McDonald’s is the largest fast food restaurant chain that serves approximately 47 million customers daily. The fast food restaurant is operated by many types of business venture like franchisee, affiliate or the corporation itself. Through continual innovation & technology research and upgrade, McDonald’s have transformed itself from a small bar-b-que restaurant to a fast food restaurant chain serving mainly burgers, chicken products, fries, beverages, desserts, salads, wraps and fruits for breakfast, lunch, dinner and even supper – 24 hours a day, 7 days a week.
In this report, we will discuss on how McDonald’s manages its innovation & technology and the strategies employed by McDonald’s in gaining its competitive advantage.
We will be using SWOT analysis to analyze the internal strength and weakness and external opportunities and threats of McDonald’s innovation & technology process and also discuss the innovation & technology concept adopted by McDonald’s. Some concepts that are discussed are stated below.
Kid’s gadget (eg. Happy Meal that comes with toy)
Food safety and quality standards (Nutrition facts on the food they serve)
Being Green (eg. Unbleached paper napkins used from recycle material, ‘One Meal, One Napkin’, McRecycle)
Events (eg. FIFA 2010, Singapore Youth Olympic Games 2010)
Drive-Thru, where customers can order McDonald’s meals on the go,
Online/Phone ordering & delivery 24/7
EZlink payment over counter and credit card payment for online and phone ordering
Free Wi-fi connection at all McDonald’s branches
Online Networking (Facebook)
The report will also recommend some approaches McDonald’s can adopt to enhance the business.
1.1 Company Profile
McDonald’s is the leading restaurant brand with more than 30,000 local restaurants serving nearly 50 million customers in more than 119 countries each day. Approximately 70 percent of McDonald’s restaurants worldwide are owned and operated by independent, local businessmen and women.
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Their rich history began with their founder, Ray Kroc. The strong foundation that he built continues today with McDonald’s vision and the commitment of our talented executives to keep the shine on McDonald’s Arches for years to come.
McDonald’s serves hamburgers, cheeseburgers, chicken products, French fries, breakfast items, soft drinks, shakes, and desserts. McDonald’s also modified its menu to healthier alternatives like salads, wraps and fruit due to obesity trends in western nations and criticism over healthiness of its products.
1.2 History of Company
McDonald’s started as a humble Bar-B-Que restaurant in the year 1940. Below states McDonald’s achievements through the years. (McDonald’s, 2010)
1940 – Dick and Mac McDonald’s open McDonald’s Bar-B-Que restaurant in San Francisco. It is a typical drive-in with featuring a typical menu with car-hop service
1948 – Dick and Mac McDonald’s closed their restaurant for 3 months and reopens as a self-service drive-in restaurant with reduced menu serving hamburgers, cheeseburger, soft drinks, milk, coffee, potatoes chips and a slice of pie with the 15 cents hamburger as the staple of the menu
1949 – Potato chips are replaced by French fries on the McDonald’s menu
1954 – Multimixer salesman, Ray Kroc(52), visit McDonald’s in San Bernardino intending to sell more multimixer to the brothers but is fascinated by the operation and learns from the brothers that they are looking for nationwide franchising agent. Kroc has an epiphany and determined that his future is in the hamburgers.
1955 – Kroc opens his first McDonald’s restaurant in Des Plaines, Illinois on April 15. The restaurant is designed by architect Stanley Menston in 1953 with red and white tile and Golden Arches
1959 – The 100th restaurant opens in Fond Du Lac, Wisconsin
1962 – McDonald’s in Denver, Colorado becomes the first indoor seating restaurant
1963 – The 500th McDonald’s restaurant in Toledo, Ohio
1965 – McDonald’s first public offering in celebration of its 10th year anniversary
1966 – First National Television Commercial of Ronald McDonald who appeared on his ‘flying hamburger’ in 35 one minute color spots on the NBC and CBS networks
1967 – McDonald’s first international restaurant in Canada and Puerto Rico
1969 – Remodeling of McDonald’s logo which emphasis more on the ever-more-famous Golden Arches
1978 – The 5000th McDonald’s restaurant in Kanagawa, Japan
1979 – Happy Meals are introduced to the national menu featuring a circus wagon theme
1984 – McDonald’s founder and Senior Chairman, Ray Kroc, dies on Jan 14
1985 – April 15, McDonald’s celebrates 30th years of operation
1988 – The 10,000th McDonald’s restaurant in Dale City, Virginia
1996 – McDonald’s Corporate Internet site launched
2003 – McDonald’s launched its first global advertisement campaign, “I’m lovin’ it”, in Munich, Germany
2006 – McDonald’s added nutritional info on its packaging at the Torino 2006 Olympic
2007 – McDonald’s Packaging updates that features 24 faces from first-ever global casting call
2009 – McDonald’s being awarded for Being Green
2010 – McDonald’s offers visitors with free Wi-Fi in over 11,000 restaurants
1.3 Vision Statement and Values
McDonald’s envision a supply chain that profitably yields high-quality and safe products without supply interruption while leveraging their leadership position to create a net benefit by improving ethical, environmental and economic outcomes.
