INFORMATION ABOUT THE COMPANY AND ITS FOUNDER
McDonald's is recognized worldwide, both for being a high quality commercial organization and for being one of the best franchise offer opportunities. The key to McDonald's success is having a very strong base of people: Its Franchisees.
(See franchises)
mcdonalds-case-analysisMcDonald's and its Franchisees constitute the largest organization in Fast Service Food Venues. McDonald's was created in 1955 when Ray Kroc opened his first store in Des Plaines, Illinois. Currently there are more than 26,000 stores distributed in 126 countries, constituting a consecrated brand with a loyal clientele of more than 40 million people per day. It is important to note that only 44 years ago, since Ray Kroc opened the first store, the same principles of QUALITY, SERVICE, CLEANING AND VALUE that he always insisted on continue to be maintained.
In Argentina, the first McDonald's store came through Arcos Dorados SA and was opened in 1986 in the Belgrano neighborhood, in the City of Buenos Aires. Throughout all these years, going through numerous economic plans and currency exchanges, they reached 1999 with more than 164 points of sale throughout the country. Their experience in recruiting, selecting and training qualified franchisees, as well as the relationship of mutual trust that they have with each of them, have been determining factors in their sustained growth.
Introduction
The first location in the history of fast food service was opened by the McDonald brothers in 1948, in San Bernardino, California, (USA). They gave a new direction to the business, offering food prepared and served at high speed, and Modernizing the system: They replaced their dishwasher with napkins and paper bags. A limited menu and high sales volume characterized the success of the new restaurant. Ray Kroc, then supplier of the shake mixing machine, surprised by the number of "Multi-mixers" requested, visited the McDonald brothers in 1954. He proposed to open more places like that. Therefore, in 1955 the first premises of the Corporation in charge of Ray Kroc were inaugurated. Between the 1950s and 1960s,Visionary Ray Kroc and his management team established the successful operating philosophy of the McDonald's System: Quality, Service, Cleanliness and Value.
Currently there are more than 26,000 establishments, 126 countries in the world and five continents where the Golden Arches are located, and they also sell about 145 hamburgers per second.
Its success is huge, in fact it has been the most profitable retail business for customers in the United States for 10 years. And it is growing rapidly, opening an average of 3 to 8 stores per day in the world market.
Throughout the world, all its stores offer a standard menu, although special products are developed in each culture that are tailored to the taste of each community. For example, in some restaurants in Germany beer, wine is offered in the French. Oriental noodles are served in some of the restaurants in the Far East. In Canada, the menu includes cheese, vegetables, sausages, and pizzas.
Food is prepared according to local laws, for example, in the menus of the Arab countries, the Islamic laws of food preparation are complied with, as in Israel with the Jewish Kosher culture, in which dairy products are not served..
McDonald's: "is the market leader"
- The latest surveys on image and brand perception published by independent media place McDonald's among the top 10 companies in the local market and the absolute leader in its category. In the CEOP ranking of "The 200 most admired brands" published by the Clarín newspaper on 12/12/99, McDonald´s appears in 7th place and first among the brands in the fast food service category. The Business magazine published in its December edition an image ranking made by the consulting firm Strategic Business Group Alberto Wilensky entitled "The 100 best companies", where McDonald´s occupies the 8th place and the first in its category.
As shown by the different categories of the published surveys:
- # 1 in fast food service and unique among the Top 10 # 1 in General Ranking among Students # 1 in General Ranking in the categories "Customer Service" and "Business Ethics" # 1 in fast food service and unique among the Top 10 # 1 Fast food in all Categories: Quality of products and / or services, Customer Service, Price Policy, Honesty and Transparency, Background,
"My question arises from how it is possible for a combination of four elements to achieve that some canteens scattered throughout Southern California transform into a large company in less than 30 years."
THE PERSON RESPONSIBLE FOR THIS ACHIEVEMENT
Ray Kroc, an unknown ice cream mixer salesman, having gone through countless trades, one day receives a major order from a Southern California restaurant chain that he has never heard of.
