McDonald's Narooma Outlet: Operations, Location & Layout Design

This report assesses McDonald's potential expansion into Narooma, New South Wales, focusing on location and layout design. It highlights the strategic importance of facilities in organizational operations, detailing factors influencing location decisions such as transportation, workforce availability, climate suitability, and infrastructure. The report discusses the pros and cons of opening a new outlet in Narooma, considering competition, climate, accessibility, cultural acceptance, traffic patterns, and workforce skills. It also applies Hill's Strategy Development Framework to McDonald's, evaluating corporate objectives, marketing strategies, and operational strategies. Feasibility, limitations, and implementation aspects are examined, with recommendations provided for sustainable and green practices. The analysis concludes that while Narooma presents opportunities, McDonald's must address cultural and logistical challenges to succeed.

Running head: Operations Management
Assessment 2: Task B
Operations Management
Student’s name
Name of the University

Executive Summary
This report focuses on the facilities role in finding the locations and the layout designing of the
newly launched outlet of McDonald's in Narooma in New South Wales. Facilities of an
organisation focus on the available space, final product, safety of users and facility and
convenience of operations. McDonald's already has more than 970 outlets in Australia and
Narooma is one of the strategic locations to start with new outlets in Australia. 3 pros and 3 cons
of opening a new outlet in Australia have been explained in this report along with limitations and
implications. McDonald's has a service-delivery system design based on the integrated
framework and layout approaches. McDonald’s is a fast food company which is based in the
USA. The company is currently focussing on spreading its operations in the Australian market.
While McDonald’s has already established a successful identity in the nation the company is yet
to make a mark in the comparatively remote areas which lack urban population. A total and
comprehensible assessment of the operations management's procedures of the company in case
of expanding in the town of Narooma in Australia has been explored and explained. Hill's
strategy has been adopted to implement this. Several advantages and drawbacks have been
analysed with respect to the location. Lastly, recommendations have been provided regarding the
actions the company must take in order to accomplish its objectives in Narooma.
1 Operations Management

Table of Contents
Introduction......................................................................................................................................4
1. Explain and introduce briefly the background of McDonalds.....................................................4
2. Succinctly discuss factors that affect location decisions and layout design................................4
3. Succinctly discuss the pros and cons of the options....................................................................6
3.1 Pros of the Location...............................................................................................................6
3.2 Cons of the Location..............................................................................................................6
3.3 Pros of the layout in Product Facility....................................................................................6
3.4 Cons of the layout in Product Facility...................................................................................7
4. Apply the Hill’s Strategy Development Framework to the organisation and discuss the
practical feasibility, limitations and implications............................................................................7
5. Recommendations......................................................................................................................10
Conclusions....................................................................................................................................11
Reference List................................................................................................................................12
2 Operations Management

Introduction
In Operations Management, facility department plays the role of business development. They
execute the daily functions within the organization to help other employees (Pemberton et al.,
2015). This process is involved in organizational function with highest corporate level and it is
included top management board of directors. The facilities are responsible for making sure that
buildings and their services meet the needs of the people that work in them. The aim of the report
is to explain the factors which affect the location decisions and layout of the new site. In the
following section, Hill Strategy Development framework of McDonald’s has been discussed. In
the final section, a set of recommendations has been discussed to become more sustainable and
green.
1. Explain and introduce briefly the background of McDonald's
Products, or services.
McDonald's Corporation is an American based fast food company which was founded in the year
1940. McDonald's has it's headquartered in Chicago and it serves worldwide. McDonald's has its
operation in more than 100 countries and in Australia; McDonald's has started its journey in
2007 from Perth. McDonald's organizes family party and it delivers the meal in Australia
(Mcdonald’s.com.au, 2019). In Australia, McDonald's serves Big Mac burger, cheeseburger and
desserts. McDonald's is famous for its hotter, juicier and tastier burgers. In Australia,
McDonald's is known for mobile ordering and McDelivery through Uber Eats. In Australia,
McDonald's serves breakfast, burgers, beef, chicken, sides, salads and wraps and drinks and
happy meals.
2. Succinctly discuss factors that affect location decisions and layout design
Transportation
McDonald’s should launch its new store in Narooma because of the strategic importance of the
location. It is well-connected with the other parts of the country through various routes. Narooma
is a town located in New South Wales, Australia. The transport facility of the town is impressive
and the traffic condition of the area is also good compared to the rest of the parts of the country.
3 Operations Management

