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McDonalds Corporation is the largest chain of hamburger fast food restaurants on earth, serving around 68 million customers daily in 119 countries. McDonalds is a corporation. McDonald's Corporation is active in restaurant industry or more specific; it is active in fast-food restaurant industry. McDonald's Corporation sold fast food products such as hamburger, French fries, soft drinks, ice-cream and so on.
The principle competitor of McDonald's is Subway. Both Subway and McDonald's are well-known worldwide fast food restaurant. Subway is the largest single-brand restaurant chain in world and it came in second place at the top 10 largest restaurant chain in world right after McDonald's. Subway has around 37,881 restaurants globally, while McDonald's has only around 34,000 franchises globally. But, McDonald's serves at 119 countries while Subway serves within 98 countries only. For the year 2012, McDonald's has made $34.2 billion of sales while Subway has made around $11.5 billion. We can conclude that McDonald's has a neck-and-neck competition with Subway as from the view of revenue and franchises .
McDonald's Corporation is active internationally. It operates over 34,000 franchises globally in countries such as United States, United Kingdom, Malaysia and so on. McDonald's Corporation operates more than 1.7 million employees.
Don Thompson, CEO of McDonald's Corporation http://www.aboutmcdonalds.com/content/dam/AboutMcDonalds/Our%20Company/thompson_bio.jpg
Don Thompson, the president and chief executive official (CEO) of McDonald's since July 2012. In 1990, he joined the company in 1990 and held a variety of leadership position such as Division President, Regional Vice President and Chief Operating Officer (COO). Besides, he served as President of McDonald's USA which is the company largest business segment between 2006 and 2010. Finally he became the President and Chief Executive Official (CEO) of McDonald's after retirement of the ex-Chief Executive Official Jim Skinner on July 2012.
Career Track of Don Thompson
Figure 1.1 Career Track of Don Thompson, current CEO of McDonald Corporation
In 1984, Thompson graduated and received a Bachelor of Science in Electrical Engineering from Purdue University and began his career with Northrop Corporation. After that, he joined McDonald's as electrical engineer in 1990. Later, he worked in a franchise of McDonald's at South Chicago which was owned by franchisee Rod Lubeznik as a part of the company's accelerated growth program for 6 months. There are two achievements that worth mentioning during Don Thompson career at McDonald. Firstly, at the beginning, Thompson had to learn from the basics such as making French fries when he switched from engineering to operations. He was promoted from a normal staff to shift manager, then assistant manager and finally he became a co-manager of the facility in a short period of time. Secondly, Thompson who was promoted as the manager at San Diego region, which was ranked 39 out of 40 McDonald's regions in 1998 and manage to catapult it to No.2.
Besides that, Thompson was awarded the Purdue University Outstanding Electrical and Computer Engineering Award and was honoured as "Purdue Old Master Fellow" in 2006. His talents and passion in leading the world top largest fast-food restaurant chain has been recognized by the Illinois Holocaust Museum (2012 Humanitarian Award), the Executive Leadership Council (2010 Corporate Award), the Trumpet foundation (2008 Corporate Executive Award), and Black Enterprise Magazine (2007 Corporate Executive of the Year). He also received an Honorary Doctorate degree in Science from Excelsior College in 2008.
As a leader in the business community, Dom Thompson serves on the Board of Directors for McDonald's Corporation, Ronald McDonald House Charities, the Exelon Corporation, North-western Memorial Hospital and Purdue University. Thompson also playing an important role in other fields as a member of Civic Committee of the Commercial Club, The Economic Club, World Business Chicago and the Brazier Foundation.
McDonald's Mission and Vision
McDonald's brand mission is to be our customers' favorite place and way to eat.
McDonald's brand vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.
As to achieve those aims, McDonald's Corporation had introduced "Plan to Win" strategy since year 2003 which focuses on Eight Ps: Purposes, Promise, People, Products, Place, Price, Promotion and Performance. To provide the "People" with best "Products" with best "Price" through "Promotion", McDonald's Corporation had announced the special offers McValue Lunch and McValue Dinner which had boost up the business significantly. Besides that, McDonald's Corporation are not scared to invest more money on new concept such as drive-thru(2001 in India) and nutritious healthy food menu.
We place the customer experience at the core of all we do. McDonald's Corporation aimed to provide best quality, service, cleanliness and value (QSC&V) for each and every customer for every moment.
To provide the customer a better welcoming environment, Jim Skinner, the ex-CEO of McDonald Corporation renovated thousand of stores around the world and enforces the tougher cleanliness standard that all stores must followed during the last 10 years.
