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Quality Management System Mcdonalds

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					 McDonalds
 Business 188
 Case Analysis




Group Members:
 Meghan Dilawari
  Tammy Huynh
  Matt Salisbury
 Isabel Soboszek
   Farhan Latif
                                                                            Meghan Dilawari
                                                                              Tammy Huynh
                                                                               Matt Salisbury
                                                                             Isabel Soboszek
                                                                                 Farhan Latif

                                         McDonalds

          McDonald has been a well-known and valuable brand for over half a century. The

company’s mission and vision is striving to be the world’s best quick service restaurant

and formalizing their beliefs into “People Vision and People Promise.” “Quality, Service,

Cleanliness and Value (Q.S.C. and V) also became the company’s motto.

(http://www.mcdonalds.com)1 The company’s first McDonald store was built in 1940 by

the original McDonald brothers, Dick and Mac. Later in 1954, Ray Kroc became the first

official franchisee appointed by Dick and Mac McDonald in San Bernardino, California.

Soon after, Mr. Kroc opened his first restaurant in Des Plaines, Illinois, and the

McDonald’s corporation was created.

          The new franchise began to grow rapidly as a result of its success. It wasn’t long

before the 100th McDonald’s restaurant opened in Chicago in 1961. Less than ten years

after the opening of Ray Kroc’s restaurant the company began to expand all over the

United States. Ray Kroc bought all rights to the McDonald’s concept from the

McDonald’s brothers for “2.7 million in 1961.”2

           McDonald’s continued to have enormous growth during the 1960’s. In 1963

alone, McDonald’s sold their one billionth hamburgers, opened their 500th restaurant,

“Ronald McDonald” made his big debut, and McDonald’s net income exceeded $1
1
    Website: http://www.McDonalds.com
2
    Website: http://www. McDonalds.com
million.3 In 1966 McDonald’s was first listed on the New York Stock Exchange, and in

1967 McDonald’s went global. The company kept expanding with the introduction of the

“Big Mac” and the opening of its 1,000th restaurant, which was where it all started- in

Des Plaines, Illinois.

          McDonald’s began to mature as a successful global business toward the beginning

of the 70’s. By 1970, there was at least one McDonald’s restaurant in every U.S. state,

and several in different countries around the world. Countries including France, Japan,

Germany, and even Guam all had McDonald’s. And in 1972 the company’s assets

reached an all time high of “500 million” while sales reached the billions. 4Statistics

showed that a new McDonald’s was being opened each day around the world. With all

this success, the company kept expanding globally. In 1972 the 200th restaurant opened,

again in Des Plaines, Illinois. The company also continued to develop their product with

the introduction of the Quarter Pounder. And in 1975 McDonald’s first drive-thru opened

in Sierra Vista, Arizona.

         Along with the company’s many successes, they also faced some significant

challenges. Ray Kroc made a $250,000 donation presidential campaign in 1972, a

donation which was subject to investigation during the Watergate scandal. According to

the “Behind the Arches Book,” which was written with the backing and assistance of the

McDonald’s corporation, the donation was made during the time that McDonald’s

executives were lobbying to prevent an increase in minimum wage.5 In 1984 there was a

terrible incident in San Diego, California where a man named James Huberty opened fire

3
    Website: http://www.McDonalds.com
4
    Website: http://www.McDonalds.com
5
    Website: http://www.McDonalds.com
in a McDonald’s restaurant and 22 people were killed. As a result, the company had a lot

of public relations to deal with along with its damaged reputation. In 1987 the Attorney

Generals of Texas, California and New York threatened to sue McDonalds under the

consumer protection laws because of an add campaign claiming that McDonald’s food

was nutritious, meaning healthy and well-balanced. There have also been matters of food

poisoning, and other related law suits.

     Even today the company continues to expand. More countries around the world are

opening more McDonald’s. There are many restaurants in the U.K., Hong Kong,

Switzerland, and Spain and so on. The company’s sales and revenues are immeasurable,

well into the billions. McDonald’s employs millions of people around the world. In

America, many of the company’s employees are young and Latino. In other countries,

employees seem to depend on the population of the country.

