McDonald’s is a worldwide fast-food franchise and a multinational corporation with more than 33,000 restaurants spread across 119 countries (Our Company-About McDonald’s 2011). The presence of this food retailer in many countries has helped many feel at home especially in an unfamiliar territory. In the United States where the company was started, there are over 14,000 restaurants. McDonald’s has over 400,000 employees all over the world. This company has stood the test of time having been started in 1955 by Ray Kroc. Different McDonald’s restaurants are owned by different business people across the world. It is not however easy to acquire one of these restaurants. They require a great amount of experience and any potential purchaser should have not less than 330,000 dollars in non-borrowed personal wealth. Any McDonald’s restaurant can also be owned by an affiliate or a franchisee or the company itself. McDonald’s market has continued to grow and some economists have argued that the business has a recession proof market. There is a lot that can be said about the McDonald’s franchise. With revenue of over billions of dollars, it can be ascertained that there are many business lessons as well as other concepts to be learnt from the McDonald’s company. Facella and Genn (2008) present the powerful lessons to be learnt from McDonald’s. They intimate that there is great teamwork, integrity, creativity and communication at the corporation. They present these perspectives from the insider point of view, owing to the fact that Paul Facella was for 11 years the regional vice president for New York. One of the ways in which it was stipulated that McDonald’s does cost cutting is through purchasing their potatoes from corporate farmers. This means that the company is able to avoid price scraping that would inevitably have been encountered had they been buying from the commodities market.
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The McDonald’s company mainly specialises in the sale of fast-foods such as hamburgers, chicken, french fries among many other food items. The corporation began in 1955 but the McDonald’s restaurant dates back to 1940. The first McDonald’s restaurant was started in California by brothers Maurice and Richard McDonald. This restaurant was a little burger stand managed by the brothers. Ray Kroc later bought the chartered restaurant and opened the first restaurant under the new company in Chicago, Illinois. Later on Kroc bought out the equity of the MacDonald brothers and expanded the company worldwide (Kroc and Anderson 1977). Schlosser (2004) also explains that Kroc was a firm believer in mass production thus the expansion. The McDonald’s company is a public limited corporation whose shares trade in the New York, Chicago, Paris, Swiss and other major stock exchanges. The company boasts of over 40 billion U.S. dollars in sales. The McDonald’s brand is recognised all over the world.
McDonald’s organisational structure is very complex considering it is a multinational company with branches all over the world. The company has its headquarters in Oak Brook, Illinois. Alfino, Caputo and Wynard (1998) explain this structure in their book. Each McDonald’s restaurant is its own organization and the McDonald franchise grows because of the rent, fees and royalties paid by the affiliates and franchisees from all over the world. McDonald is governed by a Board of Directors which has the sole responsibility of overseeing the activities of the company and is the ultimate decision maker. The Board is elected by the shareholders. The company has an honorary chairman, a chairman and a vice chairman who is also the Chief Executive Officer. Each restaurant has its own hierarchy of management. Miller, Eisenstat and Foote (2002 p.37) describe that the organisation at McDonald’s has been keen on novel designs and processes in order to beat competition. In short McDonald’s has cut its niche. McDonald’s has been known to identify its market and maintaining it, what Kim and Mauborgne (2004, p.5) have referred to as ‘finding blue oceans and protecting them.’
Bachelder (2010) explains that any company with multiple branches that are far apart needs to find a coherent system of information management. This is so as to ensure that there is no miscommunication of important information and so as to ensure that information is well collected, stored and available when required. McDonald’s restaurants in Australia which are about 730 have chosen an online information management system to make communication more efficient. This was an upgrade from the use of paper documents, CDs, couriers, e-mails and other traditional forms of information flows. This new system is also a way of reducing administrative costs.
McDonald’s like any other corporation is also trying to do more to be able to increase revenues. In 2008, they announced that the company planned to introduce coffee bars in the Macdonald’s restaurants all across America (Abelson 2005). This move was aimed at increasing sales by one billion dollars. This was also seen as a big move in terms of image change as they would be moving from a fast-food image to one of beverages. With this anticipated big new change MacDonald’s laid out a clear strategy to make the business as successful as the fast-food one.
McDonald’s has also tried to attract new customers by adding healthier foods such as salads to their menu (White 2006). Wells and Haglock (2008) explain that the move towards healthier foods has been occasioned by an aging population and obesity concerns throughout the country. It has been stipulated that McDonald’s has also introduced special Middle Eastern and Chinese cuisine such as teriyaki pork, the Bulgogi Korean pork barbeque, McArabia among others to attract the foreigners to the restaurant. Porter (1990, p.75) also explains that McDonald’s reached out to a new market when they introduced their breakfast menu. This had not yet been discovered by other fast-food restaurants and was quite an innovative move for the McDonald’s corporation.