Due to the importance of this order, he decides to go personally to operate with his client. It was there that he observed the crowd going in and out of that small business of the McDonald brothers, who sold hamburgers for $ 0.15. What was served there was simple and cheap: hamburgers, fries, and milk shakes. After several conversations with the successful brothers, he agreed, the "franchise" to enable new outlets. Under the agreement, Kroc was to collect 1.9% of the net proceeds from each concession, and a quarter of its proceeds would go to the McDonald brothers.
This ambitious businessman, in 1954, built his first McDonald's service near the Des Plaines highway, in a Chicago suburb. The place was full from the first moment it opened. The inhabitants of the Midwest appreciated the possibility of going to a Mc Donald's and being able to eat quickly without getting out of the car.
Encouraged by this success, it spread over the most important highways in central North America. After five years, the restaurants had a sales level close to fifty million dollars. Despite the boom in his business, Kroc was dissatisfied. He wanted to be the sole owner of a chain of fast restaurants. And that is how in 1960 he achieved his goal of US $ 2,700,000. One of the goals Kroc wanted to achieve in the 1960s and '70s was to try to increase the operations of its sales locations. And in order to increase the number of people who could be fed at the same time, he added to the foreign service of the parking lots, table and bar service. This spurred sales at stores located in cities where the number of Car Owners was relatively low.
Ray Kroc saw the need to create a training program for his employees. The managers of each of their businesses had to follow very demanding courses at McDonald's Hamburger University.
One of the keys to Kroc was cleaning in each establishment: the floor had to be always cleaner and for this it had to be washed every hour. Kroc carried out frequent inspections to ensure himself that his rules were faithfully followed. One day, in a Montana store, he discovered a piece of chewing gum stuck to the inside of a table: he knelt down and personally tore it off. A This business in less than 20 years would become the "big hamburger with a turnover of 12 Billion dollars worldwide and profits of more than four hundred million dollars.
MCDONALDS IN ARGENTINA
In 1984, McDonald's management began to conceive the idea of incorporating the company in Argentina. Consequently, he contacted the consulting firm Henry Martin to launch a campaign to carry out market studies and thus analyze the feasibility of installing its operations in Argentina. At the same time, he asked that an individual be found who would be able to carry out this objective.
A Henry Martin consultant, Stewart Pryor, was appointed, who along with Woods Staton, who had spearheaded the project to open the chain in Colombia, but since the government did not allow them to settle, joined Pryor to direct the Argentine Project.
They were installed in 1986 after having successfully entered the Central American markets, and in Brazil.
They do it first with a local in Cabildo and Mendoza, the full Belgrano neighborhood and another later in San Isidro. Both locations with the capacity to serve 4,000 and 5,000 people per day respectively, and to employ more than 500 people together. The two men have opened independent chains through two joint ventures with the parent company, where they control 51% of the shares: this is the classic scheme by which McDonald's is installed abroad (see franchise regime).
Before opening the premises, a team of experts was sent to the country to take samples from all kinds of suppliers:from refrigerators to dairy and plastic packers. In Chicago, tests were carried out to analyze the quality and production capacity of these Argentine suppliers in order to maintain the universal standard required by the company. But sometimes problems arise. Such is the case of an Argentine supplier that sold raw materials for one of its main products: French fries; So McDonald's sent them a shipment of "Russet Idaho Potatoes" seeds from the US for the man to grow in his fields in Balcarce. The Frigorífico Río de la Plata dedicates 10% of its hamburger production to them today. And the directors of the company assure that there will be a day when they will only sell hamburgers to McDonald's. For other providers the advantages are obvious. (see Suppliers)
The opening in November 1987 of the restaurant on Florida Street, which with more than 570 seats and an investment of three and a half million dollars could be the largest fast food place in the world. Currently, with 172 stores, McDonald's has already settled in the provinces of Buenos Aires (including strategic places such as La Plata and Mar del Plata), Mendoza, Córdoba, Santa Fé, Tucumán, Neuquén and Entre Rios (Paraná).
McDonald's decision to land in our country was a sign of confidence. And this bet is getting stronger every day.
