McDonald Company’s Operations Management

Introduction

Analysis of operations performance provides a tool kit for enabling an organisation understand its markets. As Chase, Jacob, and Aquilano (2007) confirm, operational performance refers to “performance that is measured against standards or prescribed indicators of the effectiveness, efficiency, and environmental responsibility such as cycle time, productivity, waste reduction, and regulatory performance” (p. 45).

To satisfy these concerns of operational performance, McDonald’s Company deploys various operations management approaches. Effective management of the company’s operations and processes is important in terms of lowering operational risks, securing revenue, enhancing innovative, and creative capacity in a bid to lower its capital requirements for expansion to enable it pursue low-cost strategies. This paper critically analyses and evaluates McDonald’s business from the perspectives of service and product package, characteristics of services/products, and the nature of the services/products as they apply to the organisation. The goal is to establish the roles of operations management in terms of meeting customer needs.

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Services/Product Package

To place organisation’s products successfully in the market place, it needs to describe its service/products packages. Fitzsimmons and Fitzsimmons (2007) reveal that the service package refers to “a buddle of goods and services with information that is provided in some environment” (p.22). At McDonald’s, this package consists of five essential features as outlined by Fitzsimmons and Fitzsimmons (2007). They include sustaining amenities, facilitating merchandise, information, unambiguous services, and the inherent services (Fitzsimmons & Fitzsimmons, 2007). Before offering any product and its associated service, a company must ensure the existence of supporting facilities, especially physical resources. For instance, the actual selling act involves processing of customers’ information. This implies that McDonald’s must possess machines for transacting payments. The effort of the actual physical company to establish outlets or franchiser-owned outlets is also important to facilitate service offering.

The process of facilitating goods entails availing all items that are purchased by consumers. McDonald’s stands out as one of the biggest global fast food retailers that offer fast food product packages in more than 119 customers all over the globe. McDonald’s restaurants and franchises, which stand at about 33, 500, continue to grow as the organisation penetrates new markets in Asia (Derdak & Pederson, 2004). This immense success emanates from a number of factors among them being the incredible emphasis on engagement of consumers, appropriate leadership that fits well the business of the organisation, and the exceptional investments of the organisational resources to enhance its operational performance. Customers arrive at McDonald’s to purchase fast foods as the facilitating goods component of service package.

The process of facilitating goods possesses both advantages and disadvantages to the operational performance of McDonald’s. The business has experienced myriads of changes in its operational environment, especially by noting the increasing emphasis on the need to change eating behaviours to avoid the dangers of health risks that are associated with fast foods (Love, 1997, p.23). In fact, health specialists classify foods that contain high calories such as fast foods, which form the menus of the McDonald’s as unhealthy. Campaigns that are incepted by health organisations against such products translate into the emergence of demand for fibre rich foods. For this purpose, creativity and innovation are necessary in an effort to come up with new product packages that meet the emerging customers’ need.

Distribution of information is important for efficient service offering. As a component of service package, information refers to data that is availed by either service providers or customers in an effort to facilitate service customisation (Schmenner, 2008). At McDonald’s, different menus are provided to meet the needs of different demographics, including children and the elderly. For those who are under medical directions not to take foods that have high calories, they provide such information to the company through its employees who serve them so that they can be referred to other alternatives.

Services need to deliver both explicit and implicit benefits to their consumers (Cohen & Levinthal, 1999). Explicit services constitute the benefits, which are directly observable and detected through senses. They comprise intrinsic aspects of the delivered gains (Fitzsimmons & Fitzsimmons, 2007). For McDonald’s, they include freeing consumers from hunger upon consuming products. Implicit services involve psychological gains that customers acquire after being vaguely identified by service recipients (Fitzsimmons & Fitzsimmons, 2007). For instance, in the case of McDonald’s, this may comprise inducing happiness after consuming ‘happy meals.’

McDonald’s business encounters major strategic challenges in increasing its operational performance by protecting its service/product packages. It pays substantive attention to protecting these packages by responding to negative critics of the company’s products, particularly with criticisms that fast foods are closely associated with obesity and its associated ailments (Derdak & Pederson, 2004). As part from this strategy, the company also focuses on “repositioning itself to appeal to a broader audience, particularly by redesigning its outlets and making them more modern, comfortable, and upscale” (Wilhelm, 2011, Para. 2). In this extent, brand management and brand protection are one of the performance strategies used by McDonald’s to enhance its success in a competitive and dynamic fast food business. Change in appeal of its facilities creates an impression of the capacity to offer quality services, which meet customers’ anticipation and service offering preferences.

Nature and Characteristics of Services/Products

McDonald’s does not operate as a lone entity in the fast food markets across the globe. There are competitors. While the company has developed various products to defeat other organisations in terms innovativeness in new products, the only simple formula to success entails creating distinctions in services that are being offered between it and its competitors. Indeed, competitors can copy products that McDonald’s creates, but may not duplicate its service-offering culture.

