Operation Strategy and Analysis of McDonald's - MG4101 Report

This report provides a comprehensive analysis of McDonald's operation strategy, beginning with a background of the company and its business activities. It delves into a value chain analysis, examining primary activities such as inbound logistics, operations, outbound logistics, marketing and sales, and services, as well as support activities like firm infrastructure, human resource management, technology development, and procurement. The report further explores McDonald's service delivery process, focusing on service and goods design, quality management, capacity and process design, location strategy, layout design, human resources, supply chain management, inventory management, scheduling, and maintenance. It also proposes strategies for process improvement, including adopting change, targeting a broader market, reducing product prices, and improving quality. Finally, the report addresses reasons for McDonald's failures, such as low-quality food and slow adaptation to changing customer preferences. This document is available on Desklib, a platform offering a wide range of study resources for students.

Running head: OPERATION STRATEGY
Operation Strategy

OPERATION STRATEGY 1
Table of Contents
Introduction................................................................................................................................2
Background of McDonald's....................................................................................................2
Business Activities of McDonald's........................................................................................3
Value Chain Analysis.............................................................................................................3
Primary Activities..............................................................................................................3
Support Activities...............................................................................................................5
Service Delivery Process of McDonald's...............................................................................6
Designing of Services and Goods......................................................................................6
Quality Management..........................................................................................................6
Capacity and Process Design.............................................................................................7
Location Strategy...............................................................................................................7
Layout Design and Strategy...............................................................................................7
Human Resource and Job designing..................................................................................7
Supply Chain Management................................................................................................7
Inventory management.......................................................................................................8
Scheduling..........................................................................................................................8
Maintenance.......................................................................................................................8
Strategies to Improve Process................................................................................................8
Adopting change................................................................................................................8
Target Market.....................................................................................................................9
Reducing the Product Prices..............................................................................................9
Improve Quality.................................................................................................................9
Reasons for the McDonalds Failure.......................................................................................9
Low-Quality Food..............................................................................................................9
Slow reaction of McDonald's to the changing needs and taste of the customers.............10
Conclusion................................................................................................................................10
References................................................................................................................................11

OPERATION STRATEGY 2
Introduction
Operation strategy is defined as collective concrete activities elected, instructed, or roused by
corporate strategy. As stated by Gustafson (2018), it comprises numerous activities of the
business such as supply chain management, e-business services, service operations, and
quasi-manufacturing services. In simple words, the operation strategy highlights how an
organization will employ its competence to assist in the strategy of the business. According to
(Hill, 2017), Operation strategy works as a blueprint that reflects different strategies and
actions taken by the organization to strongly deal with the competitive forces in the industry.
This study validates the critical understanding of operations strategy and management from a
practical as well as theoretical perspective. In order to do so different pertinent tools and
methods will be applied to develop a critical analysis of the problems of operation strategy.
Background of McDonald's
McDonald's is one of the famous company of fast food established in 1940 by Maurice
McDonald and Richard McDonald, in the United States. They introduced their enterprise as a
hamburger stand and later converted into a franchise with the logo of Golden Arches being
which was established in 1953 at Arizona. As per Ahmed (2016), McDonald's is considered
as the leading chain of restaurant in the world by revenue, offering services to around 69
million consumers every day in 100 nations across 36,900 outlets as of 2016. Though
McDonald's is famous in the market due to its French Fries, hamburgers, and cheeseburgers,
they also offer breakfast items, milkshakes, chicken products, soft drinks, desserts, and
wraps. However, according to Dixit (2017), with the changing taste of the customers in the
market and negative publicity, the company has included fruits, smoothies, fish, and salads in
its menu.

OPERATION STRATEGY 3
Business Activities of McDonald's
Value Chain Analysis
Value chain analysis is a technique in which a company classifies its primary as well as
support activities that enhance the value of its finished product and then evaluate these
actions in order to reduce the cost or increase differentiation. According to Sultan and
Saurabh (2013), Value chain signifies the internal activities in which a business is involved in
while converting inputs into outputs.
Source [(Li, 2014)]
Primary Activities
Inbound Logistics
Procurement of the raw material by McDonald's is done through its pre-defined suppliers;
consequently, by expanding the number of labor and capital, the production will upsurge
proportionally. McDonald's has involved in the vertical integration by substituting many of
its suppliers. The company to decrease the cost and ensure product quality has done this
(Dudovskiy, 2016).
Operations
As stated by Dudovskiy (2016), before the introduction of McDonald's, few of the restaurants
were present in the market that uses to prepare food quickly. These restaurants hired short-

