Corporate Culture at McDonald’s
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Published: Fri, 26 May 2017
This assignment is a case study on McDonalds Corporation which is one of the largest corporation and the best known fast food service provider globally operating in more than 32,000 restaurants over 120 countries.
This case study is basically on the cultural aspects of the corporation and the cultural differences between the home country (America) and host country (India).
In the first segment of the case study a brief of the corporation is presented focusing on the various areas in respect of the home country, focusing on the company profile and corporate culture.
In the second segment a brief of the corporation in India is presented focusing on the different cultural aspects highlighting McDonalds Indian culture and its corporate culture.
All of the above mentioned factors have also been presented with the help of prepared tables and charts for better understanding.
This case study is presented in such a way so as to make different cultural aspects of the McDonalds Corporation understood by the readers in a very easy and effective manner.
McDonalds Company Profile- History
McDonalds was started in May 15, 1940 in California, USA by two brothers Richard and Maurice McDonalds.
At the initial stages they served around 25 items to their customers which were mostly barbequed.
It was turning out to be very profitable for the brothers, so in the year 1948 the closed the joint and reopened it as a proper restaurant to sell only hamburgers, french-fries & milkshakes to their customers.
Experiencing an immense business growth over the years they came up with an excellent concept of “Self-Service”.
This concept made things easier for them to deal with their customers and take orders in an effective manner during the busy hours specially.
After a point of time the restaurant started getting well known for the hamburgers. This was the time that the brothers decided and started franchising their restaurant in the year 1953.
Soon after in the year 1958 McDonalds Corporation was born. McDonalds Corporation continued with its remarkable business growth and then in the year 1961 McDonalds Corporation was sold to Mr. Ray Kroc by the McDonald brothers along with all the business rights for a sum of $ 2.7 million. Later in the same year the popularity of the corporation continued with the opening of the university named The Hamburger University which offered degrees to students certifying McDonalds restaurant Bachelor of Hamburgology
In the year 1967 they realized the potential of their business the scope and opportunity to go global with their products, hence they decided and started operating globally by crossing its national boundaries and opening their first restaurant outside USA in Richmond, British Columbia.
They continued with the success and popularity of their products and kept on with their business expansions all over the globe.
By highlighting the business model of McDonalds Corporations its noticed that it earns revenue as an investor in properties, a franchiser of restaurants and an operator of restaurants.
It has been found that almost 15%-16% of McDonalds restaurants are operated and owned directly by McDonalds Corporation. The rest of the restaurants are operated by others through a variety of joint ventures and franchise agreements.
McDonalds business model is different from the other fast food chains.
It trains its franchisees and other employees at the Hamburger University for providing quality service and products to its customers I a traditional manner which the corporation will never like to compromise with.
According to McDonalds policy, it does not make sales of food pr materials to its franchisees directly, instead as a matter of fact McDonalds organize the supply of food and materials to restaurants through approved 3rd party logistics operators.
Vision & Mission
McDonalds vision is to be the best and quick service restaurant experienced by its customers.
Being the best means a number of factors to be focused on to be provided to their customers and they are as follows;
Value, so that they make every customer in every restaurant smile.
McDonalds mission is to be the best and the leading fast food provider around the globe.
Franchisees and Global Locations
The franchise system of McDonalds offers the franchisee an excellent opportunity to operate and own a quick service providing restaurant but offering a limited menu of value priced foods under the McDonalds system trade name.
The franchise offers counter service or drive through service or both in some cases with indoor and sometimes outdoor seating.
McDonalds continues to be well known as a premier franchising company around the world. Almost 75% of the restaurants situated worldwide are operated and owned by their franchisees.
The franchise system of McDonalds offers different kinds of franchisee which are stated as follows;
Small Time Oil Locations (STO)
Business Facilities Lease Franchises (BFL)
McDonalds operates its business in more that 120 countries around the globe and has got around 32,737 outlets worldwide to serve its customers.
Some of the most important countries where McDonalds operates its business globally along with the number of outlets are stated in a table format in the continued page.
Line of Products-McDonalds
McDonalds have got a variety of products to offer to its customers all over the globe. They are well known for bringing in new products to go well with the local culture of a particular region or country.
This is one of the most vital reasons that McDonalds is very well accepted by people from different cultures round the globe.
Taking into consideration the line of products it offers specifically in America and India on the other hand shows the kind of respect and importance it gives to the values and cultures of its customers.
America has got a variety of products with beef and pork base due to its high consumption rate amongst the Americans but in India it is not that because of the Indian culture which do not permit its people to consume beef and pork by going against their culture and religious values.
Hence McDonalds have changed its products emphasizing on the culture of that particular region and thus resulting in global acceptance.
