draw an operations strategy matrix for McDonald's

McDonald case study

It's loved and it's hated. It is a shining example of how good-value food can be brought to a mass market. It is a symbol of everything that is wrong with 'industrialized', capitalist, bland, high-calorie and environmentally unfriendly commercialism. It is the best-known and most loved fast food brand in the world with more than 37,000 restaurants in 119 countries, providing jobs for 1.7 million staff and feeding 69 million customers per day (yes, per day!) or nearly 1 per cent of the entire world's population. It is part of the homogenization of individual national cultures, filling the world with bland, identical, 'cookie cutter', Americanized and soulless operations that dehumanize its staff by forcing them to follow rigid and over-defined procedures. But whether you see it as friend, foe, or a bit of both, McDonald's has revolutionized the food industry, affecting the lives both of the people who produce food and of the people who eat it. It has also had its ups (mainly) and downs (occasionally) as markets, customers and economic circumstances have changed. Yet, even in the toughest times it has always displayed remarkable resilience. What follows is a brief (for such a large corporation) summary of its history. Starting small Central to the development of McDonald's is Ray Kroc, who by 1954 and at the age of 52 had been variously a piano player, a paper cup salesman and a multi-mixer salesman. He was surprised by a big order for eight multi- mixers from a restaurant in San Bernardino, California. When he visited the customer, he found a small but successful restaurant run by two brothers Dick and Mac McDonald. They had opened their 'Bar-B-Que' restaurant 14 years earlier, and by the time Ray Kroc visited the brothers' operation it had a self-service drive-in format with a limited menu of nine items. He was amazed by the effectiveness of their operation. Focusing on a limited menu including burgers, fries and beverages had allowed them to analyse every step of the process of producing and serving their food. Ray Kroc was so impressed that he persuaded the brothers to adopt his vision of creating McDonald's restaurants all over the USA, the first of which opened in Des Plaines, Illinois in June 1955. However, later, Kroc and the McDonald brothers quarreled, and Kroc bought the brothers out. Now with exclusive rights to the McDonald's name, the restaurants spread, and in five years there were 200 restaurants through the USA. Yet through this, and later, expansions, Kroc insisted on maintaining the same principles that he had seen in the original operation. If | had a brick for every time I've repeated the phrase Quality, Service, Cleanliness and Value, I think I'd probably be able to bridge the Atlantic Ocean with them' (Ray Kroc). Priority to the process Ray Kroc had been attracted by the cleanliness, simplicity, efficiency and profitability of the McDonald brothers' operation. They had stripped fast food delivery down to its essence and eliminated needless effort to make a swift assembly line for a meal at reasonable prices. Kroc wanted to build a process that would become famous for food of consistently high quality using uniform methods of preparation. His burgers, buns, fries and beverages should taste just the same in Alaska as they did in Alabama. The answer was the 'Speedee Service System'; a standardized process that prescribed exact preparation methods, specially designed equipment and strict product specifications. The emphasis on process standardization meant that customers could be assured of identical levels of food and service quality every time they visited any store, anywhere. Operating procedures were specified in minute detail. Its first operations manual prescribed rigorous cooking instructions such as temperatures, cooking times and portions. Similarly, operating procedures were defined to ensure the required customer experience: for example, no food items were to be held more than 10 minutes in the transfer bin between being cooked and being served. Technology was also automated. Specially designed equipment helped to guarantee consistency using 'fool-proof devices. For example, the ketchup was dispensed through a metered pump. Specially designed 'clam shell' grills cooked both sides of each meat patty simultaneously for a pre-set time. And when became clear that the metal tongs used by staff to fill French-fry containers were awkward to use efficiently, McDonald's engineers devised a simple aluminum scoop that made the job faster and easier. For Kroc, the operating process was both his passion and the company's central philosophy. It was also the foundation of learning and improvement. The company's almost compulsive focus on process detail was not an end in itself. Rather it was to learn what contributed to consistent high-quality service in practice and what did not. McDonald's always saw learning as important. It founded 'Hamburger University', initially the basement of a restaurant in Elk Grove Village, Illinois. It had a