McDonald’s Corporation

Introduction

McDonald’s Corporation, the largest chain of fast food restaurants in the World, created its own Golden Arches and provided customer with pleasant, fast service, tasty and inexpensive food. Although the sales per unit slowed down between 1990 and 1991 due to external competition and change of customer’s demand, McDonald still concentrated on paying attention to details and providing high-quality food to customers.

Characteristics of McDonald’s Production System

In building its success and growth, McDonald expressed several prominent characteristics. Firstly, “McDonald designed its operating system to ensure the consistency and uniformity across all outlets.” “Each hamburger was dressed in exactly the same way to guaranteed customers visit again.” The characteristic enabled McDonald bring customer uniform products and build a stable product image. Whenever customer thinks about the hamburger with pickles and mustard, they will quickly link to McDonald. A more practical advantage of this characteristic is it helps McDonald simply the operations. Selling uniform products to customers reduces the complexity of operations in the production process. The potential loss from the error in the production process is reduced for sure. In order to reduce the difficulty of the operation, McDonald just sold 10 items whereas most restaurants offered variety of menu items between 1960s and 1970s. In fact, this concentration enabled McDonald drill deep into production of each item and maintains relationship with suppliers. Secondly, the special relationship between McDonald, its suppliers and its franchisees is another characteristics, which dominated McDonald’s success. “McDonald revolutionized the entire supply chain, introducing innovations about growing potatoes and raising beef.” Instead of thinking about low franchising fee only, McDonald treated them as partners and enabled them to generate a fair profit. The long-term relationship with suppliers and franchisees laid the foundation of proving uniform and high-quality products to McDonald.

Primary Challenges

Between 1990 and 19991, McDonald’s market share and profit both went down. The first challenge McDonald faced is the changing of American’s eating habits. “More and more customers were becoming conscious of nutrition and dietary options without compromising taste.” However, some customers are still loyalty to McDonald’s fast food. The fast changes of customer’s concerns and unpredictable customer’s demand brought so much pressure to McDonald. The second challenge to McDonald is the new competition in the market. The entry of specialist competitors such as Chili’s and Olive Garden shared a little but market share from McDonald. The family-style restaurants with greater variety and competitive price compared with that of McDonald quickly became popular among customers. Sonic and Rally’s offered only drive-through service and speeded up in delivering burgers. All these new competitors brought McDonald so much pressure.

Accommodation to Changes

In order to respond to the healthy concern from customers, “McDonald introduced salads, 91% fat-free burger and chicken.” However, McDonald still cannot lose its loyalty customer who like the traditional burgers to strive for the “edge” customers who concerns healthy choice. Therefore, gaining a balance between offering nutritious food and normal fried food is a big challenge to McDonald. To compete with family-style restaurant with great varieties such as Chili’s and Olive Garden, McDonald should introduce a simple full service dinner menu and explored new items just like chicken fajitas and pizzas to gain varieties. To compete the professional drive-in service provider Sonic and Rally, McDonald need to add more drive in facilities and personnel in current locations and added drive-in only locations. These actions can help McDonald increase the drive-in service speed and took over lost market share from Sonic and Rally. In order to gain sales, McDonald spent five years perfecting its breakfast menu. It also can spend some time to design the dinner menu to draw in more customers. In response to the slow growth and win back the market share McDonald should mainly concentrate opening new venues such as schools, airports and hospitals to change with “double drive-thru windows” and enhancing brand image among customers.