MARKETING PLAN

Of mcdonald’s

Group 5-ABM12 | Marketing | January 6, 2018

 Introduction
McDonald’s is one of the leading biggest Fast Food Chains not only in the
U.S but in other parts of the globe. In 2011 McDonald’s ranked 2nd for the
Biggest Quick Service Restaurants (or QSR’s) in the U.S but ranked 1st in 2012,
as ranked by the QSR Magazine. (Forbes 2012).

The Founder of McDonald’s Ray Kroc rose from humble beginnings, in

1917, 15-year-old Ray Kroc lied about his age to join the Red Cross as an
ambulance driver, but the war ended before he completed his training. He
then worked as a piano player, a paper cup salesman and a Multimixer
salesman

In 1954, he visited a restaurant in San Bernardino, California that had

purchased several Multimixers. There he found a small but successful
restaurant run by brothers Dick and Mac McDonald, and was stunned by the
effectiveness of their operation. They produced a limited menu, concentrating
on just a few items – burgers, fries and beverages – which allowed them to
focus on quality and quick service. In 1954, he visited a restaurant in San
Bernardino, California that had purchased several Multimixers. There he
found a small but successful restaurant run by brothers Dick and Mac
McDonald, and was stunned by the effectiveness of their operation. They
produced a limited menu, concentrating on just a few items – burgers, fries
and beverages – which allowed them to focus on quality and quick service.

They were looking for a new agent and Kroc saw an opportunity. In 1955,
he founded McDonald’s System, Inc., a predecessor of the McDonald’s
Corporation, and six years later bought the exclusive rights to the McDonald’s
name. By 1958, McDonald’s had sold its 100 millionth hamburger.

They were looking for a new agent and Kroc saw an opportunity. In 1955,
he founded McDonald’s System, Inc., a predecessor of the McDonald’s
Corporation, and six years later bought the exclusive rights to the McDonald’s
name. By 1958, McDonald’s had sold its 100 millionth hamburger.

Now McDonald’s has around 30, 000 outlets in more than 120 countries
and thus it have been considered among world’s largest food chains. Their
affluent time began with their founder Ray Kroc’s vision and his dedication,
changed in their brilliant managers, and this will maintain the polish on
McDonald’s name for years to come.

1
 History of McDonald’s in the Philippines
It was in 1981 when George T. Yang opened the first McDonald’s
Restaurant in the Philippines along the Morayta, Manila and in 2005,
McDonald’s Philippines became a 100% Filipino owned company under the
name Golden Arches Development Corporation. His son Kenneth S. Yang, the
current President and CEO of McDonald’s Philippines has grown to become
one of the country’s leading quick service restaurants, with 400 stores
nationwide that proudly serves global icons, such as the Big Mac, Chicken
McNuggets and World Famous Fries, as well as food specially made to delight
the Pinoy palate, like the Chicken McDo, Burger McDo and McSpaghetti.

More than great tasting food, McDonald’s Philippines offers world-class

services that cater to the changing lifestyles of its customers. With 24-hour
restaurants and delivery services, via McDelivery, Drive-Thru and Dessert
Centers, McDonald’s Philippines ensures convenience for its customers,
anytime, anywhere.

In its commitment to the Filipino family, McDonald’s has continuously

strived to bring happiness to children through its CSR programs under Ronald
McDonald House Charities (RMHC). RMHC is committed to making a
difference in the lives of Filipino children through its banner programs “Bright
Minds Reads (BMR)”, a beginning reading program for Grade 1 students, “Bahay
Bulilt”, which aims to build low-cost day care centers for children aged 2-5
years old, and “Bigay Tulong”, a program to provide immediate aid to affected
families during natural calamities.

The McDonald’s system has over 27,000 employees all over the country,
each with a commitment to deliver quality service and a delightful customer
experience. Employees enjoy a dynamic working environment, support,
training and opportunities to help them deliver the best possible results and
advance their career.

