McDonalds

INTRODUCTION TO MANAGEMENT

Table of Contents

1 EXECUTIVE SUMMARY...................................................................................................................2

2 INTRODUCTION TO McDonalds.......................................................................................................3

2.1 MISSION & VISION....................................................................................................................3

3 MEGA ENVIRONMENT.....................................................................................................................6

3.1 ECONOMIC SEGMENT..............................................................................................................6

3.1.1 NET DISPOSABLE INCOME..............................................................................................7

3.1.2 INTEREST RATE.................................................................................................................7

3.1.3 UNEMPLOYMENT RATE...................................................................................................7

3.1.4 INFLATION..........................................................................................................................8

3.1.5 GROSS DOMESTIC PRODUCT (GDP)..............................................................................8

3.2 INTERNATIONAL SEGMENT...................................................................................................9

3.2.1 TRADE BARRIERS..............................................................................................................9

3.2.2 TRADE RISK......................................................................................................................10

3.2.3 TRADE BENEFITS.............................................................................................................10

4 TASK ENVIRONMENT.....................................................................................................................11

4.1 SUPPLIERS.................................................................................................................................11

4.2 COMPETITORS..........................................................................................................................13

5 LEADERSHIP.....................................................................................................................................15

5.1 7 TRAITS ASSOCIATED WITH LEADERSHIP......................................................................15

5.2 CORPORATE & WORK CULTURE.........................................................................................17

5.2.1 WORK CULTURE: McDonalds Work Culture is as follows given in their website:........17

5.2.2 MOTIVATION....................................................................................................................18

5.2.3 TRAINING & EDUCATION..............................................................................................18

6 CONCLUSION....................................................................................................................................19

7 REFERENCES....................................................................................................................................20

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INTRODUCTION TO MANAGEMENT

1 EXECUTIVE SUMMARY

This case study is to research the factors that affect or have influence on McDonalds.

Before the company’s’ analysed this report will give an overview of McDonalds background and

history. The mega environment and task environment of the company will be discussed in this

research. Furthermore McDonalds current leader, Jim Skinners’ leadership skills will be

discussed.

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2 INTRODUCTION TO McDonalds

The long journey of McDonalds started with two brothers Dick & Mac McDonalds single

drive-in restaurant in San Bernardino, California, in 1940. In 1948 they closed and reopened the

restaurant to sell only hamburgers, milkshakes & French fries. In 1954 the entrepreneur and

milkshake-mixer sales man, Ray Kroc acquired the franchise of McDonald’s restaurant. In effect

Kroc opened his first restaurant in Illinois, Chicago and gave birth to “McDonald’s

Corporation”. Since the birth McDonalds have emerged as multinational company & the leading

fast-food chains in world with more than 33,000 local restaurants serving more than 64 million

people in 119 countries each day.

2.1 MISSION & VISION

Mission is a set of organizational goals that include both the purpose of the

organization, its scope of the operations and the basis of its competitive advantage. In other

word it reveals what an organization wants to be and whom it wants to serve, it answers the

question “What is our business”.

The mission statement of McDonalds is given below:

“McDonald's brand mission is to "be our customers' favorite place and way to

eat." Our worldwide operations have been aligned around a global strategy called the

Plan to Win centering on the five basics of an exceptional customer experience – People,

Products, Place, Price and Promotion. We are committed to improving our operations and

enhancing our customers' experience.”

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Vision is a goal which is massively inspiring, overarching and long-term. This

can be an organizational goal(s) that evoke(s) powerful and compelling mental images.

Vision answers the question “What do we want to become”. Below is the vision

statement of McDonalds.

“Our vision is to provide the world’s premier quick service restaurant experience.

Being the best means providing outstanding quality, service, cleanliness and value.”

McDonalds brand promise is: To provide Simple Easy Enjoyment to every

customer at every visit.

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These following core values guide McDonalds actions they we strive to achieve their mission.

