Business overview of McDonalds and analysis

The UK fast food market is worth an estimated £7.82 billion annually (Keynote, 2003), amounting to an average spend £20/month per adult (Mcdonald, 2003). Due to busier consumer lifestyles and dual working families with children emphasis is increasingly being placed on quick meal solutions (Atkins and Bowler, 2001). This has resulted in a market growth of 19% in fast food since 1998. As the business has spread globally; giant fast food companies adapted their business strategy as well. It has invested money on research and development to strengthen their managing policies. Recently many researchers have shown interest regarding implementing change in management system of the fast food industry. They have carried out numerous observations to illuminate the darkness of this field.

As the literature review helps to frame the initial focus of the study, well as to focus the data analysis (Swanson & Holton1997). It also helps researchers to limit the scope of their inquiry and acts as a benchmark for comparison purposes. In this literature review, their findings and suggestions are sincerely considered for further steps of the research. According to Creswell (2003) literature reviews provide a framework for establishing the importance of the study.

2.1 An overview of McDonald’s

In the world of globalisation the fast food business is the most dynamic and growth orientated business. McDonald’s is one of the most thriving global restaurant chains around the world. McDonald’s have used effective global expansion strategies to enter new markets and gain a share of the foreign fast food market. Now McDonald’s is a global scale brand. Since the start of the company in 1973, McDonald’s Corporation began spreading domestically throughout the United States thus establishing its brand recognition. Its initial strategy began by advertising directly to the middle and upper class citizens, as can be seen in countries such as India and China. To meet the challenge and maintain the success McDonald’s has, they had adopt may changes in their strategy, management, and operation process.

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The focus of the research is to reveal the elements of resistance in the current change management system both in practice and theory in MacDonald’s. This chapter is organized according to the various components of resistance to change and reducing resistance with the help of human resource strategies of the organization.

In England first McDonald was opened 1974 at Woolwich Southeast Station. In 35 years 1250 restaurants have reached by end of 2005 most of the traditional high streets, shopping centres, retail parks, roadside locations, leisure centres, railway and airport terminal and motorway service areas (Official website). They have different types of store like 24hrs, take away only, super store in Retail Park. There is no particular up-to-date information about how many superstore, take-a-way or airport as well as franchise restaurant in London or in specific area in UK. May be this information is only for top level management, not available for general people. New store is open every year, also some store has been relocated or even close for business policy. MacDonald’s also spread its franchise business all over the world mainly in Asia. Asia is very attractive business market for McDonald’s. It’s now common to see MacDonald’s drive to logo in many Asian major cities. Recession is also affecting the fast food industry but this situation is improving day by day. Many new menus are including attracting more customers. MacDonald’s also develop policy for healthy fast food policy so campaigners cannot blame them continuously which influence general public to have MacDonald’s food.

2.2. Change

McDonalds has adopted many strategic and operational changes during its business cycle .Organizational theorists like Drucker (1995) stated change is a constant in all contexts. Change can be defined from an organizational development perspective.

Pendlebury, J. et al (1998) demonstrated change as troublesome to organizations, and it is quite disruptive to the individual. The effect of change on individuals is significant. In many respects, it is the emotional dimension of resistance that must be managed throughout the life of the change event. Vigorous emotions can be removed through the process of change within organizations. In fact, scholars argue that every act or event of change will draw some type of resistance — resistance that will clear itself in emotions such as fear and anger, denial, avoidance, and resistance. Change can be so disturbing that even individuals directly unaffected by a change initiative can be affected through survivor guilt. According to Noer (1997) survivor guilt or sickness may be experienced by individuals indirectly affected by change and may serve as a significant source of resistance for individuals.

2.2.1. Forces of change

Change depends on two forces, which could be external and internal forces. If managers, employees or organisations think about these forces, than they can implement on change successfully. The forces for change are:

Internal Forces

Human resource prospects (Unmet needs, Job dissatisfaction, Absenteeism and staff turnover Productivity Participation) Managerial decisions.

Managerial decisions (Conflict, Leadership, Reward system, Structural reorganisation) the needs for the change. (Bullens, et al 2006).

External Forces

Change is initiated via external sources such as cultural and political factors. In short, additional external factors like globalizing markets, technology, politics, and communications are all sources of change (Nadler, 1997).

Social Change

There is lots of pressure from many health concern organisations, doctor’s association, consumer association even government health institution for the food type and food value of McDonald’s restaurant. Many scientific statistics has been published on different media about the quality and nutrition value of Mac’s food. Even UN organisation W.H.O (World Health Organisation) also comments negatively against fast food. Mac’s mainly targeted customers are children and teenagers rather professional and elderly people. McDonald’s always face different social challenge from internal as well as external sources. But they try to maintain highest possible hygiene and safe way to make and serve the food as well as plan to mention the food values for each item which help all the consumers to know the nutrition value of the food.

