Internal Analysis of McDonald’s Corp.
Introduction
McDonald’s is the biggest chain of hamburger fasts food cafes around the world with over 50 million consumers. The corporation was started in 1940 by two brothers in San Bernardino, California (McDonald’s. com, 2016). Today, McDonald's is the leader in global food service retail with around 35,000 locations in more than 100 nations. However, most of its worldwide restaurants are owned and operated by independent local business people. Additionally, the alignment strength in McDonald’s is its franchisees and suppliers. This system has been the reason for the long-term success of the corporation. In the process of leveraging the organization's system, it has been able to identify, implement, and scale ideas that can satisfy the changing needs and preference of its clients. Moreover, the business model of McDonald’s has enabled it to provide the local restaurants with customer experiences. Therefore, it has been in the central part while serving the community.
The overall mission of the corporation is to become a modern, and a progressive burger that can deliver a contemporary customer experience. Regarding modernity, the firm is planning to take its brands to where it is required while liberal involved the performance of what is needed to the customer of McDonald's. In the process of realizing these concepts, the company is focusing on the clients, and what matters to them concerning the meals (hot and fresh, fast and friendly) and the experience of the contemporary restaurant at the value of McDonald’s. The foundation of the system is the powerful and enduring brand of the company. That is it is leveraging the competitive strengths regarding the iconic menu that the clients like, an excellent model of the franchise that can empower entrepreneurs, scales that can make the operational investments efficient, and a well-diversified footprint around the globe. Therefore, in 2015, McDonald's began to operate under new organizational structure with the above segments that combine the marketplace with the same characteristics, challenges, and opportunities for growth.
Tangible Resources
Physical
The overall number of outlets in McDonald's slightly increased from 30,946 to 31,967 between 2004 and 2008 respectively. However, the specific number of shops that is under the company decreased steadily from 8,179 to 6,502 while the franchised outlets increased sharply from 22,317 in 2004 to 25,465 in 2008. Similarly, almost three-quarters of the company's stores are under franchisees and other affiliates. Consequently, it has enabled the organization to build its brand recognition around the globe as it save money for the establishment of new business but still earn more income from the franchise segment. In the effort of fair competition, McDonald's is trying to refurbish its global outlets so that they can be more attractive to the clients. The interiors of the stores have armchairs and sofas, contemporary lighting, large television as well as wireless internets. Moreover, it also offers features for its drive through clients to allow them to see meals being prepared from the vehicles.
Technological
McDonald's Corporation has participated in the revolution of the way restaurants are using technology. This has reflected on the fascination of the founder who believes that serving burgers and fries is a matter of minutes. Over the years, the company's fascination with the advanced technology has become a great obsession for the department of informatics (McDonald’s Technology, 2010). Due to the corporation's outstanding lead and large chains of Burger, the food industry shifted from cash registers and ultimately installed a computerized point-of-sale (POS). In this sector, the technology of McDonald's has considerably improved up to the present dates since the POS are in the form of touch screens in most restaurants.
Recently, the company installed the Wi-Fi hot spots in most of its restaurants at international level. The Corporation employed more young and techno-savvy individuals into their restaurants. Something Starbucks thought is free. Moreover, the electronic model of payment also facilitated quick ordering and payment of meals. Thus, putting in a system that speeds up the time of processing, preparation as well as payment time.
The company also uses a biodiesel technology to reduce the emissions of carbon from the delivery tracks. Similarly, the meat supplier of McDonald’s, the Keystone Foods, operated carefully with a fuel manufacturer in the United Kingdom to come up with the idea of using the biodiesel to limit the emission of Carbon (IV) Oxide every year (McDonald’s Technology, 2010).
The corporation also uses the Nintendo a DS system as the electronic learning training tool to recruit new staffs in about 3,000 restaurants. The system trains the recruits and at the same time, grade them on their performance in the sense that they can make a comparison with older employees and determine the progress. The application of this new technology allows McDonald's to use less paper and have its workers enjoy their duties, in particular on the job learning experience.
Financial Analysis (The figures are in billion US dollars)
Source: (McDonald’s Corp, 2016)
Gross profit margin
According to Stickney, gross profit margin indicates is that profit that a company is earning per dollar of the total revenues (Stickney, Weil, Schipper & Francis, 2009). For instance, during the FY 2015, 2014, and 2015, McDonald's had a gross profit margin of 60.84%, 60.35%, and 60.19%. It means that the operations of the company were profitable throughout the three years. Moreover, the trend also shows that the ratio was increasing though with a slight margin. Hence, a slight increase in the company's profitability.