Logo Description

We place the customer experience at the core off all we do

Our customers are the reason for our existence. We

demonstrate our appreciation by providing them with high

quality food and superior service, in a clean, welcoming

environment, at great value. Our goal is outstanding QSC&V

for each customer every time.

We are committed to our people

We provide opportunity, recognize talent, and develop leaders.

We believe that a diverse team of well-trained individuals

working together in an environment that fosters respect and

drives high levels of engagement is essential to our continued

success.

We believe in the McDonald’s system

McDonald’s business model, depicted by the “three-legged

stool” of owner/operators, suppliers, and company employees,

is our foundation, and the balance of interests among the three

groups is key.

We operate our business ethically

Sound ethics is good business. At McDonald’s, we hold

ourselves and conduct our business to the highest possible

standards of fairness, honesty, and integrity. We are

individually accountable and collectively responsible.

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We give back to our communities

We take seriously the responsibilities that come with being a

leader. We help our customers build better communities,

support RMHC, and leverage our size, scope and resources to

help make the world a better place. We are committed to

sustainable business practices and are determined to conduct

our operations in a manner that does not compromise the

ability of future generations to meet their needs

We grow our business profitably

Our stakeholders support our ability to serve our customers. In

return, we work to provide sustained, profitable growth for all

members of our system and our investors

We strive continually to improve

We consider ourselves a learning organization that is green and

growing which anticipates and responds to changing customer,

employee, system and community needs through constant

evolution and innovation.

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Source: http://www.mcdonalds.com.my/abtus/corpinfo/mission.asp

INTRODUCTION TO MANAGEMENT

3 MEGA ENVIRONMENT

Mega environment consists of factors that can have dramatic effects on company

strategy. Company has little ability to predict the events in mega environment and therefore less

ability to control them. General environment is divided in to five elements: economic,

international, technological, sociocultural and legal-political element.

Two mega environment factors which have effects on the success of McDonalds will be

discussed.

3.1 ECONOMIC ELEMENT

The state of the country’s economy has an impact on all companies, same applied for the

McDonalds all around globe. Economic factors which have a direct impact on potential

attractiveness of McDonald’s strategies.

Some of the key economic factors which affect McDonalds Internationally are analyzed

on the next page.

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3.1.1 NET DISPOSABLE INCOME

Disposable income is the amount of the money households have

available for spending & saving after deducting income tax. Disposable

income is a major factor which effects McDonalds sales and revenue.

When the net disposable income of customers or people increases, they

spending power of consumers will increase thereby increases the

spending of consumers on McDonald’s products. As more consumers

purchase or McDonald’s products, McDonalds sales figures will

increase, thus rise in their net income and vice versa.

3.1.2 INTEREST RATE Bank loans and finance companies are very important for McDonald’s

investments and for other purposes. When there is a high interest rate the

amount the company has to repay as a loan will be higher and this will

reduce the company’s investments and finances for fixed assets. This

will have same effect for McDonalds.

As McDonalds sell their shares in stock market and allow people to

invest in their business, interest rates will affect how much money people

invest in McDonalds and its stock.

3.1.3 UNEMPLOYMENT RATE

When the unemployment rate of a country is relatively low, it means

that there are more people who are working thereby generating more

income. This leads consumers to have a higher disposable income thus

increasing the sales of McDonald’s products and their revenue and vice

versa.

In January 2010, the fast-food giant reported that their sales figures

slipped. Analysts said that it was mainly due to the unemployment rate in

U.S

There is also a benefit for McDonalds when one of their franchise

countries when unemployment rises. When unemployment rises,

McDonalds can hire staffs at a cheaper wages.

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3.1.4 INFLATIONInflation is the rate at which the general level of prices for

goods & services is rising and subsequently purchasing

power is falling. By the definition when the raw materials

or core ingredients prices of McDonalds rises, it will

affect their cost of production and thus rise in the final

price of the product. This will have a negative effect on

company as it will lose its customers due to high prices

and reducing their net income. This will also reduce their

shares in global market & Vice versa.