Technological Change

Technological change in the organisation is critical, for three primary reasons.

1- Competitors use technology as part of major success strategies.

2- Technology driven is everywhere and always present.

3- Value capture from new technology is challenging and never guaranteed.

Source: Ettlie,J (2000)

Most of the time, we hold technology as a constant, because it’s convenient. The more change in technology of products, services, and operations, the more change in administrative procedures, new strategies, new organisational structures, and new operating procedures will be required to successfully capture the potential benefits of the venture. The failure of technological change typically occurs when either too much technology is adopted too quickly or not enough technology is adopted to stay ahead of competitors.

Nadler (1997) argue strongly for the case of new technologies and new markets. Jick (1995) identifies competition and the aspirations to gain and maintain competitive advantage a key Impetus for change.

Economical Change

McDonald’s has the tendency to experience hardship in instances where the economy of the country is hit by inflation and changes in the exchange rates. **The current recession also put them struggling. The high store maintenance cost in major cities like London, New York, Tokyo etc. is very expensive. For the recession people try to eat home to save money even MacDonald’s offers food is the cheapest than other competitor’s. The low sales impact on store profit which also related to all kind of necessary expenditure. Another factor is the maintaining the food preparation and service standard for MacDonald’s food which is prime concern for them to establish the hygiene and safety issue for the people health. If MacDonald’s charge high price of their food to maintain store standard they will definitely loose target customer and most valuable reputation. Still they are in market leader position. Economical chance has great influence on MacDonald’s business.

Political Change

Government can implement some bindings on the advertisement of McDonalds because of the high cholesterol, obesity and some other health problem. They also control the licence as we mentioned earlier in social change that MacDonald’s have many legal bindings from different level of government and non-government organisation. Political change of a country has also affect MacDonald’s business. As health issue is one of the prime concerns of the respective government, if any political change occurs the health policy can also change. The very practical example in UK conservative government will change the health policy of the previous labour government. MacDonald’s must track the relevant information by which their business can be affected. In other case marketing can also affected by political change. Sometimes, social crisis influence to raise the public issue politically. Like obesity in the western world is an important discussion topic in heath area. Government regulates the advertising to focus this concern so that people awareness will increases about the obesity. MacDonald’s must accommodate with this policy in all its marketing campaigns.

Culture

Culture examines society’s values, norms, believes, symbols. Organisational culture, is the concept to analyse that the organisation can be very useful for focusing on the more behavioural and attitudinal aspects of the organisational life. Organisational culture is the social aspects of our employing organisations. Schein’s (1985) developed the following typology for cultural analysis

The organisation’s relationship to its environment (belief that relate to the broader environment)

The nature of the human activity (beliefs about what the core activity of the business should be)

The nature of the reality and truth

The nature of human nature (beliefs about what people are like)

The nature of human relationships (beliefs are about how people should relate to one another both hierarchically and horizontally)

Homogeneity versus diversity (beliefs about similar or diverse the workforce should be) (Ellis & Dick 2003).

According to Schein (2004) culture change certainly involves unlearning as well as relearning and is therefore, by definition, transformative thus: Schein (2004) also suggested learning leaders must be well connected to those parts of the organization that are themselves well connected to the environment-the sales organization, purchasing, marketing, public relations, legal, finance, and R&D must be able to listen to disconfirming information coming from these sources and to assess the implications for the future of the organization.

The Wider Environment

Social Values

Demographics

Task Environment Customers and markets

Economy

Technology

Suppliers of Inputs

Competitors

For markets

For resources

Regulatory groups

The Firm

Process Factor

What is done (task)

How things are done (technology)

People factors

Workforce diversity

Workforce

Behaviour

Figure 2.1: Triggers to change. Corlett,Forster, (2004),

2.3. Theories of change management

There are many change models that are used to aid experts in implementing change. These models can be broken down into two types of change theories that organizations can use: radical and incremental. Within each of these approaches there are various models and processes.

2.3.1 Radical vs Incremental change

Radical change approaches include, but are not limited to, six sigma, quality function deployment, and re-engineering. Radical change models are used to jump-start an organization and are also used when a culture change is required. In 1994, Dyer explain radical change , In a conventionally Midwestern family business atmosphere, change is likely to be more heavily resisted than in other organizations because the feelings adjacent to the change tend to be deeper and more intense, and previous research shows that family values, goals, and relations deeply influence strategic change in family-oriented firms . A review of the literature Senge (1990) reflects the need for organizations to be able to continuously adjust as well as to allow for learning to take place. Incremental change approaches include, but are not limited to, Kurt Lewin’s model, Beckhard’s change model, Kotter’s transformation model, and the Bridges transition model.