Corporate Culture – Effective strategies adopted by McDonalds
The following table prepared states clearly the different strategies followed by McDonalds and making it its culture and one of the key reasons for its business success and product acceptability around the globe over the years.
McDonalds have made these strategies its own culture that has been followed over the years without any changes.
Providing quality food to the customers
Adopting itself to the local culture
Globally accepted and fast served healthy food
Consumer’s values and preferences are must to be taken into considerations.
Never to sacrifice quality for value
Easily affordable for all the consumers, specially the middle class consumers.
Always acquiring strategic locations
Maintaining standardized environment in all the outlets without any fail
Cleanliness, comfortable and healthy environment.
Extra value meals
Low price specials
Donations and charity functions
Celebration of McDonalds Happy Day.
To get better, not just bigger
To do experiments along with technology and to reach out to new markets.
McDonalds Corporation can be stated as an excellent example of a company following a global strategy and having a centralized organizational structure. The 32,000 restaurants situated all over around 120 countries are typically franchises, they all receive food and packing from the same approved vendors. This reflects that there is no change in the standard of the products all over the globe, the quality and taste is just the same everywhere.
All of the crucial decisions taken related to the menus and marketing are made at the higher or corporate level of the organization in America.
McDonalds has a goal of 100% total customer satisfaction and their second primary goal is to give back to the community in which they are doing very well globally.
McDonalds Senior Management Structure
PAUL PRESTON (CEO)
Andrew Marcus Terence Ed Philip
Taylor Hewson Haynes Oakley Cobden
Operations Marketing Finance Purchasing Property
Field Services Franchising Information Quality Assurance Construction/
Training Charities Services Communications Design
A chart have been prepared and presented above to have a clear understanding about the senior management structure at McDonalds.
McDonalds Restaurants Management Structure
1st Assistant Manager
2nd Assistant Manager
Shift Running Floor Manager
Trainee Floor Manager
A systematic flow chart has been prepared and presented above to understand the restaurants management structure in McDonalds followed all over the globe.
Operations Management in McDonalds
It’s in the culture of McDonalds to be structured along the functional lines which are related to the major areas of activities.
MAJOR FUNCTIONAL ACTIVITIES
Appointing of new staff
Termination, Retirement & Dismissal
Negotiation of grievances
Disciplinary procedures with trade unions and others
Application of disciplinary procedures
Producing as economically as possible without compromising the quality
Maintaining product quality all the time
Maintaining authentic records of all financial transactions
Producing charts and records to the management whenever needed
Market research and analyzing
Working with design and production departments
Adjustment of product price, quality and design to attract customers
Attracting new customers
The above table has been prepared to have a clear understanding of the organizational structure and the core activities which are related to the functions of the organization.
Management Style at McDonalds
Restaurants of McDonalds are managed differently in the home country.
An Autocratic Management Style is mainly practiced in McDonalds. One of the main reasons behind following an autocratic management style is that they deal directly with their customers and at busy times a decision needs to be made quickly and correctly to ensure that the customer receives the best services.
Another reason for using autocratic management style is that the people who are better trained for certain tasks will be needed to do them at busier times.
Every business has got different cultures and the cultures that are present in the business depend on the management styles and organizational structures that are used, so it’s even the same how it works for McDonalds.
McDonalds have different cultures present within the business; this is because of its size and the number of offices that are situated all over the globe. In the home country McDonalds offices follows Task Culture, in which all people are encouraged to work as a team. All of the offices in the home country are divided into different functional departments. These departments have people specially trained to do specific task, as all staff members are trained to do a certain job. The management of the departments leave them to carry on with their jobs alone.
Brief of McDonalds India
McDonalds in India is joint venture between the McDonalds Corporation of America and two businessmen from India named Mr. Amit Jatia and Mr. Vikram Bakshi.
It’s a totally locally managed company run by Indians even the employees and suppliers are Indians.
The 1st McDonalds restaurant opened in the year 1996 for serving its customers.
In India McDonalds have got over 160 restaurants covering the main cities of the north, south, west and east region.
McDonalds India has got its key objective of 100% customer satisfaction and the formula behind achieving this goal in the Indian restaurants operations is the long standing commitment to the McDonalds Promise, which promises to provide four things to their customers at any cost and all the time, they are as follows;
McDonalds India is amongst the few countries that provides a home delivery service for its customers. There is no restriction on the minimum order for home delivery, but Rs.15 is charged for it as delivery charges.
Culture of McDonalds in India
The respect McDonalds have for the Indian customs and culture reflects in all the operations of the business. They are well known globally for the respect they give to the local culture where they operate their business.
McDonalds have developed a menu especially for India with a line of vegetarian items to match the local tastes and culture.
