Mac Donald's Business Case Study

Mac Donald’s Business Case Study

Introduction - Mac Donald’s Business Case Study

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Almost 50 million people visit McDonald's every day, making it the world's most popular restaurant chain. It has more than 30,000 outlets in 119 countries and a daily customer base of more than 30,000 individuals. Approximately “70% of McDonald's restaurants across the world are owned and operated by independent, local business” owners and managers. Ray Kroc, the company's founder, has had a long and famous career in business. McDonald's vision, as well as the devotion of our outstanding leaders, ensures that the firm foundation he established today continues to shine brightly for years to come, guaranteeing that the McDonald's Arches continue to dazzle (Boyar et al., 2019). McDonald's offers burgers, cheeseburgers, chicken products and fries, as well as breakfast dishes, “soft drinks, shakes, and desserts. McDonald's also” offers delivery service. Following an increase in obesity rates in Western nations, as well as worries about the nutritional value of McDonald's products, the fast-food giant has expanded its menu to include salads, wraps, and fruit.

Critically evaluate the current process for innovation and change present within Mac Donald’s

Need for innovation strategy

When it comes down to it, strategy is nothing more than an organization's commitment to a set of rational, mutually reinforcing rules or practises that are designed to achieve a certain competitive aim. The objectives and ambitions of an organisation should be clearly stated and prioritised by a strategy that encourages alignment throughout the business's different groups. Marketing, operations, finance, and research and development are all important components of a company's overall business plan (Brancalion and van Melis, 2017). When people researched and consulted for organisations across a broad range of industries over the course of more than two decades, they observed that they seldom developed strategies to link their innovation efforts with the overall business strategy of the company they were consulting for.

Without a clear innovation strategy, innovation activities may rapidly devolve into a haphazard collection of widely acclaimed best practises: Just a few examples include the division of research and development into decentralised autonomous teams; creation internal entrepreneurial ventures; establishment of “corporate venture-capital arms; pursuit of external alliances; acceptance of open innovation and crowdsourcing; collaboration with customers; and implementation of rapid prototyping” (Varadarajan, 2018). These activities are not inherently dangerous in any way. It is built on a well-coordinated collection of interdependent processes and structures that lead the company's search for new challenges, synthesis of ideas into a business concept or product design, and selection of projects to be supported. This is the crux of the issue. When it comes to the greatest practises of each person, there are trade-offs to be made. When a company adopts a new practise, it is customary for the organization's innovation system to undergo a sequence of complementary alterations. The selection of all of the components of the innovation system will be difficult for a company that does not have an established innovation strategy in place.

It's not a good idea to copy someone else's system. There is no one method that works for all businesses or all situations. While there is nothing wrong with taking inspiration from others, it is important not to blindly assume that what works for one company will work for another. Having a clear innovation strategy helps you develop a system that meets your distinct competitive demands (Soewarno et al., 2019). As a final point, without a strategy for innovation, various areas of an organisation might easily pursue contradictory goals even if the business plan is clear. Salespeople are constantly reminded of the demands of the company's most important clients. It is possible that marketing sees chances to leverage the brand with similar items or to gain market share via new distribution channels. The chief executives of each business unit are focused on their own target markets and P&L concerns. Those in the R&D field have a tendency to regard new technology as an opportunity. To succeed in innovation, it is essential to have a variety of viewpoints. Unless there is a plan in place to integrate and align various viewpoints around shared goals, the potential of diversity is diminished or even counterproductive.

One of the most powerful drivers of advancement in the modern economic environment is change, which is inescapable. Change is especially important for a worldwide and massive company like McDonald's. Because McDonald's is a global company, it has to adhere to laws and customs in other nations (Kotkova Striteska and Prokop, 2020). Secondly, this company has been in business for a long period of time. McDonald's is one of the companies that need leading transformation strategies because of these two factors. A grasp of the motives for change might be useful. A company's ability to adapt to change depends on its ability to identify and understand the forces driving the shifts. Without this knowledge, a company may end up with a "perfect" technology that no one wants to use. When a company leader understands and communicates the need and process of change, customers are more likely to accept the new product or service. McDonald's culture has always included the acceptance of change. The McDonald brothers realised in 1948 that “the more they hammered away at the barbeque sector, the more hamburgers they sold” (Howse et al., 2018). They founded McDonald's in 1948. They closed their restaurant for three months before reopening it as a self-service cafe where customers could create their own sandwiches on their own time. In reaction to these adjustments, 20 waiters were put off, and their metal utensils were replaced with paper containers and cups, which saved money. As a result, there was no need for dishwashing personnel. They condensed their menu and expanded it to include nine new options to make things simpler for clients. Profits improved significantly within two years of using this new strategy. As a consequence, the McDonald brothers were forced to rethink and redesign their firm and services throughout the course of the next few years.

