Current Scenario of McDonald’s
Question:
Discuss about the Operation Management Of McDonald’s.
Operation management is a significant dimension of an organization which plays a crucial role in the production of goods and services for customers. The impact of operations management is also perceived in context of other departments of the organization. The following report aims to identify the current scenario for McDonald’s and the key operational issues experienced by the enterprise.
The analysis of the different issues is helpful for drawing feasible references into the realization of prolific recommendations that can address the operational issues of McDonald’s alongside emphasizing on concerns for refraining from creation of new issues (Bianchi & Åhlström, 2014). The report delves into secondary research in order to ensure that the analysis is able to provide recommendations that could be able to address the problems with the operations management of McDonald’s.
The reputation of McDonald’s is profoundly observed in the fast food industry and has become one of the leading examples of business expansion through franchising. The organization has experienced substantial threats from the market environment which indicated potential risks for the brand’s identity and the role of the company in the marketplace. The success of McDonald’s could be observed explicitly in the organization’s presence across 6 continents in over 100 countries.
As per Bromiley & Rau, the performance of McDonald’s could be attributed to the efficiency of operations management framework adopted by the company which is reflective of comprehensive access to information pertaining to daily operations thereby facilitating product delivery to customers (Bromiley & Rau, 2016). Therefore the brand identity of McDonald’s can be classified as a service oriented business which relies largely on the efficiency of its operations management approach. The existing operations management framework follows a strategic approach which is utilized for management of expenses, creation of consistent brand and retention of customer loyalty.
The delivery system of the organization is improved over the course of years which provides McDonald’s with an additional competitive advantage that is also reflective of the features of adaptability to changing conditions. For example, the change in menu of McDonalds does not impinge any formidable impact on the delivery system of the company which in turn is influenced by the supply chain of the organization (Brown, Bessant & Lamming, 2013). However, the organization also faced substantial issues in its operations management owing to its business framework which favours the design of new products as well as the business model which relies on supply chain management and the interaction with local franchisees. The current situation for McDonald’s is characterized by profound issues pertaining to its operations that include references to the sustainability of new initiatives introduced by the organization.
Operational Issues of McDonald’s
According to Carnes, Hitt & Xu, the revision of menus to address needs of local cuisine alongside the introduction of new menus and customized products could lead to delay in delivery of products at customer’s tables. The lack of technical flexibility in the app of McDonald’s as compared to that of competitors such as Domino’s Pizza can be accounted as another profound indicator of the current situation for the company (Carnes, Hitt & Xu, 2016). Furthermore, the long term approach for refranchising of almost 4000 restaurants by the end of 2018 could also be accounted as another profound indicator of the current situation of the company.
Furthermore, it is essential to focus on global strategic objectives which are associated closely with the vision statement of the company which are observed in the form of menu expansion, providing master franchises to implement their information pertaining to local cuisines and market conditions as well as targeting growth while warding off competitive rivalry in the market. Therefore, it is essential to focus on the significance of operations management for accomplishing optimal business performance (Foropon & McLachlin, 2013). The existing situation of McDonald’s in the fast food industry is characterized by a major market share which could be affected by the competition in marketplace. Hence the company needs to improvise in terms of innovation in its operations management framework that can provide sustainability of market share.
The operational problems experienced by McDonald’s could be observed in the aspects of competitor analysis, supply chain management, quality management and product innovation. It is essential to consider competitor analysis as a valid representation of the operational problems encountered by McDonald’s. The comparison of McDonald’s strategy with that of competitors is considered as a feasible resource to identify the operational aspects in which the organization is lacking behind competitors.
One of the profound elements that are observed in the fast food industry is the frequent variation in consumer preferences alongside profound competition as compared to other industries (Galindo & Batta, 2013). Despite a formidable hold over the fast food market, McDonalds is more likely to experience potential hit in revenues due to the strategies adopted by customers.