2
 Mission, Vision and Values
(Philippines)

Mission
McDonald’s Philippines aims to not only offers great tasting food but also
offers a world class services that offers a great experience for their customers.
They offer a 24-hour restaurant and delivery services, through the McDelivery,
Drive-Thru and Dessert Centers, To ensure the convenience of the Pilipino
customers anytime and anywhere in the McDonald’s Philippines.

Vision

In its commitment to the Filipino family, McDonald’s has continuously

strived to bring happiness to children through its CSR programs under Ronald
McDonald House Charities (RMHC). RMHC is committed to making a
difference in the lives of Filipino children through its banner programs “Bright
Minds Reads (BMR)”, a beginning reading program for Grade 1 students, “Bahay
Bulilt”, which aims to build low-cost day care centers for children aged 2-5
years old, and “Bigay Tulong”, a program to provide immediate aid to affected
families during natural calamities.

Values

The McDonald’s system has over 27,000 employees all over the country,
each with a commitment to deliver quality service and a delightful customer
experience. Employees enjoy a dynamic working environment, support,
training and opportunities to help them deliver the best possible results and
advance their career.

3
 Situational Analysis

Market Analysis

McDonalds is a usually acknowledged marketplace Leader in the quick

nourishment Industry or also called the "Burger" business. The organization
has productively perceived a prominent brand picture. Indeed, the extensions
of quick nourishment have been named subsequent to the association as
'McDonaldization'. Advertising includes distinguishing what clients require and
endeavoring towards satisfying their requests. Promoting Audit includes
investigating the organization's different viewpoints and assessing the
organization's advertising technique. It includes in drawing out the pitfalls in
the associations execution. McDonald's is the world 'stop organization in the
fast food industry. It has more than 30,000 eateries in more than 100 nations
serving millions of individuals around the worldwide.

Market Size

Targeting implies choosing specific groups identified as a result of

segmentation to sell products. How does McDonalds select/target the right
segments? Iacobucci (2014) advices that marketers iterate between
understanding corporate fit and having information about segment size and
likely profitability.

Types of Segmentation McDonald’s

segmentation
Criteria target segment

Region Domestic/International

Geographic Density Urban/rural

Age 8-45

Gender Males/Females

4
 Bachelor Stage: young, single
people not living at home

Newly Married Couples: young, no

Life-cycle stage
children

Full Nest II: youngest child six or

Demographic over

Income Low and middle

Occupation Students, employees, professionals

Degree of loyalty ‘Hard core loyal’ and ‘Switchers’

Benefit sought Cost benefits, time efficiency

Behavioral Personality Easy going and careless

User status Potential and regular fast food

eaters

Social class Lower, working and middle classes

Psychographic McDonald’s targets Resigned,

Struggler and Mainstreamer
individuals according to Cross
Lifestyle Cultural Consumer
Characterization developed by
Young and Rubican

Market Growth Rate

5
 Earning Growth Rate
16

14

12

10

8
14.16
6
9.62
4 8.67
6.45
2

0 0
Dec-16 Dec-17 Dec-18 Dec-19 Long term 5 yr

Growth Rate

Market Profitability

6
 Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2016 2015 2014 2013 2012
Return on
sales
Gross profit 41.45% 38.52% 38.10% 38.79% 39.24%
margin
Operating 31.45% 28.12% 28.97% 31.18% 31.21%
profit
margin
Net profit 19.03% 17.82% 17.34% 19.87% 19.82%
margin
Return on
Investment
Return on –% 63.90% 37.02% 34.89% 35.73%
equity
(ROE)
Return on 15.11% 11.94% 13.88% 15.25% 15.44%
assets
(ROA)

Industry Cost Structure

McDonald’s cost structure is very similar to the industry average,

with raw materials (purchases) being the largest component, followed by labor.

Breakdown:

 31.00% on Purchases
 24.60% on Wages
 14.00% on Rent and Utility
 3.50% on Depreciation
 3.40% on Marketing

Distribution Channels

The most prominent place McDonald’s products can be found are at its
restaurants. Other places where the company uses to sell its products are:

7
  Kiosks
 Post mates website and app
 McDonald’s mobile app

Hence, the company is using the selective distribution channel maintaining a

push-and-pull marketing communication.