research and development laboratory to develop new cooking, freezing, storing and serving methods. Also, franchisees and operators were trained in the analytical techniques necessary to run a successful McDonald's. It awarded degrees in 'Hamburgerology'. But learning was not just for headquarters. The company also formed a 'field service unit to appraise and help its restaurants by sending field service consultants to review their performance on a number of 'dimensions' including cleanliness, queuing, food quality and customer service. As Ray Kroc said, 'We take the hamburger business more seriously than anyone else. What sets McDonald's apart is the passion that we and our suppliers share around producing and delivering the highest-quality beef patties. Rigorous food safety and quality standards and practices are in place and executed at the highest levels every day.' N o story illustrates the company's philosophy of learning and improvement better than its adoption of frozen fries. French fried potatoes had always been important. Initially, the company tried observing the temperature levels and cooking methods that produced the best fries. The problem was that the temperature during the cooking process was very much influenced by the temperature of the potatoes when they were placed into the cooking vat. So, unless the temperature of the potatoes before they were cooked was also controlled (not very practical), it was difficult to specify the exact time and temperature that would produce perfect fries. But McDonald's researchers discovered that, irrespective of the temperature of the raw potatoes, fries were always at their best when the oil temperature in the cooking vat increased by three degrees above the low temperature point after they were put in the vat. So, by monitoring the temperature of the vat, perfect fries could be produced every time. But that was not the end of the story. The ideal potato for fries was the Idaho Russet, which was seasonal and not available in the summer months. At other times an alternative (inferior) potato was used. One grower, who, at the time, supplied a fifth of McDonald's potatoes, suggested that he could put Idaho Russets into cold storage for supplying during the summer period. Unfortunately, all the stored potatoes rotted. Not to be beaten, he offered another suggestion. Why don't McDonald's consider switching to frozen potatoes? But the company was initially cautious about meddling with such an important menu item. However, there were other advantages in using frozen potatoes. Supplying fresh potatoes in perfect condition to McDonald's rapidly expanding chain was increasingly difficult. Frozen potatoes could actually increase the quality of the company's fries if a method of satisfactorily cooking them could be found. Once again McDonald's developers came to the rescue. They developed a method of air-drying the raw fries, quick frying and then freezing them. The supplier, who was a relatively small and local suppler when he first suggested storing Idaho Russets, grew its business to supply around half of McDonald's US business. Throughout its rapid expansion McDonald's focused on four areas - improving the product, establishing strong supplier relationships, creating (largely customized) equipment and developing franchise holders. But it was strict control of the menu that provided a platform of stability. Although its competitors offered a relatively wide variety of menu items, McDonald's limited itself to ten items. As one of McDonald's senior managers at the time stressed, 'It wasn't because we were smarter. The fact that we were selling just ten items [and] had a facility that was small, and used a limited number of suppliers created an ideal environment.' Capacity growth (through additional stores) was also managed carefully. Well-utilized stores were important to franchise holders, so franchise opportunities were located only where they would not seriously undercut existing stores. Fostering franchisees McDonald's revenues consisted of sales by company-operated restaurants and fees from restaurants operated fran nald's views itself primarily as a franchisor and franchising is 'important to delivering great, locally- relevant customer experiences and driving profitability'. However, it also believes that directly operating restaurants is essential to providing the company with real operations experience. Of the 36,000 restaurants in 117 countries, approximately 80 per cent were operated by franchisees. But where some restaurant chains concentrated on recruiting franchisees that were then left to themselves, McDonald's expected its franchisees to contribute their experiences for the benefit of all. Ray Kroc's original concept was that franchisees would make money before the company did. So he made sure that the revenues that went to McDonald's came from the success of the restaurants themselves rather from initial franchise fees. Initiating innovation Ideas for new menu items have often come from franchisees. For example, Lou Groen, a Cincinnati franchise holder, had noticed