McDonalds Strategic Management

Strategies, Techniques and Best Practices of an Efficient and Effective McDonald's Corporation

"If I had a brick for every time I've repeated the phrase Quality, Service, Cleanliness and Value, I think I'd probably be able to bridge the Atlantic Ocean with them."

Ray Kroc

Introduction

Ray Kroc, a multi-mixer salesman, founded the McDonald's Corporation in 1954. Kroc's vision was to build a famous restaurant chain renowned for quick service menu items of a consistently high quality and uniform methods of preparation. Today, McDonald's is arguably the most successful quick service restaurant chain boasting more than 33,000 restaurants in 119 countries with 1.7 million employees serving 68 million customers every day, (McDonald's Corporation, 2012). The strategic plan of the McDonald's Corporation is to continue to lead the way of the quick service restaurant industry and remain ahead of their competitors by providing consumers with affordable prices, great service and healthier menu options. McDonald's remains competitive in many categories including price quality, management and employee training. The aim of this paper is to discuss the strategies, best practices and techniques used by the McDonald's Corporation to improve responsiveness to customers, offer a better service quality and manage resources efficiently and effectively to achieve exceptional organisational performance. To do this I will examine the McDonald's Corporation Annual Reports, Strategic Policies and related historical articles.

The McDonald's Vision

"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile." (McDonald's, 2012)

What is Strategic Management?

Strategic Management is 'the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage' (Schermerhorn, 2011). It is a process, which begins with identifying a mission, values and objectives where top-level managers are largely responsible for the development of this process, which further involves, 'looking ahead, understanding the environment and the organisation, and effectively positioning an organisation for competitive advantage in changing times' (Schermerhorn, 2011). McDonald's top-level managers determine the McDonald's mission to 'be our customers favourite place and way to eat' (McDonald's Corporation, 2012). Furthermore, they have determined a range of values which include placing the customer experience at the core of the business - understanding that the customers are the reason for their existence and by providing them high quality food and superior service, in a clean, welcoming environment, at great value; committing to its people (employees and suppliers) - by providing career progression training and developing the future leaders of McDonald's; believing in the McDonald's system - understanding the McDonald's business model; operating ethically - conducting business to the highest possible standards of fairness, honesty and integrity; giving back to the community - sponsorship of community sporting teams and a commitment to the Ronald McDonald House Charities; growing the business profitably - providing sustained, profitable growth to all stakeholders; and striving to continuously improve - respond to changing consumer trends through constant evolution and innovation (McDonald's Australia, 2010). The primary goal of any business is to build sustainable competitive advantage over its competition. This competitive advantage may be the development of a strategic asset and can be driven by factors such as 'the ability to outperform based on product innovation, customer service, speed to market, manufacturing flexibility, and product and service quality' (Schermerhorn, 2011). McDonald's has a number of ways it achieves its competitive advantage. It is arguably the market leader in providing a breakfast menu in the quick service restaurant industry. There have been attempts by other competitors, which as resulted in their success not even coming close to the success of the McDonald's breakfast menu. The Big Mac burger is world famous and now the McCafe is rivalling the biggest coffee chains the world over.

The strategic management process includes a number of strategy levels including a corporate level strategy, which 'sets long-term direction for the total enterprise' (Schermerhorn, 2011). The McDonald's corporate strategy is to franchise and operate McDonald's restaurants in the global restaurant industry. These restaurants serve a varied, yet limited menu in more than 100 countries around the world (McDonald's Corporation, 2010). Yet the strategy which most greatly assists the success of the McDonald's strategy is its business strategy. The business strategy 'identifies how a division or strategic business unit will compete in its product or service domain' (Schermerhorn, 2011). McDonald's uses its business strategy in a way that allows each region to determine what are the best products for the customers of that region. Examples of how this business strategy has worked in Australia is the introduction of the McOz burger. The ingredients in the McOz were determined to be -- through customer opinion surveys -- ingredients which Australians believed should be on a burger e.g. beetroot and tomato. McDonald's Australia's largest successful business strategy initiative was the introduction of McCafe, created and launched in Melbourne in 1993. McCafe is the result of consumer trends towards espresso style coffee and is reported to generate 15 percent more revenue than a regular McDonald's restaurants. By 2003, the McCafe diversification strategy (growth through diversification is by acquisition in new and different business areas, (Schermerhorn, 2011)) saw it become the largest coffee shop brand in Australia and New Zealand taking over other competitors such as Gloria Jeans and The Coffee Club (Wikipedia, 2012).

The Made for You Strategy

The McDonald's Strategy of providing food to its customers in the early 90's was to prepare bulk menu items at once and hold them in a warming tray until a customer purchased the items. Using this system, shift supervisors and managers has to precisely predict how much food was to be placed in the tray based on historical