Net profit margin
The net profit of McDonald’s decreased slightly in 2014 and 2015 as compared the ratio of 2013. Despite the declining net profit margin, the company still made a profit since all figures were positive
Current ratio
This ratio shows some current assets that may be available to offset the current financial obligations of the company. McDonald's recorded a ratio of 1.6 and 1.5 in 2013 and 2014 respectively. However, during the FY 2015, the company experienced a stronger ratio of 3. 26. This implies that McDonald's had more than enough current assets to pay the current creditors of the company
Acid test ratio
The company made a good record on this ratio since it was above the thumb rule for the three years. Moreover, this ratio increased steadily from 2013 to 2015. Therefore, the liquidity of McDonald's was improved with FY 2015 making the best improvement.
Asset turnover
The asset turnover ratio for McDonald’s in 2015, 2014, and 2013 are 0.7, 0.77, and 0.78 respectively. Therefore, the company still gained since it recorded positive figures. Thus, it was efficient because it generated additional revenues over the total assets used during the three years.
Inventory turnover period
This period shows the average time that a company will take to sell its stocks. According to the ratio, McDonald's is having a faster rate of converting its stocks into cash. This is because the turnover periods are short. Furthermore, this ratio is declining across the FYs 2013 to 2015. Therefore, it illustrates that McDonald's is converting its stocks into revenues in both 2014 and 2015.
Intangible Resources
Human resource
The strategy of the HR in McDonald’s seems to increase motivation and commitment of the employees. For instance, the company emphasizes on the learning and improvement of the employees by offering them proper training and even satisfy them with countless promotional programs. Moreover, the company also continues to enhance its strategic position through further evaluation of additional critical factors such as the perception of the employees about the organization. Similarly, they inspire the workforce to add a few of their personalities. Training is continuous throughout the organization and in different restaurants. Some of the training offered are the daily coaching and technology learning programs.
The aspiring managers are required to attend and advanced operational management sessions at the Management Training Center of the company. Moreover, they hold a call Founders Day annually where all office worker are leaving their desks and work in various restaurants for the whole day for them to recall the type of business they are running (Fredericksen, Witt, Patton & Lovrich, 2015).
In McDonald's, most employees have to move around from one function to the other so that they can gain enough experience in all sectors of the business. The activities of the HR include promotions, offering scholarship programs, recognizing service awards, lifetime assurance schemes, private medical care, providing various opportunities to the workforce so that they can invest in the company’s shares. Consequently, as an organization, McDonald's has identified its team as part of the international commercial strategy for success. Therefore, it is using its workforce in an extensive manner to achieve its objectives. The employees must follow the defined procedures.
In contrary, the HR department stress on the human side as they motivate the workforce, developing commitment, collaboration, and communication. Therefore, it is not easy to draw a clear line between the hard and soft HRM for McDonald's. But it can be deduced that they follow all approaches that include flexible and less hard human resource management.
About 40% of senior employees at McDonald’s have been promoted internally. That is they have not been hired directly from outside organizations. It seems that they started their careers in McDonald’s at lower levels. Due to regular training, they learn through program developments in the HR department. Through the implementation of different HR activities, the company has managed to develop both committed and competent team that can deliver quality and customer satisfaction. This can be proved by the present market position of McDonald's.
McDonald's is providing extensive training opportunities to its team. For example, it has a lot of programs like the CDP that enhances the progress of the employees, and this has made the organization more efficient. Moreover, there are other plans for the development of the staff members to take them to management positions. This implies that the company offers several chances for growth. However, there are no separate plans for the development of the staff members, and the company does not spend much cash on training activities. Therefore, it fits the food industry than its competitors.
Selective hiring and Reward System in the HR department
Recruitments for McDonald’s is conducted through internet application and it advertised on the store. The process is very quick, time-saving as well as cost friendly. After the reception of all the application forms, the selected candidates will be invited for interviews. Therefore, we can conclude that the organization is practicing the best model. The company is paying minimum wages to its workers. Through personal experience, the low-level workers, the crew member that are considered to be the most important to the organization are not happy with their salaries and remuneration systems. Therefore, the company should improve on the motivation and commitment among the low-level employees particularly by increasing the evaluation schemes. Through this context, it will adhere to its best-fit policy.
Innovation & creativity
Creativity and innovation are important successful tools for companies in their increasing and challenging corporate setting. That is, creativity is the ability to create new ideas and the discovery of ways of looking at business issues and opportunities. Innovation is the strategy to economic development of any nation. Therefore, inventions and innovation are components of the future while entrepreneurship involves the creation of new things through the devotion of necessary time and effort. It assumes the financial and social risks as it receives the resulting rewards of monetary value and individual satisfaction.