Incremental change models are related with improving the existing system and operate within the current business model. All these models have a stage of unfreezing of the current behavior, a change being introduced, and a stage of refreezing the new behavior, or else they begin with the identification of the current state, the desired state, and the blocks and barriers that exist between the two.

Cummings and Worley, (2001) state that Kurt Lewin’s three-stage change model is the root of change management. Lewin’s change model consisting of the following steps: 1) unfreezing the old behaviour (or situation), 2) moving to a new level of behaviour, and 3) refreezing, the behaviour at the new level. Lewin viewed the change process as a fundamental alteration or change in the forces that kept a system in stasis. According to Lewin, an organization will go through the process of making preparations for change, developing the force for change, implementing change, and then will strive to re-establish stability or reach stasis.

Unfreeze

Change

Refreeze

Figure 2.2 Kurt Lewin’s three-stage change model of change.

Adopted from Cummings and Worley, (2001)

According to Van de Ven and Poole (1995) Organizational change is an empirical observation in an organizational entity of variations in shape, quality or state over time.

Kaestle (1990) states in A New Rationale for Organizational Structure, that there are fundamentally two drivers for organizational change: 1) a dynamic marketplace and, 2) information technology.

2.3.2 Conditions for change

According to Kotter (1996) certain conditions need to be met in order to bring about effective change. These conditions on what is known to contribute to the failure of change efforts.

2.3.3 People involved in change

Kotter also states that producing change is about 80% leadership (establishing direction, aligning, and motivating and inspiring people) and about 20% management (planning, budgeting, organizing, and problem-solving). In most change efforts he has studied, the percentages have been reversed. While there are some examples of successful change efforts, so leadership or management works as a change agent within the organization.

According to Vago (1999) in a planned change effort, change agents are professionals who influence and implement the change; they are critical to the success of a change effort.

Recent studies indicate that static change models are being replaced with dynamic change models that reflect the discontinuous nature of organizational change. In other words, change does not occur at a steady rate even though in the past organizational theory has written about steady or static models.

2.3.4 People in change

Schein (2004) also suggested learning leaders must be well connected to those parts of the organization that are themselves well connected to the environment-the sales organization, purchasing, marketing, public relations, legal, finance, and R&D must be able to listen to disconfirming information coming from these sources and to assess the implications for the future of the organization.

2.3.5. The modern version of Lewin’s theory

Neito (2006) described the graceful tools of Lewin’s theory is the critical analysis if it is to be helpful to HR professionals. To start by means of, it is affective and how easy to get the agreement of employees regarding a change process. Even though if the change is important, but people will not accept the change easily, that’s way the first stage ‘Unfreezing’ takes more time rather than other stages. Next process is ‘Change’, this process will be by itself, but this process should be managed properly. If this process is managed properly there are incentives and benefits (easy wins) during the change process, end of the day this process will give the positive support.

Finally, the last stage is ‘Refreezing’ which is a process of that stabilizes the change, which has been done.

Human resource strategies are influenced by external and internal factors. Change successful depends on the concern and growth on the employee relations and interpersonal relationships. Human resource professionals should consider the change processes are likely to meet resistance and that is more efficient to consult with staff and expand teamwork than to oblige changes. Present workers should therefore invest in special development to enhance their long term employability.(Neito,M 2006)

To understand the process and the nature of change in the organization, it is important to understand how organization works in the complex environment of external and internal forces.

According to Hayes. J (2007) open structure theory predicts that changes to any one of the internal and external elements of an organisation’s will source changes to other fundamentals. Hayes. J (2007) adopts from Kotter (1980) the integrative model of organisational dynamics.

Recent theorists have considered change according to developmental change, transitional change, and transformational change (Anderson &Ackerman-Anderson, 2001).

The six main elements in Kotter’s model are:

External environment, based on the direct task related environment and the wider environment (which includes the political system, economical system etc).

Employees and other tangible assets, as well as building cash and all other stuff and inventories.

Formal organisational arrangements – which system is operating and job design

Social system, which is based on organisation’s culture and social structure.

Technology is the main product of the organisation.

Dominant coalition – Goals, strategies of those who control to make the plane.

