5 C’s Of McDonald’s:Company: McDonald's Corporation is in 119 countries around the world. 33,000 locations serve over 68 million customers each day (Data Monitor, 2011). When it comes down to the McDonald’s as a brand and fast food industry, the sales are high, but the brand perception is not keeping up with the pace. Rated the world’s number 6 brand by Interbrand, McDonald’s brand is negatively perceived by the public (Morrison, 2011). A few factors that influence the negative effect on McDonalds brand perception include the issue of obesity, the involvement of animal cruelty, social media commentary, and targeting an innocent audience with manipulation. McDonald’s aims are to maximize the profit by increasing the sales, keeping cost low and more outlets nationwide. McDonald’s main aim is to lead the Quick Service restaurant market by a programmer of site development and profitable restaurant opening. The mission statement of business “McDonald’s mission 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."
Collaborators: Supplier is an organization that provides resources for other organizations. In McDonalds three legged stool philosophy the third leg is supplier partners. McDonald's has practiced a backward vertical integration, by replacing most of its suppliers. It has done so for two reasons,
To reduce costs, and To ensure that its products are of top quality.
These supplies include beef and milk to be used in its products, which it gets from its farms. Other suppliers include local grocery stores that supply McDonald's with fresh vegetables. Soft drinks are supplied exclusively by Coca-Cola, which is also its ally. McDonald's supplies also include raw material such as flour, sugar, yeast, etc.
Customers: This refers to buyer force. The buyer has a great deal of selecting power due to the fact that if they are dissatisfied with the food or service they can easily switch or purchase from an alternate product. But it is undeniable that any organization cannot satisfy the needs of all the consumers. Therefore organization divides the market into segments which display similar characteristics or behavior is necessary. McDonald's market segmentation is based on demographic variables Age and Lifestyle. The primary target markets are seniors, adults and teenagers, but the most heavily targeted segment is children.
The market segmentation of McDonalds can be visualized as follows: Market Segments
Seniors Adults Teenagers Children
Customers are those who pay money to acquire an organization's goods or services. For many years McDonald's mostly targeted the young people, however this has changed in this decade; McDonald's has turned towards a more general market. By doing this McDonald's concentrates on the family, targeting a diverse market. Customers used to get to know about the products through advertising. Now a days they are focusing on billboards and give ads on social media site.
Competitors: It was said that Food industry is highly competitive" ("Data Warehousing Case Study: Fast Food", n. d.). McDonald's major Competitors include that Burger King, Taco Bell, Subway, and Panera Bread. Especially, KFC, which offers chicken nuggets and fries on its menu, operates over an 11000 restaurants in more than 80 countries. Fast food, especially fries, hamburger and so on, are thought as garbage-food because of highcalorie. There are high possibilities of healthy substitutes posing a threat to these companies. Of course, McDonalds is concentrating on the health side by introduction of healthy food items in the menu. The following are the findings of the competitive position of McDonalds based on the Porter's five forces: Rivalry: This involves how the company differentiates itself from its competitors. In case of McDonalds, as discussed above the major rivals are Burger King, KFC and Wendy's. Though McDonalds is the Market Leader currently, with the capacity of the rivals growing the competition seems intense. The rivals are trying to increase their sales by concentrating on the health factors. New Entrants: With so many popular fast food companies in the industry new entrants are not much if a threat when seen globally. McDonalds has an edge over its competitors as it is globally spread.
Buyers: With reasonable prices and quick service provided by McDonalds, there is less scope for customers to move to competitors for the products. With the introduction of the wireless facility in the some of the outlets has added to the attraction. Suppliers: Except for the cold drink from Coca Cola, the company does not have a single supplier at a global level. For meat it has its own farm and other raw materials are from local store Substitutes: There are high possibilities of healthy substitutes posing a threat to the company. Though McDonalds is concentrating on the health side by introduction of healthy food items in the menu, it might still be posed with the challenge of substitutes.
Context:McDonald is the largest fast food company in the world. There are more than 30,000 restaurants in over 120 countries worldwide. In reality, there is nearly 49 million customers daily buy food from McDonald. The reasons of success for McDonalds are not only about delicious fast food, but also the theory, strategy that it used. In this post, I will mainly focus on the analysis of macro environment for McDonalds, which is using the tool called PESTEL analysis Political Factors Generally, McDonalds are affected by government policy on the regulations of Fast Food Company such as health and hygiene policy. Government realized health problem have been a big concern for everyone, people are having diseases such as cardiovascular and cholesterol because they are eating too much fast food. Furthermore, hygiene policy also is a big concern for a fast food company. Good relationship with government will bring McDonald on a better position to service in this industry Economic Factors McDonalds have to consider the effect of economic. Organisational performance is usually affected economic factors such as tax rate, exchange rate and unemployment rate. Running a Business in local market, a company must be facing government regulation on tax or profit. Especially McDonald is an international company, and its business is successfully running over the world. Every country also has its own regulation on tax or other else that affect the business. Moreover, McDonald needs to import food and drink in local market, which mean the exchange rate and people living standard also affect the cost of running a business and productivity.