Ethical – McDonald’s envision purchasing from suppliers who follow practices that ensure the health and safety of their employees and the welfare and humane treatment of animals in their supply chain.
Environmental – McDonald’s envision influencing the sourcing of their materials and ensuring the design of their products, their manufacture, distribution and use minimize lifecycle impacts on the environment.
Economic – McDonald’s envision delivering affordable food, engaging in equitable trade practices, limiting the spread of agricultural diseases, and positively impacting the communities where their suppliers operate.
McDonald’s view this vision and its responsibilities holistically. As sourcing decisions are made, they consider their priorities for food safety, quality and costs, as well as ethical, environmental and economic responsibilities.
McDonald’s place the customer experience at the core
Customers are the reason for their existence. They demonstrate appreciation by providing them with high-quality food and superior service, in a clean, welcoming environment, at a great value. Their goal is Quality, Service, Cleanliness &Value for each and every customer, each and every time.
McDonald’s are committed to the people
They provide opportunity, nurture talent, develop leaders and reward achievement. They believe that a team of well-trained individuals with diverse backgrounds and experiences, working together in an environment that fosters respect and drives high levels of engagement, is essential to their continued success.
McDonald’s believe in the their system
McDonald’s business model, depicted by the “three-legged stool” of owner/operators, suppliers and company employees, is their foundation, and the balance of interests among the three groups is key.
McDonald’s operate the business ethically
Sound ethics is good business. At McDonald’s, they hold themselves and conduct their business to high standards of fairness, honesty and integrity. They are individually accountable and collectively responsible.
McDonald’s give back to the communities
They take the responsibilities seriously. They help their customers build better communities, support Ronald McDonald House Charities, and leverage their size, scope and resources to help make the world a better place.
McDonald’s grow their business profitably
McDonald’s is a publicly traded company. As such, they work to provide sustained profitable growth for the shareholders. This requires a continuing focus on our customers and the health of their System.
McDonald’s strive continually to improve
Being a learning organization that aims to anticipate and respond to changing customer, employee and System needs through constant evolution and innovation.
2 SWOT Analysis
Let us look at some of the strengths that McDonald’s hold for it to be so successful and what opportunities did they took advantage of.
With billions of investment spent on training annually, McDonald’s have succeeded in motivating its staff to provide better customer service.
The brand reputation of McDonald’s increased when the Fortune Magazine 2008 listed McDonald’s as one of the most admired food service companies.
The Golden Arches and spokes character, Ronald McDonald – the clown is one of the world’s most recognizable logos.
Source: Images obtained from flickr.com and Palm Beach County Library System
McDonald’s is a global company operating in 109 countries. By spreading out in different regions, they can withstand economic fluctuations and operate effectively during an economic downturn.
McDonald’s restaurants are able to adapt to each country’s cultural differences. For example, lamb burgers are served in India instead of beef and pork.
As most of the McDonald’s restaurant businesses are owned and operated by franchisees which are independent they are able to reach out to global locations like major airports, and cities, tourist locations and theme parks.
McDonald’s developed an efficient, assembly line style of food preparation. In addition, they maintained a systemization and duplication of all their food preparation processes in every restaurant.
