approved by the Secretary [of Health and Human Services], the number of calories, grams of saturated fat plus trans fat, and milligrams of sodium contained in a serving of the food, offered for sale, in a clear and conspicuous manner and information, specified by the Secretary by regulation, designed to enable the public to understand, in the context of a total daily diet, the significance of the nutrition information that is provided" (Obesity and McLawsuits). As a consequence, the firm will have additional costs in order to determine the exact features of the products. Moreover, whenever introducing a new product, it should develop a close analysis of the ingredients. These requirements imply spending more time and money on products.