OPERATION STRATEGY 4
order cooks, who are expert in preparing food at a short time duration. The founders of
McDonald's changed the restaurant kitchen's design that is in place of installing numerous
stations and equipment for making a different variety of food, the Speedy kitchen had:
 Arranged a big grill where one employee can prepare lots of burgers instantaneously
 A dressing place where staff members can add condiments to all the burgers
 A fryer where staff can prepare French fries
 A milkshake machine and soda fountain for desserts and beverages
 A counter for the customers to place the order (Dudovskiy, 2016)
Outbound Logistics
McDonald's is focused on offering the best quality food and excellent service, at a reasonable
value, in a welcoming environment. Therefore, a company works with its suppliers,
franchises, and employees to offer a composed range of food selections and offer the
information of nutrition required by the consumers to take corrective decisions. At the level
of the restaurant, McDonald's is concentrating on waste management, sustainable packaging,
and conservation of energy. McDonald’s is devoted to enhancing its operations and invention
to create a more viable, lucrative, and environmentally friendly business (Dudovskiy, 2016).
Marketing and Sales
Advertisement
McDonald's has always maintained a widespread campaign of advertisement for some
decades. Besides this, to the normal media (newspaper, radio, and television), McDonald's
make use of billboards, take sponsorship of events reaching from Little League to the
Olympic Games. However, television has performed a significant part in the strategy of
advertisement of McDonald’s.

OPERATION STRATEGY 5
Services
Free Wi-Fi
McDonald's offers free Wi-Fi service at around 11,500 restaurants; the consumer can access
the Internet by using PDAs or laptops at free of cost (McDonald’s, 2018a).
Arch cards
The Arch cards are a kind of pre-paid cards that offer the consumer a fast and suitable mode
of payment at McDonald's. These Cards also considered as a perfect gift for special occasions
or holidays.
Parties and PlayPlaces
McDonald's offer party facilities for kids at its premises (Dudovskiy, 2016)
Support Activities
Firm infrastructure
The infrastructure of the McDonalds is modern as well as classy. It is making use of
advanced Information Technology and still, they are trying to maintain the green activities
(Franklin, 2016).
Human Resource Management
The job provided by McDonald's can possess a few of the positive features, but employees
are mostly picking employment opportunity at McDonald's due to get access at other
attractive options. It is not important what people think about working at McDonald's, but it
is advantageous for the workers who desire to have flexible working hours and are involved
in different responsibilities and activities. At McDonald's, the employment relationship is
handled by an exclusive range of panels, from humble, bureaucratic, and direct controls to the
management of prejudice (Dudovskiy, 2016).

OPERATION STRATEGY 6
Technology Development
Even as the trust of the customer festers locally and in Europe, McDonald's is concentrating
on renovating its infrastructure, developing the menu, and engineering value.
Procurement
E-Procurement System of McDonald's is the key reason for its successful management of the
supply chain. It is very efficient, as it offers a backbone to not only all the logistics but also to
the entire supply chain management of McDonald's (Dudovskiy, 2016).
Service Delivery Process of McDonald's
Designing of Services and Goods
The objective of McDonald’s in operation management is to offer products to customers at
affordable prices. Until now, the prices and size of the products are dependent on popular
customer expectations. However, some of the products of the company are reduced in terms
of size in order to make them affordable for the customers.
Quality Management
The intent of the company is to enhance the quality of the products in the constraints, like
price and costs limited. McDonald's make use of the production line method in order to
preserve the consistency in the quality of the product. Consistency in the services offers
satisfaction to the customers (McDonald’s, 2018b).
Capacity and Process Design
Capacity and process design of McDonald's is based on the competence for cost minimization
that assists the strategies of the company. This operation management’s strategic decision
concentrates on preserving the efficiency of the procedure and satisfactory capability to fulfill
the market demand. The method of the production line at McDonald's exploits competence
and capacity utilization.