So, Narooma can be a better choice of McDonald’s because of better transportation and
connectivity.
Availability of workers
Availability of efficient labour is considered one of the prerequisites of opening a new operation
in a new location. In Narooma, the company can get the required manpower in order to run its
business activities effectively. Moreover, the company can access cheap labour in the area. Most
of the people in Narooma are highly educated and energetic. Access to cheap labour is very
important for a company that seeks to start the launch of a new store in a new location
((Radosavljević, Jevtić & Klimenta, 2016).
Suitability of climate
Narooma is situated on the Narooma Terrane which is predominantly a coastal area. As the area
is located close to the coastal area of the country, the climate of the country is oceanic.
Therefore, the summer days are not too hot. During winter days, the temperature remains mild.
The comfortable atmosphere of Narooma can inspire the leaders of the company to open the new
store in Narooma.
Availability of Infrastructure
In order to inaugurate a new store in a new area, the availability of better infrastructure is
necessary. Without adequate infrastructure, success cannot be ensured (Zhang et al., 2016). In
Narooma, there are adequate infrastructural facilities like availability of power, transport, waste
disposal facilities and so on. Adequate infrastructure is one of the prerequisites to launch a new
store in a new location.
Facility layout design
The facility layout design is regarded as an essential component of the overall operations of an
enterprise in terms of boosting up the production and meeting the needs of the workers (Atkin &
Brooks, 2015). The primary objective of the facility layout is to ensure a flawless workflow.
Effective facility layout design suggests the process of integrating the requirements of the
people, machinery and materials in such a way that they can generate a well functioning
4 Operations Management

mechanism (Parisio, Rikos & Glielmo, 2016). McDonald’s new stores would be more spacious
so that both the personnel and consumers feel comfort. The company needs to provide much
emphasis on the safety standards in order to ensure a better workplace.
3. Succinctly discuss the pros and cons of the options
McDonald’s makes use of pragmatism to finalise the locations for its stores. The company takes
into consideration several factors such as population density, tourist attractions, traffic patterns
and relevant demographics before deciding on the location (Mcdonalds.com, 2019).
3.1 Pros of the Location
Lack of Competition- Very few restaurants in Narooma serve the core products of McDonald’s
(Sarvaiy, Eweje & Arrowsmith, 2018). The competitive rate of McDonald’s owing to its robust
distribution network will gain customers easily.
Climate – The town of Narooma located in the coasts of New South Wales is clean and has a
pleasant climate which is temperate. The town also has a few interesting local attractions.
Accessible – Low traffic in Narooma establishes easy accessibility options for its population
(Onofrei et al., 2019).
3.2 Cons of the Location
Narooma being different from other Australian locations might pose some difficulty
Culture – The culture of Narooma is slightly conservative with the urban population being 3000.
It might take some time for the population to accept a global brand such as McDonald’s.
Traffic- The lack of traffic indicates a reduction in the number of visits to the outlet after a
certain hour which can impact the business (Quesado, Aibar Guzmán & Lima Rodrigues, 2018).
Workforce - McDonald’s may face some barriers in obtaining skilled local workforce for their
daily operations owing to the conservative attitude of the population.
3.3 Pros of the layout in Product Facility
A facility layout of products is concerned with categorising all the similar services and machines
together.
5 Operations Management