Market Trends

Nullatech AI, predicted 71.33% of McDonald’s Corporation (MCD)

market trends correctly in last 300 weeks.
McDonald’s is an American fast food restaurant chain. Two brothers
founded McDonald’s in 1940 and today is one of the world’s largest restaurant
chains. McDonald’s stock is among the 3 Dividend Aristocrats Over the Last 10
Years. There are more than 36.000 of McDonald’s branches worldwide. so it
makes sense that McDonald’s stock has grown this much through these years.

Customer Analysis

To build long-term business it is essential to retain people once they have

become customers. Customers are not all the same. Market research identifies
different types of customers. These examples represent just a few of

8
McDonald's possible customer profiles. Each has different reasons for coming

to McDonald's. McDonald’s wants to recognize and emphases a lot focus on

buyer behavior. It usually asks the following questions in Oder to understand

the market needs and wants in term of what they want to buy, when they want
to buy? Where they want buy? On other hand there are many different
segments when it comes to McDonald's such as geographic, demographic, age,
gender, income, and ethnic. McDonald's offers not only hamburgers, but also
chicken sandwiches, fish burgers, beef wraps, and chicken wraps. With this
much variety McDonald's can attract way more customers

Competitive Analysis

Market Share of Leading Brands In U.S

(2015)

Other 58.90%

Chipotle 2.20%

Wendy's Company 4.40%

Subway 6.70%

Yum Brands Inc. 10.80%

McDonald's 17%

0% 10% 20% 30% 40% 50% 60% 70%

McDonald’s is one of the leading fast food chain in the industry and
it’s market share as observed on the chart above, compare to other competitor
in U.S like chipotle, Wendy’s, Subway and Yum Brands Incorporation,
McDonalds’ have been successful in surpassing it’s competitors due to their
Emphasis on aligning with local taste, Multi-domestic strategy, high level of
Diversification and Related-Constrain. With just only a year it’s competitors
bench market their method.

9
 In the Philippines, comparison between McDonalds’ no.1
competitor Jollibee especially in Metro Manila as of early January 2017 shows a
surprising result. At 253, the number of Jollibee branches in the National
Capital Region's 17 cities easily overwhelms McDonald's 164 stores. The figures
were compiled from the two fast-food chain's websites and mobile apps as of
January 5, 2017.

However, McDonald's managed to edge past Jollibee in three of four

business districts--Makati City, Bonifacio Global City in Taguig, and Binondo,
the country's biggest Chinatown, in Manila. In BGC, McDonald's even has more
than double Jollibee's stores. It's only in Ortigas Center, where Jollibee has its
main office, that it outnumbers McDonald's.

SWOT Analysis

Strengths

 Strong brand name, image and reputation

McDonalds’ is one of the leading fast food chains with more than
31,000 restaurants serving burgers and fries in almost 120 countries for over 62
years and establish their brand so well that the image of McDonalds is
recognized everywhere. This brand is in top ten of the most powerful brand
names in the world with Coca-Cola, Nokia or GM. In 2003 McDonald’s brand
value was placed at 8th number among worlds most valuable brand with $24.69
billions (source: interbrand). Brand image is the totality of
consumer perceptions about the brand, or how they see it. Companies have to
work hard on theconsumer experience to make sure that what customers see
and think is what they wantthem to. (Temporal, 2002 & Marino, 2004)

 Large market share

McDonalds is considered as the largest player in size and global reach. When
Wendy’s or Burgers King are losing market share in 2006, McDonalds still

10
increases its market share. Market share of McDonalds in the recent time is
about 19% while Yum!Brands is 9% and both Wendy’s and Burger King is 2%.

 Specialized training for managers

McDonalds is very serious on training managers. This company has its own
program to train managers the most professionally, which is called Hamburger
University. As a result, McDonalds has many good managers who can help
company development well.

