Operations Management at McDonald's: Value Proposition, Manufacturing Excellence, Service Quality and Profitability

This report on Operations Management discusses the value proposition, manufacturing excellence, service quality and profitability of McDonald's. It also highlights the current and potential operational challenges faced by the fast food industry and provides recommendations to overcome them.

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Operations Management
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Operations Management 1
Contents
Introduction......................................................................................................................................2
Value Proposition............................................................................................................................2
Established Value Proposition.....................................................................................................2
Emerging Value proposition........................................................................................................3
Process Map.....................................................................................................................................4
Manufacturing Excellence at McDonalds.......................................................................................5
Service Quality and Profitability.....................................................................................................6
Current and Potential Operational Challenges................................................................................7
Recommendations............................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10

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Introduction
The purpose of this report is to enlighten the reader about the information about the company
McDonald’s along with the operational practices initiated in the environment as well. The report
evaluates established and emerging value proposition of the company along with its process map.
The process map helps in evaluating the process with which customer attain products and
services of the company in the market. Further, manufacturing excellence of the company
McDonald’s is analysed in the report. The relation between service quality and profitability of
the company is reported along with challenges and potential recommendations for the
organization. McDonald’s is an American multinational organization that is involved in the
business of fast food. The company has diversified its business in the worldwide market and has
more than US$ 22.820 billion. McDonald’s works effectively in the fast food industry and has an
effective operation system as well. More details about the report are discussed below:
Value Proposition
Customer value proposition refers to the process that explains the benefits that the customers will
receive after procuring the product from the company in the target market. It is the value that
vendor promises the customers to provide with respect to the payment those they will receive in
the market. Customer value proposition is very important for the business as it gives reasons to
the customers to purchase the products, it also provide the information with which the customer
can differentiate their product in the market (Heizer, and Render 2008). Further, the established
and emerging value proposition of the company McDonald’s is discussed below:
Established Value Proposition
Convenient Location: The outlets of the company are situated at place where the customer can
easily reach. The stores and restaurants of the company are present in malls and near grocery
retail stores due to which the customers get to easily approach to the store without going too far.
In fact on highways also the company has opened their stores for the comfortability of travellers.
Convenient location and availability of stores nearby increases the satisfaction level of customers
in the market (Davis, et. al., 2018).

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Fast and Efficient Services: The company also provide fast and efficient services to the
customers in the market. As soon as the customer orders the product, the internal staffs start
preparing the food. The ERP system of the company efficiently delivers the order to be made and
delivered, looking at which the staff prepare the food at first come first serve basis.
Good Value Offering: The Company McDonald’s provide valuable products and services to the
customers in the market. The value proposition of the organization states that they aim to provide
tasty and valuable food to customers in the market at the nominal price. Good taste and healthy
food drives the will of the customers to purchase the food products from the company. Good
value offering is one of the biggest value proposition that the food organizations need to have in
the target market (Jacobs, Chase, and Lummus 2014).
Manage Localized Menu: The Company has attained efficiency in serving food on the basis of
local demand of the customer. McDonald’s is known for serving is differentiated menu at
breakfast to the customers. Further, on the basis of local demand, the company many time makes
changes in the menu at local restaurants. This kind of innovation in the menu increases the
satisfaction level of the customers in the market (Crane, and Matten 2016).
Emerging Value proposition
Emerging value proposition refers to the change in values and services offered by the company
that can increases the satisfaction level of the customers and attract them to initiate the sales of
the company as well. The emerging value proposition of McDonald’s is discussed below:
Broad Range of Food Choices: Apart from serving hamburgers, fries and puff etc. the company
aim to innovate the overall menu. They should aim to diversify their food and beverages
category so that they can attract more customers in the market. Increase in food items will
definitely increase the customer value proposition (Hanson, et. al., 2016).
Comfortable Seating and in-store facilities: Due to high demand of the products of the
company, the restaurant many times face the problem of congestion due to which approaching
customers have to either wait for too long return back. So, comfortable seating arrangement with
large arena and in-store facilities will increase the satisfaction level of the customers in the
market.