We are committed to our people. McDonald's Corporation provide opportunity, nurture talent, develop leaders and reward achievement as they believe a group of well-trained human power will is essential to their continued success.
They provides training, management opportunities and curriculum for employee and managers. McDonald Corporation also trained the newcomer or newbie through crew development program. Futhermore, they will give reward for the top-performed employee that chosen every month and year at stores around the world. For example : last year, McDonald rewarded its top-performed employee by giving them the opportunity to be part of the London 2012 Olympic Games.
We operate our business ethically. Sound ethics is good business. McDonald's Corporation conducts their business to high standards of fairness, honesty, and integrity.
We believe in the McDonald's System. McDonald's had depicted by their "three-legged stool" of owner/operators, suppliers, and company employees, is their foundation and balancing the interests of all three groups is key.
"Three-legged stool" of owner, suppliers, and company employees introduced by Ray Kroc are the foundation that operates McDonald's System. This system is used to balanced the needs of employer, employee and supplier to avoid supplier overpower and affect their raw material costs. This system also manage to ensures that their food such as burgers, fries and beverages tasted the same in every stores which are important in maintaining their good international image.
We give back to our communities. We take seriously the responsibilities that come with being a leader. We help our customers build better communities, support Ronald McDonald House Charities, and leverage our size, scope and resources to help make the world a better place.
McDonald Corporation took seriously in helping their customers building better communities and give the next generation a better life. In 1981, the first Ronald McDonald's House was opened by McDonald Corporation in New York City, US. The Ronald McDonald House(RMHC) is an independent non-profit organization who committed the mission to provide comfort, safety and advocacy for families with critically ill or injured children. Every year, McDonald will held an event named "McHappy Day" which a percentage of day's sales go to the Ronald McDonald House fund. This event had raised 20.4 and 20.8 million respectively in 2009 and 2010.
We grow our business profitably. McDonald's is a public corporation. As such, we work to provide profitable growth and return for our shareholders.
Based on the annual report announced by McDonald Corporation, announced that they manage to achieve revenue of USD 27.006 billion(increase by 12% compare to 2010), operating income of USD 8.53 billion (increase by 11% compare to 2012) and a net income of USD 5.26 billion(increase by 11 compare to 2010) in year 2011. Those figures has push McDonald Corporation to become the world largest chain of hamburger fast food restaurants.
We strive continually to improve. McDonald's are a learning organization that aims to anticipate and respond to changing customer, employee and system needs through constant evolution and innovation.
From years 2010 to 2011, McDonald Corporation had increased their total number of restaurant by 773(from 32737 (2010) to 33510 (2011)) which is a scary amount to be mentioned. Besides that, they have introduced many new foods into their menu worldwide and start to introduce healthy food such as salads into the market. As example, McDonald Australia had just released their new Serious lamb burger recently.
McDonald's Major Goals
In the next few years, we aim to advance our balanced, active lifestyle efforts by:
Continuing to develop new menu offerings that provide our customers with a range of choices that correspond to their needs and preferences and can fit into a balanced diet.
McDonald's develop additional vegetable, fruits or low-fat diary choices and will be roll out over the next few years. For example, McDonald's changed from the Apple Dipper (included caramel dip) to Apple slices (Apple without caramel dip) in the Happy Meal for balanced diet.
Develop more Happy Meal choices, including new entrée offerings and non-carbonated beverages without added sugar.
In the month March of 2012, McDonald's had launched their new Happy Meal which includes Apple slices, a kids size fry and several option of the non carbonated beverages such as fat free chocolate milk, low fat white milk or apple juice. While the examples of several new entrée are CheeseBurger and Fish McBites can also be included into a Happy Meal.
Sticking to our timetable for phasing in our new nutrition information initiative for core packaging items.
McDonald's develop a mobile app in 2011, this app will view the detailed nutrition information for every packaging items. To date, there are approximately 290,000 people had downloaded the McDonald's app.
Continuing to assess, listen, learn and evolve our policies and marketing and communication practices so that we can continue our special regard for young people.
From August 2011 to July 2012, members of McDonald's management team participated in 12 listening tours stops. The Listening tour audiences were comprised of parents, nutrition experts, college students and customers. The Listening Tour was conducted through blogger conferences, nutrition conferences and online via @McDonald's Twitter chats.
Expanding our engagement with experts to ensure that we are guided by the best scientific information and insight.
From the month of January through July of 2012, McDonald's has met with the Global Advisory Council (GAC), a group of 12 independent and international nutrition, health and food science experts twice. The meeting was conducted to discuss how McDonald's could do to strengthen their commitments to nutrition.