 McDonalds Plan to Win

McDonalds customer – focused Plan to Win provide a common framework for

its global business yet allows for local adaptation. Through the execution of
initiatives surrounding the five elements of its Plan to Win – People, Products,
Place, Price and Promotion – McDonalds has enhanced the restaurant
experience for customers worldwide and grown comparable sales and customer
visits in each of the last eight years. This Plan, combined with financial
discipline, has delivered strong results for company’s shareholders.

 Introduction of new production

McDonalds is considered the first one enters to fast food industry. It initiates to
other brand to enter this industry. As a result, when think about fast food,
customers always remember McDonalds first. In fact, in some big countries,
especially in US, McDonalds is the first choice of a large number of customers.

 Technology Innovative

McDonald’s is keeping at the forefront of technology around the globe. For

example, In Brazil McDonald’s is currently studying the installation of Internet
access terminals in some outlets as well as enabling customers to order online.
This will create a more efficient process that will reduce the amount of lag time
between a customer’s orders and pick up of the order.

11
  Good marketing strategies

No matter the continent, children and adults know the face of Ronald
McDonald is synonymous with the colossus restaurant chain. This results in
wonderful marketing strategies among management which conducts a very
thorough market analysis, resulting in much success around the globe.

Weaknesses

 Unhealthy food image

McDonald's has been impacted by negative press like the

documentary "Supersize Me" by Morgan Spurlock in which he contributed our
society’s obesity to McDonald's and other fast food chains. In fact, each
McDonalds dishes provides large amount of calories but not too much
nutrition.

 Customer loses due to fierce competition

McDonalds has to compete with many strong brand name in fast food
industry such as Wendy’s, Burger King or Yum!Brands. This fierce competition
makes McDonalds loose a large number of customers who prefer favor of other
brands.

 Problem related to health issue

McDonalds use Trans - fat and beef oil in their food. Although it is not
illegal, it affects badly on customer’s health because Trans – fat is causes of
some kind of cancer. Consequently, a number of customers who care about
their health stop eating at McDonalds restaurants. It makes revenue of
company decrease.

 Legal action

12
McDonald’s has been involved in a number of lawsuits and other legal cases in
the course. For example, there are many case which involved with trademark
issue. McDonald’s force many others restaurant, company of just a coffee shop
to change their brand name because of keeping “Mc” letters.

 Unbalance meals

Although McDonalds tries to update its menu by healthy criteria, McDonald’s

meals are still unbalance. For example, there are many dishes with chicken
(both grilled and fried), bacon, beef, rib or egg. Besides, just several dishes are
salad with vegetable and fruit. Moreover, amount of fruit or vegetable is not
much.

 High employee turnover rate

Although McDonalds has many good managers as well as skillful employees,

the turnover rate is still high. Every year many of their employees are fired out
of the restaurants. Moreover, many others quit their jobs, especially part time
employees because of low salary as well as too high working pressure.

 Action related to environmental issue

McDonalds uses HCFC – 22 to make polystyrene that is contributing to ozone

depletion. The company has to repair this weakness if doesn’t want to be
criticized.

 Dissatisfied Franchisees

Franchisees are beginning to become very dissatisfied with the fees that
McDonald’s are forcing them to pay. As the company continues to expand, they
are also increasing the amount of fees franchisees have to pay for the use of the
notorious fast-food brand. Many people are not very happy about this and as a
result many franchisees are selling their businesses.

Opportunities

13
  Growth of the fast food industry

Fast food industry now is developing significantly. The change of

lifestyle leads to the change in people eating habit. In the past, if just workers,
drivers or someone who had to work busily and didn’t have enough time for a
home meal choose fast food; nowadays, almost people eat fast food and a major
of them like fast food very much. It is a huge chance for fast food brand to
increase their revenues, especially McDonalds.

 Conservation

McDonald should research green energies and green packaging

solutions and incorporate these finding as a part of their marketing strategies
and advertisements.