One of the examples of operational problems affecting McDonald’s is in the expansion of menu which resulted in depreciation of quality of the products while competitors such as Burger King reduced the size of their menu alongside improving the quality of the products. Therefore a clear perception of the elements such as customer requirements, efficiency and cost are noted as major priorities for improvement of the process strategy implemented by an organization. As per Guide & Ketokivi, the process strategy of McDonald’s is considered as a notable aspect of its operations management that reflect on the transparent nature of the manufacturing process. The customer could be able to observe the process of fast food production and could also verify the compliance of the food of McDonald’s with hygienic standards (Guide & Ketokivi, 2015).
Recommendations
The privileges of customers also extend to the observation of ingredients used in the products. These factors are responsible for inducing competitive differentiation in the modern business environment which makes it a challenge for the operation management of McDonald’s. The dynamic nature of customer preferences enables rivals to limit the existing gap in terms of market share and the necessity of incremental innovation which is lacking in case of McDonald’s (Harvey, Heineke & Lewis, 2016).
A critical reflection on the practical examples such as the depreciation of the sales of international as well as domestic units of McDonald’s in 2012 indicate the challenges encountered by McDonald’s in terms of operation management. The moderate growth of refranchised restaurants and the lack of customer confidence could be assumed as profound outcomes of operational issues pertaining to McDonald’s. The primary operational issues emerged in this case due to the lack of responsiveness of the top management to implement aggressive tactics in the international units (Heizer, 2016).
The implications of competition also impacts the operations management of McDonald’s since the external environment for the organization depicts modest consumer demands, declining customer sentiments and escalation of competitive activity. The shifting of customer loyalty is largely based on the customer’s perception of the lack of fresh and better products that can be classified as an operational issue. The large scale layoffs implemented by the human resources management of the organization could also be accounted as the measures for improving operational efficiency while reducing the involvement of competent employees (Hendricks, Hora & Singhal, 2014).
This factor could be classified as a strategic operational issue for the organization in terms of staffing decisions. The staffing decisions of McDonald’s are perceived to be the major determinant of quality aspects of the organization’s products and services alongside providing the competitive edge to the organization in terms of outcomes such as smooth and efficient operations. The operational issue is anticipated in the self-defeating mechanism which is reflective of the loss of trained workforce to competitors. The different operations of the international units of McDonalds as franchises, the uniform pricing strategies and the high franchise fees are also indicative of the resistance that can be generated from unsatisfied groups.
The prospects of increasing costs in the international market have led to withdrawal of majority of franchise owners. Furthermore, the international operations of McDonalds are also associated with higher costs since the international markets are more likely to depict potential influence of confectioneries and other competitors in the fast food sector with local appeal. Furthermore, the management of international franchise system could be associated with major defects since the individual units are more likely to operate their manufacturing process accordingly (Hitt, Carnes & Xu, 2016). Therefore, the operations of the enterprise are subject to ambiguities in context of conformity with the precedents of service delivery established by McDonald’s for its restaurants.
Competitor Analysis
According to Hitt, Xu & Carnes, the operational issues that could be identified in the case of McDonald’s also include references to the quality of the food provided by the organization and its criticism by health practitioners. The quality of the products and nutritional value associated with the products could also be considered as profound indicators of reasons for deriving concerns among legal circles for the organization (Hitt, Xu & Carnes, 2016).
It is imperative to understand that the process aspect of the organization is that the manufacturing line of McDonald’s indicates issues such as time taken for preparation of different products is not same. The lack of automation in the manufacturing process is also responsible for the impact of inefficiency of team members on the flow of work. These factors are responsible for creating bottlenecks in customer service delivery. Another notable operational issue pertaining to delivery in context of McDonald’s could be identified in the form of the lack of technical assistance for drivers (Katsikopoulos & Gigerenzer, 2013). The only respite in this case is observed in the pre-existing information among drivers regarding the topography of the international jurisdictions of the franchise operations. However, this factor alone contributes to a reduction in efficiency of on-time deliveries. Other significant operational issues can be observed in the dimensions of store and production layout.