Seeking to always be where its customers are, McDonald's opened its premises, in April 1999, in a historic building located in front of the Obelisk, symbol of the city of Buenos Aires.
This place pays tribute to the Argentine culture, recovering one of the most mythical corners of Buenos Aires. This shows that McDonalds is here to stay.
It is not a fundamental requirement to work at McDonald's to have an excellent academic background. Much less than half of executives in the US have a college education. The company prioritizes other values, starting with loyalty, dedication and service, which means that, far from having a conventional structure, employees behave like parts of the same family.
When the directors of the company say that they keep "doors open" it is not false. According to Pryor, “In headquarters there are no doors. One can reach the threshold of the President's office and see if he is working. If he is not Busy, he will surely invite him to come in ». He also adds: »… The trio that makes up the head of McDonald's, the president, the general manager and the operations manager, call their offices" the hairdresser ", because they are always ready to chat…"
Along with the help of their managers, Pryor and Staton, they have endeavored to reproduce this culture in Argentina and although they have suffered abandonment by more experienced men and women, in general the morale of the employees is very good. Many of the local employees are university students. For most, this is their first job and they can only keep it thanks to the employment policy, which allows them to work only the hours they need.
Another key of Pryor and Staton is to promote good communication: at McDonald's there is a mailbox of good ideas, the possibility of writing a confidential letter to the presidents of the company, there are anonymous surveys and every three months they hold meetings with the groups to pose and seek solutions to problems.
At first it was feared that young Argentines would feel belittled by working with their hands, cooking hamburgers, and carrying garbage cans. Martín Reynal, 26, manager of the Belgrano store, says: »… when the boys saw us fixing tables and cleaning bathrooms, they felt no prejudice for going ahead and doing the same for their client. The main task of a manager is to know how to motivate his team, and the best way is to know what the frustrations of his employees are. If our employee is happy, he will know how to convey his satisfaction to the consumer. The Argentine consumer is eager for good service. Our attitude towards them is to say 'thank you for coming' ……
Despite this informal context, McDonald's employs an extremely rigid operating system. There are specific rules for doing everything from setting the distance from the wall to the refrigerator and the exact temperature at which potatoes should be fried. All these methods are detailed in special manuals. While the system is strict, employees work in a comfortable environment, where innovation and creativity are rewarded. For example: in addition to serving the typical North American apple cakes, in Argentina they also come with quince jelly. In Thailand, in addition to chocolate and vanilla milk shakes, McDonald's also come prepared, with fruit. But it is not always so easy to innovate in this way. Staton states:«… The possibility of introducing fish fillets using hake has been studied. But there is no supplier that manages to produce them according to the strict specifications of the company. ” (see EndoMarketing)
One of McDonald's main challenges has been to faithfully reproduce the quality and variety of all its products.
COMPETITIVE KEYS TO SUCCESS
Business vision:
- Dominate the global food service industry, through customer satisfaction. Be recognized by employees, customers, competitors, suppliers, investors and the general public. Promote innovation and creativity. Anticipate market changes and potential problems that can be generated.
Definition of your business:
They are a limited menu of fast food, good taste and consistent quality, fast and accurate service, great value, exceptional customer service, convenient locations, and global market coverage
Mission :
Quickly serve a limited menu of appetizing hot food in a nice clean restaurant for a good price.
Corporate goals:
Achieve 100% of total customer satisfaction every day in every restaurant.
Company Target:
One of McDonald's main client groups is young couples with several children. Given the aging population, Mc Donald's holds particular interest in the adult market.
Mc Donald´s positioning map:
STRATEGIES APPLIED IN THE COMPANY
Mc Donald´s applies the same competitive strategy in all countries: be the first in the market and establish its brand as soon as possible through intense advertising.
Total Leadership in Differentiation: "more for the same wreck". The company tries to differentiate its products and services by creating characteristics perceived as unique and important by consumers.
Its market share and profits grew due to convenience, value and execution strategies.
McDonald´s also performs value activities in the most efficient way possible in order to reduce operating costs, thus increasing its benefits.