        The McDonald’s company has a wide range of loyal customers. Many people

feel as if they grew up with McDonald’s. People trust the company, and the McDonald’s

concept just seems to make people feel good. That’s why their customers are rich, poor,

old, young, black, white, Asian, and European. Though many of McDonalds’ competitors

are also successful, they are no match for the giant franchise. Other restaurants such as

Burger King, Jack in the Box, and Taco Bell simply don’t have the same image as

McDonald’s. The company focuses on marketing strategies that effectively attract a wide

variety of people. They especially appeal to children in hopes that they will become

lifelong customers.
CURRENT STATUS OF COMPANY:

          “"Billions served," indeed. McDonald's is the world's #1 fast-food company by

sales, with more than 30,000 of its flagship restaurants serving burgers and fries in more

than 100 countries” . Today, “McDonald's operates over 31,000 restaurants worldwide,

employing more than 1.5 million people.” 6In terms of countries, it operates in more than

119 countries on six continents. 70% of the locations are run by franchises while the

corporation owns the other 30%. The Boston Market and Chipotle Mexican Grill fast-

casual chains are also owned by McDonald's. There are some quick-service kiosk units

located in retail areas and airports; the other locations are free-standing units. On a day

to day basis, more than 47 million customers world wide are served by McDonalds. Over

the years, McDonald has brought different promotions into the market to make the

consumer purchase a fun experience. The most recent promotion was the Monopoly Best

Chance Game 2004 which lasted from October 12 – November 15.7 It is also very

important for the company to have a standard reputation. Therefore, the corporation

makes sure that a Big Mac purchased in Pittsburgh tastes the same as one bought in

Beijing by using standardized procedures.

          The key numbers and key people for the company are as follows:8

                                          Key Numbers

Company Type                      Public (NYSE: MCD)

Fiscal Year-End                   December

6
  McDonalds FAQs
website: http://www.mcdonalds.ca/en/aboutus/faq.aspx
7
  McDonalds FAQs
website: http://www.mcdonalds.ca/en/aboutus/faq.aspx
8
    website: http://www.mcdonalds.com
2003 Sales (mil.)                 $17,140.5
1-Year Sales Growth               11.3%
2003 Net Income (mil.)            $1,471.4
1-Year Net Income Growth 64.7%
2003 Employees                    418,000
More Financials

                                             Key People
Chairman                          Andrew J. McKenna Sr.
President, CEO, and
Director                          Charles H. (Charlie) Bell

SEVP and CFO                      Matthew H. (Matt) Paull




The company location and other related information is as follows: 9

                            McDonald's Corporation (NYSE: MCD)
                                     McDonald's Plaza
                                Oak Brook, IL 60523 (Map)
                                   Phone: 630-623-3000
                                    Fax: 630-623-5004

          Since McDonalds is such a huge corporation, serving so many customers world

wide, it greatly relies on its suppliers. “McDonald's suppliers in the U.S. operate over 40

distribution centers, strategically located to be accessible to more than 12,000 restaurants

in the country. They provide a diverse range of products and services for our restaurants.

It is crucial that the suppliers reflect the diversity of our customers around the world” 8

By maintaining current relationships with suppliers and also establishing new contacts,

McDonalds continues to leverage the diversity within the supplier community. According




9
    website:http://www.mcdonalds.com
to the corporation, the only way to serve a wide, diverse group of customers is through a

wide, diverse group of suppliers.”10

        McDonald’s is in the fast-food business, and nowadays, there is huge competition

for that. A competitor for McDonald’s can be anywhere from an upscale restaurant to a

measly hot dog stand at a football game. The following is a list of companies that are in

the same business as McDonald’s and qualify as major competitors:

Burger King
Subway
Yum
Wendy’s
In & Out
Taco Bell
Sonic
Jack in the Box
Carl’s Jr
Togo’s
Quiznos
KFC
Popeye’s
Pizza Hut
Round Table Pizza
Domino’s
Wenerschnitzel

Of those, Burger King, Subway, and Yum are listed as the top three competitors.

        The company uses IT and IS in a number of ways. In fact, without the technology,

McDonald’s would not be able to operate as it does today. From taking orders to

completing the orders everything involves a computer. A network system is used to take

the order which is then sent in the back also through the system in order for the food to be

cooked. The following are a few systems used by McDonald’s:11 POS (Point of sale) –

this system allows orders to be placed, check the amount of inventory on hand, see the

10
   McDonalds Corporation-Diversity and Suppliers
http://www.mcdonalds.com/corp/values/diversity/suppliers.html
11
   Interview: Rahul Sharma, Supervisor of Sharmac Corporation
number of transactions that have occurred in the last few days or even years, see the labor

percentage, total cost of waste, check the drive thru time(TTL). KVS (Kitchen valiance

system) – this system allows the orders taken up front and in the drive thru to be

displayed and transferred to the monitors in the grill area. 12

The Porter Five Forces

        The fast food industry is a revolutionary industry, which has taken the world by

storm. With fast food restaurants showing up, what seems like on every corner, it’s

interesting to analyze the competitive strategies companies in this industry use in order to

survive. McDonald’s, with more than 30,000 restaurants worldwide is certainly no

exception. A good way to analyze the strategies is by using the Porter five forces