Socio-Cultural Factors The changing lifestyle will affect the sales performance of McDonalds. Nowadays, people are willing to eat more expensively. They want to have quality services and food more than fast food. Moreover, different country has different eating behaviour. In western country such as USA, people are willing to eat potato and hamburger. But in China, people prefer rice more than hamburger and potato. Few years ago, McDonald promoted rice burger, and now is promoting rice for dinner. For my point of view, it is really strange and hardly to say it is delicious. Socio-Cultural Factors The changing lifestyle will affect the sales performance of McDonalds. Nowadays, people are willing to eat more expensively. They want to have quality services and food more than fast food. Moreover, different country has different eating behaviour. In western country such as USA, people are willing to eat potato and hamburger. But in China, people prefer rice more than hamburger and potato. Few years ago, McDonald promoted rice burger, and now is promoting rice for dinner. For my point of view, it is really strange and hardly to say it is delicious. Environment Factor Recently, people start concern environmental problems such as air pollution and too much waste of row material. Take McDonald as example, it faced a lot of criticize of the waste production. Before the pager packaging was produced, McDonalds were using polystyrene for packaging for foods. As I mentioned at the beginning, there are around 49 million customers daily buy the food from McDonald. Can you imagine how much food waste and the waste of polystyrene Legal Factors Regulation always is the biggest concern to a company. As a company in fast industry, there are many legal requirements that McDonald should achieve in different countries, such as the labour and employment law, company law and tax requirement. In conclusion, McDonald is still facing different threat from the macro environment. McDonald will be affected by each of the factors.
Key success factors:Uncompromising Standards: One of the most influential factors that made the initial set of McDonald's possible would have to be credited to the restaurant's extreme commitment to their aimed standards of consistency and their motto of "Quality, Service, Cleanliness and Value." In which both were created by Kroc himself. Even customers knew that no matter where they travelled, they could rely on those qualities at every McDonald's they visited
Consistency: In 1955, Kroc incorporated his company as McDonald's corporation and opened his first very own restaurant in Illinois. Placing his concern over the consistency and uniformity from store to store, he decided to establish strong restaurants first before franchising them out. Wants McDonald's to be a multi local and not a multinational corporation. QSCV: For example, cleanliness is one feature of the McDonald's corporate system that needs no explanation; clean toilets are universally appreciated. McDonald's is widely credited with starting a revolution of rising expectations among East Asian consumers who had never experienced high standards of public hygiene in the catering trade. In Taipei, Beijing, Seoul, and Hong Kong, local restaurateurs had to match this new standard or watch their customers go elsewhere. Young people began to draw an equation between the condition of a restaurant's toilet and the state of its kitchen. Willingness to Adapt: McDonald's success is dependent on adapting to its consumers’ needs and demands McDonald's franchise business has not only survived but thrived through boom times and recessions and has successfully reacted to consumer trends. It was one of the first franchise restaurants to post nutritional information about its menu, and now offers salads and other healthy options in recent years. Also, the key to McDonald's worldwide success is that people everywhere know what to expect when they pass through the golden arches. This does not, however, mean that the corporation has resisted change or refused to adapt when local customs require flexibility. McDonald's continually seeks for innovation and they need to adapt to new market conditions according the fast paced globalize world. For example, in 1963, McDonald's introduced the "Filet-of-Fish" sandwich in the Cincinnati area for Catholics who were restricted not to consume meat on Fridays. This new offering was later on implemented to the standard menu, then to the national menu and lastly world wide. In 2005, another adaptation to the times and consumer demand was the provision of WiFi with Nintendo in select locations; and delivery service in Singapore, where customers can phone in their order and have it delivered 24 hours a day, seven days a week. The company has also departed from its standard free-standing units, and installed quick service kiosks in busy places, like malls and airports.