According to Luxenberg (1985) McDonald’s is involved in corporate social responsibility. The company donates some of its profits to the Ronald McDonald houses which are located all over America. These houses were basically started to help children with chronic illnesses. Odell (2008) stipulates that McDonald’s is also involved in other social responsibility activities such as sustainable recycling and fisheries in protection of the environment, disclosure, animal protection and promotion of small scale entrepreneurs. Porter and Kramer (2006, p.12) explain that McDonald’s has recognised the important relationship between the company and the community and has used its existing resources to benefit the community. It has also been specified that McDonald’s extends care to its employees in order to maintain a good relationship and retain its employees (Handy 2002, p.7).
McDonald’s company is also known for effective operational structure. The ‘Speedee Service System’ allowed for quality, fast and convenient service (Upton 2005). McDonald’s has also maintained a good relationship with its suppliers by dictating fair standards of pricing. This has led to a good relationship between the suppliers and the franchisees. McGahan asserted that this kind of relationship is beneficial to the company because it ensures that there is no imitation and both suppliers and franchisees benefit mutually.
McDonald’s has also used technology to advance its business. Upton (2005) states that McDonald’s came up with a way of making genetically modified potatoes that would create a distinctive taste for all McDonald’s french fries. They also came up with innovative methods of freezing and frying the potatoes. McDonald’s also uses frozen beef pastries for its meat products.
McDonald’s just like any other successful company has had its challenges. Some critics have associated the company with such lifestyle diseases as obesity, mad cow disease, diabetes among others. This has especially been so for children (Tanner 2006). The genetically modified food used at McDonald’s has also been associated with environmental problems and contamination (Schlosser 2004).
McDonald’s has also been accused of mistreating its employees by paying them low wages. Some have referred to jobs at the company as ‘McJobs’. Taylor (2006, p.5) explains that the term ‘McJob’ was invented by Douglas Copland in his book Generation X: Tales for an Accelerated Culture to describe a low-wage job which did not require any skills, and did not have any prestige or future benefits. The bad reputation of the McJob has been extended to the classroom where bad students are warned that if they do not take their studies seriously they would be flipping burgers (Hamilton 2005).
Watson (2006) has also asserted that McDonald’s restaurants in foreign countries have contributed to the erosion of their cultures especially in East-Asia. Critics have claimed that Hong Kong people have today become more interested with the fast-food they can acquire from the restaurants rather than preservation of their cultural experiences.
McDonald’s has also faced the challenge of quality delivery of its products. There have been some mishaps in the past where the food has been found to have various ‘unpleasant surprises’. In 2007 two women sued McDonald’s corporation for 1.7 million U.S. dollars, having found a dead rat in their bacon ranch salad (Whitt 2005). Such incidents have been numerous and have proved to be a challenge to the image of the McDonald’s company. On top of this, the company is also facing competition from other fast-food companies as Burger King.
McDonald’s just like most multinational corporations has been accused of unethical practices. This has made it attract enemies and now there are even the so called anti-McDonald’s activists, one of them being George Ritzer (Pennino 2006). The suffering economic environment around the world has also been a challenge. Reuters (2009) reported that McDonald’s was planning to boost its capital spending in the year 2010, in order to increase spending on new markets and revamp existing restaurants. The increase in health issues awareness has also created a challenge for the fast-food company. Health concerns from people have translated into lower demand for unhealthy options such as hamburgers which are the main products of McDonald’s.
It is evident that McDonald’s corporation has had a high turnover and is hugely successful. The company has come a long way since its inception in 1955. It has shown its commitment to the fast-food industry and is continuing to grow. The company has a strong international presence which has made it a household name. McDonald’s is a market leader and an innovator of many processes that have revolutionised the fast-food industry (Cusick, Martinez and Robinovich 2009). It is through sheer hard work and merit that the company has been able to reach the unprecedented heights that it has. Winter (2005, p.4) explains that the four principles used by Ray Kroc to build the McDonald’s empire were: cleanliness, quality, value and service. Moser (1988) describes that Kroc’s leadership was very influential and even those who did not work with him personally, still felt his presence. This kind of innovative and creative leadership has also been witnessed in successful companies such as Microsoft, Amazon.com and Apple, among others. To deal with its challenges McDonald’s has put in place some strategies such as mass customization to reach out to its consumers. For example Markman (2009) has explained that for every million customers in America there are 47 McDonald’s restaurants. McDonald’s has also involved the media in dispelling the bad image of the so called ‘McJobs’.