McDonald’s is an example of a company that has earned a brand image over the years with effective application of innovative and creative ideas. This has allowed it to achieve significant competitive advantages and an edge of building new ideas. Thus, defining new and better ways of customer satisfaction. As an organization, McDonald's has offered an extensive case study of the application of well thought and thorough innovative strategies, a product planning and the process of development that has effectively reflected the changing industry. Similarly, the opportunity for the company to remain on top and the culture of McDonalization that is embedded with innovation that follows successful practices in all aspects of obtaining customer satisfaction defines the industry standards.
Reputation
McDonald’s experienced the problem of improving the perception of its career opportunities. In the 1980s, it coined the term McJob to indicate a dead end, and low- paying employment opportunities. However, this terminology represented any work that was based on the occupation of the firm. But later McDonald’s made efforts to remove this negative reputation. In early 2000, it launched an advertising campaign to sell the advantages and the upward mobility of working at McDonald’s.
Later, the company earned a lot of respect because of its improved animal welfare and environmental strategies. Moreover, the company enforced standards its meet vendors to ensure that the human method of treating livestock such as debeaking phase out in chickens. The company also bans the sellers from the use of growth hormones on livestock. In 2007, McDonald’s announced that it only purchase coffee from certified growers by the Rainforest Alliance. Additionally, some individuals argued that the fast food is becoming greener than any other option because of its efficiency.
Value Chain Analysis
It mainly deals with the development of maximum value for the clients due to many activities that include logistic operations, and services. The value chain of McDonald's is strong since it fulfills its aims that fortify its competency (Value Chain and Competitive Advantage of McDonald’s, 2012). Therefore, to get the goods and services that can be levered to the national, and global markets, franchising is the best tool that can promote rapid growth of the business.
Primary
Inbound logistics
McDonald’s buys raw vegetables and other materials only from its fixed, and pre-defined suppliers. Therefore, as the company increases its capital, its production will proportionately increase. Moreover, the firm has been practicing backward and vertical integration through the replacement of most of its sellers for the following reasons: to limit the operation costs, and ensure that the company's products are of high quality. The suppliers provided beef and milk from the farms for the products of McDonald's. Other vendors are the local grocery stores that provide McDonald's with fresh vegetables. However, soft drinks are exclusively supplied by Coca-Cola, the ally of McDonald's. Moreover, the company also import beef from Australia and New Zealand.
Operations
Before the invention of this corporation by the McDonald's brothers, some restaurants were not making food pretty quickly. The restaurants used short order cooks that only specialized in making food that did not need too much time for preparation. Since the short order cook took skill and training, the appropriate chefs were still in high demand. However, these systems were completely different and instead of using skilled chefs to prepare meals quickly, McDonald’s used semi-skilled employees. Consequently, the McDonald’s brothers changed the design the kitchen and restaurant. Where instead of having several equipment and stations for the preparation of a wide variety of meals, the new kitchen had big grills that can allow only a single person to cook many burgers simultaneously. It also has a dressing station where chefs can add similar condiments to each burger, a fryer where one can make some French fries. Lastly, the new kitchen is designed with a soda fountain and milkshake machines particularly for the counters where a customer can place and receive orders.
During production, the mass process obliges every chain restaurants to have a distribution network that can carry food to all cafeterias. Similarly, the warehouses have all that the restaurant requires regarding foods, paper products, and cleaning supplies. The warehousing and distribution like any other chain of management are centralized instead of being handled by on cafeteria. However, in some chains, the managers can track the inventories of food, cups, and other items for each restaurant. Therefore, the always make orders for everything that is needed for the cafeteria right from the distribution center.
In other chains, the system is automated. This implies that the computer is tracking what the company has on hand. The distribution center may also ship the necessary items regularly instead of waiting for requests from the eating place. Therefore, the company is ever profound while taking charge of the significant duties of turning the enterprise around to meet the demand of customers. For example, McDonald’s have proposed of innovating the manufacturing process of logistics. This has been achieved with the aim of increasing the efficiency of supply chain regarding capacity, selection of technologies, and the purchasing policies.
Outbound logistics
The primary commitment of McDonald's is to provide the highest quality of food and superior services at a great value in a tidy and welcoming environment. This is why the corporation is working together with its employees, suppliers, and franchisees to serve a balanced collection of food. It is also committed to offering information needed concerning nutrition for the clients so that they can make sound decisions. The company is focused on the conservation of energy, sustainability packages, and management of waste at the restaurant level. The corporation is dedicated to innovation that can improve the operations to create a more sustainable, environmentally friendly, and profitable enterprise. It has also re-optimize its menu, modernized the experience of its customers, and broadened their brand accessibility to allow their clients to enjoy the maximum experience of McDonald's.