Rapid worldwide development and a change in public perception toward fast food, which is now commonly seen as unhealthful, were both factors contributing to McDonald's decision to flip their position. Aside from that, the rapid development of the fast-food sector, together with certain instances of organisational stagnation and management failure, has contributed to McDonald's turnaround dilemma (Raduzzi and Massey, 2019). McDonald's found itself in a turnaround situation throughout the 1990s, when many of its concepts and advertising campaigns were deemed failed. McDonald's worldwide network of franchisees was established in order to compete with the company's flagship restaurant. Consumers from older McDonald's stores were being lured to newer McDonald's outlets, which was hurting the company's profits. McDonald's shares went public for the first time since 1965 in 1998, at a time when McDonald's revenues were declining and the company was forced to lay off a large number of employees.

Businesses might face a variety of implications if they find themselves in a turnaround position. If a company finds itself in this scenario, it may be forced to consolidate and sell, restructure its business model, replace key individuals, or change its strategy. In addition, it might lead to a shift in the organization's structure or even its culture. Many initiatives and methods were used by McDonald's throughout the crisis (Rodrigues et al., 2021). Improve its present business model by lowering pricing and speeding up services, for example. Additionally, McDonald's has undertaken a $ 20 million advertising campaign to rebrand itself. The company's management was also reshuffled, with the return of the former CEO. Due to the company's financial problems, McDonald's has also shuttered many locations and restaurants in three countries (Ceil, 2017). On top of all that, McDonald's has launched a slew of new goods and meals. As a result, the operational adjustments that took place at the time did not result in a shift in the strategy, structure or culture of McDonald's.

Concept of Innovation in McDonald’s

Innovation in Culinary

For the last four years, "Chef Dan" has served as McDonald's corporate director of culinary innovation. His background is in fine dining, and he says he loves working at McDonald's because it allows him to use those skills every day. When Coudreaut was only 14, he got his first job as a dishwasher. Having graduated from a recognised institution with an associate's degree in business administration and management (Yaacob et al., 2021). In order to pursue his dream of becoming a chef, Coudreaut worked as a sous chef at New York City's Quatorze Bis. He was a top student at the Culinary Institute of America and graduated in 1995 as one of the country's greatest cooks. Only a few of the 1,800 new items Coudreaut and his colleagues created each year that were deemed to be healthy, tasty, and easy to prepare by the McDonald's kitchen staff were chosen for introduction. They've added a Fruit and Walnut Salad and Premium Chicken Sandwiches to their menus recently. According to Coudreaut, a rise in demand for high-quality goods has given him the freedom to experiment with harsher flavours. A combination of McDonald's commitment to fostering innovation and his background in fine dining enable him to produce things that consumers really value.

Introduction of Egg McMuffin

Jim Delligatti, the legendary McDonald's franchisee who invented the Big Mac burger, started experimenting with basic breakfast foods after his historic triumph. The customary opening time of 11:00 A.M. was moved to 07:00 A.M. since the owner was looking for a new business opportunity during the early hours. Doughnuts and sweet rolls were among the first goods Delligatti began selling when he first opened his coffee shop. A year after that, pancakes and sausage were introduced to the menu (Ge, 2020). Even with a little variety, Delligatti was able to secure 5% of his business at breakfast, despite the competition. Even though Delligatti's invention had enhanced sales at his restaurant, other McDonald's owners were reluctant to lengthen their already-exhausting 11:00 PM-midnight schedules. The McDonald's breakfast line would have to wait until a new breakfast item could produce double-digit sales growth.

In late 1971, Herb Peterson came up with the idea for a product that would revolutionise the McDonald's experience. D'Arcy Advertising in Santa Barbara, California, handled Peterson's McDonald's account, so he chose to become a McDonald's franchisee. Following Delligatti's lead, Peterson set out to create a new breakfast item that could be consumed the same way as the rest of McDonald's offerings: by hand. He found a solution by modifying a Jack-in-the-Box Eggs Benedict sandwich from the West Coast. Pre-packaged Hollandaise was rejected by Peterson as being too runny, so he experimented with making his own Hollandaise by mixing together a piece of cheese with a boiled egg (Arsalan et al., 2021). To make the eggs into the shape of an English muffin, Peterson devised a new frying instrument, a cluster of six rings that could be used on the McDonald's assembly line. When Peterson added grilled Canadian bacon to his egg and muffin sandwich, he had a polished breakfast meal that would be ideal for a fast-casual sandwich shop.

Introducing the kids’ gadget

In recent years, the Happy Meal toys for youngsters have undergone tremendous transformation. In the beginning, they were created using mechanical elements that were meant to simulate the motions of their toy figures. McDonald's toys increasingly feature digital games, which is becoming more commonplace (KURGUN et al., 2021). The rocking horse is an excellent illustration. Whenever the toy was rocked by a small child, an image of the horse's motions could be seen on the LCD screen.

“McDonald's uses subliminal perception” to pull children into their restaurants as early as one year old, offering them special kid's meals and toys, as well as parks and renowned movie character tie-ins to entice them in. Children consume McDonald's from the time they are born until they reach adulthood (Bönnelyche and Schönborg, 2020). Therefore, many parents have expressed their dissatisfaction with the company's marketing practises, which they feel to be in violation of ethical standards. McDonald's and other "unhealthy" items are seen to contain addictive ingredients that contribute to the obesity of its consumers. Contenders may pose a threat to the team. “Burger King, Starbucks, Subway, KFC, and any other mid-range sit-down restaurants” are the key competitors of the company.

