McDonalds’ change process in supply chain management
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Published: Tue, 02 May 2017
Our project is based upon the organization McDonalds and their change process in supply chain management in order to succeed in Indian market. We first look to the background of our company and the need of change them we see its strengths and weaknesses. We will also see its major competitors and how they are doing. After this part is covered we will see the important stakeholders in our organization and the way they have helped the organization to execute the change process. Then we have applied the Force Field Model and 3 step model of Kotter’s to support our topic. And in the end we use 8 Step Model to show the necessary change our organization needs in order to be competitive.
In today’s world McDonalds is a tantamount in fast food industry. McDonalds is well known and renowned with a good brand image around whole globe. It has 120 restaurants that provide fast food all over the globe serving around fifty-four million customers every day and has its headquarters in US. The McDonalds serves its customers with burgers and other fast food variety products. It also serves other food products like French fries, Big Mac, Quarter Pounder, Chicken Nuggets and Egg McMuffin. It has a viewpoint of providing one world with one burger. It does maintain a very high standard in price and quality issues. Its name is the biggest in the world in fast food industry.
The reason why I have selected McDonalds for change management process is because they are such vast and huge and do maintain a high standard that requires a very good supply chain management. Thus the change process of supply chain management will help them Hazard
Analysis Critical Control Point (HACCP) which is a systematic approach of saving them from food wastage. Controlling this can help them maintain good food and quality with pricing issue in the India.
Discuss the background to change that exists in today’s economy that motivated your organisation to consider Change.
In today’s world all fast food industries want to have good service providing hygienic food with affordable price at good quality. In order to maintain this circumstance all fast food industry wants to have a very good inventory management. During the past few decades because of globalization, information technology and outsourcing have changed the way in which we look and maintain inventory. Traditionally the companies would focus on supply network inputs and outputs of the process. But because of globalization supply change management has been drastically been changed with concepts of Just in time, lead management and Agile manufacturing which has helped to reduce communication costs and transaction costs.
Hence McDonalds went for similar concept of using functions of supply change management. With McDonalds having such a vast reach globally needed to maintain its supply chain management and quality issues. By doing so they saved their costs considerably. Today’s supply chain management also contains concepts of customer relation management, Procurement, Product development and commercialization, Manufacturing flow management/support and many more which help the company maintaining good supply chain management in order to work efficiently.
Thus by following all these concepts of supply chain management McDonalds felt that they would grow at a faster rate with saving a lots of cash and getting more effective and efficient in Indian Market. In order to maintain successful supply chain management maintaining change would help them grow bigger and better. By following the method SCM and its quality management function of it has given them earn great profits in Indian Market.
Theoretically Evaluate the strengths and weaknesses of bureaucratic organizations
Strengths of McDonalds:
McDonalds has many advantages this is simply because it is the one of the oldest fast food industry which has a good reputation all over the world. Also the brand name of McDonalds is very good this is because of its specifications in providing fast food items. With McDonalds providing burgers, French fries, etc. and many more items which are well known and loved by the customers all over the world. It does also posses good staff and very good management team which is their strength. It also offers its customer with choice, at reasonable price and superb service.
Also it is spread over all geographic locations of the world with a reputation of maintaining good quality and price. It does provide meals to its customers in different parts of globe according to the taste of the local people with its burgers and fries. Their innovation helps them in maintaining good customer relations and retaining them. Each and every McDonalds restaurant has duplication and systemization of products. They also serve only branded items like Dannon yogurt, Craft cheese, Nestle chocolate and many more.
McDonalds does provide a very good standard all over the world and it is been choose by the customers as their first priority to eat in a fast food restaurant. As it maintains a good standard all over the world it does enjoy in implementing changes very effectively. McDonalds has been ranked number one by Fortune magazine in years like 2005, 2008 and many more. Packard’s children hospital centre has mentioned that Children aged between 3 and 5 years choose to have food at McDonalds. They are also successful in adapting local cultures in different countries they have their restaurants. Their business operates around 87% of franchises and they are the number franchised company.
Weakness of McDonalds:
Although being the most well known an trusted fast food industry their experiment of starting pizza failed and they were not able to compete with other fast food pizza operating chains. Since then they have never tried to compete for pizza’s. Every year there is a high employee turnover because of training given to their employees. Also they have made no entries into organic food categories. There core products are out of line and do not match the healthier lifestyles for adults and teenagers because it focuses mainly on burgers and fast food items.
As McDonalds is 87% been managed by their Franchises and hence there is always a problem of quality control. As all franchise do not keep the quality maintained by the McDonalds. Also their relations with their investors are not been very good this is because of fluctuating operating and net profits over time. Every year there is a vast change in their income and thus its relations with its investors is not that good. As most of its restaurants are owned and managed by other man and woman there is big difference in standardization of products and price at which products are been served.