McDonald’s uses 100% pure inspected beef with no fillers or additives added. The produce is farm fresh. McDonald’s serves 100% farm raised chicken, no fillers or additives and only Grade-A eggs. To ensure only safe and tastiest food are produced, McDonald’s purchased their ingredients only from certified suppliers. The frequent food inspections conducted also ensured food quality and freshness.
McDonald’s only serves name brand processed items such as Kraft Cheese, Nestle Chocolate, Heinz Ketchup and Minute Maid Juice.
McDonald’s treats food safety very seriously. Checks are performed at every stage of the food processing to ensure that the food is produced from a clean, contamination free environment.
McDonald’s have printed their food nutritional information on the serving mat that was placed on the serving trays. It enables the consumers to understand what the nutritional levels of individual food they are consuming are, at the same time, enjoying their meal. This information was published on McDonald’s Internet site. For consumers who were health conscious, McDonald’s have gone the extra miles to offer salads, bottled water and other low fat / calorie food as alternatives.
To build publicity, McDonald’s sponsored various main events. The recent sponsorship is the Singapore Youth Olympic Games 2010.
McDonald’s have incorporated free Wi-Fi in the restaurants to encourage consumers to come for their meal.
McDonald’s tried to market into the pizza line but failed thus leaving them not able to compete with fast food pizza chains yet.
The employment of temporary staffs and part-timer lead to high employee turnover in their restaurants. This will increased the amount of money being spent on training new staffs.
While promoting health living, McDonald’s had yet to explore the trend towards organic foods.
McDonald’s can create a healthier version of the hamburger to cater for the health conscious society today. They can do it by replacing the ingredient with those that are organic. They will be the first in the fast food industry to have an “organic” hamburger.
McDonald’s can provide optional allergen free food items, such as gluten free and peanut free.
McDonald’s can look into introducing new food items, like sandwich wrap to cater for new taste buds.
McDonald’s uses subliminal perception to attract children as young as one year old into their restaurants with special kid’s meals, toys, playgrounds and popular movie character tie-ins. Children end up enjoying McDonald’s through childhood to adulthood. Hence, many parents criticized their marketing practices towards children which are seen as not ethical.
McDonald’s is considered as “unhealthy” food, allegedly with addictive additives that contributed to the obesity in consumers.
Competitors are a threat. Major competitors include Burger King, Starbucks, Subway and KFC and any mid-range sit-down restaurants.
3. Innovation Concept
Source: Happy Meal http://www.aboutmcdonalds.com/mcd/parents/happy_meal_choice.html
McDonald’s Happy Meal toys for kids have undergone an evolution. The toys were first design with mechanical moving parts that simulate the movement of the toy character. Over the years, McDonald’s have incorporated digital games with the toys. Example is the “Rocking Horse”. The LCD displayed the movement of the horse when the child put a rocking action on the toy.
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Meet “Chef Dan” Coudreaut, McDonald’s Director of Culinary Innovation
“Chef Dan” – as he is known to millions – has been the Director of Culinary Innovation at McDonald’s headquarters for over four years. His background and training is in fine dining, and he gets huge job satisfaction being a part of McDonald’s. Coudreaut began working as a dishwasher when he was 14 years old. He earned an associate’s degree in business administration and management. To pursed his dream as a Chef, Coudreaut worked in New York City at Quatorze Bis, a French bistro, as the PM Sous Chef. Later, he enrolled at the Culinary Institute of America, where he graduated at the top of his class in 1995.
Coudreaut with his team created up to 1,800 new recipes annually but only a few selected recipes that are wholesome, tasty and easy for McDonald’s crew members to prepare to launch. The most recent innovation was to produce the famous Fruit and Walnut Salad as well as the Premium Chicken Sandwich line.
“Customers increasingly want higher-quality items, which is a reality that allows me to take more risks and make flavors bolder,” says Coudreaut. “My fine-dining background and McDonald’s desire not to stifle creativity helps me develop products customers can really enjoy.”
The Birth of the Egg McMuffin
A legacy of innovation from within
It was 1970. Legendary McDonald’s franchisee Jim Delligatti, still fresh from his historic success in developing the Big Mac sandwich, began experimenting with simple breakfast items. Exploring new business opportunity for his restaurant during the morning hours, the usual Opening at 11:00 A.M. was changed to 07:00 A.M. instead. Delligatti started selling coffee and other simple items like doughnuts, and sweet rolls. Pancakes and sausage were added to the menu a year later. Even with limited selection, Delligatti was by that time was able to obtain 5 percent of his business during breakfast.