In April 2011, McDonalds warned about higher food

inflation. Shares fell 1.5 percent after McDonalds said it

planned to offset some, but not all, of its higher food costs,

with small price increases throughout the year.

3.1.5 GROSS DOMESTIC PRODUCT (GDP)

GDP is the monetary value of all the finished goods and

services produced within a country's borders in a specific

time period. GDP is commonly used as an indicator of the

economic health of a country, as well as to gauge a

country's standard of living. As mentioned, when a

country’s GDP is high, the standard of living of people

will be higher, thus households have higher spending

power. This will increase the sales and revenues of

McDonalds in that country. A high GDP will also interest

investors to invest in the company and will be better

market to sell its shares at the best price. And vice versa.

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3.2 INTERNATIONAL ELEMENT

First let's ask our self-what's mean's international management?

"A process of accomplishing the global objectives of a firm"

When we can say this firm it's international?

It's an enterprise that has operations in two or more countries.

As we know McDonald's is the leading global foodservice retailer with more than 33,000 local

restaurants in 119 countries around the world,

3.2.1 TRADE BARRIERSTo be international restaurants it's not that easy there's many Hindrances in the export and

import to other countries.

Customs inspection, they carefully examining the foods they see their validity, and if

the result is expired it you will lose the charge and fines on that.

Cost for shipping, it's expensive especially in seasons in the same time any accident can't

happen in the way.

International competition, always the international market they have a good quality the

only danger faced by the local market for many reasons

The international they have fixed price they can't go down more than that because they

calculated, import and customs to get the profit, in addition local market always support by the

government, Commercial law gives more powers of local restaurants from international

restaurants.

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3.2.2 TRADE RISKTo be international restaurants it's all about time everything must come on time.

When import the food it will in fridge but there's limited time to be there after that it will

be expired.

3.2.3 TRADE BENEFITSAs we have a risk In contrast we have benefits

Maybe McDonald found good supplies for materials cheaper than USA.

They can find also from countries a famous in technology to support them to connect the

restaurant together.

Take the experiences of other countries.

Some countries they allowed to import without customs.

They build a trust with other countries if now McDonald want to open a new business he

I'll acceptable anywhere around the world.

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Source: http://www.bme.eu.com/news/mcdonalds-across-the-world/

INTRODUCTION TO MANAGEMENT

4 TASK ENVIRONMENT

Task environment or can be called as specific environment is an external

circumstances that a company has to deal with. The environment can be changed as the time

goes by so this will directly impact to the decisions making and the actions the manager will

take and eventually have an impact on the company’s ability to achieve goals. Each

company has their own unique task environment as they have different target markets so

they have to consider with different factors. The elements of McDonald’s task environment

are considered as: customers, suppliers, competitors, pressure groups, employees and

government agency.

From the above mentioned elements suppliers and competitors which have high

effects on the success of McDonalds will be discussed.

4.1 SUPPLIERS ELEMENT

Suppliers from the word of supply which mean make (something needed or wanted)

available to someone, provide. The plural form of supply is supplies which mean a stock or

amount of something supplied or available for use and suppliers is the person or the company

that initiated the supply. For the company, suppliers are one of the most important parts as they

are who keep the needs of the company flown in continuously, not only goods but they also

provide financial and labor inputs. By knowing the important role of suppliers, McDonalds put

their suppliers as “The Three-Legged Stool”.

“The Three-Legged Stool” is the way McDonalds makes a strong foundation for their

business. Those McDonalds’s three important pillars are their employees, their franchisees and

their suppliers. Now, we focused on McDonalds’s supplier which providing food, packaging and

other products and services.

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McDonalds has a high requirement for their suppliers. As they want a great quality to

provide a great taste for their foods, McDonalds needs the finest and freshest ingredients. So, to

achieve the standard their suppliers have to fulfill few requirements such as the food safety

policy, have a standardize preparation, high social, environmental and animal welfare standards

and namely leading company. Some of McDonald’s suppliers are given below.