Part 2.c. Significant Strategic Error Over The Last Decade
McDonald's Banned Coloring Apple Pies
In 2003 and 2006, McDonald's food product, apple pies had been recalled due to the food coloring called Azorobine contained in apple pies which are unauthorized under Japan's food sanitation law. McDonald's company said that it is not a harmful substance and they will give out vouchers to all the customers who bring the food product or receipt.They also defended that customers from European Union and Australia who had took apple pies which contain the Azorubine without any ill effect. (Azorubine may cause allergic reactions, nettle rash, skin swelling and is very danger to asthma patients.)
As the CEO and the managers of the McDonald's, they should acknowledge that the Japan did ban the coloring agent and avoid to uses the same coloring agent again. CEO decisions of try to prove that the coloring agent is harmless by using the coloring agent is meaningless and strike their international image heavily as they have quite a lot of issues of healthy and ethical nowadays.
McDonald's Food Hygiene Problems
A female customer found a dead rat under a large lettuce leaf in her shared salad at Southlake McDonald's in 2006. McDonald's company has not yet to respond and apologize to the customer. The blood and stool samples of the customer are repeated testing in the last five and a half month. The customer has tested negative for any illness and sued McDonald's company for around $1.7 million for the dead rat in her salad and response of McDonald's to the incident. McDonald's was uncooperative during the process of the litigation.
Part 3: Organization Structure
Figure 1.0 The Organization Chart Of McDonald's Corporation
Figure 1.1 The Organization Chart Of McDonald's Corporation
The Organisational Structure of McDonald's Corporation is consists of corporate level (CEO, CFO and etc) , business level and functional level ( restaurant manager, crew supervisor). The CEO of McDonald's Corporation is Don Thompson and he reported to the Chairman of the board, Andrew McKenna. There are 8 major divisions that are direct by the CEO of McDonald's Corporation, Don Thompson which are Brand , Human Resources, Legal & Secretary, Restaurant , Operation (USA region), Supply chain & franchising, Europe , APAC & MEA. There are several sub-division under such division. For example, control division that under CFO, Peter Benson, Social Media that under Brand. In aside , they also have an interesting officer named Chief Happiness Officer which hold by the figurehead Ronald McDonald.
From the organisational chart, we can found out that McDonald's Corporation divide their division based on geographic location such as Europe, APAC and USA division . However such division that based on region is too large and very hard to manage. Thus, They separated the division deeper by split out the region into small pieces such as splitting USA region to east,west and central USA division. Another reason McDonald's divide their structure based on region is they practice Multi-Domestic Strategy in order to provide quality food based on the needs of the customer ( e.g. MCDonald's India have specially design a menu of vegetarian food for the customer). Besides that, Every small piece of the regional division contain their own corporate affairs, marketing, human resources, national operations, regional managers, finance, information, and strategic planning according to McDonald's UK website, on Jun 2011.Then, below that, the departments are broken down into Other functional departments within McDonald's are legal, customer services, franchising, security, hygiene and safety, property and construction, supply chain and restaurant services.
As McDonald's Corporation operate in a stable environment, McDonald's Corporation encouraged centralised management by designing the organisational structure as tall hierarchy structure. McDonald's also practices mechanical structure. There are many rules and SOP to be followed by the employee to maintain the quality and consistency of food.
The organization structure is design as flat structure because it can be have a quick communication from the top management till the staff manager. There have several strategies which are used by the McDonald's Corporation. And through all these strategy, we can see it has matched the organization structure of McDonald's.
Plan to Win Strategy
James Skinner, the McDonald's CEO, said that the company strategy is Plan to Win. This strategy invoked five P's which the organization focuses that are People, Products, Place, Price and Promotions. By looking at the organization structure, the McDonald's has divided its operation into five geographical divisions (United States, Europe, Asia/ Pacific/ Middle East/ Africa, Latin America and Canada). This is because different customer that stayed in different countries may having different tastes or requirements. So the top management required each of the functional geographical unit's managers to fully response for the producing and marketing its product in that region. As we can see, the types of products that produce and market by them are slightly different in different countries and may also in different prices. But the quality, services, cleanliness and value are same for every McDonald's restaurant. Fast service, affordable price and good standard hygiene are the consumers need, and therefore it set as the target of McDonalds. With this target, McDonald's has some main products that are similar in most countries. And because of the consumers in different countries having different needs, McDonald's keep launching the new products for their regional consumers. Besides to the innovative menu, McDonald's has also made some of their restaurant environment become more attractive by rebuilding and relocating.