Customers value speed, dependability, flexibility, quality, and cost effectiveness (Slack & Lewis, 2002; Hayes, 2005). This suggests that McDonald’s can effectively build its operations performance strategy around these five components in a bid to defeat its competitors effectively. For instance, by increasing the speed of service offering, it can minimise incidences of customers who spend too much time in queues. This strategy will help in building better-satisfied clientele. In fact, such a strategy amounts to one of the most important aspects of operations management, which entails management of processes and flows within an organisation to optimise service delivery (Ferdows & Meyer, 2001).

In designing the appropriate strategies for ensuring quick, dependable, quality, and flexible service delivery, the concepts of operations management at McDonald’s are incredibly important. They help in the determination of ways of ensuring that business operations are efficient and effective (Zineldin, 2000). These two aspects are functions of understanding the market environment for fast foods and/or understanding the characteristics of services offered in the industry in an effort to utilise only those strategies that can yield success. Fitzsimmons and Fitzsimmons (2007) assert that services possess typical qualities such as simultaneity, perishability, intangibility, and heterogeneity.

In the process of selling its fast food products, McDonald’s offers services to people. This implies that customers are also players in the service delivery processes. This claim creates the need to consider facility design approaches that enhance the ease of flow of people across its shops and franchises, which do not follow the same layouts as those found in production-based organisations (Schmenner, 2008).

Issues such the sitting arrangements, the tidiness on the eating areas, the appeal of the furniture, and the cleanness of employee outfits contribute towards the quality of the services delivered at McDonald’s Company. Fitzsimmons and Fitzsimmons (2007, p.18) assert, “Quality of services is enhanced if the service facility is designed from the customers’ perspective.” Customers can compare service quality offered at McDonald’s to those offered by its competitors through layout, interior decorations and paintings, furnishings, and noise absorption levels. The organisation that wins the confidence of most customers is the one, which the characteristics of its facilities create positive service perceptions.

Simultaneity, as a characteristic of services, constitutes one of the most important considerations in the design of McDonald’s strategic performance initiatives. The organisation believes that it can suffer the loss of customers without quick service delivery since services cannot be stored. They are consumed just at the time they are produced (Rust, 2004). Bitran and Lojo (2003) support this assertion by adding that specialising in the service sector places an organisation at a disadvantage since the buffers to absorb various fluctuations in demand levels are impossible to maintain.

At McDonald’s, simultaneity creates the challenge of running quality-control interventions when delivering services. Indeed, employees judge the quality of services that are delivered to a given customer during the process of offering the service. This implies that employees act as the sources of customer satisfaction with the service. A service company cannot have proactive control of service quality (Sureshchandar, Rajendran & Anantharaman, 2009).

The only strategy to ensure consistency in quality is through reactive strategies. Through this approach, customers give their feedback on their service satisfaction levels, which the management then uses to prescribe the appropriate procedures and guidelines to avoid repeating the experienced poor customer satisfaction with services. Thus, when employees get it right from the beginning, McDonald’s develops the capacity to build a good reputation for quality.

The main concerns of management at McDonald’s entails ensuring that all seats at the company-owned outlets and franchises are occupied, and that no customer misses a sitting space at any particular time. This strategy is a measure to ensure balancing arrival rates, service rates, and departure rates. The goal is to avoid customer dissatisfaction, which may make clients consider eating from competitors’ outlets that have the right combination of these three aspects. When offering products such as fast foods, any time when space is not utilised implies a lost service due to its perishability nature (Fitzsimmons & Fitzsimmons, 2007). Consequently, at McDonald’s, when a staff member does not deliver services to customers due to their absorption by the competitors, the services and its monetary gains to McDonald’s are lost completely. To sustain the services, operations management finds a mega application.

Services are intangible. The word ‘things’ may describe products such as hamburgers. However, concepts and ideas describe well the services McDonald’s offers. Intangibility characteristic of services implies that they cannot be patented (Bitran & Lojo, 2003). Therefore, “to secure the benefits of a novel service concept, the firm must expand extremely rapidly while pre-empting any competitor” (Fitzsimmons & Fitzsimmons, 2007, p.20). To ensure that McDonald’s protects its unique service-offering techniques, it deploys the franchising model to establish and build fast enough its brand in the emerging markets.

Through franchising, organisations develop the capacity to sell ideas to various locally established entrepreneurs (Fitzsimmons & Fitzsimmons, 2007). In the process, they protect their capital, reduce risks, and/or maintain control of ideas (Stevenson, 2002). Franchising ensures that the company will have built large clientele by the time competitors copy its techniques so that it can run optimally by taking advantages of economies of scale and good customer reputation to induce both repeated sale and customer loyalty.