Alternative strategies:
Integration strategies:
- Forward integration: as they exercise control over their franchises worldwide. Backward integration : integrates value chains with that of its suppliers, thus coordinating their activities and achieving both benefits from it.
Intensive strategies:
- Market penetration: since strategies are developed to increase sales, such as promotional activities, etc. Development of new products:
ANALYSIS OF COMPETITIVE FORCES
McDonald's will only be effective to the extent that it succeeds in establishing a partnership with its employees (EndoMarketing), franchisees, suppliers, to provide exceptionally high customer value.
Providers:
McDonald's policy with respect to its suppliers is to develop long-term and mutually beneficial relationships that allow the company's quality standards to be maintained. In 1998 McDonald's purchased goods and services for more than $ 100 million, mostly provided by national companies.
McDonald's makes its contribution to the growth of the field, consuming annually a large quantity of Argentine food products, including 8,000 tons of beef, 100 million breads, 900 tons of tomato, 1,000 tons of lettuce, 4.5 million liters of ice cream and 8,200 tons of potatoes.
87% of the staples on the McDonald's menu - meat, potatoes, bread, lettuce, and ice cream - are purchased from Argentine companies. This data not only confirms the confidence of the company in the national industry, but also reaffirms its vocation to promote its growth and expansion.
From raw materials, and throughout the production process (value chain), McDonald's is committed to always providing the highest quality, safety, freshness and flavor in all its products.
Franchisees
McDonald's is successful because it has a system of corporate standards and individual opportunities and the Franchisee is integrated into it with clear and shared values and expectations.
McDonald´s conceives the Franchise system as a true association between an independent entrepreneur and the Company, whose prestige and experience are recognized worldwide. 66% of its restaurants are franchises.
Competition:
McDonald's also faces stiff competition from many fast food restaurant chains. Such is the case of Taco Bell, Wendy´s, Burguer King, Lomiton, Kentucky Freíd Chicken, Pizza Hut, among others, which lowered their prices while trying to take advantage of the attractive menu and the fast service of McDonald´s.
In addition, fast food is now sold in reheatable containers in supermarkets, warehouses, and even at service stations. Even so, Mc Donald´s leads the fast food industry.
Potential competitors:
McDonald's A leader be the market, and owning most of it, is very unlikely to enter a competitor with human sufficient financial resources, technological, or how to deal with this monster of the business as it is McDonald 's.
Customers:
For many years, one of McDonald's main client groups consisted of young couples with several children. Today, people marry at an older age and families have fewer children, so the traditional customer base for this chain has been eroded.
Another condition is that, as he became more concerned with health, the consumption of beef has been reduced.
Michael Quinlan, the head of McDonald´s, maintains that customers "are more interested in taste, comfort and value… We are giving customers what they want. "
Each member of the organization puts all their passion to serve clients so that they always feel as comfortable as possible.
For this, high quality ingredients are used, premises with strict hygiene standards, superior customer service and a family atmosphere where children, youth and adults have their own space
McDonald's has a loyal customer base of more than 40 million people per day around the world.
Total quality management:
VALUE CHAIN IN THE COMPANY
McDonald's monitors product and service quality through ongoing customer surveys and dedicates a lot of effort to improving hamburger production methods to simplify operations, lower costs, accelerate service, and deliver greater value to customers..
McDonald's employs an extremely rigid operating system. There are specific rules for doing everything from setting the distance from the wall to the refrigerator and the exact temperature at which potatoes should be fried. All these methods are detailed in special manuals.
The company brought to this new market an original fast service concept, where the details are carefully taken care of to provide the consumer with an excellent product.
McDonald´s managed to differentiate itself from its competitors through the integration of its value chain with that of its suppliers and buyers, thus forming a whole interrelated system that allows it to achieve maximum benefits.
SWOT Analysis of Mc Donald´s:
PRICE POLICY IN MC DONALD´S
Pricing methods used:
- Affordable pricing: a high-quality product is offered through promotions at a low price. Pricing according to the value perceived by customers.