competitive model. The Porter model looks at what strategies a company uses to

“effectively counter 1) the rivalry of companies in the industry, 2) the threat of new

entrants, 3) the threat substitutes, 4) the bargaining power of customers, and 4) the

bargaining power of suppliers.”13

        The first of the five forces looks at rivalry within the industry. For McDonald’s,

this includes all other fast food businesses. “ McDonald’s recognizes that it is up against

not only other larger burger and chicken chains but also independent owned fish and

chips shops and eat-in or take-out establishments.” 14 Some of McDonald’s competitors

include: Burger King, Wendy’s, In and Out, Taco Bell, and Jack in the Box. As

mentioned above, the fast food industry is a very dynamic and competitive industry, so it

is important for the McDonald’s corporation to develop strategies which will keep them


12
   Interview: Rahul Sharma, Supervisor of Sharmac Corporation
13
   O’Brien, James. 2004. Management Information system-Managing Information Technology in Business
Enterprise.
14
   Website: http://www.mcdonalds.com
ahead. Judging by the success of McDonald’s, it is clear that the corporation has

developed some very effective strategies to stand out in the crowd.

       One strategy McDonald’s focuses on is a differentiation strategy, partly

combining it with the innovation strategy. By creating unique brand products, (chicken

McNuggets, Big Mac, McFlurry) McDonald’s is setting self apart from its competitors.

The innovation strategy is used by creating new and unique products (chicken tenders,

Newman’s own salads, as well as specific products catered to specific region in the

world), special celebrity endorsements (athletes, actors/actresses),

partnerships/sponsorships (Music, Olympics, special movie toys), charities (Ronald

McDonald House), games/promotions (monopoly game, special movie toys), which

allow McDonald’s to develop their unique corporate image that sets them apart from their

rivals. Another important role in staying competitive is McDonald’s online presence. The

website (www.McDonald’s.com) is great opportunity to connect with the customers and

stay competitive. Through the website, the company shows company facts, product

information (nutrition facts), and links to the charity website, as well as games

promotions (monopoly).

       The second force that acts on the industry is the threat of new entrants.

Fortunately for McDonald’s and it’s over 30,000 restaurants world wide, the corporation

has set itself in a position of dominance. Using a growth strategy, McDonald’s is

continuously expanding its reach which makes it increasingly difficult for new fast food

restaurants to enter the industry. Through franchising, McDonald’s is able to reach nearly

every corner of the globe. In addition, by using an alliance strategy, they are able to set
up operations in Wal-Mart’s and sports stadiums and other firms which help support the

industry.

           The third force involves the threat of substitutes. For McDonald’s, any other food

industry is a substitute. From classy restaurants, to hotdog stands, to grocery stores,

McDonald’s faces a very large amount of substitutes. By continually offering different

products, however, McDonald’s can be sure to remain on people’s list for a place to eat.

Don’t forget the fact that one can get a lot of value for his/her money with McDonald’s

dollar menu. Furthermore, by offering healthier alternatives, the company will be able to

enter into new segments and increase their customer base.

           The fourth force acting on McDonald’s is the bargaining power of buyers. This is

a very powerful force, since McDonald’s relies on a strong customer base. In order to

keep and gain new customers, the company must pay attention to the demands of

consumers. With an onslaught of health books and diets, Americans are increasingly

becoming aware of their health. As a result, consumers are demanding healthier products

from the fast food industry. McDonald’s leads the industry by offering salads with

organic Newman’s own dressing, as well as changing the oil they cook their fries in to a

healthier substitute. In addition, they showcase all the ingredients in their foods in their

restaurants and on their website. Also because of movies like “Super Size Me,” and

books like, “Fast Food Nation” by Eric Schlosser, McDonald’s is aware of consumer

trends and worries and is taking steps in that direction. An example is the removal of the

super size option. Since the movie “Super Size Me,” people have taken notice to how bad

super sizing is for your health. McDonald’s is the first to take action.”15



15
     website: http://www.mcdonalds.com
           The fifth and final force affecting the company is the bargaining power of

suppliers. This is an important aspect of this industry. The supply chain going all the way

to the farmers needs to be kept strong and connected. Especially, relationships with key

firms like Coca Cola, Minute Maid, Heinz, Newman’s Own and others, needs to remain

strong. “It is crucial that the suppliers reflect the diversity of our customers around the

world. McDonald's seeks to leverage the diversity within our supplier community

through growing our existing supplier base, as well as developing new supplier

relationships.”16

           McDonald’s is successfully taking measures to ensure their dominance in this

food industry; they are continually growing, in size, in the products they offer and in

charity work. It’s no surprise that McDonald’s is number one in the fast food industry.