OPERATION STRATEGY 7
Location Strategy
The goal of McDonald's in the area of operations management is to found places for higher
market reach. The marketing mix of the company comprises kiosks, the website of the
company, restaurants, and mobile applications. With the help of these locations company
effectively reach target market online as well as traditional manner (Greygory, 2017).
Layout Design and Strategy
In order to take decisions the management of McDonald's think practically. The strategy
comprises the maximum use of the space in the kiosks, and restaurants, in place of
concentrating on spaciousness and comfort.
Human Resource and Job designing
Human Resource strategies of the company comprise training to increase the skills of the
employees related to production in the kitchen (Gould, 2013). For this area of the decision of
operations management, organizational and individual learning are highlighted to provision
the organizational culture of McDonald's.
Supply Chain Management
The worldwide supply chain of McDonald's assists its different locations across the globe.
The company possesses a supply chain strategy that is diversification in the operation
management (McDonald’s, 2018). This kind of strategy requires extra suppliers of diverse
areas in order to decrease the supply chain risk at McDonald's.
Inventory management
The objective of McDonald's is to reduce the inventory cost by assisting the operations of the
restaurant. The company does not vend products directly to its restaurants. In its place,
regional and local mediators and suppliers synchronize with the managers of the McDonalds
restaurant to handle the inventory.

OPERATION STRATEGY 8
Scheduling
McDonald’s uses corporate contracts for scheduling, depending on domestic situations of the
market and laws, along with the requirements of the supply chain. For example, the strategy
of the company encompasses seasonal and regular schedules to determine variations in the
demand of the local market. Therefore, in this area, McDonald's is adaptable and flexible to
local market situations.
Maintenance
McDonald's allow the managers of the franchises or restaurant to choose the maintenance
service providers. However, for the equipment of kitchen or production, McDonald’s possess
certified maintenance providers.
Strategies to Improve Process
Adopting change
In order to improve the service delivery process McDonald's need to depend on test
marketing in order to check new menu if they desire to keep a constant growth in the market.
Target Market
It is known that McDonald's majorly target teenagers and kids in order to offer its services.
This is done by mass marketing strategies across the world. However, according to Jin, Line,
and Lee (2017), today customers are becoming aware of their health and the benefits of
organic food, this is the reason today different businesses are entering into the market with
new and innovative idea of offering healthy dishes to the customers. Therefore, it is
recommended to McDonald's to adopt a change strategy and add healthy dishes to its menu.
This will also help the company in targeting old health conscious people.

OPERATION STRATEGY 9
Reducing the Product Prices
As stated by Houghton (2014), presently, there are numerous numbers of restaurants in the
market that offer tasty and quality food at reasonable or low prices, in order to increase their
market share and target potential customers. Therefore, in order to improve the procedure,
McDonald's needs to revise the prices of its product in the menu, as it will help business
increasing the customer base as well as sales.
Improve Quality
According to Linton (2018), managing product quality is very important for every business.
Quality Products support business in maintaining the satisfaction of the customers and
decrease the level of risk as well as the cost of replacing faulty goods. In order to survive in
the market, McDonald's need to adopt some quality check techniques and procedures to grab
the confidence and trust of the customers.
Reasons for the McDonalds Failure
Low-Quality Food
McDonald's is experiencing numerous type of controversies related to poor food quality.
Consumers in the market are demanding high-quality food, great taste and for this,
McDonald's have to do some alterations in its main menu in order to fulfill that demand.
According to Peterson (2015), the company has taken a pledge to eliminate antibiotics and
hard to pronounce elements from its chicken.
Slow reaction of McDonald's to the changing needs and taste of the customers
Customers in the market desire to experience a more progressive restaurant than what
McDonald's is presently providing. As per Peterson (2015), the company have to be smarter
with handling risk, and faster with the innovations.

OPERATION STRATEGY 10
Conclusion
The above report has provided a detailed analysis of McDonalds one of the known chain of
fast food restaurants across the world. The report has highlighted different stages of its
service delivery process and business activities in order to increase the understanding
regarding organization and its key operations in the market. From the analysis, it has been
identified that the company is presently dealing with a numerous number of controversies due
to offering low-quality food to its customers. In order to overcome these challenges, the
report has suggested that McDonald's should focus on enhancing its product quality, reducing
product prices, and increase the products in its menu to attract more customers.

OPERATION STRATEGY 11
References
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Dixit, D. (2017) Global marketing strategies of Mcdonald’s Corporation. International
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https://research-methodology.net/mcdonalds-value-chain-analysis/ [accessed 4 December
2018]
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digital-document-infrastructure-/a/d-id/1327184 [accessed 4 December 2018]
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still-order-day/ [accessed 4 December 2018]
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December 2018]

OPERATION STRATEGY 12
Hill, T. (2017) Operations Strategy: Design, Implementation and Delivery 1st ed. Netherland:
Macmillan International Higher Education.
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December 2018]
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us/services/free-wi-fi.html [accessed 4 December 2018]
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4 December 2018]

OPERATION STRATEGY 13
Peterson, H. (2015) 7 mistakes that led to McDonald's downfall [online]. Available from
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47155143.cms [accessed 4 December 2018]
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