Business Strategy is based on the franchise model and products consistency. Franchise model is done by the operation and franchising department and based on our research, there have 15% of the total number of McDonald's restaurant are owned by the company and the rest of 85% is operated by the franchises. The franchises have to follow all the rules of that company in order to achieve the good service, cleanliness and low cost of meal for its customers. Product consistency is responsible by the development department and it could be done by developing a sophisticated supplier networked operation and distribution system.
Worldwide Growth Strategy
Worldwide Growth Strategy is based on the three of the elements that are adding restaurant, maximizing the sales and the profit of the existing restaurants, and improving the international profitability. Due to these three elements, the top management have pass the task to the marketing, finance and regional manager together to achieve the task. Maximizing the sales and the profit of the existing restaurant can be done through the better operations of management, innovative, low development cost and so on. Whereas, improving international profitability will be realized as economies of scale are achieved in individual markets and as the company benefits from the global infrastructure.
Motivation of McDonald's
McDonald's Corporation motivated their employees based on 3 points of motivation strategy . First, every department must have a unique and different motivation in the company. Second, employees must have their own attainable, specific and goals. Last, salary of the employees is related with how their performance in the company. According to McDonald's official website , they stated that their reward program is based on "pay for performance" philosophy :The better your results, the greater your pay opportunities.
Besides that, McDonald's offer their employees some benefits such free meal allowance, 4 weeks per annum paid holidays, employee discount card, free life assurance of employee and dependent upon service, stakeholder pension, health care such as medical and dental with 3 years' service, sponsorship program, service awards and stock purchase scheme. McDonald's USA also introduced a Gold Card Plus Program exclusive for employee which the employee can use it to get discount in over 60,000 retail, online merchant, national store , traveling and activities provider.
Furthermore, the tall structure of McDonald's enables many opportunities for the crew member to climb higher and further positions in the restaurant. Therefore, every talented crew members posses the chances to work through their way into management level position just by complete the management entrance exam successfully and attend some training courses organized by Training Department before they return to the restaurant and promote to a management position. Such environments will significantly motivated McDonald's employees to work harder to grab the golden opportunity to become the management level of the largest fast-food restaurant chain in the world.
All those people around Don Thompson have treated him as a transformational leader because of his trait that able to create agitate and initiate quick change. He has earned a lot of experience and intuition in several fields that enable him to become a charismatic leader among the people, and this has motivated all the people around him. Furthermore, it makes him fairly consider individuals and relate to their needs.
All of the employee and worker of McDonald's corporation that work together with him had been influenced by his personality and positive attitude. These traits had shows his referent power as a successful leader. As an engineer, Thompson has the ability to change the idea into the business strategies and processes that able the McDonald's to work properly until today, this ability proved Thompson's expert power in this field. These changes will become possible only if he has listened and interacted with his team members, management and subordinates. We can see that Thompson is a relationship- oriented style leader. Thompson's minds have always remained clear and focus. We can know that he is trying to bring all of the people together and grow the company to cover a larger and larger audience through his eyes.
Thompson's leadership and passion has been recognized by the Black Enterprise (2007 Corporate Executive of the Year), the Trumpet foundation (2008 Corporate Executive Award), the Executive Leadership Council (2010 Corporate Award) and Illinois Holocaust Museum (2012 Humanitarian Award).
Part 5 Control Method of McDonald Corporation
McDonald's have specific goals for large capital investments, for example the new restaurant openings must achieve a 20% return over a 10 year period and re- imaging investment, which must achieve a 20% return over a 5 year period.
According to Don Thompson, The President of McDonald's Corporation, McDonald's long-term targets remain unchanged: operating income growth of 6% to 7%, the system wide sales growth of 3% to 5%, and return on incremental invested capital in the high teens. To open up to 1,600 new restaurants in 2013, McDonald's plans to invest around $3.2 billion of capital and reinvest in their existing locations, including reimaging 1,600 or more franchises worldwide. Besides, Thompson claimed that McDonald's will focus on binding the long-term opportunities in the worldwide marketplace by using their competitive advantages.
As a leading fast-food restaurant chain company which lives in a stable environment, McDonald's Corporation also practices bureaucratic control. According to Dr. J. Nevan Wright and Peter Race (2004), every single daily operations of a McDonald's restaurant from the recipe for the making of hamburger, the standards and the amount for the ingredients used , the steps by steps procedure for preparation, the service level, what to do if the length of customer queue is too long, the size and shape of the scoop for the French fries, and even what the front-counter staff say to customers (When a serving staff serves a customer, they must smile and say : "Welcome to McDonald") has been planned and written in a very detail manner inside the policy and procedures(SOP) that can be found inside the employee handbook that available in McDonald Intranet : McdAccess.com and distributed to every employee. We could also say that McDonald's do practice Scientific method as every part of tasks and recipe have been analyses carefully and the best is chosen to be followed.