Promotional pricing technique used:
Psychological discounts: a relatively high artificial price is set. With its corresponding discount, which represents a significant psychological saving for the client. Example: Big Mc Before: $ 7, Now: $ 5; Savings: $ 2
INTERNAL POLICIES USED
Social responsability
Community
Palais de Glace Award for New Painters 1999
McDonald's together with the Secretary of Culture of the Nation and the Association of Friends of the Palais de Glace launched for the third consecutive year this award dedicated to artists from 16 to 35 years old, with the purpose of supporting their creative work. This year there was a Special Prize for children under 15 years old. More than 640 works were presented and part of them were exhibited at the Palais de Glace.
Responsibility for the health of its clients:
THE McDONALD 'S MENU is made up of meat, bread, potatoes, dairy and vegetables, which belong to the main food groups that our body needs:
- Carnes, pescados, aves y huevos (ricos en proteínas, grasas, vitaminas A, B y D y buena fuente de minerales con hierro, potasio y fósforo). Ejemplo: hamburguesas, McPollo y McNuggets®.Grasas y aceites (aportan grasas y vitaminas A, D y E. Ejemplo: salsas y aderezos.Cereales, leguminosas y tubérculos (contienen proteínas y fibra con vitaminas A, D y E. Ejemplo: panes y papas.Hortalizas y verduras (de vital importancia en la dieta, aportan vitaminas C y A, carbohidratos, fibra y sales minerales) Ejemplo: ensaladas.Leche y derivados (ricos en vitaminas A, B y D, calcio y proteínas. Ejemplo: sundaes y helados.Frutas (proporcionan vitamina C, carbohidratos, fibra y sales minerales. Ejemplo: jugo de naranja.
"Let's face it: Burgers, fries, eggs, and sausages are not exactly at the beginning of recommendations for today's diet menu."
Youth Special Skills Job Placement Program:
More than seven years ago, at McDonald's Argentina the
Job Placement for Young People with Disabilities. The project emerged from the hand of the Discar Foundation who today coordinate this program, and together with institutions such as the Surco Foundation in Buenos Aires and others in the interior of the country, make it possible for more than 100 young people with special abilities to be working in their premises.
The objective of the Program is to give young disabled people the opportunity to enter the world of work, promote the development of their abilities, and become aware that the person with disabilities can enter the world of work, carrying out tasks efficiently and with good performance, enjoying the same opportunities and benefits and respecting the corresponding obligations as the rest of the employees. Young people with different types of mental disabilities participate in this Program. Those who apply are interviewed by professionals from the Foundations, who evaluate through interviews whether the young person's profile is suitable for working in the local area. This modality assures both the young person, his family and the Company that the insertion is a success.The Foundations have a relevant role in this program as they serve as professional support and support in monitoring young people.
Throughout this period, the results have exceeded the general expectations and the experiences are highly gratifying both for the youth, their family and for the Company. Every day you learn from them, their high level of responsibility, their desire to learn and grow, their ability to join groups and work as a team. Many of them have earned the Employee of the Month distinction, and others have been promoted to Trainers demonstrating their high standards, commitment and passion. At McDonald's they are convinced that this Program is a success, and for this reason they are committed to continuing to integrate young people with special abilities into their families to give them a real opportunity for job placement.
Agreement with the University of Morón :
The University of Morón and McDonald's signed an agreement for the development of joint educational projects and announced that the first step of this agreement will be the implementation of a new career called "University Technician in Retail Marketing". This two-year career aims to train professionals in the field of retail. In particular, the students who make up the McDonald's management team will be able to apply for scholarships for the course of the race and all the personnel who register will enjoy a special bonus in the fee.
Professionals of the Future:
McDonald's offers possibilities for everyone. The principles of Quality, Service and Cleanliness start with your people. To achieve this, they have different recruitment, selection and development programs:
- a) Training program for future local managers:
In order to be in charge of a McDonald's store, it is essential that you train for it. This training program is the best in the industry, it is progressive and structured in such a way that theory and practice are combined, accompanying learning on the premises with courses and seminars in its Training Center. They will train you to become an effective manager, a Leader with the skills to recruit and select people, transmit knowledge, motivate and delegate, build sales and profits. The first three months will serve to incorporate you into the business, training you to learn the tasks corresponding to all the positions of the employees. After this stage,According to the skills learned and performance, he may be promoted to positions with more responsibility with salary increases within the program. Step by step you will reach the goal: Manage a McDonald's Store. This program lasts approximately two years.