Task 1 c)
Theoretically compare alternative forms of organizational development.
There are many more companies that are doing very good business in fast food industry. They are as follows KFC, Pizza Hut, Burger King etc. from all these companies McDonald faces toughest competition from KFC as their main focus is on fried Chicken items itself. KFC is world’s most popular chicken restaurant in the world. It has specialized extra crispy, grilled chicken, spicy wings, recipe strips and home- made chicken sandwiches. KFC owner Colonel started a concept of finger liking goods with 11 herbs and spices to start Kentucky Fried Chicken.
KFC was introduced in UK in the year 1965 first US quick chain restaurant to be get started in UK. It operates around more than 700 KFC restaurants around UK and Ireland. KFC spends around 202 million pounds for its famous coating. Every day around 12 million customer around 109 countries of the globe are been served by KFC. It has around 5200 restaurants in US alone and operates more than 16,200 restaurants around the world. Recently it has reached a mark off 2.4 billion sales per year and has made increased profits around 25% in recent years.
McDonalds other competitor in fast food industry is Pizza Hut which was started by Frank and Dan Carney in 1950’s. As the name suggest Pizza hut specializes in making pizza’s all over the world currently operating around 10,000 and more restaurants in about more than 90 countries. It has around 6500 online ordering locations from which customers can get their pizza. Their pan pizza is been loved by all pizza eaters all over the world. And they offer yummy pizza with cheese which is been loved by all. Although McDonalds had tries to enter its shoes when they had started a similar concept to start giving Pizza’s in their own restaurants but they failed as they were not able to maintain it the way Pizza hut does.
Identify the key Stakeholders in your organisation and Develop systems to involve those stakeholders in the introduction of change.
In McDonald’s business the key stakeholders are customers, business partners, employees and opinion leaders. Customers are the person’s who buy McDonald’s food items they range from very young to extremely old individuals. Business partners include both suppliers and other franchises. Employees are the person’s working in KFC and are a key part of the business as all duties of execution are in their hand. Opinion leaders are those groups of people that generate ideas for the business. They are media person, health professionals, environmental groups and other government.
In India more than 50,000 Crore of food is been wasted every year because of lack of storage facilities and also because of transportation. With McDonalds aim to provide quality products to Indian people served at McDonalds they introduced the concept of “Cold Chain” which was been revised from supply chain management which was decision of stakeholders of McDonalds operating its restaurants in India. SCM is flow of materials from suppliers and all their upstream suppliers at all level, transformation of products into semi-finished goods and distribution of these goods to customers and their downstream at all levels. It operates around 20 quality checks in order to provide good quality of products to its customers in Cold Chain process of Supply chain management.
In India all these stakeholders played an important role in managing supply chain management. McDonalds was always been looking to sourcing its major business requirements from suppliers and farmers. They always looked forward to maintain a good relationship with the local businesses which resulted and ensured its success is mirrored by its suppliers in India. They looked to those important stakeholders like suppliers who were keen in providing customers with high quality products to customers. With McDonalds looking for local business partners for its business in order to provide food is a very good opportunity for these local businesses to increase its businesses.
Analyse and evaluate these systems which you had used to involve the key stakeholder in change process.
In our system of SCM at McDonalds in Indian market the involvement of key Stakeholders like suppliers and customers is very important from making decision how to manage the inventory and how do the supplies for products need to be arranged and what kind of menu should be placed according to the taste of the Indian public. In order to implement the change in the SCM process McDonalds selected the “Cold Chain” process for Indian Market and there was a keen part played by all the stakeholders on each and every process. Main steps that are been involved in Cold Chain are procurement, warehousing, transportation and retailing.
The process of cold chain was very effective and essential for specially a market like India because it integrates food products from its suppliers and are been stored and transported in a standard manner in order to maintain products freshness and keep up the nutrition value of it. In Cold chain suppliers play an important role with the help of advanced technology in order to maintain good state of food. The supply chain management from its suppliers to warehouse and finally from the distribution channel to its stores was been maintained in by the concept of
“Cold Chain”. It considers all steps of SCM and keeps the food items at a controlled temperature.
The food items that are been served at restaurants in Indian McDonalds on daily basis were to be kept under the temperature between -18°Censisu to 4°Censius. Almost every product in the warehouse and during transportation should be kept under these temperatures for quality issues. If the quality of these food products is not been maintained them it would damage the reputation of the company. And hence strict rules and very skilled people are been employed in order to carry all these tasks.