Operating globally, India is the 1st country where McDonalds do not sell any kind of beef or pork items as its not accepted in India because of its culture and customs. Different sections have been provided to deal with vegetarian and non-vegetarian items till its served to the customers. Even the milk-shakes and the soft-serves are made egg-less and only vegetable oil is used for the entire cooking process.
Restaurants and Locations- India
McDonalds restaurants are situated all over the main cities of India to serve its customers. The main cities that have McDonalds restaurants in India are as follows;
Delhi, Uttar Pradesh, Haryana, Punjab, Uttaranchal, West Bengal, Himachal Pradesh, Maharashtra, Gujarat, Karnataka, Andhra Pradesh and Madhya Pradesh.
A map with all the cities having McDonalds restaurants have been
presented below and the cities have been star marked for better
Indian Menu Emphasizing on The local Culture
Chicken Maharaja Mac
Soft Serve Cone
Mc Aloo Tikki
Paneer Salsa Wrap
Chicken Mexican Wrap
Chicken Mc Grill
Veg Mc Curry Pan
Chicken Mc Curry Pan
Pizza Mc Puff
The above mentioned table contains the list of items that McDonalds offers to its customers in India. Beef and pork items are not offered in India as it’s against the culture of the Indian people to consume such things.
Corporate Culture McDonalds India- Hierarchy Structure
McDonalds work culture is highly dependant on the particular line manager in charge at any given point of time.
Its quite normal to think that the line manager would almost all the time use his position power and would use a telling style of leadership since the typical employee is young or inexperienced.
Its true that some managers were observed as running the operations in a machine like manner especially during peak business hours, but in the maximum of the cases the managers were found to be relaxed and sometimes indistinguishable from the other employees.
A same kind of hierarchical structure is followed globally in all the McDonalds restaurants, as they believe in maintaining their on set standards without any fail and thus being successful all the time.
The chart presented previously under the McDonalds restaurant level management structure is applicable for India as well.
Indian Supply Chain Management
Talegaon – Maharashtra
Frozen Chicken & Vegetable Items
Vista Processed Food Pvt. Ltd.
Talegaon – Maharashtra
Baramati – Maharashtra
Gaziabad – Uttar Pradesh
Special Egg-Less Sauce
Phillaur – Punjab
Shah Boctar & Sons
Khapoli – Maharashtra
Taloga – Maharashtra
Batter & Breading
Ludhiana – Punjab
A table have been prepared and presented above to have a clear understanding of the supply chain management of McDonalds in India.
All of the suppliers are selected very efficiently after checking their product quality and also keeping the standards in mind all the time.
Recognition to Employees
McDonalds is well known globally for giving recognition to their employees in a very effective manner to boost the morale of the employees, their hard work and determination.
Some of the examples of the different kinds of rewards given to the employees are stated as follows;
Face of the month
Face of the quarter
McDonalds know how to make their employees happy and give them job satisfaction in an effective manner.
INTERACTION AND COMMUNICATION
McDonalds over the years is increasing its focus on employee communications in order to have a strong bonding with the staff.
McDonalds follow a different technique of communication by preparing different groups of customers in order to pass different messages in respect of the segments.
In case of health campaigns which are held by McDonalds, focuses on advertising on;
Scientific reports and
Public relations like even the endorsements, etc.
One of the major threats that McDonalds faced was the quality relationship between the management and the franchise dealers. But it slowly recover from this problem as its brand managers can now effortlessly communicate, compare and improve their service through the latest technology developments where in they can use the internet to motivate and improve upon other centers performance.
CROSS CULTURAL AWARENESS
its very important as it helps a Multinational Corporation to identify where and how things may be going wrong,
So cross cultural training is very vital part of the process as it helps the multinational corporation to identify areas that needs some serious attentions or else the things might goes miserably wrong.
Cultural differences can happen in many ways in a multi national corporations like McDonalds.
Differences can be mainly in areas like;
Approach of completing a given task
Decision making styles etc.
So its very important to realize the above mentioned differences with the help of cross cultural awareness or else problems may arise and become more complicated in the future.
Effective ways to Increase cross cultural awareness for a Multinational corporation like McDonalds;
Building Cultural Knowledge – It refers to learning about other cultures and countries, with the help of internet, books etc.
Treating people as individuals – Information on the other cultures available are usually based on a general basis, which means the information is not applicable for every single member of that culture.
Implementation of Own Cultural Knowledge – Finding some new information about a culture which is useful should be worked on to experience the benefits and learn more.
Maximum Avoid of Assumptions – Jumping into conclusions about people is wrong as its one of the most important steps to increase cross cultural awareness.
POTENTIAL PROBLEMS IN RESPECT OF CULTURES AND INTERCULTURAL INTERACTIONS
McDonalds being a multinational corporation is likely to face a number of challenges while operating globally.