that in Lent (a 40-day period when some Christians give up eating red meat on Fridays and instead eat only fish or no meat at all) some customers avoided the traditional hamburger. He went to Ray Kroc with his idea for a 'Filet-o-Fish': a steamed bun with a shot of tartar sauce, a fish fillet and cheese on the bottom bun. But Kroc wanted to push his own meatless sandwich, called the hula burger: a cold bun with a piece of pineapple and cheese. Groen and Kroc competed on a Lenten Friday to see whose sandwich would sell more. Kroc's hula burger failed, selling only six sandwiches all day, while Groen sold 350 Filet-o-Fish. Similarly, the Egg McMuffin was introduced by franchisee Herb Peterson, who wanted to attract customers into his McDonald's stores all through the day, not just at lunch and dinner. He came up with idea for the signature McDonald's breakfast item because he was reputedly 'very partial to eggs Benedict and wanted to create something similar'. Other innovations came from the company itself. When poultry became popular, Fred Turner, then the Chairman of McDonald's, had an idea for a new meal: a chicken finger food without bones, about the size of a thumb. After six months of research, the food technicians and scientists managed to reconstitute shreds of white chicken meat into small portions that could be breaded, fried, frozen then reheated. Test-marketing the new product was positive, and in 1983 they were launched under the name Chicken Mc Nuggets. These were so successful that within a month McDonald's became the second largest purchaser of chicken in the USA. Some innovations came as a reaction to market conditions. Criticized by nutritionists who worried about calorie-rich burgers and shareholders who were alarmed by flattening sales, McDonald's launched its biggest menu revolution in 30 years 2003 when it entered the prepared salad market. It offered a choice of dressings for its grilled chicken salad with Caesar dressing (and croutons) or the lighter option of a drizzle of balsamic dressing. Likewise, moves towards coffee sales were prompted by the ever-growing trend set by big coffee shops like Starbucks. Problematic periods Food, like almost everything else, is subject to swings in fashion. Not surprising then that there have been periods when McDonald's has had to adapt. The period from the early 1990s to the mid 2000s was difficult for parts of the McDonald's Empire. Growth in some parts of the world stalled. Partly this was due to changes in food fashion, nutritional concerns and demographic changes. Partly was because competitors were learning to either emulate McDonald's operating system, focus on one aspect of the traditional 'quick service offering, such as speed of service, range of menu items, (perceived) quality of food, or price. Burger King promoted itself on its 'flame-grilled' quality. Wendy's offered a fuller service level. Taco Bell undercut McDonald's prices with its 'value pricing' promotions. Drive-through specialists sped up service times. Also, 'fast food' was developing a poor reputation in some quarters, and as its iconic brand, McDonald's was taking much of the heat. Similarly, the company became a lightning rod for other questionable aspects of modern life that it was held to promote, from cultural imperialism, low skilled jobs (called 'McJobs by some critics), abuse of animals and the use of hormone-enhanced beef, to an attack on traditional (French) values (in France). A French farmer called Jose Bov (who was briefly imprisoned) got other farmers to drive their tractors through, and wreck, a half-built McDonald's. Similarly, in 2015 McDonald's closed more stores in its US home market than it opened - for the first time in its 60-year history. Partly this was a result of the increase in so-called 'fast casual dining, a trend that combined the convenience of traditional McDonald's style service with food that was seen as healthier, even if it was more expensive. Smaller rivals, such as Chipotle and Shake Shack, had started to take domestic market share, Surviving strategies Over recent years the company's strategy has been to become 'better, not just bigger', focusing on 'restaurant execution', with the goal of 'improving the overall experience for our customers'. In particular it has, according to some analysts, 'gone back to basics", a strategy used by McDonald's Chief Executive Officer, Steve Easterbrook, when he was head the company's British operation, where he redesigned the outlets to make them more modern, introduced coffee and cappuccinos, worked with farmers to raise standards and increased transparency about the supply chain. At the same time, he participated fully and forcefully with the company's critics in the debate over fast food health concerns. But some analysts believe that the 'burger and fries' market is in terminal decline, and the McDonald's brand is so closely associated with that market that further growth will be difficult

how have mcdonald's operations strategy in terms of design delivery and development influence operations performance activities