FOOD SUPPLIERS DRINK & BEVERAGES SUPPLIERS

Keystone Foods – Chicken McNuggets Coca-ColaLopez Foods – pure beef patties Nestle100 Circle Farms – potatoes Gavina Gourmet CoffeeDinding Poultry FonterraTPC Plus – eggs Dutch LadyCargill

McDonalds as a well-known fast food company has a standards about their food quality.

As we can see, McDonalds has suppliers who could be trusted, not only trusted by McDonalds

but also with their customer. This trust based on the supplier performance which already proved

with a certification and based on how many loyal customer they have, for example one of the

McDonalds supplier, Coca-Cola, their products are certified, well-known and most favored soft

drink by everyone.

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4.2 COMPETITORS ELEMENT

“……. In management terms, the definition of competitors means any person or entity

which is a rival against another. It is also an organization in the similar industry which offers

the same product or service……”

McDonalds has two different types of competitors, direct competitor and indirect

competitor. McDonalds faces more competitors directly compared to indirect competitors. One

of the examples of direct competitors of McDonalds are Burger King and Wendy’s, whereas

indirect competitors are Dominos, Pizza Hut and many more.

Company McDonalds Burger King

Cost Reasonable Reasonable

Promotions Various Seldom

Franchise/Outlets Worldwide Worldwide

Customer Service Good Satisfying

Table 1 difference between McDonalds and Burger King

Let’s say we take Burger King as an example to show how McDonalds overcome this

company. Table 1 above shows the difference between McDonalds and one of the closest direct

competitors that McDonalds is facing, Burger King. In terms of cost for both companies,

McDonalds is just as reasonable compared to Burger King. McDonalds has plenty of promotions

compared to Burger King which do have promotions but not as many as McDonalds. This is a

marketing strategy that McDonalds uses to overcome their competitors.

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Speaking on franchise/outlets and customer service, McDonalds overcome the

competitors with worldwide franchise and outlets everywhere, ensuring good customer service

which makes the company even more successful. No matter wherever customers are, there are

always McDonalds everywhere at any time. Therefore, it lots of McDonalds outlets around the

world. McDonalds also places great value on its employees which is one of the reasons why

McDonalds is consistently known as one of the top companies to work.

It is clear that McDonalds faces many competitors at the same time and was able to

overcome them and be the world famous best fast food chain. Thereby McDonalds have

competitive advantage over their rivals.

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Source: http://www.princeton.edu/~ina/infographics/starbucks.html

INTRODUCTION TO MANAGEMENT

5 LEADERSHIP

As McDonalds Vice Chairman and Chief Executive Officer, Jim Skinner

leads the world’s largest fast food company with 33,000 restaurants in 119

countries. Upon, becoming CEO in 2004, Jim Skinner set three top priorities for

his leadership: long-term sustainable growth for the company; talent

management and leadership development; and promoting balanced active

lifestyles.

5.1 7 TRAITS ASSOCIATED WITH LEADERSHIPDrive: exhibit high effort level As McDonalds Leader Jim Skinner has worked

very hard on making the business successful and

achieving its goals. So we know he has the high

effort level.

Desire to lead: leaders have strong desire to influence

& lead others.

As President and Chief Operating Officer

of the McDonald’s Restaurant Group, skinner led

the operating for all of the company’s global

restaurants.

Honesty & Integrity: leaders build trusting relationship

within company, followers & outside relationships.

Consistency in word & deed

Skinner previously worked as Executive

Vice President and International Relationship

Partner for Central Europe, Middle East, Africa,

and India and has made trustworthy relationships

around the world.

Self-confidence: leaders have to show their confidence

in rightfulness of company’s goals & strategies.

Skinner has always been confident with the

business strategies and made McDonalds achieve

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its goals.

Intelligence: leaders must be intelligent enough to

gather, synthesize & interpret information and need to

be able to create visions, solve problems & make

correct decisions.