According to Hayes.J (2007) adaptability is very important because it determines whether the organisation will be able or not to maintain the require degree of alignment over the long period. For the long period, the main purpose of change management needs to be ensuring, that the structural basics of the organisation are as adaptable.

Key organisational processes

Information gathering

Communication

Decision making

Matter energy transportation

Matter energy conversion

Formal organisational

Dominant coalition

External environment

Technology, methods

Social system culture

Employees and tangibleaaaa assets

Source of potential behaviour and constraint

Impact on

Figure: 2.4

Source: Hayes,J.(2007) The theory and Practice of Change Management ,2nd ed, p-47, palgrave Macmillan.

2.3.6. Force Field Tool

Force Field Tool is the pioneer tool for change management; the tool was developed by Kurt Lewin. Schein (2002) explain Kurt Lewin tool, how change is influenced by two opposing factors driving and restraining forces that work against each other to sustain a state of stability .At the same time as driving forces uphold change, restraining forces resist the driving forces and thus hold back change. When these forces are balanced, a state of quasi-stationary equilibrium is achieved.

Equilibrium

Driving forces

(

Restraining forces

Figure2.3: Lewin’s Force Field Theory

The term ‘quasi-stationary equilibrium’ was used by Schein (2002) to describe the stable routine of day-to-day activity, rather than just ‘equilibrium’ which implies a state of rest . According to Schein (2002) “Any living system is always in a state of some change (growth, metamorphosis, or decline), but all systems are homeostatic in that they always tend toward some kind of equilibrium” (p. 35). To explain the quasi-stationary state, Lewin used the analogy of a river flowing at the same velocity and direction over time. Although the river is not at rest, it flows consistently at the same rate and thus is stable. A shift in velocity or direction, however, would constitute a change.

To bring about change, either driving forces need to be added or restraining forces must be diminished. According to Schein (2002) adding more driving forces is likely to be paralleled by higher aggressiveness, higher emotionality, and lower constructiveness than if restraining forces were reduced; therefore, the latter is a more desirable course of action. In addition, adding driving forces is likely to result in new restraining forces as people try to maintain a state of quasi-stationary equilibrium. In this study, force field theory provided the theoretical framework for the variable of resistance to change in that it posited the tendency for groups to maintain a state of stability with restraining forces (i.e. resistance) resulting when driving forces that promote change are introduced.

2.3.7. A congruence model of organisations

A substitute open system model, planned by Nadler and Tushman (1982) point out the effect of the congruency of the elements of the organisation, and shows the effectiveness on the organisation. Additionally, it puts more pressure, on the role of strategy, because any organisation based on the strategy as well. Congruence model depends on the four classes of input:

Environment:

Environment as well as based on wider culture, within which the organisation operates, that’s the backbone of the organisation. Environment is a part of financial institutions, supplies, markets and it is the overall system of the organisation, which is based on the external and internal environment of the organisation. Environment provides the strength and opportunities that the organisation has to compete with.

Resources:

Resources like as raw material, liquid capital, labour, technologies.

History: History is very important for the organisation, because past strategic decisions and development of central part values and patterns of leadership can affect the present model of organisation.

Strategy:

This input gives the direction how the organisation’s resources can be used to be the advantage in relation to the opportunities, and demands of the environment. Successful organisations are those that are able to support themselves with the help of external environment and move themselves to take advantage of any environmental changes.

Nadler and Tushman (1982) argue that strategy defines the task of the organisation. Strategy is effective to the organisation’s behavioural system. They recommend that the goals of strategy measure the organisation’s performance.

Nadler and Tushman(1982) define the major components of the transformation process as:

a- Task, can be viewed in terms of obstacle, predictability, interdependence a skill demands.

b- Individuals, those are the members of the organisation and their reaction capabilities, intelligence, experience, training, skills, attitudes, expectations etc.

c- Formal organisational performance that include all the mechanisms used by the organisation to direct, control behaviour or formation.

d- Informal organisation, as well as informal group structures, the quality of inter-group relations, political processes, etc.

Transformation process

x

Informal organisation

Individual

Task

Formal organisation

Organisation

Group,

Individual

Environment

Resources,

History

Inputs

Outputs

Strategy

Feedback

Figure: 2.5

Source: Hayes,J.(2007) The theory and Practice of Change Management 2nd ed, p-52,palgrave Macmillan.