Budget Reduction – The product layout of McDonald's is planned in an efficient manner where
there are no over utilisation of services or machines. Optimum utilisation of all services and
machines ensure that very little material is wasted. This is fundamental in reducing the overhead
costs and expenses of the company for which they can offer products at a competitive rate (Khan
et al., 2018).
Process Lubrication – The entire process is integrated which ensures that daily operations are
smooth. This is essential since it saves valuable time which can be invested in enhanced
customer service.
Workforce – The labour and tasks of human resources are effectively reduced which ensures
serving more customers within less time reducing the waiting time frame (Ateş, van Raaij &
Wynstra, 2018).
3.4 Cons of the layout in Product Facility
Rigidity- The product layout is frozen and is not equipped enough to handle emergency
situations when changes are required. Operations are executed smoothly but sudden changes can
delay the entire system.
Attrition – The product layout is rigid where each job role is defined and rarely any changes are
made pertaining to the evolving skills of the employees. This causes the employee to lose morale
and look for alternative opportunities.
Decision Making – Owing to the strictly followed production layout it is difficult for the
organisation to take decisions and resume normal operations in case of a bottleneck (Höglund et
al., 2018).
4. Apply the Hill’s Strategy Development Framework to the organisation and discuss the
practical feasibility, limitations and implications
Hill's Strategy developmental framework is instrumental in establishing the corporate objectives
of the company. The direction of the organisation, the competitors in the current market and the
core capabilities of the organisation in accomplishing its objectives are discussed. The operations
of the organisation which facilitate in combating its competitors in the current market are
assessed. The framework comprises of crucial elements which contribute to making the
6 Operations Management

operational process of the organisation smooth and free-flowing (Bonazzoli et al., 2018). The
five factors determining this are corporate objectives, marketing strategies, assessing and
winning fresh products, establishing the accurate style and developing the infrastructure required
for it.
Operational Strategy
Corporate
Objectives
Marketing
Strategies
Order Winners Infrastructure Freezing the
operational design
Profitable growth McDonald’s has a
large number of
stores globally.970
of these stores is
located in Australia
spread over a
number of
geographic
locations.
In the case of
operational
strategies, the
corporate objectives
and goals are linked
with the marketing
strategies.
Standardising the
taking of customer’s
orders and
preparation of food
within the allotted
time is the purpose.
The hiring process is
based on recruiting
self –motivated
individuals.
Training,
recognition and
rewards are a part of
this program.
For the smooth flow
of corporate
objectives and
operations, the shop
layout is designed
accordingly. The
tasks need to be
allocated as per the
requirements of the
order-taking process
Excellence in
Operations
The marketing
strategy should
consist of well-
placed locations,
staff recognition and
daily guidelines to
increase sales.
Competitive pricing
and less amount of
waiting time
(Malviya, Kant &
Gupta, 2018).
Operating plans and
effective control is
required with the
management of
machines and shifts
of the workforce
Scheduling of
resources and
standardization of
job procedures are
required at this stage
Diversity Enriched and
empowered work
culture free from
bias
Demand Flexibility
and
variability of
products is crucial
(Chofreh, Goni &
Klemeš, 2018)
Learning and
innovation are
required during this
phase
Process
performance,
franchising and
training need to be
implemented
Social
Responsibility
Partnering with local
communities in the
neighbourhood
Brand Image Use recycling
material for
packages and build
more green stores
Package designing,
recycling, donating
and shipping come
under this phase
Feasibility
The corporate strategy related to social responsibility is feasible as packages can be designed
with materials which can be recycled. Green LEED certified stores can also be opened as
customers care about the ethical source of products.
Limitations
7 Operations Management

Partnering with local communities can be challenging as they already have tie-ups with business
entities in a different domain
Implementation
Implementation is easy through proper study of the market and obtaining non-profit
organisations for implementation.
Feasibility
Owing to the global brand name the profitable growth described is imminently feasible.
Competitive pricing is also a crucial factor.
Limitations
The lack of urban population can severely limit the profitability initially. The population may
take some time to accept new products.
Implementation
Proper marketing strategies can be used effectively to gain new customers. Enriched customer
service will aid in retention.
5. Recommendations
The brand value of the company is huge which must be utilised to gain urban customers. The
company already has an advantage since the product layout process effectively saves time and
funds leading steadily to profitability
 The company must implement joint ventures and retailers in supermarkets to gain more
visibility
 The company must implement healthier choices in its range of products to attract more
customers
 The company should make use of databases and CRM’s to gain potential customers and
serve existing customers in a better manner. It will also help in forecasting sales.
 The rigidity of the product layout must be made more flexible to accommodate sudden
changes or requirements owing to demand fluctuations.
8 Operations Management