 Globalization, expansion in other countries

McDonalds has more than 31,000 restaurants serving in almost 120

countries. Of the 31,000 restaurants, at least 14,000 are in US. However, now,
because the care of McDonalds about favors and cultures in each country it
enters, McDonalds can open more restaurant in new areas such as China or
India – the countries which culture influences on people lifestyle deeply. They
are very potential markets. The expansion of these areas is big opportunities
For McDonalds.

 Low cost menu is preferred by large number of customers

With low cost menu, McDonalds can attract customers who just have
low income. This segment makes up a fairly remarkable part, especially in the
recent time, when global economic is struggling. It is not difficult for
McDonalds to apply low cost menu on all restaurants.

 Appearance of freebies and discounts

14
 Discounts given on every food item may help them gain more
customers. Moreover, a new trend is rising among customers that they like
freebies and discounts, even when they don’t need it or don’t use these freebies
after.

 Diverse tastes and needs of customers

Customer’s tastes now become more diverse. As a result, they

require new format of service in order to satisfy them. McDonalds, with new
format of business such as McCafe, it can attract new segment of customer; for
instance, civil service, who prefer coffee as well as want to use Wi-Fi to work
when drink coffee.

 Growing health trend among the customers:

Although people concern about how McDonalds influence badly on

their health, it is also a chance for McDonalds. This company can develop new
products, specifically fresh burger or healthy dessert.

Threats

 Intensity competitors

Along with the development of fast food industry, there are many
new fast food brand enter to the market. It is nothing to say if there is no strong
brand which can compete with McDonalds. However, in fact, there are some
and they are stronger gradually, for example Yum!Brands, Wendy’s or Burger
King. Although market share of these brand are lower than McDonalds, they
try to gain more customers from McDonalds. Moreover, more casual dining
restaurants increase their burger offering and decrease the price. If we are not
really hurry, we may choose this kind of restaurant instead of fast food
restaurants. They also become the competitors of McDonalds.

 Public health crisis

15
 With a growing number of obesity cases among Americans, fast food
chains like McDonalds will continued to be overshadowed by their previous
products offerings, for example Supersized Meal, no fruit or yogurt, slim salad
selection. Besides, people nowadays are facing heart problem more seriously. As
a result, they require nutritious and healthy food as well as lifestyle.

 Economic recession

The company's revenue streams are diversified, but depending on the

length of this "recession", they will inevitably be negatively impacted by the
trickledown effect. Recession or down turn in economy may affect the retailer
sales, as household budgets tighten reducing spend and number of visitors.

 Serious environmental issue

Environment is one of the hottest topics all over the world. Any action
which influence on the earth and human life is criticized strongly.
Consequently, if McDonalds keep using HCFC -22, it may lose customers,
especially who really care about the earth.

16
 Market Objectives

Currently McDonald’s is focusing on service delivery time because of

customer don’t have much time today while using electronic media for
promotion.

Profitability

McDonald's is a large corporation, therefore, must remain profitable

to stay in business. To remain profitable, McDonald's offers quality products at
remained profitable, even during global recessions, by offering a cheap
alternative to sit-down meals.

Quality Service

McDonald's aims to offer quick, efficient products at a reasonable

price. Its strives to expand and increase awareness of nutritious menu items.
For example, McDonald's has expanded food and beverages containing fruit
and vegetables across the menu, and has increased awareness of fruit,
vegetable and dairy options available for children on the menu. Their fast,
convenient meals won't result in an unsatisfactory product.

Customer Satisfaction

Customer loyalty is an important objective of McDonald's. Without

customer loyalty, there would be a decrease in customers meaning less positive
word of mouth from customers to friends and family members. Customer
satisfaction involves marketing, as McDonald's identifies the needs and
requirements of its consumers in a better way than its competitors. Many
consumers choose McDonald's because of its friendly, inviting atmosphere.
Restaurants offer comfortable seating, televisions and playgrounds for

17
children. Convenience is also important, as customers want their food
produced in a fast, efficient manner.