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Ensure Cleanliness: Cleanliness at the restaurant and at the kitchen is very important as it
symbolises the hygiene with which food products are made. So, it is important for the company
to ensure that the cleanliness rules are followed by the organization (Zhang, Lawrence, and
Anderson 2015).
Treat People with Courtesy: It is very important for the organization to train the employees
who to handle the customers coming to the organization. This is an emerging value proposition
for customers that the company aim to provide (Zindiye 2018).
Process Map
Customer looks for a TableCustomer enters at
the restaurant
Customer found
the table.
Yes No
Wait and search
for table to get
empty
Help the customer
to get seated.
Customer order
Food at the
counter Make Payment
Share the order
receipt to the
kitchen staff
Preparation of
Food
Serve the order in
a tray
Guest takes the
food
Clean
the
table

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Manufacturing Excellence at McDonalds
The process of manufacturing excellence was initially designed for the growth of the
manufacturing companies in the environment. But, these principles have so far helped the fast
food restaurants to manage their operations successfully. In the process of manufacturing
excellences, there are three major value disciplines that the companies need the follow on order
to grow (Talwar 2018). These principles are:
Operational Excellence: An organization initiating operational excellence aims to provide
products at low cost to the customers in the market.
Customer Intimacy: Under the process of manufacturing excellence, the organization needs to
reciprocate the customer’s value of money and they should also maintain a close relationship
with them (Zhu, Anagondahalli, and Zhang 2017).
Product Leadership: An organization following this practice should concentrate on the product
leadership and innovations in their products as well.
Further, the operational excellence of the company McDonald’s is discussed below:
 The company works with simple and organized menu. Initially when the company
started, the served food with small menu and less variations, later with time and repeated
sales the company started expanding in the markets with diversification in food as well.
Increased competition also motivated the organization to expand their scope of business.
The company has yielded the attractions by increasing the menu (Cui, and Basnet 2015).
 The company aims to maintain consistency in the taste. Although there is slight change in
the menu on the basis of area but otherwise the company provides remarkable
consistency in its product.
 The company also follows consistency in the interior and the experience as well. The
décor is same; services are easy going the staff is extremely friendly with the customers.
 The company offers the food at economic rates so that any person can afford it. In
addition, the taste of the products is so good and healthy that every person of any age
group enjoys eating it. Good food at reasonable prices increases the satisfaction of
customers in the market (Yuen, and Cheng 2015).

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 The company offer, hygienic and clean food to the customers. Cleanliness at the
restaurant attracts customers the most, further, effective and efficient services adds bonus
marks in the satisfaction level of the customers in the market.
 The company uses great branding as well as marketing strategies that attract customers of
all age group to purchase products from the company. The company has also good terms
will other multinational organizations like Disney and Coca-Cola that supports them in its
business operations (Kim, and Zapata Ramos 2018).
The above mentioned were the manufacturing excellence of the company McDonald’s that
helped them to grow and sustain their image in the market.
Service Quality and Profitability
The fast food industry has become highly revenue generated industry in worldwide market and
the service quality plays the lead role in making the customers happy in the target market and
insisting them to make repeated sales as well (Hugos 2018). An organization does not become
profitable by making sales in the market, but it becomes profitable by making repeated sales in
the target market. So, it can be said that service quality and profitability has a very deep rooted
connection in the target market. There are particularly five dimensions present in the service
quality that are, reliability, assurance, tangibility, empathy and responsiveness (RATER) that
affect the customer satisfaction in the target market that ultimately affects the profitability in the
industry as well (Nadolny, and Ryan 2015).
Reliability: It refers to the capability to perform the given service properly while depending on
the bills and records.
Assurance: It refers to the association of manners and skills of workers with the information that
they have about the organization (Gensler, et. al., 2015).
Tangibility: It refers to the communication material, employees, equipments and physical
facilities provided by the companies to the customers in the market.
Empathy: It refers to the caring and attention received to the customers by the way of
communication and understanding as well.

