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McDonald’s Business Strategy

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Abstract

There has been an increasing demand for fast foods globally due to many factors, such as the rise of the middle class and their busy lifestyle that depends on fast foods. Though the United States of America still provides the biggest market for the fast foods, other regions are constantly increasing their consumption of such foods. McDonald's is a fast food company that deals with the distribution of the foods in a global platform. The company was founded in the United States, but now, it trades in more than 119 countries. McDonald’s has become one of the biggest companies in the industry due to its attention to its supply chain. It has developed a supply chain system that ensures the sharing of information among the players, including the customers and the suppliers. McDonald’s benefits from its focus on the supply chain system because it ensures the production of the fresh products that promote healthy living and quality. However, as the leader of the fast food market, the company faces some challenges in its supply chain system. The main challenge is maintaining the quality and the freshness of the products because any mistake can damage the brand of the company. McDonald’s, therefore, needs to solve the above-mentioned problems to ensure that it maintains a lead status in the industry.

The Fast Food Industry

Fast food means ready-to-take food that includes a variety of foods and drinks, such hamburgers and chips. In the past, people did not accept fast foods mainly because they did not have busy lives. Nowadays, the situation has changed drastically. Nevertheless, the last decade has seen the rise of the fast food industry, which started in the United States and has been spreading across the globe. Many companies have used an available opportunity and have spread their operations in the global platform. These companies include Kentucky Fried Chicken (KFC), McDonald's, and Starbucks. They have continued their good performance in the market due to the increased demand for their foods. However, recently there have been some notions that the industry does not use healthy ingredients to produce the foods. The companies, therefore, have been facing the challenge of ensuring that they produce the high quality foods and that their costs are at the manageable levels. The current paper is aimed at analyzing the supply chain system of McDonald's, which is one of the leading fast food companies in the world, as well as the problems that the company faces in terms of the systems and their possible solutions.

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The Background of McDonald’s

McDonald’s is recognized as one of the largest and influential fast food corporations globally. Its brand is represented in more than 119 countries and serves millions of customers. The company deals with selling the fast foods, such as hamburgers, products of chicken, and other categories of foods and drinks. Most of the restaurants of the company have a platform where children can play games. It is an advertising strategy to attract kids to buy its products. Most people view the company as the carrier of the American way of life because it provides meals that originated from the United States. Recently, the company has altered the menu of its meals. McDonald’s has added more meals, such as salads and other native meals, based on the country of operation meaning that it has a well-designed plan to attract a greater number of customers. The new menu also includes meals that cater for people who have different health problems and are allergic to some foods the company provides. The branches of McDonald’s operate either under franchising or the corporation operates them. Some affiliates of the company also operate some branches of McDonald’s. The diverse use of affiliates and franchises has allowed McDonald’s to expand rapidly in the growing markets.

The Strategy of McDonald’s

The company has a global marketing strategy that combines its internal capabilities and external aspects. The aim of McDonald’s is to become the best option for every fast food customer. The company executes and orients all its activities towards its customers. Recently, the company has added the aim of ensuring that customers enjoy healthy food. Currently, McDonald’s is promoting its image by changing the menu. It is adding more foods that promote a healthy lifestyle. McDonald’s is currently changing its image so that the customers could see it as a place where they can access healthy foods, therefore promoting a health image of the whole company. McDonald’s is planning to change its menu to incorporate such foods as burrito and other products as optional breakfast meals. The change of the menu shows the determination of the company to provide the customers with a wide variety of the well-balanced foods to promote a healthy living.

The Business Process of the Company

The whole process of a supply chain involves the cooperation of suppliers and their buyers, as well as the information that is available in the market. In order to be successful in operating a supply chain that is integrated, the buyers and the sellers must have access to the information that affects the market, which leads to a smooth flow of the products. The supply chain involves different processes as discussed below:

The Management of Customer Service

The process involves the creation of a fruitful relationship between the corporation and its customers. This type of relationship creates a flow of information in the two ways, which allows for a beneficial relationship to be in place. If the company provides customer service, it can obtain critical information about the customers. The company benefits from the process by analyzing the details of the customers so that it could produce specified products.

The Procurement Process

There must be a relationship between the suppliers of goods and the buyers to ensure an effective buying and selling process. Information is vital in the process because it enlightens both parties on the availability of the current and new products. McDonald’s should have a clear planning for its resources, sourcing and other activities that involve obtaining the products and raw materials from the outside suppliers. With the right information, the company can plan appropriately on its procurement process to ensure that it is efficient and cost effective.

Product Development

The process refers to the level of unity between the customers and the suppliers so that there can be time saving in the market. The developers of products must ensure that they launch their products in as short time as possible.

The Flow of Manufacturing Management

The process follows the past statistics of supplies and production to ensure that there are no wastages or shortages in the market. However, the process needs to be flexible because the market is dynamic and prone to changes. Mostly, the main method of processing orders is just-in-time that ensures that the quantity of production is as little as possible. The method also ensures that there are short cycles of production, leading to efficiency in the whole process.

Physical Distribution

The process involved the movement of products to the respective customers. The company should have an effective channel that does not cause any delay and also meets deadlines of the customers. The process allows the creation of a link between the manufacturers and other distributors of products of the company.