Hence McDonald’s stakeholders from supplier, distributors, employees and franchises made a good decision in order for the goods to be stored and transported properly and with a good standard. Also the necessary temperatures were maintained to provide the customers with a good food. Technology helped the business in order to maintain proper functioning of all stages of qualitative SCM. Thus, Cold Chain function of SCM (supply change management) helped the Stakeholders at McDonalds India to provide a system that would help them to generate profits by maintaining a good quality of products been served at their restaurants.
Identify number of appropriate models for change that suites your organisation.
FORCE FIELD ANALYSIS (DRIVING FORCES/ RESTIRTCING FORCES) on McDonalds:
McDonalds supply chain process of Cold Chain was been followed in order to maintain change which would help them to be successful in Indian Continent. But in order to achieve it there are a number of driving forces that conflicting with restraining forces that go against it. For McDonalds to achieve success the driving force was adopting Cold Chain process of SCM that would help them gain success and conflicting with them was to maintain good quality that was tough to achieve in India. But to change the way in which they operate their business they had to maintain quality with supply chain management. This was been achieved by following these key steps:
Investigate the balance of power involved in an issue: The change process was to outsource its suppliers in India and also to maintain good food quality for its restaurants. This was been achieved by the process of Cold Chain in which standard temperatures were been maintained in order to achieve quality food products by the use of effective technology.
Identify the key stakeholders on the issue: The key stakeholders in our business are the customers, business partners, employees and opinion leaders. Customers are the people who are going to consume our products they range from young individuals to old age group. Business partners are the business partners and Franchises. Employees are those people that are going to work in our esteemed organization to maintain all its standards. And opinion leaders are government, media etc.
Identify opponents and allies: The major opponents of McDonalds are US fast food industry such as KFC, Pizza Hut, and Burger King. Amongst all these they face toughest competition from KFC as their main target is providing customers with Fried Crispy Chicken. And pizza hut specializing in providing Crispy pizzas. Both KFC and Pizza Hut have more than 10,000 restaurants around more than 90 countries in the world. As per the allies of McDonalds they have many Franchises in counties they operate their business.
Identify how to influence the target groups: According to McDonalds approach they approach to local suppliers in each country they operate their business and maintain a good relationship with them. Their main focus is to outsource all parts of their products in the countries they operate. While outsourcing all its products and maintain good relationship with them suppliers they can easily enter the market with changing their Menu according to the taste of the local people and thus enjoying profits.
THE 3 STEP MODEL on McDonalds:
By the use of Lewin’s 3 Step Model we are going to see the change process that McDonalds followed in order to enter the Indian Market successfully. McDonalds approach to achieve quality management in India through supply chain management process function of Cold Chain. By successful implementation of Cold Chain and key decisions made by stakeholders in outsourcing supplies were some key decisions that helped them achieve success in Indian market.
Stage 1: Unfreeze
The first step to achieve change in Indian market was to study the Indian market and the lifestyle that was been followed by the people living in there. The first key step by McDonalds to start its business in India with change in way they operate was to outsource their supplies to local suppliers. They did so because local Indians knew the taste and choice of people which helped the McDonalds to prepare menu accordingly. The supply change was a key factor in Indian market because every year around 50,000 Crore worth of food was been wasted. To change this factor effectively it was very important in the way that McDonalds would set its Supply chain management. As they had a world -wide tag of being quality providing fast food company. And if this was not been handheld properly it would affect them diversely.
In order to come out of this they followed a simple function of supply chain management called as “Cold Chain” which helped them to maintain procurement, warehousing, transportation and retailing of their food products effectively. The change had to be supported by the technology in order to maintain products under normal temperature. In India to maintain such a level of quality was very difficult but McDonalds was successful for finding such suppliers who would provide their customers with the best product with best quality.
Stage 2: Transition
Once the supply chain managements function “Cold Chain” was been adopted it was very necessary for McDonalds to approach the right suppliers that would provide them with good quality products and also maintain a very strong relationship with them in the upcoming future. Also they needed to check that the state of their warehouse was in a perfect condition in order for them to store their food products. Drip and sprinkler irrigation in raised farm beds with fertilizer mixing plant. It was not only the condition of warehouse in which the products were kept but it was to maintain those food products at the right temperature so that they are not been destroyed or been damaged. Pre-cooling room and a large cold room for post harvest handling. If so happened then it would cost them great losses.
After the food products were been properly stored at the warehouse the next stage was to safely take them back to stores when they were required. Once they were been off from warehouse and been getting transported in refrigerated trucks would help them to keep the right temperature. It was to be maintained properly so that they were not been spoiled during transportation. And also they had to make sure that they were been stocked properly in the stores at right temperature so that they could be of good quality. With good use of technology all these was been achieved by the McDonalds when they started their business in Indian Market.