`There are also some rules that must be follow in every franchise of McDonald's to ensure the food safety and their local image. For example, they must wash their hand for at least once per hour or before or after entering the kitchen, restroom or touching their hairs. They are also forced to keep a good appearance such as no visible tattoo, long hair or beard (long hair has to be tied up and put inside the uniform) is allowed. Those rules procedures is to ensure that the services and food provided by McDonald's in Alaska or in Hong Kong tastes the same and reaches the worldwide quality.
McDonald's has a unique philosophy which started by the founder of McDonald's - Ray Kroc. Kroc wanted to create a system as for a restaurant that would be well-known for foods that have unique method of preparation and consistently high quality. Until now, McDonald's have over 37,000 franchises all over the world, but McDonald's operating system still insisted the franchises to follow the core of McDonald's principle of cleanliness, quality, services, and value.
Besides, Ray Kroc believed in lifelong self- improvement, entrepreneurial spirit and rewards the franchisees with great innovation. Many of McDonald's most popular menu items such as Big Mac and Filet- O- Fish were created by franchisees. Today, McDonald's still encourage the employees to bring on their creativity to create more menu item for the customers.
McDonald's have recognition programs that created to recognize and rewards the strong performer among the employees worldwide. There are several awards such as the Presidents' Award was rewarded to the top 1% of individual performer and the Circle of Excellence Award which is given to recognize the contribution of the top teams with the best performance.
Review of McDonald's Control Method
McDonald's Corporation has a very complete system in maintaining the high consistency and quality of food and services around the world. However , we suggest there are some changes need to be done to the bureaucratic control of McDonald's Corporation. Normally, if a crew member or a staff involve with a fight or quarrel with the customer, they will mostly be fired no matter the fight is started by who as the franchise manager scared those cases will affect their international image. Despite cases involving rude behavior of crew member, there are also a lot of cases about how the crew member being insult by the customer. For example, a customer throws his cigarettes towards the crew member when waiting impatiently during drive-thru. Therefore, McDonald's Corporation should conduct some laws to protect their employee or customer from being insult or harm. In our opinion, McDonald's should fine RM500 to anyone that attack McDonald's customer or employee. If there are quarrel between employee and customer , the fine will be shared by both side.
Part 6: Ethics and Social Responsibility
Based on our investigation, McDonald's Corporation undertakes proactive approach toward the social responsibility and investment. One of their largest social investment successes is the Ronald McDonald House (RMHC). As stated from mcdonalds.com, the first Ronald McDonald House (RMHC) in Philadelphia was opened successfully with the help of McDonald's. McDonald's have been a providing millions of parents a place to stay by their sick child's side. RMHC has been McDonald's charity of choices for 38years.
RMHC included "Home Away from Home" which helps to provide a place to stay which is near to a hospital for families who need while their child is receiving medical treatment, while "Helping Children In Need" is a Ronald McDonald Care Mobile program that offers essential medical, dental and education services (e.g. scholarships) annually to more than 154,000 children worldwide. "McHappy Day" is a global fundraiser that donates 2% of the total sales worldwide on that day to RMHC to benefits RMHC and children all around the world. Besides than McDonald's, the fundraiser could be its employees, owner/operator, suppliers, and customers, it demonstrate how a small contribution can lead to large changes in children's life. For example, each Happy Meal and Mighty Kid's Meal that customer purchased would contribute a certain amount of money to supports RMHC and also its family-centered programs.
Mcdonalds.com also stated that McDonald's Corporation does practices three-pronged approaches which are reduce, reuse, and recycle. The value if showed when McDonald's tried to create a big impact with several small ways by using unbleached paper napkins made from recycled materials. For example, the McDonald's restaurants inside WalMart stores manage to save an total of 170 million napkins in just one annum through the "One Meal, One Napkin" campaign. Currently, 82% of McDonald's consumer packaging are made from renewable materials, and they're aiming for higher percentages in the future. In several countries, McDonald's restaurants are reusing their used cooking oil in a variety of ways, including the formation of environmental-friendly biodiesel and served as fuel for the delivery trucks, this is commonly called as a "closed-loop solution".
Obviously, these investments have benefits. McDonald's stakeholders, other children's causes around the world and also the communities are those who owned the benefits. Therefore, I agree of these investments as McDonald's is doing a great job in ethics and social responsibility which helps people who need helps.