Reputable Image

McDonald's opened its first restaurant in 1954. As of 2011,

McDonald's operates more than 32,000 restaurants serving more than 60
million people in more than 100 countries every day. McDonald's strives for
uniformity. If you are in Paris, you can find many similar products on the
menu as you would in New York City. McDonald's seeks to continually
improve its image as a pathway to a career, rather than a provider of
"minimum-wage, dead-end, burger flipping jobs."

Community Outreach

McDonald's strives to increase its financial and volunteer

support to Ronald McDonald House Charities through communication
outreach. It is involved in many schools, community organizations and
nonprofit organizations that benefit citizen in communities all over the world.

Currently McDonald’s is focusing on service delivery time because of customer

don’t have much time today while using electronic media for promotion.

Overall Objectives

 Easy accessibility of product and services to the customers

 Easy accessibility for providing essential services and value-added
services
 Easy complaint handling process
 Covering whole target market.

18
 Marketing Strategies

Distribution Strategies
McDonald's Corporation is the world's largest chain of hamburger fast
food restaurants, serving more than 58 million customers daily. In addition to
its signature restaurant chain, McDonald’s Corporation held a minority interest
in Pret A Manger until 2008, was a major investor in the Chipotle Mexican Grill
until 2006, and owned the restaurant chain Boston Market until 2007.

A McDonald's restaurant is operated by either a franchisee, an affiliate, or

the corporation itself. The corporation's revenues come from the rent, royalties
and fees paid by the franchisees, as well as sales in company-operated
restaurants. McDonald's revenues grew 27% over the three years ending in 2007
to $22.8 billion, and 9% growth in operating income to $3.9 billion.

McDonald's primarily sells hamburgers, cheeseburgers, chicken products,

French fries, breakfast items, soft drinks, shakes, and desserts. In response to
obesity trends in Western nations and in the face of criticism over the
healthiness of its products, the company has modified its menu to include
alternatives considered healthier such as salads, wraps and fruit.

McDonald's distribution channel and the way in which this fast-food

restaurant chain gets its products to the market. In the theory of the Marketing
Mix, place (distribution) determines where the product will be sold and how it
will get there. In fact, as noted on www.mcdonalds.com, McDonald's is the
leading global foodservice retailer, with more than 30,000 local restaurants
serving nearly 46 million people each day in 121 different countries.
Approximately 80 percent of all McDonald's restaurants company wants to be
the first in the market and establish the brand as rapidly as possible by
advertising very heavily. This effective distribution strategy (place) has helped
McDonald's develop a strong market share in the fast-food market around the

19
world. Moreover, according to Kotler stores must have a planned atmosphere
that suits the target market and moves customers to buy. In addition,
McDonald's has pre-determined the locations for many of its stores to help
reach a variety and diverse population. Conclusion. In conclusion, McDonald's
has an intensive distribution process which is a credit to their Marketing
department. As businesses and other organizations move forward, the
challenge of making their products

The McDonald’s executive claimed that it was about being part of

Disney and their theme parks, their movies and their characters because now
you can buy a Happy Meal at the Happiest Place on Earth. There are multiple
places in Disney World to buy a Happy Meal or more so to buy McDonald’s
products. A McDonald’s kiosk can be found in between Frontier land and
Adventureland and restaurants in Downtown Disney and next to the Disney
All-Star Resorts. Not only can you find these restaurants, they are also a few of
the best McDonald’s. The kiosk in the Magic Kingdom is decorated as a
Conestoga wagon depicting the theme of Frontier land. The McDonald’s in
Downtown Disney is huge and offers children a great place to play as does the
one next to the All-Star Resort. Although Disney offers a wide range of
restaurants and food, visitors flock to the McDonald’s because they know their
children love the food, the price is right, the quality of food is good and it gives
their children a place to play during the meal. This delivery channel was
ingenious on McDonald’s part; they recognized all they had to gain by joining
in a partnership with the Disney Corporation.