As per Khanna, the dimensions of the store construction are aligned to increase efficiency through providing optimum utilization of floor space. On the other hand, the store layout also indicates the safety hazards for employees working in close proximities with the cooking equipment such as burns which are noticed in the peak hours of service (Khanna, 2015). The capacity of the equipment installed in the stores has also indicated profound operational issues in terms of inability to address customer demands. Examples of equipment malfunctions during peak periods could be observed as the outcomes of refraining from the anticipation of customer demand and the frequency of demand. The international operations of McDonalds are also subject to the concerns of conflict among managers regarding the approach for decision making which leads to major operational issues (Krajewski, Ritzman & Malhotra, 2013).
The role of operations manager in determining the decisions in the different units of McDonald’s vary among the three categories of strategic decision making, tactical decision making and operational decision making. The strategic decision making in organizations is realized on the grounds of the prospects for long term decisions which could establish directions for the organization. The tactical decision making is preferred in cases of addressing short term development needs while operational decision making are related to scheduling, replacement and maintenance.
Supply Chain Management
Quality management issues that could be apprehended in the operations of McDonalds could be observed in the decisions of McDonalds to diversify into other restaurant markets with new chains (Langabeer II & Helton, 2015). The change in menu items also involves major concerns of training of the staff for preparation of new food products which emerges as a profound operational issue for McDonald’s. The lack of prolific interaction with the local supply chain in order to address the cross cultural presence of McDonald’s in international market could also be accounted as a major pitfall in the operations of the organization. The interaction with local supply chain would ensure flexible access to the ingredients required for preparation of products in line with the local cuisine. However, the organization also places considerable emphasis on the loss of brand identity with the emphasis on local supply chains instead of relying on global supply chain. It is imperative to observe that the operations of McDonalds would be subject to profound operational issues due to the lack of information on the local customer preferences and delay in customer service delivery (Mahadevan, 2015).
Depending on a global supply chain would be liable for creating setbacks such as delay in delivery of ingredients, concerns regarding freshness of products and the factors of overstocking and lack of stock. Therefore, the operational issues identified in the case of McDonald’s should be reviewed from a theoretical perspective in order to derive viable recommendations for improving the situation of operations management in McDonald’s (Marshall, Metters & Pagell, 2016).
The review of the operations management aspect from the theoretical perspective of performance objectives associated with the operations management could provide viable insights into the recommendations for resolution of operational issues. The five performance objectives that are intended for determining efficiency of an operations management strategy could be observed as speed, cost, quality, flexibility and dependability. In general context, the organizational structure is responsible to a certain extent for determining the framework of operations management which indicates a formidable impact on the promotion of effective performance alongside promoting the organization to address the objectives (Slack, Brandon-Jones & Johnston, 2013).
The instances of effective measures adopted by McDonald’s to ensure effective operations management include references to the facilities of ensuring adequate stock, packaging of food and ingredients and anticipation of customer needs to address them effectively. The aspect of speed in operations of McDonald’s could be observed in the delivery time for customers or the wait time and the objective for McDonald’s is to deliver the order in 90 seconds. McDonalds could obtain a recommendation for ensuring accuracy of the measurement of speed in delivery of service which could be useful for improving the satisfaction of customers (Smith, Maull & CL Ng, 2014).
Quality Management
The recommendation for improving the competitive advantage of McDonald’s in order to resolve the operational issue of competitive differentiation could be observed in policy reforms and effective system management to improve the operational issues in delivery of services. The expectations of excellent performance could also be implemented in the case of McDonald’s to include sequencing regulations which could improve the speed of service delivery (Spring, et al., 2017).
The concerns of cost in terms of operations management could also be observed as major determinant of performance and the primary objective of every organization is to obtain higher returns at minimal investments. The competition experienced by McDonalds in terms of pricing could ascertain the role of cost as an influence on the operational issues. The production of low cost products could be a major contributor to the resolution of operational issues observed in case of quality management in the store design and layout. The reduction of product prices would also ensure that the franchises would have to invest less in equipment and machinery (Walker, et al., 2015).