But a significant dilemma remained: while Delligatti’s innovation had increased business at his store, other McDonald’s operators balked at the prospect of extending their already-backbreaking 11:00 P.M.-midnight shifts. Unless a new breakfast item was found that could deliver double-digit sales gains, the McDonald’s breakfast line would have to wait.
That product, which was to completely transform the McDonald’s experience, came in late 1971 on the vision of a man named Herb Peterson. After managing the McDonald’s account for Santa Barbara, California-based D’Arcy Advertising, Peterson decided to join the increasing ranks of McDonald’s franchisees. Having identified the same breakfast opportunity that Delligatti had seen, Peterson focused his creative energy on launching an entirely new product that could be eaten like the rest of the McDonald’s line: by hand. A solution arrived when he began to modify an Eggs Benedict sandwich that was being marketed by Jack-in-the-Box, a West Coast chain. Experimenting with prepackaged Hollandaise, which he rejected as too runny, Peterson combined a slice of cheese with a hot egg, producing the exact consistency he had been aiming for. Since poaching eggs didn’t fit into the McDonald’s assembly line production process, Peterson invented a creative new cooking utensil – a cluster of six rings – that was placed on the grill to form the eggs in the shape of an English muffin. When he complimented the egg and muffin with grilled Canadian bacon, Peterson had a finished breakfast item that was perfect for a sandwich-oriented fast-food chain.
Convincing McDonald’s founder Ray Kroc of the new creation’s brilliance turned out to be easier than expected: Peterson invited Kroc to stop by a store over the Christmas holiday, and even though Kroc had just eaten lunch, he ate two of the egg sandwiches anyway. Peterson’s organized demonstration of the new product, complete with a flip-chart to explain its economics, wasn’t what sold Kroc. It was the sandwich itself. Weeks later, Herb Peterson was in Chicago showing the new product to McDonald’s senior management, who received it with excitement. Not long after, the final challenge – naming the sandwich – was tackled during a dinner conversation between the Krocs and the Turners (Fred Turner is now Honorary Chairman of McDonald’s Corporation), when Patty Turner suggested it be called the Egg McMuffin. The name stuck, and roll out began. By 1976, McDonald’s had perfected the breakfast menu, elevating its brand above the competitors, which didn’t introduce commercial breakfast items until the mid-1980s.
Thanks to the relentless creativity and innovation of its own visionary franchisees, McDonald’s by then held a monopoly on breakfast. To this day, breakfast represents 15 percent of McDonald’s sales.
Thru SMS on 15 July 2010 – All new Spicy Nuggets & tangy Honey Chipotle Shaker fries.
We start with a 3-pronged approach: reduce, reuse, and recycle; and we’re committed to diverting as much waste as possible from the solid waste stream. McDonald’s has come up with countless small ways to make a big impact: Switching to unbleached paper napkins made from recycled materials. Examining how our suppliers package raw materials and cleaning supplies. We’ve even created litter patrols to ensure we’re good neighbors in our communities.
Less is More
Currently, 82% of McDonald’s consumer packaging is made from renewable materials, and we’re aiming for higher percentages in the future.
In several countries, our restaurants are recycling their used cooking oil for re-use in a variety of products, including the creation of environmentally-friendly biodiesel. In some markets, McDonald’s delivery trucks use our own re-purposed cooking oil as fuel. We call this a “closed-loop solution,” and we’re very proud of it.
Our customers are also helping make a difference. McDonald’s restaurants inside WalMart stores saved an estimated 170 million napkins (equivalent to 497 tons of wood) in just one year through the “One Meal, One Napkin” campaign.
McDonald’s Global Environmental Commitment
Effectively managing solid waste
We are committed to taking a “total life cycle” approach to solid waste, examining ways of reducing materials used in production and packaging, as well as diverting as much waste as possible from the solid waste stream. In doing so, we will follow three courses of action: reduce, reuse and recycle.
Reduce. We will take steps to reduce the weight and/or volume of the packaging we use. This may mean eliminating packaging, adopting thinner and lighter packaging, changing manufacturing and distribution systems, adopting new technologies or using alternative materials. We will continually search for materials that are environmentally preferable.