Marketing and sales
McDonald’s is owning most shares in Chipotle Mexican Grill. It also has some shares in Donatos Pizza. In 2007, McDonald's sold out the Boston Market to Sun Capital Partners. Remarkably, the firm increased its shareholding dividends for the last two decades, and this made it be one of the dividend aristocrats. However, in 2012, the monthly sales decreased for the first time in nine years.
Services of McDonald’s
Wi-Fi and Gift Cards
The meals in different cafeterias are complemented with free Wi-Fi to allow customers connect with friends. Therefore, with free Wi-Fi in over 11,000 restaurants, consumers can access Internet services with their laptops or PDAs at no cost. Gift cards allow the employees to reward their colleagues for a job well done
Secondary
Procurement
The electronic procurement system is the key reason for the success of McDonald’s supply chain management. This is because the E-Procurement is efficient in the provision of the backbone not only to the overall logistics, the entire supply chain of the company. The E- procurement is a supply hub that was launched in 2011 to enable the franchisee of the McDonald's to acquire everything that is necessary that can operate the restaurants around the globe. Apart from its faster speed and convenience, this site allows the owners of the business to buy supplies and raw materials at reduced price. Hence, it reduced the cost of the firm. That is it allows about 85% cut in costs. On the other hand, McDonald's is operating with two different types of suppliers, major and smaller providers.
Technology Development
The Fujitsu signed a five-year deal with the fast-food chain, McDonald's to supply the information technology (IT) support to over 1,000 branches of this fast food store in the United Kingdom, and Ireland. This will offer support at the point of sale and operations at the back office especially to both main company and the franchise outlets. Thereby, replacing different incumbent suppliers. Moreover, the plan of Fujitsu is to make the IT system in McDonald’s more reliable through the deployment of user exchange parts. This will enable the employees to fix negligible issues of IT by themselves by replacing the units that are faulty such as card readers.
The success of will be determined when the IT support is simplified for the branch staff, and reduced on-site visits to the engineering down to the cost of ownership of the IT equipment in McDonald's over time. Most importantly, the forward movement is about the customer experience, and support to the new technologies to ensure the agility in meeting the needs of clients.
Human Resource Management
Most workers in McDonald’s are always selecting employment in the context of having other few alternatives. But regardless of what individuals are thinking of work, an opportunity at McDonald's provides some advantages to some employees that are willing to have flexible working hours since they are engaged in other operations and responsibilities (Marchington & Wilkinson, 2002). Similarly, the firm also offers much-needed jobs to the marginalized individuals in the labor market that are having no chances of employment in other places.
On the other hand, the dependence of the workers on McDonald's and their tendency to view their contracts as a short term strategy make them vulnerable particularly to the management manipulation. Consequently, those that have less interest will simply quit when they don't find it enjoyable, and this is supported by the high labor turnover. That is the employees may have been attracted by the secure employment or the working condition that have created a highly protective management approach, especially where several employees have same age or temperament. This provides a good explanation to why McDonald's is sometimes retaining its employees who could have been obtaining better salaries and more skilled work in other companies such as Starbucks. Therefore, the company is said to have been making good use of recruiting as a means of control.
The relationship of employment at McDonald's is under the management of the complete spectrum of checks especially from simple, direct, and rigid or bureaucratic management controls subjectivity. Therefore, at the end of the range, the managers of the restaurant are always disciplined in accepting the schedules of work. Therefore, they have to prove themselves while pushing for the programs. That is both loyalty and long working hours are locked in, and the mid-age managers are swayed not only to accept the culture of many and unpaid working hours but also to gain a willful satisfaction from enduring the harsh and uncompromising routines of the jobs. The young managers that are not able to get similar opportunities anywhere in the labor market are enticed by offers of promotion and career development. Similarly, McDonald’s applies direct approaches at the other side of the HR plans.
General Administration
McDonald's is operating in the food industry that needs a lot of quality, service, and satisfaction of the customers as well as hygiene. Therefore, it identified its workforce as the primary tool to achieve its philosophy of maintaining its brands by achieving growth in profitability. Furthermore, the company feels that it is not easy to achieve goals minus motivation and commitment among the workers and also without keeping the employees satisfied.
Core competencies of McDonald’s
The core competency is applied to explain the capabilities that any diversified corporation may own when identifying its unique resources while framing up a strategic direction for achieving the competitive advantage (Ireland, Hoskisson & Hitt, 2008). The competitive advantage can be attained through the use of strategic deployment of intellectual capabilities, physical assets, and other technological and managerial capitals. The process of the main competency may include a chain of activities that are developed by both tangible and intangible assets owned by the company. For example, the basis of a firm entering new markets and future direction rely on the strength of core competence that such corporations are possessing.