Some of the potential problems that McDonalds is likely to face operating globally are as follows;
Different communicating approach
Style – pitch, tone, accent, gestures, signs, expressions etc.
– It refers to the openness of people, their ability and extent of accepting another culture.
“Monetary Conflicts and Exchange Rates”
Different exchange rates and the acceptance of currencies of other countries
Exchange Rates not favorable for the home country to commence business.
“Local Employment Laws”
Every country has got set of different employment laws
Difficulty for the home country to follow such norms while marketing and commencing its business worldwide.
High cost of technology up-gradation and new set-up
Rules and regulations set up by the government
As the culture differs from one country to another the company is likely to face such cultural challenges while operating globally.
Porters 5 Forces Model in Case of McDonalds
The 5 Forces Model presented by Porter deals with the key factors functioning outside the industry that affects the characteristics of competition within it, in such a case the forces inside the industry that affects the system in which firms compete.
Thus the profitability of the related industry is conducted in the Porters 5 forces model.
Porter states in his model that the 5 forces which drive competition are as follows;
Competition between existing sellers: – The industry in which McDonalds is categorized is highly a competitive one, as it comprises of a number of fast food companies who can come up with new ideas over the night and take up with the business of their competitors. Therefore McDonalds have done a great job over the years since 1940 by bringing in new products, expansion of their business and remarkably going well with their customer’s choice and preference to stay strong and do well in the industry working globally over 120 countries and having more than 32,000 restaurants worldwide.
Entry of new players in the market: – To enter into an industry where there are big names like McDonalds, Burger King Etc, and which involves a high cost of research and developments, it becomes quite difficult for new companies to enter such an industry. Therefore McDonalds is enjoying the benefits of such conditions as it’s a brand which is there in the industry over 70 plus years of successful business and expansion. Once again making it quite difficult for the new companies to enter and become successful in the industry.
Substitutes: – There are a number of substitutes in the industry, by which McDonalds burgers can be substituted, as well as its beverages and other products which they offer to their customers.
Strength of suppliers: – The power in the hand of the suppliers in the fast food industry would be not much until and unless the components of the offered products are not readily available in the market.
Strength of buyers: – The power in the hands of the buyers is not much high in this industry as the customers needs to consume what the brand offers.
Porter stated that the level of competition is determined on the basis of the relative strengths of the above mentioned 5 forces.
In case of McDonalds the Porters 5 forces model is perfectly applicable as it satisfies all of the 5 factors mentioned in the model.
Effectively Solving Problems of Intercultural Interaction and Working
Intercultural interaction and working is one of the most important part of a business specially for a multinational corporation like McDonalds for which extra care should be taken in order to solve and avoid problems effectively related to it.
The few most effective steps that can be taken in order to effectively solve problems of intercultural interactions and working are as follows;
Intercultural Communication Workshop: –
Giving respect to others and their cultures
Being patient and not getting frustrated easily
Asking questions to clear doubts and avoid misunderstandings
Knowing the difference between humor and insult
One persons humor can be the other persons insult
Being positive and avoiding mistakes to happen again
Self improvement in respect to own communication and motivation style to be accepted by others
Intercultural Training of Culture Assimilator: –
This method is also known as a cognitive technique as it emphasizes on the gaining of knowledge and information by the trainee. The components in this technique help in the effective development of attitude, emotions, behaviors and skills of the trainee.
This technique helps in developing the trainees by giving them exposure to the wide range of situations in respect of a specific culture.
The method of Culture Assimilator, Intercultural Training Process helps the trainee in the following mentioned ways;
Ability to understand and solve intercultural issues
Helps in reduction of ethnocentrism
Helps in effective interaction with people belonging to different cultures
Helps in increasing the stress tolerance capability
Helps in improving knowledge and information about different cultures
Helps in working better on international assignments in an effective and haste free manner
Helps in experiencing expected intercultural interactions
Therefore McDonalds being a multinational corporation operating its business globally its advisable for McDonalds to practice similar training and development programs for their employees in order to solve and avoid all kind of problems related to intercultural interactions and working.
McDonalds being a multinational corporation operates its business globally serving its products in more than 120 countries through its restaurants.
McDonalds have got more than 32,000 outlets which are situated all over the globe.
McDonalds provides a magnificent line of products in which they offer different items for different countries on the basis of the local culture.
This reflects that McDonalds gives high respect and importance to the culture of its customers, which finally helps in a global acceptance of its products.
McDonalds products are very reasonable for a common man and of good quality, making it a very preferred fast food brand globally.
Different effective steps have been taken by the corporation to solve all its problems, for their product development and its business growth.
McDonalds believes in quality products for its customers without and compromise.
All of the above mentioned factors speaks for itself the few main reasons responsible for its continued business growth and global acceptance.
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