Business Model followed by McDonald’s

As of now, McDonald's is the most lucrative restaurant chain in the world. McDonald's was founded in 1940 as a Drive-In Hamburger Bar by the McDonald Brothers (Dick and Mac), and has since grown into a full-fledged fast food restaurant corporation. In fact, the McDonald Brothers didn't start McDonald's Hamburgers until after the Speedee Service System was created (Zhang et al., 2020). The Speedee Service System was the first step in the establishment of the McDonald Brothers franchise. McDonald's principal source of revenue comes through franchising. Fast-food franchises, whose primary goal is to develop as rapidly and efficiently as possible, rely on the usage of small investors' money to finance their operations.

Ray Kroc is credited with developing the McDonald's revenue model, since he was the one who developed the company's franchising strategies. Ray Kroc came up with the idea of expanding the firm's size without compromising product quality, which was accepted by the corporation. When the McDonald's Corporation decided to rent out its locations to franchisees, it gained a fortune (Dilip et al., 2021). By selling them supplies, it was able to maintain a safe distance between itself and the franchisees. Only 15 percent of the network's restaurants are owned and operated by the network itself, despite the fact that there are more than 120 restaurants in the network. Its revenue model is a three-legged stool, with the three legs being suppliers, franchisees, and McDonald's.

Profound Growth Strategy

For the sake of pleasing its customers while also expanding its company, McDonald's has stuck to a promising growth strategy. “The implementation of the Velocity Growth Plan in March 2017” contributed to the success of the firm and its stockholders (Lutsiv et al., 2017). The company's growth strategy is based on the concepts of Retain, Regain, and Convert. McDonald's main goals include retaining customers and recovering their trust, as well as turning casual customers into regular customers. Aside from that, the corporation has adopted three accelerators in the United States: digital transformation, delivery transformation, and experience transformation. Increased access to the McDonald's experience will be possible in the future as technological advancements and human initiatives continue to revolutionise how the company interacts with its customers.

“Recommendations on how the subject organisation should lead and manage innovation and change in 2021 and beyond”

1. Embrace the use of junk food

It seemed that a fast food corporation is producing a new monstrosity virtually every day these days. There have been a few novelty foods added to the McDonald's menu, but they haven't been quite as imaginative as the KFC Double Down Dog or the several hybrid cuisine items on Taco Bell's morning menu, for example. If McDonald's is going to embrace the fact that it has a bad image for serving unhealthy food, then it should go all out with its menu selections, in my opinion (Christensen et al., 2018). As a consequence of the introduction of new, more luxurious menu items, sales at Dunkin' Donuts and Domino's both increased by 2.7 percent and 15 percent, respectively, in the first quarter. It's possible that it will work for McDonald's as well.

1. More efforts on Breakfast menu

McDonald's is currently doing a wonderful job with breakfast, so this isn't really a proposal, but more an encouragement for them to keep up the good work they are doing. The demand for McDonald's to provide breakfast all day has grown steadily since the introduction of the breakfast menu to the fast-food sector in the 1970s. As shown by a March 2014 NPD Group study, consumers in the United States increased their visits to restaurant breakfasts in 2014, marking a fourth straight year of growth (Alomia-Hinojosa et al., 2018). This might be a huge advantage for McDonald's if the corporation decides to extend its breakfast menu.

1. Rates within reach

In addition to the Double Cheeseburger on the Dollar Menu, McDonald's has now launched the Sirloin Third Pounder, which will cost $4.99 and is much more costly than the Double Cheeseburger, the firm says. A high-end burger enterprise is not McDonald's first foray into high-end burgers. At 2013, Angus Third Pounder burgers, which had been sold for $4.49 in most locations for four years, were phased out. For McDonald's consumers, it's not in their best interest to provide them an expensive, fancy burger that they can get at Five Guys for a few dollars more (Desmond et al., 2018). To keep customers coming back for more, McDonald's has to maintain its pricing as low as it possibly can.

1. Interiors of the restaurant

The advertisements for McDonald's restaurants, at least from my viewpoint, portray the establishments as warm and friendly, yet this is not the case in reality. The interiors of the majority of McDonald's restaurants are drab and out of date (Wu and Ma, 2021). In comparison, Starbucks' spacious, soft chairs and relaxing light acoustic music are a far cry from this. A friendlier environment at McDonald's may entice certain customers to visit the business.

1. Paying proper wage

As a consequence of protests demanding that McDonald's raise its minimum pay for its workers, the corporation has been under a cloud of doom in recent months. For April 15, a massive wave of protests calling on McDonald's to raise its minimum wage to $15 an hour got under way. As recently as last month, McDonald's said that it plans to raise employee compensation by more than 10%. On the other hand, employees employed by franchisees were not included in this wage increase (Wu and Ma, 2021). Increasing the wages of employees will increase the company's costs, but it will also enhance the company's public image and the lives of its workers.

Conclusion

The report provides a clear understanding about the innovation strategy of McDonalds and how they can perform better in the future is also recommended. These show that by following these activities the company can perform even better in the coming years. The company should perform well so that they can improve their revenue in a better way.

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