 Activities linked to social responsibilities should be published to develop an overall
positive image
 A model of optimisation should be used to overcome capacity constraints
 Seasonal inventory must be categorised by the company and demand forecasting should
be made based on previous sales figures. Order fulfilment process must be streamlined.
Conclusions
The present report seeks to cast light on the facilities role in terms of identifying suitable
locations and the layout of the newly inaugurated stores of McDonald’s in Narooma. The
company has more than 970 stores in Australia and Narooma can be a preferred location for the
company to launch its new store. McDonald's Corporation is a well-established fast-food brand
based on America. McDonald’s is aiming to expand its operations in diverse area of Australia to
establish a resilient network and increase its customer base. The organisation must however
make an assessment of the risk, cost and benefits associated with the operation to gain long term
profitability in the particular location. Every location has its own set of advantages and
drawbacks and the organisation should capitalise on the strengths of the location. Important
factors that can affect the layout design and location decisions have been discussed in detail.
Various advantages and disadvantages associated with various options are also discussed. In
order to discuss the practical feasibility, implications and limitations Hill's strategy has been
applied to the company. A global brand such as McDonald’s must adapt to certain local factors
and characteristics in order to gain a strong foothold within Narooma. The unique products of the
company will aid in developing an eventually loyal customer base.
9 Operations Management

Reference List
Ateş, M. A., van Raaij, E. M., & Wynstra, F. (2018). The impact of purchasing strategy-structure
(mis) fit on purchasing cost and innovation performance. Journal of Purchasing and
Supply Management, 24(1), 68-82.
Atkin, B., & Brooks, A. (2015). Total facility management. John Wiley & Sons.
Bonazzoli, M., Dolean, V., Hecht, F., & Rapetti, F. (2018). An example of explicit
implementation strategy and preconditioning for the high order edge finite elements
applied to the time-harmonic Maxwell’s equations. Computers & Mathematics with
Applications, 75(5), 1498-1514.
Chofreh, A. G., Goni, F. A., & Klemeš, J. J. (2018). Evaluation of a framework for sustainable
Enterprise Resource Planning systems implementation. Journal of Cleaner
Production, 190, 778-786.
Höglund, L., Holmgren Caicedo, M., Mårtensson, M., & Svärdsten, F. (2018). Strategic
management in the public sector: how tools enable and constrain strategy
making. International Public Management Journal, 21(5), 822-849.
Khan, S. M., Khan, M. Z., Dey, K., Chowdhury, M., Shiri, S., & Huynh, N. (2018). Augmenting
Safety and Economic Considerations with Operational Impacts in Access Management 1
Policy Development—a South Carolina Case Study 2 (No. 18-06429).
Malviya, R. K., Kant, R., & Gupta, A. D. (2018). Evaluation and selection of sustainable strategy
for green supply chain management implementation. Business Strategy and the
Environment, 27(4), 475-502.
Mcdonald’s.com.au. (2019). Retrieved on 30th May 2019. Retrieved from:
Onofrei, G., Prester, J., Fynes, B., Humphreys, P., & Wiengarten, F. (2019). The relationship
between investments in lean practices and operational performance: exploring the
moderating effects of operational intellectual capital. International Journal of Operations
& Production Management, 39(3), 406-428.
10 Operations Management

Parisio, A., Rikos, E., &Glielmo, L. (2016). Stochastic model predictive control for
economic/environmental operation management of microgrids: An experimental case
study. Journal of Process Control, 43, 24-37.
Pemberton, G., Darling, S., Koheler, C., & McDonald, E. (2015). Managing simultaneous
operations during seismic acquisition. first break, 33(11), 75-81.
Quesado, P. R., Aibar Guzmán, B., & Lima Rodrigues, L. (2018). Advantages and contributions
in the balanced scorecard implementation. Intangible Capital, 14(1), 186-201.
Radosavljević, J., Jevtić, M., &Klimenta, D. (2016).Energy and operation management of a
microgrid using particle swarm optimization. Engineering Optimization, 48(5), 811-830.
Sarvaiya, H., Eweje, G., & Arrowsmith, J. (2018). The roles of HRM in CSR: strategic
partnership or operational support?. Journal of Business Ethics, 153(3), 825-837.
Zhang, Y., Wang, R., Zhang, T., Liu, Y., &Guo, B. (2016). Model predictive control-based
operation management for a residential microgrid with considering forecast uncertainties
and demand response strategies. IET Generation, Transmission & Distribution, 10(10),
2367-2378.
11 Operations Management