4 P’s

20
 Evaluation and Control

Internal Factor Evaluation

 McDonalds performing well on strengths and weaknesses.

 Taking competitive advantages.
 Being the icon of fast-food worldwide by franchising.
 Catching the current market trends and changing.

External Factors Evaluation

 Increasing sales by low price menu & McCafé.

 Creating more diversified menu with low price.
 Having more competitive advantages and opportunity.
 Biggest weakness is healthier issue and lawsuit issue.

Action Evaluation

McDonalds should:

 Forward integration
 Product Development
 Quality control involves the business working towards maintaining and
improving the provision of quality service and products. McDonald’s has
made this an important performance objective. The company has made it
compulsory for any individual who wants to own a McDonald’s franchise to
attend a course where they are taught on the main operations of a
McDonald’s store. These activities are split into operations in the
McDonald’s kitchen and employee management. This course aims at
ensuring that the food quality at McDonald’s store is not compromised and
that there is proper working order in all stores. The interior and exterior

21
 décor and architectural design of all stores are consistent in all stores. This
requirement ensures that the environment of all stores is the same thus the
customer is assured of the same ambiance in all McDonald stores. To
maintain the quality of supplies, McDonald’s has a list of approved suppliers
that all franchisees must adhere to. This ensures that the quality of food is
not compromised.
 Quality control is also practiced in the selection of potential franchise
owners. The selection process is rigorous as all applicants must satisfy all
the set-out requirements. The first element is that an applicant must
comply and be conversant with the operations and training manual that is
prepared by McDonald’s. The 600-page manual explains McDonald’s
business standards and procedures in detail which may be a challenge for
most applicants to grasp all the content in it. Second element is the training
program that potential franchisees must pay to attend at the Hamburger
University. Third element is that those that graduate from Hamburger
University and are allowed to open a McDonald’s franchise store, have to
sign a franchise agreement that outlines the obligations of the owner and
the corporation with regards to quality control.
 The business has field consultants who regularly monitor if the franchise
stores are adhering to the signed agreement. These officers frequently
inspect the stores and fill out an items checklist as well as an inspection
form. Franchise stores that perform poorly on these inspections are at a risk
of losing their franchise license on the basis of failure to meet the setout
standards.

Production Process

 The performance objective in this area is to minimize costs and

maximize output and thereby becoming a cost leader in the food service
industry. McDonald’s has sought to increase its efficiency in production
such that minimum cost possible is used in the inputs required without

22
 compromising the quality of the desired output. McDonald’s has been
able to reduce its input costs by simplifying the processes involved in
cooking of food. These processes are easy to learn and execute and their
failure rate is minimal. The simplified processes ensure that production
and delivery are carried out quickly and efficiently.
 McDonalds follows a Just In Time (JIT) inventory management system.
Use of JIT means that they only cook or assemble their food only after a
customer makes an order. This method was recently introduced after
they realized that a lot of food was wasted as a result of overproduction
when the food was pre-cooked. Additionally, their customers were not
able to enjoy freshly made food, or they would only eat fresh food after
making a special order. However the JIT system is made even more
reliable by the introduction of sophisticated burger making technology.
 Some of the benefits of using JIT include the quality of food is better as it
is fresh, and the cost is also low. The customer confidence is enhanced
as the quality of customer service is high. The system has enabled
McDonalds to adapt to demand a little better. Initially higher demands
would cause panic as the safety stock may not be sufficient. The system
has also enabled the business to save ordering and holding inventory
costs.
 McDonald’s has a list of its approved suppliers where all its franchise
stores get their supplies from. The suppliers are expected to deliver
quality products and services in a timely manner. The fact that
McDonald’s has a list of suppliers means that costs that are involved
with delays in delivery, and the delivery of poor quality supplies are
eliminated. The business is also able to negotiate purchase prices with
their suppliers. The company has an e-procurement system that ensures
purchase orders are made on time in all its franchise stores.

23
24