Reuse. We will implement reusable materials whenever feasible within our operations and distribution systems as long as they do not compromise our safety and sanitation standards, customer service and expectations and are not offset by other environmental or safety concerns.
Recycle. We are committed to maximum use of recycled materials in the construction, equipping and operations of our restaurants. We are already the largest user of recycled paper in our industry, applying it to such items as tray liners, Happy Meal boxes, carryout bags, carryout trays and napkins. Through our “McRecycle” program, we maintain the industry’s largest repository of information on recycling suppliers and will spend a minimum of $100 million a year buying recycled materials of all kinds.
We are also committed to recycling and/or composting as much of our solid waste as possible, including such materials as corrugated paper, polyethylene film and paper. We will change the composition of our packaging, where feasible, to enhance recyclability or compostability.
Conserving and protecting natural resources
We will continue to take aggressive measures to minimize energy and other resource consumption through increased efficiency and conservation. We will not permit the destruction of rain forests for our beef supply.
Encouraging environmental values and practices
Given our close relationship with local communities around the world, we believe we have an obligation to promote sound environmental practices by providing educational materials in our restaurants and working with teachers in the schools.
We intend to continue to work in partnership with our suppliers in the pursuit of these policies. Our suppliers will be held accountable for achieving mutually established waste reduction goals, as well as continuously pursuing sound production practices which minimize environmental impact. Compliance with these policies will receive consideration with other business criteria in evaluating both current and potential McDonald’s suppliers.
Ensuring accountability procedures
We understand that a commitment to a strong environmental policy begins with leadership at the top of an organization. Therefore, our environmental affairs officer will be given broad-based responsibility to ensure adherence to these environmental principles throughout our system. This officer will report to the board of directors on a regular basis regarding progress made toward specific environmental initiatives.
On all of the above, we are committed to timely, honest and forthright communications with our customers, shareholders, suppliers and employees. And we will continue to seek the counsel of experts in the environmental field. By maintaining a productive, ongoing dialogue with all of these stakeholders, we will learn from them and move ever closer to doing all we can, the best we can, to preserve and protect the environment.
We value sustainable food and packaging
McDonald’s is committed to minimizing the environmental impacts of our food and other products in the supply chain. We are working with our direct suppliers to:
measure and reduce water, energy, air, and waste impacts through our Environmental Scorecard,
design our packaging with resource conservation in mind
improve fishing practices through our Sustainable Fisheries program.
“green” our distribution system through efforts such as using recycled frying oil as fuel
better understand the carbon footprint of our entire supply chain, based on work by McDonald’s Europe
We are also trying other things to make a difference upstream in the supply chain by working with other companies and NGOs. Our sustainable land use efforts, such as protection of high-value conservation lands like the Amazon Rainforest, are ongoing. We also support multi-stakeholder sustainable agriculture initiatives such as the Sustainable Agriculture Initiative (SAI) Platform in Europe. It was created by the food industry to actively support the development of sustainable agriculture worldwide.
You can read more about our efforts to green our supply chain as well as some specific leadership steps taken by our suppliers in our catalogue of global environmental best practices, the 2009 McDonald’s Global Best of Green.
Tracking our performance – the Environmental Scorecard and EcoFilter
McDonald’s Environmental Scorecard for suppliers was created to help make our food suppliers aware of the resources they are using and to help drive continuous improvements related to their impacts in the categories of energy, water, air, and waste.
In 2005, we began rolling out the current version of the Scorecard with a goal of reaching all of our bakery, beef, poultry, pork, and potato suppliers in our nine largest markets. Last year, we decided to set a deadline of 2009 to reach that goal and are currently on track to achieve this before the end of the year.
Many suppliers that have been using the Scorecard for multiple years have reduced their use of water and energy and their production of waste. In Canada, for example:
All direct suppliers of beef, poultry, potatoes, and bakery products located in Canada completed the 2008 Environmental Scorecard
45% showed a decrease in water used per unit of finished product between 2007 and 2008
64% showed a decrease in energy used per unit of finished product between 2007 and 2008
100% showed zero air emissions violations in 2008
64% showed a decrease in waste production per unit of finished product between 2007 and 2008
In 2010, some markets will continue to expand the use of the Scorecard. Globally, we will focus our efforts on making the Scorecard easier to use and more impactful, through enhancements like online training and data collection. We also continue to encourage our direct suppliers to help our indirect suppliers become more aware of their resource use and to explore options for reductions.