Valuing People Approach: The real secret to successful operation system is not found in its regimen but in the way it enforces uniform procedures without stifling the entrepreneurship of franchises. For example, in Japan, without the freedom of franchisees and suppliers to exercise their entrepreneurial instincts, to test their own ideas . . . it would lose touch with the market place." Everybody from below to top. Also, McDonald's views people, including the maintenance people, partners, corporate managers, hostess in the restaurant, suppliers etc. what to see our associates grow. If one example of a family succeeds, we all succeed. Franchisees/ Associates/ Partners: His idea was to start the franchisee without paying the franchisee charges. This was the start of Mc Donald's success. First, make your partners rich. Though Kroc focused more closely on the burger than others, his real innovation was to turn the business of franchising on its head. Typically, franchising deals were struck by firms that wanted to get rich quick by being paid up front for licensing their brand name and menu and supplying products. They were not confident in their long term survival, so they wanted to pocket money now Kroc burst with confidence in McDonald's future and that's why he was willing to get rich at a slower pace, if it meant that his franchisees would prosper. Kroc felt that his competitors cared only about jamming profitable stuff down the throats of their partners, rather than long term growth. He noticed how casually and negligently the companies supervised their stores. Kroc felt passionately that his job was to make his franchisees rich by cutting their costs and improving their products. (Buchholz, 2007) Kroc's business model required an extra helping of patience. Kroc trusted a bunch of novice franchisees. Kroc may have been confiden. He slowly distributed the stores, testing and training the franchisees and requiring them to meet his excruciating standards for QSCV. Because other companies were eager to collect big bucks fast, they sold off vast statewide territories to rich speculators. Kroc sold just one at a time and refused to sell a second franchise to an operator unless his performance was stellar. Wanted the corporation to have control over its franchisees, the local business people who paid the corporation to run its restaurants. Other chains let franchisees buy the right to open as many stores in a region as they could. Kroc sold his franchisees just one store, so he could make sure they knew how to run a McDonald's the way he wanted it run. He made sure his franchisees did well, their success served his interests, since the corporation earned money on their restaurants' sales. Also, from his background knowledge of being a successful salesman, he understood that he would not be a supplier to his franchisees, for it would jeopardize the relationships between the
two because of profits. "You cannot be a partner and a supplier at the same time" says Kroc. Because it creates beaucracy. Do it another way and it builds trust. Kroc was adamant in helping out his franchisees as much as possible, as he knew that McDonald's growth was highly dependent on their success. Suppliers: Kroc wanted to tame his suppliers by making them rich. He wanted better prices and better quality. . Ray Kroc's plan to do business with outside suppliers was giving many small but new companies a chance to make a profit on high volume orders. Kroc negotiated better deals with small suppliers who were hungry for his emerging business. Kraft had the McDonald's cheese account early on, but when Kroc requested a sharper- tasting cheddar for the burgers, Kraft was too busy or too comfortable to develop a new recipe. When Kroc went looking for good-quality beef, major players like Armour and Swift refused to extend credit. So Kroc made multimillionaires of the quick and hungry suppliers. When Kraft failed him, Kroc turned to a cheese head in Green Bay, Wisconsin, named L.D. Schreiber. Today the Schreiber Company is a multibillionaire dollar firm. Kroc could not negotiate great deals with Wesson oil and Procter & Gamble. Instead he turned an upstart named Harry Smargon into a very rich man. Staff: McDonald's saw the importance of doing an internal marketing plan. Explaining that "external plans and programs will not be as successful if you put the outside world before your own people. Employees come first" When "im loving it' was first globally launched, McDonald's launched it internally first before a single consumer saw the advertising and experienced the marketing. This demonstrated that the people were the most important elements for making the revitalization of the McDonald's brand work. They wanted "i'm loving it" to become an internal rallying cry, and not just an external slogan. Charlie Bell recognized that proud employees provided greater service, which can make an incredible impression that will have an impact on a customer’s loyalty. Currently, approximately 1.6 billion people all over the world are employed or own a franchise at McDonald's. Though much of the success could be contributed from the sharp eyes of Ray Kroc and his management team, we cannot deny that one of the contributors to the success lies within the employees inside the organization. Since employees play such an essential role in the main activities of the company, there have been surveys conducted concerning employees and staff of the growing popularity of this chain of restaurants and employees' contribution to it. One of the most important points is that
employees are motivated in their work and duties. Company provides with a set of benefits for their internal staff, such as:
Employees are allowed to eat for free;
Employees have a month of paid holidays;
Employees have an access for private health care;
Employees have discount card;
Employees are awarded for servicing for 3, 5, 10, 15 and more years;
Employees have an opportunity to get sponsorship program, etc.
Moreover, training sessions are provided for the internal new coming staff. These training sessions are properly structured and highlight the main values and principles of the company Quality, Service, Cleanliness and Value (QSC&V). Newcomers and freshmen are trained how to provide the better service to customers and clients. What is more important is that the training sessions are constantly updated, to become more modern and realistic. McDonald's has went further and established its own education center for learning and training classes, called Hamburger University, in which is now opened in many parts of the world . In this university there is a centralized system of education, which teaches new staff about the importance of people in marketing management, the sense of employee training and so on. That is why even every day new technologies appears, McDonalds remain the number one in the fast food providers. The career ladder is very attainable for everyone who wishes it in McDonalds. Approximately 20% of the top management staff passed through the very beginning position in the kitchen. For example, If the person really has a willing to be promoted further, he always can reach it. Everything in the hiring and promotion people in McDonalds depends on ability and hardworking skills of a particular person. For a new coming employee there is a set of stages he/she should take in order to have a desired position within the company. People taking high positions within the company and willing to know all internal processes need to pass through them by themselves. They should clearly understand all the details their subordinates report to them so that they do not only rely on their results, but can estimate what has been made incorrectly or in improper way. McDonalds exactly gives such an opportunity for people to start from the early steps and grow till the desired point of destination.