Strategy:

The strategy the company is using to maintain or improve its competitive position is

lowest total cost, expanded menu, having more than 30,000 stores, Hamburger

University, celebrity endorsements, partnerships/sponsorships in music and Olympics,

and Ronald McDonald Charity/Corporate responsibility. With the Ronald McDonald

Charity program the company has awarded more than “$400 million” dollars in grants

worldwide towards the mission to make an immediate and positive impact on as many

children as possible.17 The company also participates in for World Children’s Day, an

annual global fundraiser which benefits the Ronald McDonald House Charities and local

Children’s causes.        In addition to the Ronald McDonald House Charities, corporate

responsibility is also an important factor of McDonald’s heritage. The company has a

16
     website: http://www.mcdonalds.com
17
     website:http://www.mcdonalds.com
record of industry leadership in community involvement, environmental protection,

diversity, opportunity, and working with their suppliers to improve their practices. By

having these programs the company is doing a very good job in building a relationship

with the community.

Challenges and Opportunities:

        Like many other companies, McDonald also struggles with many challenges and

opportunities. There are opportunities as in continuous deliverance of quality, cleanliness,

service, and value to their consumers. The company has to face challenges of other

competitors which include Wendy’s, Burger King, In and Out, Jack in the box, etc. In

addition to competitor challenges, the company also faces unionized workforce. They are

ideologically hostile to unions. They regard unions as third parties and they refuse the

legitimacy of a union as an expression of the interests of the employees that they're

dealing with. Dan Gallian who is the general secretary of IUF said, “They have accepted

unions, and collective bargaining, if the alternative was to close altogether or suffer major

public relations damage. But even when they have allowed a union, they've then tried to
                                         18
chip away at union recognitions.”             The company only follows the Donald’s manual,

which is their form of regulatory compliance. With this being the issue, IT/IS can

definitely help the company out in many ways. The company needs to make sure all

challenges and opportunities within the organization are easier for everyone to

understand and ensure that all employees follow the company’s compliances. IT/IS

allows employees within the corporation to communicate effectively and ensuring

everyone is on top of everything. Do to this; it is very necessary that an intranet website


18
 Interview: Dan Gallian, General Supervisor of IUF
website: http//:www.mcspotlight.org
is made which goes into detail about all of these concepts, that way everyone within the

company is on the same page. Information system can also allow the company in

supporting business processes, decision making, and competitive advantage. By utilizing

Information system it helps store managers to make better decisions and attempt to gain a

competitive advantage. For instance, what lines of merchandise need to be added or

discounted, and it helps them looks for ways to gain an advantage over their competitors

in competition for customers.



Internal Strength/Weaknesses:

They are many strengths and weaknesses in the McDonald’s corporation. The first

strength is that the company can offer a meal with low prices. They also have a healthy

menu which consist of Low carbohydrates options which cost only $1.00. One of the

weaknesses the company faces is the low market share in chicken products since

Wendy’s is the leader with the biggest market share in chicken products. The company

can further improve their business with other IT/IS. First of all, there are many ways to

use IT/IS because it helps in business activities, resolving problems, and business

opportunities. By utilizing IT, McDonald can create an interactive marketing process

which is “a term used to describe a customer focused marketing process that is based on

using the intranet, internet, and extranet to establish two-way transactions between a

business and its customers.”19 By utilizing IT to create an interactive marketing,

McDonald can use the network to attract and keep customers. This also allows them to



19
  O’Brien, James. 2004. Management Information system-Managing Information Technology in Business
Enterprise.
get feedback from customers since interactive marketing encourages customers to be

involved with the company’s services and delivery issues.

       Through researching McDonalds Corporation these last few weeks we have

learned a lot about the company’s responsibility and how they have contributed to the

community in children’s life. As consumers we all value how important time is, with

McDonalds offering more than 30,000 restaurants for services, it is going to surely make

getting food faster and cheaper.
                                    Division of Labor



Isabel Soboszek:

  She was assigned the task of finding background information on the company, history,

the founder, executives, and significant challenges the company may face.

Meghan Dilawari:

 She did the current status of company which includes all information on sales/revenues,

share of market, company locations, and number of employees, suppliers, customers, and

competitors. She also assists in putting the reference page together.

Matt Salisbury:

He was responsible for the Porter’s Competitive Forces Model and doing researching on

the company’s key external challenges and opportunities.

Farhan Latif:

Strategy, cost leadership, differentiation information. Researching information as well.



Tammy Huynh:

I worked on the challenges/opportunities for the company, as well as the strength and

weaknesses. I also help put the project together and ensuring that things are correct with

the help of Meghan.

				
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