Although the change in supply chain management was totally different of the way in which McDonalds would do their business in other parts of the world. To get everything right at the first did took them time but they were successful in maintaining it. The most important factor for McDonalds was to get right people to be employed in their stores that could handle all type of customers and that would be able to solve and reply to customers efficiently. But at the end it was McDonalds that was able to achieve all that it wanted by taking SCM’s Cold Chain concept for its business organizations.
Stage 3: Refreeze
With McDonalds able to achieve success with its “Cold Chain” management process was done step by step. In beginning they were did well but as time went on they were able to better all their departments of supply chain management. They then were able to get good deals with suppliers and were able to force them to get food products as they were so big that suppliers could not effort to lose them. As McDonalds went buzzing with its Indian Menu that was made according to Indian people taste. They were able to get better people wanting to work with them and seek a better future with them.
Thus it was able to achieve considerable increase after their initial success helped them to control quality and all hygiene factors that were important to their image which was been placed in minds of every individual all over the world. Technology to maintain and keep up all aspects of their business was also a critical success factor.
How would you go ahead in implementing one or more model(s) in your chosen organisation and what improvements do you expect to achieve by implementing your chosen model(s).
For our organization I would prefer 8 Step change Model for the following reasons:
Step One: Create Urgency
The McDonalds wanted to change the way they operated their supply chain management in India because they saw India as a good market for their fast food industry and with a good supply change management they could earn massive profits with local taste. Indian market was been seen as a mass market an in order to achieve success in India they needed to pull out a good combination of market mix and supply chain to succeed.
Step Two: Form a Powerful Coalition
Before making the inroads into Indian market there was a good research made about the Indian market and likes of the people. McDonalds wanted to grow its reach all over the world and in order to succeed in India they did require a good relationship with local suppliers from the beginning to launch fast food restaurants in India. Although this was not easy and they had to spent a lot of money and resources to understand the taste of Indian people and their lifestyle. But with a contract with suppliers to help them from beginning and outsource all products helped them make good inroads.
Step Three: Create a Vision for Change
With the Vision to outsource all its products in India and to have good channel with agricultural farmers was a key step bringing a change to their business in Indian market. This vision to change their supply chain management through a process of Cold Chain in which all food products should be kept under -18 degree census to 4 degree census was their main Vision operating change to their business.
Step Four: Communicate the Vision
With the vision of having a good relationship with suppliers who are looking forward to provide good food products to its customers and maintaining standard temperatures for their food products on daily basis was their day to day strategy. With providing good supply chain meant there would be no waste of food products and close relationship with suppliers would help them to understand local tastes so that they could make Menu’s as per the taste of local crowds. Especially in Indian market where every year around 50,000 Crore of food is been wasted this was a good plan to start communicating with.
Step Five: Remove Obstacles
After the successful implementation of its processed function of Cold Chain McDonalds was able to maintain food products at a standard temperature at which they would not be spoiled and good relationship with suppliers would maintain good day to day operation of their business. Although maintaining those suppliers for longer period and also maintaining a good skilled employed that would understand at what temperatures the food products should be preserved was very important. But they were successful in executing both functions properly by maintaining good relations with suppliers and recruiting and providing training to employees that could carry day to day operations of business properly and moving with great guns.
Step Six: Create Short-term Wins
Although the way that McDonalds had targeted Indian market for its fast food chain was long term but its short term goals like selecting right suppliers and employing and training skilled people for its day to day operations when they would began their fast food restaurants was very important. With its short term plan to cut out on food waste while transporting and employing right people with good skills gave the company great boosting success with its intro in Indian market. The help they got from suppliers to understand taste of local people in introducing Menu’s according to local tastes was important. And a long term goal to succeed in all departments.
Step Seven: Build on the Change
The McDonalds should keep on developing their business by introducing more restaurants and developing relations with more suppliers in order to be the fast food giant in Indian Market and put KFC, Pizza Hut and some local fast food chains like Dominos pizza and many more. E advanced technologies should be placed at workforce to provide its employees with latest machines to serve the customers on the till. They should keep in touch of the taste of the local people as the environment changes with the changing taste of people and their lifestyle. And should always try to provide customers with good deals that they would be satisfied and maintain their loyalty towards the McDonalds in India.
Step Eight: Anchor the Changes in Corporate Culture
Although McDonalds has expanded its business in more than 109 countries but it still follows its basic burgers and French fries to its customers all over the world. They might have different Menu’s in different countries to support the taste of the people but they have always kept their basic food items and also culture all over the globe to be the number fast food company.
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