Skinner is one of the three architects of

McDonald’s worldwide revitalization plan

launched in 2003 that turned the company around

and re-focused on customer strategies, business

disciplines and close global alignment. As he

became CEO he made his top priorities as: talent

management and leadership development; and

promoting balanced active lifestyles.

Job Relevant Knowledge: they should have high degree

of knowledge about company, industry and technical

matters.

Skinner began his career in 1971 as a restaurant

manager trainee and since then has held numerous

leadership positions. Skinner served as Vice

Chairman of McDonald's Corporation, and had

management responsibility for APMEA and Latin

America, in addition to overseeing most corporate

staff functions. Since the beginning of 2003, he

was accountable for McDonald’s Japan Limited.

Before becoming Vice Chairman, he served as

President and Chief Operating Officer of the

McDonald’s Restaurant Group, with operating

leadership for all of the company’s global

restaurants. With these experiences he has lot of

knowledge about McDonalds and its operations.

Extraversion: leaders are energetic & lively people. McDonalds have involvement in youth sports,

local charities, and events that inspire the world,

giving back is an essential part of the way the

company operates every day.

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5.2 CORPORATE & WORK CULTURE

When analyzing McDonalds Leadership, it’s useful to analyze their work culture and how it’s

maintained.

5.2.1 WORK CULTURE: McDonalds Work Culture is as follows given in their website:

Working Here

We believe the words “Welcome to McDonald’s” should apply to our employees just as much as

our customers. We’re proud of our food, and we’re just as proud of the jobs we create.

Flexible Schedules

We believe in flexible schedules that fit into the way you live your life and can help you reach

your goals. We’ll also give you the mentorship and guidance you need to succeed.

Celebrating Diversity

We believe that different people, from different backgrounds, with different interests, combine to

make our ideal work force. McDonald’s is committed to diversity in hiring—actually, we’re an

industry leader—from our restaurants to our supplier networks to our owners.

Empowering You

We believe in giving you the tools you need to succeed, whether it’s the chance to own your own

restaurant or tackle the corporate ladder. To be the best company we can, we have to offer the

best opportunities, and we’d like to believe that some of the best ones around are right here.

Source:

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5.2.2 MOTIVATIONMcDonalds have strong motivational factors for their employees by providing safe and

clean environment to work, flexible schedules and high wages. One of the most important

motivational elements used by McDonalds is Best Employee award they give each month.

Each year, the top 1% of McDonald’s store managers are honored with Ray Kroc award,

which recognizes their passion for perfection

5.2.3 TRAINING & EDUCATIONMcDonald’s corporate management believes in training and leadership at all levels.

McDonalds provide training and internship programs in their world renowned Hamburger

University. McDonalds founder Ray Kroc once said, “if we are going to go anywhere, we’ve

got to have talent. And I’m going to put my money in talent.” McDonalds & Hamburger

University continues to promote that philosophy every day.

In 2007, Dow Jones/Marketwatch named Skinner “CEO of the Year,” and Restaurants &

Institutions magazine bestowed him “2007 Executive of the Year.” In 2008, Skinner was named

one of “America’s Best CEOs” by Institutional Investor magazine. Chief Executive magazine

named Skinner the "2009 CEO of the Year" and he was also named as one of Barron’s “30 Most

Respected CEOs.”

From the above analysis n discussion we can conclude that McDonalds will grow & be more

successful in the future under the current leader, McCEO Jim Skinner.

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6 CONCLUSION

Based on the analysis done, it is recommended for McDonalds to forecast their mega &

task environmental factors, as these factors are indirect and it’s very difficult to anticipate. The

strategies used by McDonalds in tackling the environmental issues are very effective. As

McDonalds is a multinational company they need to provide same services and products all

around the globe. Furthermore McDonalds need to improve their marketing strategies as there is

high level of competition in fast food industry. In conclusion is doing very well compared to the

threats they have been facing through environmental factors and they need to improve their

strategies and improve the success of the business internationally.

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