The requirements to apply are:
- Be between 23 and 30 years of age. Secondary degree as minimum training. Ability to work on rotating shifts. Preferably have previous experience in service areas, retail, customer service. Possess teamwork ability, service attitude, results orientation, excellent communication., leadership, commitment and integrity.
b) «Fast Track» program for professionals:
Another program that enables you to reach the position of Local Manager is the "Fast Track" Program for Professionals.
The basic difference with the previous one is that it is faster: it lasts 9 months, in addition to other requirements to apply:
- Be between 26 and 33 years old Tertiary degree as minimum training Ability to work in rotating shifts Preferably have previous experience in service areas, retail, customer service Possess teamwork ability, service attitude, results orientation, excellent communication, leadership, commitment and integrity Management skills
Your Commitment to the Environment
McDonald's feels that it has a special responsibility to protect the environment for future generations. They realize that in today's world, a business leader must be an environmental leader.
Its commitment and environmental behavior is guided by the following principles:
REDUCE: They take actions on the weight and / or volume of the packaging they use. This can mean eliminating packaging and making it thinner and lighter, changing manufacturing and distribution systems, adopting new technologies, and using alternative materials. They are continually searching for materials that are environmentally preferable.
REUSE: They implement reusable materials, when possible, within their facilities and distribution systems, as long as they do not compromise safety and hygiene standards, customer service and expectations, and are not counteracted by other environmental and safety interests.
RECYCLE: They are committed to the maximum use of recycled materials in the construction, equipment and operations of their restaurants.
McDonald's buys recycled materials to build and remodel its restaurants and asks its suppliers to supply and use recycled products.
McDonald´s USA and the Enviromental Defense Fund celebrated the tenth anniversary of their alliance by announcing important achievements in solving environmental problems.
- The reduction of 150,000 tons of packaging due to the redesign and reduction of the material used in the napkins, glasses, containers of potato chips, sandwich wrappers, etc. The purchase of products made from recycled materials for more than 3,000 million dollars, both for the operation such as the construction of McDonald's stores. The recycling of more than 2 million tons of corrugated cardboard, the material most used to transport McDonald's products to the 12,500 stores in the chain in the US, thus reducing the waste of the premises by 30%.
CONCLUSIONS
At McDonald's, Quality, Service, Cleanliness and Value are the pillars of daily work, foundations that have allowed it to offer a unique experience.
The company brought to this new market an original fast service concept, where the details are carefully taken care of to provide the consumer with an excellent product. For this, high quality ingredients are used, premises with strict hygiene standards, superior customer service and a family atmosphere where children, youth and adults have their own space.
McDonald's sparks a silent revolution by entering a new market. It immediately sets a new standard in fast food service, provides opportunities for young people, and stands out for offering a new standard in the staff training system.
The impression I had when entering various McDonald's stores was good attention, since the people they serve are trained to smile. A negative aspect to highlight is the influx of people at peak hours, an aspect that is really uncomfortable for people like me.
Finally, I believe that the marketing policies carried out by this company are in accordance with the needs of the market, for this reason Mc Donald´s is a leading company in its field, achieving constant and persistent successes.
Bibliography consulted:
- Administration and strategy (Hermida / Kastika) Ediciones Macchi.Marketing (Kotler) Editorial Prentice May.Fundamentals of Marketing (Stanton / Etzel / Walker) Editorial Mc Graw Hill.Business strategies for an unexpected future. (Rodolfo Wenceslao Salas). Publishing WinRed.ComAdministration, a global perspective (Koontz / Weihrich) Publishing Mc Graw Hill.Strategic administration. Concepts and Cases (Thompson / Strickland) Mc Graw Hill.
Consulted web pages:
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