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Responsiveness: Lastly, responsiveness refers to the readiness to give constant and prompt
services to the customers in the industry (Vivaldini, and Pires 2016).
So, it should be noted that if all the above mentioned requirements of service quality are
successfully fulfilled in the target market then the industry would ultimately grow profitable
only. Apart from this, it should be noted that the customer is the king pin in this industry, so it
important for the organization to understand the importance of the satisfaction of the customers
in the target market and then initiate the services accordingly. This will enhance the profitability
of the whole industry. Thus, it can be said that there is a positive relationship between service
quality and the profitability in the industry because the company like McDonald’s are adequately
understanding the need of the customers and serving them products and services accordingly.
McDonald’s is properly working according to the RATER concept of service quality (Anaf, et.
al., 2017).
Current and Potential Operational Challenges
The below mentioned are the current and potential challenges faced by the companies present in
the fast food industry:
Financial Crunch: Adequate amount of capital in hand as well as for long term is most
important problem for the restaurants present in the fast food industry. The high up-front cost
explains that the company will attain profit but with time only. The machinery kept at the
restaurant along with the cost of the staff are some of the major expenses for the organizations in
the market. The management face difficulty in operating the work with low cash in hand. The
restaurants should save money on the prior basis so that they can meet the unseen liability or any
expenditure in the business (Dant, et. al., 2016).
Management Issues: A good staff is good for the organization till the manager is working
properly for the company. It is important for the organization to employ effective management
so that they can organize the work effectively by cooperating with each other. The manager
needs to give appropriate directions to the employees so that they can operate the work
effectively. It is important for the manager to lay tight control at the inventory as well as delegate
some work to the employees. The internal process of the company should be effectively designed

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so that all the work performed by the employees fall in line and the manager operate the business
functions effectively (Kashif, Awang, Walsh, and Altaf 2015).
Menu: Customers visit the restaurant to eat and get satisfied but if the food fails to satisfy the
customers then service quality will not work anyway. Thus, this acts as one of the major issues
because competition is increasing that is subsequently increasing the expectation of the
customers. And if the expectations are not fulfilled then all the operations of the management go
in vain.
Sustainability: It is very important for the manager to initiate the sustainability of the company
in the target market because lack of sustainability which reduce the competence of the company.
The company should not imitate the product and service nor make any other organization
imitate. This will increase the competitive advantage of the organization. However, increasing
competition and decreasing quality of the products is reducing the suitability aspect from the
companies in the market (Vivaldini, and Pires 2016).
Recommendations
As discussed above that there are many operational challenges faced by the companies present in
the fast food industry. So, below mentioned are some of the recommendations that can help the
fast food organization to grow and succeed in the target market.
Good Promotion and Branding: adequate marketing strategies will instigate the customers to
come to the restaurant and makes sales of the company. The companies should post the photos of
tempting food that will attract the customer. Further, they should also provide offer discounts to
the customers so that they can purchase products at a comparatively lower rate in the market.
Good branding strategy along with taste food works best for the customers. If these two aspect
are fulfilled then the customer will definitely make repeated sales in the target market.
No Compromise with Food Quality: Quality of food is the most important aspect that comes
first on the priority list of the customers. So, the companies should serve healthy food to the
customers. They should never compromise with the food quality.

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Friendly and Understanding Staff: It is important for the staff to understand the requirement of
the customer so that they can attain a good experience. The staff should be friendly and
understanding and they should quickly resolve the issues of the customers as well.
Selection of Right Inventory: As the inventory used of the restaurants is perishable in nature, so
it is important for the manager to select right type of inventory for the use. The inventory utilized
should be purchased at low price and it should be fresh as well.
Conclusion
Thus, in the limelight of above-mentioned event, the fact should be noted that the report
evaluated the operations management practice of the company McDonald’s. The organization is
a part of fast food industry and is operating well in the target market. The report evaluated the
process map of the company and the value proposition as well. Value proposition helped in
analysing the areas where the company needs to grow. Manufacturing excellence acknowledged
the areas where the company has excelled in the market. Further, it was evaluated that service
quality and profitability has a direct and positive relation in the fast food industry.

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transnational corporations: a case study on McDonald’s Australia.
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Zealand fast food industry. International Journal of Logistics Systems and Management, 20(2),
pp.199-2
Dant, R.P., Jin (Jean) Jeon, H., Mumdziev, N. and Windsperger, J., 2016. A cross-national
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