Like Kotter, Nadler and Tushman argue that any useful model of organisations must go beyond only providing a simple sketch of the tools of the organisation and consider the dynamic relationships that exist between the various tools. They define ‘congruence’ as the degree to those the needs, goals, objectives and structures of any one tool of the organisation are reliable with the needs. Their general theory is that, other things equal, the greater the total degree of congruence between the different tools the more efficient will be the organisation’s behaviour. Figure 2.5 summarises the congruence model and the bold double headed arrows specify the six ‘fits’ between the components of the transformation process (the internal organisation)

These are:

(a) Individual – Formal organisations for example to what extents are individual needs met by the formal organisational arrangements?

(b) Individual – Task for example, to what extent do individuals have the skills required to meet task demands and to what extent do the tasks satisfy individual needs?

(c) Individual – informal organisation for example, to what extent does the informal organisation satisfy the needs of individuals or make best use of their talents?

(d) Task – formal organisation for example, to what level are the formal organisational arrangements enough to meet the demands of the task?

(e) Task – informal organisation for example, to what point does the informal organisation make sure to task performance?

(f) Formal – informal organisation for example, to what level are the goals, rewards and structures of the informal organisation reliable with those of the formal organisation?

Mostly tools that Nadler and Tushman desire to focus on are different to those that figure in kotter’s model. All models are overview of the real world, and the usefulness of the particular model, in the context of the change management. Schneider state in the book of john Hayes, Internal and external alignment promotes organisational effectiveness because the various elements of the system strengthen rather than upset each other, thereby minimising the loss of system energy and resources.

2.4. Defining resistance to change

Resistance to change is not rigorously related to organizations’ management and leadership. It is a problem embedded in the very nature of its organizational members. In any case, resistance to change is a significant factor that must be understood in the organizational context. Examples of resistance may include, refusal to work, riots (in extreme cases). On the other hand the employees can demonstrate contentment with change, a happier performance at work and a general consensus that the change was beneficial to the restaurant. Individuals can arrive at a psychological state where major change can no longer be absorbed. According to psychologists, change can trigger emotional experiences such as depression, mania, irritability, anger, disturbing or obsessive thoughts.

According to Conner (1998) the main sources of individual resistance to change are: lack of trust, commitment to the status quo, belief that the change is not feasible, economic threats, relative high costs, loss of status and power, and threats to values and ideals.

Tushman and O’Reilly (1997), state that despite the inevitability of change and its necessity for survival, it presents serious dilemmas to anyone serious about the notion of change. Change is disruptive to organizations. That is undeniable. Change is not helpful to an environment of stability; it precipitates more and more disruption wooing business leaders to a critical deadlock. One cannot have both stability and change; they are conflicting forces.

Pascal, R et el (1997), state, findings from surveys confirm that executives have begun to give renewal a high priority….however, most of their efforts to achieve it have met with frustration – partly because large organizations have such a remarkable capacity to resist change of all kinds.

2.4.1. Sources of resistance in the implementation stage

According to Klein and Sorra (1996) implementation of any change in the organization is the significant step between the decision to change and the regular use of it at the organization. In implementation stage more resistance groups can be found. The main resistance is with political and cultural locks to change. It consists of:

Implementation climate and relation between change values and organizational values, considering that a strong implementation climate when the values’ relation is negative will result in resistance and opposition to change and forgetfulness of the social dimension of changes ( Schalk et al., 1998).

Last but not least, a set of five sources of resistance with different characteristics are according to Rumelt (1995): leadership inaction, sometimes because leaders are afraid of uncertainty, sometimes for fear of changing the status quo ;embedded routines ;collective action problems, specially dealing with the difficulty to decide who is going to move first or how to deal with free-extruders ,ask of the necessary capabilities to implement change – capabilities gap and cynicism.

2.4.2. Sources of resistance in the formulation stage of change

To understand resistance in the process of change in any organization, we need to focuses on the very fast formulation stage of change.

It includes: inability of the company to look into the future with clarity. According to Morrison and Milliken (2000) organizational silence, which limits the information flow with individuals who do not express their thoughts, meaning that decisions are made without all the necessary information. Denial or refusal to accept any information that is not expected or desired ( Rumelt, 1995).

Low motivation for change, sources are:

Direct costs of change, is the cost of change that brings success to a product but at the same time brings losses to others, so it requires some sort of sacrifice. According to Rumelt (1995) the need for a change is compensated through the high rents obtained without change with another different factor, so that there is no real motivation for change.

According to Lorenzo (2000) past failures, leave a pessimistic image for future changes. Waddell and Sohal (1998) identified different interests among employees and management, or lack of motivation of employees who value change results less than managers value them).

2.5. Kotter and Schlesinger’s Choosing Strategies

“Choosing Strategies for Change” an article of Kotter and Schlesinger’s (1979) explain causes for resistance to change. Organizations frequently experience employee’s resistance when change is introduced.