McDonald’s is finding ways to incorporate used cooking oil into their operations. The answer is biodiesel.
In several countries across the McDonald’s System, our restaurants are recycling their used cooking oil for re-use in a variety of products, including the creation of biodiesel – an environmentally friendly diesel fuel made from recycling vegetable oils.
“We have a resource that can be put to good use, and we’ve been taking steps, to varying degrees across the System, to utilize it in the best interests of the business,” says Brian Kramer, Senior Manager Corporate Social Responsibility. “This is an exciting and relevant area for all of us – and one where McDonald’s is looking to make a greater impact.”
From Fryer to Fuel
The oil-into-fuel effort is just one aspect of our larger environmental platform. With consumers ranking environmental protection as a top expectation of socially responsible businesses, McDonald’s is continuously working on a variety of ways to go green – from reducing energy use at our restaurants to creating a more sustainable supply chain.
With regard to biodiesel, the way it normally works is that restaurants team up with a contractor who picks up the used oil in bulk and sells it to companies that specialize in refining the product into clean burning diesel for consumer use.
McDonald’s stepped into this arena about six years ago with a test run in Austria – and the effort has gradually gained momentum. Today, biodiesel initiatives are occurring in major markets across Europe, APMEA, Latin America and the U.S.
The leader in this effort is McDonald’s Europe, which recycles all of its used oil – and sends approximately 80% to the production of biodiesel. Meanwhile, a growing number of U.S. restaurants are also directing their oil from fries to fuel.
The bulk cooking oil delivery and retrieval program that McDonald’s USA has been implementing with our supplier, RTI, over the past decade has achieved significant results as well. Currently, there more than 7,500 U.S. restaurants enrolled in the program, which includes delivery of the cooking oil to the restaurants in bulk via a portal on the exterior of the restaurant to a tank in the store. At the same time, waste oil is sucked out a separate tank and then sold to biofuel companies and other purchasers such as pet food companies.
There are a range of environmental benefits to the bulk oil program. For example, every year it eliminates a significant amount of packaging that would normally be used if the cooking oil was delivered in smaller plastic jugs in corrugated boxes, or “Jibs”. This, in turn, reduces the amount of waste that goes to landfill.
Fueling McDonald’s Trucks
Some markets, like Austria and the U.K., have taken things one step further – and now use some of their reformulated oil to fuel their McDonald’s delivery trucks. It’s known in the environmental world as “closing the loop” – taking your used products and putting them to good use back into your system.
“This really is a great story,” says Sebastian Csaki, Manager Environment and Corporate Social Responsibility McDonald’s Europe. “The fact that we’re able to recycle so much of our used oil into biodiesel and use it in our own trucks truly shows our commitment to lessening our environmental impact in innovative ways.”
Greener Than Ever
McDonald’s strives to provide eco-friendly workplaces and restaurants that reflect our sustainability goals and demonstrate environmental stewardship in the workplace.
In August 2008, McDonald’s USA opened its first corporate-owned pilot green restaurant and received Leadership in Energy and Environmental Design (LEED) Gold certification in April 2009. Some of the green attributes of the Chicago restaurant include energy-efficiency equipment and lighting, high efficiency plumbing fixtures, and permeable pavement and rainwater collection for irrigation. We’re using this “green building lab” to help refine our green building strategy. Our second green restaurant was completed in North Carolina in early 2010.
Green building strategies aren’t limited to McDonald’s restaurants. Using the LEED rating system developed for Existing Buildings (LEED EB), we recently tackled our Global Headquarters in Oak Brook, Illinois. Our 20-year-old Campus Office Building (affectionately known as the COB) was granted Platinum Certification, the highest level possible. The COB is one of the oldest buildings to receive this certification.
The sustainable building enhancements made during the certification process have resulted in clear financial and environmental benefits. Energy use is at its lowest level in five years, helping to offset rising utility costs
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