Nowadays, more and more students come to interviews trying to get the job in McDonalds. It becomes popular among the youth to have a part - time job and the companies like McDonalds also benefits it as they offer a little bit higher the industry's average minimum salaries. Students have several benefits working for McDonalds; they have free meal and have the opportunity to earn their own pocket money. McDonalds, on the other hand, should have trained employees, whom they need to teach immediately, and accurately introducing to the existing process and paying them less. To reach the goal of fast training and not disturbing other employees from their routine work, managers of McDonalds decided to implement the E-learning system for freshmen, consisting of videos, role plays, newspapers and so on. Employees are the most essential part in every organization. McDonalds wholly understands the importance and contribution of every one person within the organization; that is why there is well - known principle: "The result is done by a man". In order to fulfill the requirements of the company - Quality, Service, Cleanliness and Value (QSC&V) - McDonalds considers each employee as the vital part for success in achieving the above mentioned characteristics. In the desire to fit the reputation of brand as number one fast-food restaurant, McDonalds tries to follow four simple rules to help their employees to improve, such as:
The company has to maintain different kind of motivation to different departments within the organization;
Every member of the staff has to have one goal, which will be reachable and clearly viewed;
As a particular employee grow in his positions, his goals should also be changed, so that every position up will spread his goals broader;
An increase in salary should be attractive for an employee. This will be a good motivation technique. McDonalds uses different aspects of motivation tools, which include financial, non - financial and social ones. Variety of motivation methods were chosen for implementation because the research conducted internally in the company showed that people need not only monetary refunds, but social recognition too. They should not be separated, but rather combined for serving as the strong motivation technique. The results of conducting the survey clearly underlines that although the motivation tools were based on the theory of Maslow's hierarchy of needs, in the reality employees need the mix of all aspects of motivation, not excluding some of them, in order to improve the performance of people and as the result increase the productivity of the whole activities of McDonalds. (NADIYA)
Giving Back to the Community: Kroc became extremely wealthy following McDonald's enlisting in the stock market in 1965. . Kroc believed in giving "something back to the community where you do your business This extreme wealth did not stay with him alone, he decided that he would like to share his wealth amongst others too. The Kroc foundation, which supports researches on diabetes, arthritis and multiple sclerosis, is a testimonial of that. Other wealth sharing opportunities known was that he gave 8 million USD to some of his top employees. Over the years, the corporation also donated food and money to many charities, and the company encouraged local franchisees to get involved in their communities. The best known charitable effort is the Ronald McDonald house, which is located near hospitals where families can stay for free while their children receive medical treatment. ". In 1974 McDonald's first opened the Ronald McDonald's house in Philadelphia thus following Kroc's philosophy to provide the home away from home for the families of children in nearby hospital followed by 100 similar McDonald houses all over US after 12 yrs Kroc makes it a mission to give back to the people, as it reflects on the consideration and serves as a "thank you" to those who have always been supporting McDonald's. Insights to Other Critical Success Factors: Alongside it's philosophy, vision and mission statements, McDonald's has definitely managed to beat the mediocre standards during the earlier stages, allowing it to take off and penetrate quicker into the fast food market than its rivals. This is mainly by it's
Attributes of speed: Initially, this was the main factor to McDonald's success. Even from the earlier days, McDonald's has earned a reputation for serving meals efficiently fast. In comparison to other similar fast food competitors, such as Hardee's and Rex Burger joints, McDonald's was always developing its method behind the counters to speed up their process of delivering the goods.
Types of products offered: A variety of goods catered to all types of people in every region of the world. In India, for example, McVeggie has become a popular delight among the locals, as the majority of the population is vegetarians.
Prices of products: Affordable to everybody. This was hugely contributed by the speedy process of the food preparation time. Since it took less time to cook, "assemble" and serve the burgers and fries, this only meant that McDonald's was able to sell more
products in a shorter time as well. Hence, the economy of scale, prices were able to fall lower than its main competitors.
Level of service: Consistency of the services. Ray Kroc understood that the uniformity and precision was key to a successful franchise. He made sure that there were rules set and abided, by carefully creating a manual for all to follow and conform to. In that way, everybody from different parts of the planet could enjoy McDonald's the way they usually have it anywhere in the world just the same.