Supply Chain

For smooth operations of the company, there must be an effective supply chain. It shows the sources of different components that make up a product. The components of the food include the supplied materials and the services that the customers receive. All the services lead to some addition of value to a product, but at all the times, the customer dictates the supply chain in the fast food industry. The customer drives the market because of the availability of many options when it comes to choosing what to consume. It means that a fast food company needs to have an effective marketing strategy.

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Supply Chain of McDonald's

The main principle that drives McDonald's in its supply chain is efficiency. The following principle helps the company consistently to provide the customers with the fast foods that are always of the highest quality and safe for consumption. McDonald's does not only care about its final products, but also about the raw materials that are used to prepare the products. The company always wants to control the production of the raw materials and to participate positively in various sustainable agricultural activities. The corporation measures the performance of its suppliers to ensure that they maintain high standards of supplies and ensure that they strive to improve the quality of their services and products. The company has both direct and indirect suppliers. McDonald’s maintains a record of the activities to assist it in forecasting regarding the future behavior.

The company operates with distribution centers where there are the safety stocks stored. In these stores, the company optimizes its inventory. All activities in the distribution centers ensure that the products are readily available to the customers in a fresh status. Examples of suppliers who distribute inventories directly to the distribution centers include Coca Cola and other distributors. After the products are in the distribution centers, the consequent process is to deliver them to the restaurants for sale to the customers. The main secret behind the efficiency of the supply chain of McDonald's is that it emphasizes very much on technology. The company also shares the technology with its suppliers to ensure efficiency at all activities. The continued communication makes it easy for the company and the suppliers to share information, thus leading to improvement in their operations.

Challenges Facing the Supply Chain of McDonald's

The main challenge that the company has is to ensure that its products are always fresh when they reach the customers. The challenge is also very common in all fast food companies due to the fast perishability of their products. However, McDonald's experiences a greater challenge because many customers have the notion that its products are always fresh and of the highest quality compared to other fast food companies. For example, the company needs to ensure that the supplies of potatoes are always in their right state because any form of mistake or negligence can lead to customers sensing a change in the quality of its products, thus resulting in a change in opinion. McDonald's has created a good brand in the market mainly due to its effective supply chain. This means that the company does not have room for errors. For example, in the purchase of beef, McDonald's has to rely on suppliers of beef and not cattle ranchers. The company has to rely on suppliers because they transform and freeze the beef that is used in the products of the company, and ranchers cannot perform such an activity. Reliance on suppliers of beef leads to increased cost of obtaining the meat because the company cannot directly deal with the original cattle ranchers.

Another problem is the continuous innovations of products. McDonald's has a research and development department that ensures continuous research on new products that it could introduce in the market. However, the efforts of McDonald’s to maintain secrecy of innovations can be hampered because it has to share some information with the suppliers. Sharing information with the suppliers means that the information is no longer secure because the competitors can access such information with ease. McDonald's has to believe that the suppliers will not reveal any secrets to the competitors. The only efforts the company can put are to strive to maintain a relationship of respect and trust with its suppliers.

The next problem is the fluctuation of sales due to marketing issues. McDonald's uses McToys and the Happy Meal product to attract and convince the young consumers to buy its products. However, continuous use of the promotional tools may get the children bored because they always have a desire to have newer and fresher products. The differential sales, therefore, put the company in a difficult situation when it is necessary to control the costs and the revenues.

A bullwhip effect is also a major problem for the company due to the channels the products pass through before they reach the customers. Any fluctuations in demand at the customer level usually leads to an increased effect in terms of cost through the supply chain. For examples, the company produces such products as burgers and stores them until the customers purchase them. The method is a risky one because of the uncertainties of whether the customers will avail themselves. Lack of customers can lead to the accumulated costs in the hierarchy of the supply chain, leading to enormous amounts of losses for the company.

Solutions to the Problems

Firstly, the company needs to come up with a supervised system that ensures the quality of its products. McDonald’s faces a continuous challenge in the production of quality and fresh products, especially now when it has built a positive brand among the customers globally. The company faces a challenge in ensuring that that the ingredients of its products are healthy and balanced for consumption. The main solution to the above-mentioned problem is to introduce a supervised system instead of having the independent distribution centers. The supervised system will ensure that the company has control of all the activities of the distribution centers to ensure that these centers do not deal directly with the suppliers. McDonald's can also employ a supervisory system for all products and ingredients to ensure that the criteria of quality and freshness are met. Control of the centers and regular inspections would greatly improve the quality and freshness of its products.

Lastly, the company can empower the research and development department to operate in different regions so that it can minimize the time of implementing innovations. It can establish research centers in different regions, such as Asia, Africa, South America, or Europe, and customize different research methods to suit the regions. The availability of the customized centers will lead to development of new products accustomed to the regions, as well as reduce the time of implementing the innovations. The reduced time would mean that the company does not incur the risk of suppliers sharing information with the competitors.

Conclusion

McDonald's Company continues to dominate the market due to its efficient supply chain system. The company recognizes the importance of sharing information with all the players of the supply chain. It ensures that information flows freely between the company, suppliers, and customers. However, the company still faces some challenges that could lead to its brand being at risk. McDonald’s should always ensure that its products are of the highest quality and fresh. It needs to find solutions to the problems to ensure that it continues its domination in the fast food market and industry. Nonetheless, the company is still a strong player in the market because of its attention to details concerning its supply chain.

 

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