McDonald’s has an exclusive recipe that cannot be copied easily by its rivals. That is only a few people are aware of the secret recipe of McDonald's. The company assigns strict confidential contracts while handling classified information to the concerned individuals. Secondly, the experienced and well-trained personnel are also the strength of McDonald's because they promote systematic practices within the workforce. Consequently, there is cognition and attitude through high standards of training. Moreover, the firm conducts training programs in Hamburger University while the individual training is conducted within the company and its outlets. Quick service is one of the strengths in McDonald's as a fast food company.
Thirdly, McDonald’s displays a long range of product varieties and segmentations are made upon demographics. The recipe of the company varies from one nation to the other due to socio-cultural factors. This act as the source of its competitive advantage because the company can market the products by mixing cultural differences as well as maintenance of global standards. As the firm is enjoying economies of large scale, it has been successful in large-scale activities, and this has reduced the cost of every unit by making its products affordable while maintaining the quality of production.
Specific knowledge skills and capabilities
McDonald's is one of the best multinational corporation. Its partnership with Coca-Cola made it more reputable than its rivals. Therefore, it has made its presence in over 120 nations with numerous outlets. However, its competitors also have the same advantage, but McDonald's still reigns as the leader in the coffee market.
Replication is necessary since it requires systemization of the knowledge via standard operating procedures. McDonald’s do business distillation through functional processes, and training manuals that assist in controlling all characteristics of the restaurant. The company also can circulate millions of burgers from a huge number of outlets around the globe with remarkable uniformity in the quality of production, and satisfaction of customers.
VRIN Analysis
Value. McDonald's is holding a high value of its products following the image of the brands and the use of the available resources. This has helped the company to grow successfully for over 50 years.
Rarity. The utilization of the resources is company oriented. Moreover. They spread through the breadth of the company. However, the key control remains with the top 50 management authorities. Consequently, the franchisees have to follow the rules of the company to operate the franchise of McDonald's.
Imitability. The firm may not be technical to imitate concerning its products. However, the functionality of its products is technical to attain.
Non-Sustainability. The firm is ever ready to exploit new opportunities because it has well organized managerial structures. Additionally, it provides good support to its franchise operators.
Key success factors
Uncompromising Standards. This is the leading factor that enables McDonald's to be credited as the most committed restaurant with an effort of maintaining consistency in production through its slogan, Quality, Service, Value, and Cleanliness.
Staffing. It was important for the firm to conduct internal marketing plans because the external programs seemed unsuccessful especially when the outside world is put before your people. That is the company gave its employees priority.
Willingness to Adapt to economic changes. The success of the company depended on its choice for adapting to the need of its clients, and the demands of its franchise segment. This did not only make the company to survive but to thrive through hard times of recession. Therefore, it reacted successfully to the trends of its consumers. For instance, McDonald’s was the first restaurant to post nutritional information regarding its menu.
Conclusion
The restaurant is found in over 100 countries and other territories around the globe. Thereby, serving millions of clients every day. Moreover, it operates about 30,000 restaurants globally and has offered employment to over 1 million people. While concentrating on its major brands, McDonald's divests itself of other chains that it had acquired in the early 90s. For instance, the firm has most of its shares in Chipotle Mexican Grill but, it fully divested from Chipotle via the stock exchange. The company has improved its shareholding dividends for more than 25 consecutive years. This made it be one of the dividend aristocrats in S&P 500.
References
Fredericksen, E., Witt, S., Patton, D., & Lovrich, N. (2015). Human Resource Management: The Public Service Perspective. Boise State University, U.S.A: Routledge.
Ireland, D., Hoskisson, R., & Hitt, M. (2008). Understanding Business Strategy: Concepts and Cases (2nd ed.). Cengage Learning.
Marchington, M. & Wilkinson, A. (2002). People Management and Development-Human resource Management at Work (2nd ed.). CIPD.
McDonald's Corp. (2016). Marketwatch.com. Retrieved 4 June 2016, from http://www.marketwatch.com/investing/stock/mcd/financials
McDonald's: McDonald’s Technology. (2010). Mcdonaldsteam3.blogspot.co.ke. Retrieved 4 June 2016, from http://mcdonaldsteam3.blogspot.co.ke/2010/05/mcdonalds-corp.html
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Stickney, C., Weil, R., Schipper, K., & Francis, J. (2009). Financial Accounting: An Introduction to Concepts, Methods and Uses (13th ed.). Cengage Learning.
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