Heterogeneity arises from the fluctuation of perception of services by different customers due to the participation of customers in the process of its delivery together with its intangibility trait (Fitzsimmons & Fitzsimmons, 2007). However, the interaction between customers and employees helps in developing more customer service experience. At McDonald’s, this strategy ensures that the service delivery remains oriented towards customers. This claim reveals why McDonald’s builds its organisational culture around people as a strategy of enhancing its competitive advantage. Although this culture is important in increasing utility for the services during their selling, it may pose challenges when employees boycott work. They bridge the link between customers and services. McDonald’s confirms that it cannot deliver quality, dependable, and speedy services without innovative and creative workforce (Wilhelm 2011). Employees anchor the operations of the organisation.

Service acts are different in nature. Fitzsimmons and Fitzsimmons (2007) reckon that a service acts can fall into two broad dimensions. The first dimension comprises defining the direct service recipient while the second dimension entails the tangible nature of any delivered service. Therefore, in the development of operational performance strategies by focusing on service offering as a mechanism of building competitive advantage, four aspects are important to take into consideration. Firstly, there is a need to consider the definition of strategies for enhancing tangible actions, especially those that are designed to address customer needs such as personal care (Bitran & Lojo, 2003).

Tangible actions can also be directed towards customers’ properties. For fast food restaurants such as McDonald’s, direct actions towards customers involve the actual selling of foods from the food counters. Actions that are directed towards their property involves ensuring security for customer possessions such as bicycles, cars, motors cycles, and other belongings while at the organisation’s premises. Thirdly, an organisation can deploy intangible actions that focus on consumers’ intellects. For instance, entertainment is crucial in fast food eating facilities. Intangible actions can also target customers’ properties. This suggests that customers execute transactions directly with service providers (Bitran & Lojo, 2003). In fast food industries, the customer does this role in person. Thus, McDonald’s applies different strategies for ensuring long-term relationships with its customers in a bid to consistently increase and maintain its operational performance.

Conclusion

Organisations enhance their growth and development by various mechanisms among them being cost effectiveness and the development of operational strategies that respond to the emerging needs in the markets. McDonald’s considers such strategies effective in helping it gain competitive advantage to withstand any aggressive forces both in the short-term and in the end. Organisations that operate in the service sectors or offering their products, and hence services in the process, have an incredible challenge to develop appropriate operational strategies to enhance retention and attraction of new clientele. McDonald’s focuses on designing and improving its services/products packages to acquire higher operational performance while considering the nature and characteristics of its services and products.

Reference List

Bitran, G., & Lojo, M. (2003). A Framework for Analysing Service Operations. European Management Journal, 11(3), 271-282. Web.

Chase, B., Jacobs, F., & Aquilano, J. (2007). Operations Management for Competitive Advantage. New York, NY: McGraw-Hill. Web.

Cohen, W., & Levinthal, D. (1999). Absorptive Capacity: A New Perspective on Learning and Innovation. Administrative Science Quarterly, 35(1), 128–152. Web.

Derdak, T., & Pederson, J. (2004). McDonald’s. International directory of company histories, 67(7), 105-109. Web.

Ferdows, K., & Meyer, A. (2001). Lasting Improvement in Manufacturing. Journal of Operations Management, 9(2), 168-184. Web.

Fitzsimmons, J., & Fitzsimmons, M. (2007). Service Management: Operations, Strategy, Information Technology. New York, NY: McGraw Hill. Web.

Hayes, R., Pisano, G., Upton, D., & Wheelwright, S. (2005). Operations, Strategy and Technology: Pursuing the Competitive Edge. New York, NY: Love Wiley. Web.

Love, J. (1997). Big Macs, Fries, and Real Estate. Financial Executive, 3(4), 20-26. Web.

Rust, T., Zeithaml, A., & Lemon, N. (2004). Customer centred brand management. Harvard Business Review, 82(4), 110-118. Web.

Schmenner, R. (2008). How Can Service Businesses Survive and Prosper? Sloan Management Review, 27(3), 315-321. Web.

Slack, N., & Lewis, M. (2002). Operations Strategy. Harlow: Pearson Education. Web.

Stevenson, W. (2002), Production and Operations Management. New York, NY: McGraw-Hill. Web.

Sureshchandar, G., Rajendran, C., & Anantharaman, N. (2009). The influence of total quality service age on quality and operational performance. Total Quality Management and Business Excellence, 14 (9), 69-88. Web.

Wilhelm, R. (2011). McDonald’s Formal Business Structure. Web.

Zineldin, M. (2000). Beyond relationship marketing: Technological marketing. Marketing Intelligence and Planning, 18(1), 9-23. Web.

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