The aspects of cost differentiation should however be implemented in moderation in the case of McDonalds in order to ensure that the organization does not lose its financial advantage. The plausible recommendations for apprehending the cost related implications of operations management would also include references to inventory management which involves reduction of expenditures in inventory alongside supporting restaurant activities (White, McCutcheon & Meredith, 2013). The effect of local intermediaries and distributors that provide the ingredients to franchise restaurants could also be considered as an influence on the cost aspect of operations management. The exclusion of intermediaries could be assumed as a viable recommendation to ensure that the task of inventory management for restaurant managers is streamlined.
Quality aspect of McDonalds should also be accounted as a major theoretical insight into the efficiency of operations management. Quality management is a widely accepted theory in context of business which is largely reliant on determining the specific dimensions that influence the effectiveness of an organization. Quality management is considered as the resource for organizations to depict potential improvement in design, development and delivery of products and services.
The fast food industry is subject to profound implications of changes in trends which lead to the identification of quality of the operations. The recommendation for a quality management could be considered effective since it would be helpful for McDonald’s to retain its brand reputation and image in the environment where it is criticized on legal grounds for health and safety risks in its products. The products provided by McDonalds are generally stereotyped as junk food which creates major concerns for the organization to revise its quality management implications (Zurich, 2017). McDonald’s has to implement a quality assurance and quality control monitoring framework which would serve as a significant influence on the limitation of operational issues pertaining to quality management in the organization.
Product Innovation
The organization has to ensure that its supply chain is capable of providing the franchises with flexible opportunities to source their ingredients effectively from local supply chain, stock them in local commissaries and then ensure their distribution to the stores and franchises at periodic intervals (White, McCutcheon & Meredith, 2013). The implications of quality management could be improved on the grounds of implementing supplier approval procedure which could be helpful for determining that the organization is in agreement with all the suppliers. The approval procedures are liable for establishing precedents for packaging and product specification which ensures that the operational issues pertaining to quality of products and lack of resources could be limited.
Another plausible recommendation that can be presented for McDonald’s to deal with its operational issues is to ensure the assessment of all of its food products for risk. The risk assessment procedure has to be implemented by authorized personnel that must be documented in a database. The database could act as a prolific indicator of the information related to supplier performance which enables the organization to access quality ingredients. The continuous assessment of suppliers could be estimated as a reasonable contributor to the resolution of operational issues in supply chain management (Slack, Brandon-Jones & Johnston, 2013).
As per Katsikopoulos & Gigerenzer, the distinct methods that could be implemented by McDonalds to ensure comprehensive assessment of its suppliers include references to quality checks which are executed at the time of delivery, sample analysis and customer feedback. The existing reputation of McDonalds as a market leader in the fast food industry could be subject to detrimental consequences due to insufficiencies in the operations management. Therefore, McDonald’s could resolve its performance issues in operations management through addressing the dimensions of service speed, quality and cost (Katsikopoulos & Gigerenzer, 2013).
Conclusion:
The report illustrated the existing scenario of McDonald’s in context of its operations and issues faced by the organization. The primary objective of the report was directed towards identification of the key issues in operation of McDonalds which have been identified in context of supply chain management and quality management. The next section of the report highlighted feasible analysis on the issues faced by McDonalds in its operations alongside recommendations to resolve the same.
References
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Bromiley, P., & Rau, D. (2016). Operations management and the resource based view: Another view. Journal of Operations Management, 41, 95-106.
Brown, S., Bessant, J. R., & Lamming, R. (2013). Strategic operations management. Routledge.
Carnes, C. M., Hitt, M. A., & Xu, K. (2016). Resource based theory in operations management research.
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Galindo, G., & Batta, R. (2013). Review of recent developments in OR/MS research in disaster operations management. European Journal of Operational Research, 230(2), 201-211.
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Heizer, J. (2016). Operations Management, 11/e. Pearson Education India.
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Zurich, L. B. (2017). Service Operations and Management.
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