Leader in the Quick Service Sandwich Industry McDonald’s is the leader in the quick service sandwich industry both in terms of coverage and sales. McDonald’s is currently the world’s largest burger chain with over 30,000 stores worldwide serving up to 46 million customers a day and $41 billion in sales. While its closest competitor, Burger King only had $1.72 billion in revenue, McDonald’s revenues in 2002 were significantly higher at $15.4 billion. Brand Recognition With presence in 120 countries worldwide, the McDonald’s brand (with its ‘golden arches’) is one of the world’s best known brands. Strongest International Presence and Highest Worldwide Sales The company has had the strongest international presence and achieved the highest worldwide sales since the beginning of its overseas expansion. It had a first-mover advantage in expanding overseas, utilizing its well-reputed franchising business model. Real-Estate Holdings McDonald’s owns most of the real-estate its restaurants are built on. This gives them more control over what they can do with the land. McDonald’s restaurants were usually located on prime time high-traffic real estates. This gives it high visibility and accessibility. McDonald’s also derives a revenue stream from its real estate holdings by collecting ‘rent’ from its franchisees operating on the land. When it is not rented out or utilized, McDonald’s also can market its excess land, property and buildings. Easily Recognizable Product This fast food company has its own easily recognizable product – McDonald’s “BigMac” as its trademark. Variety of Sources of Income McDonald’s derive s its income from several sources. Firstly, with its franchise business model, its franchisees are to pay to McDonalds (a) a monthly service fee charged which is determined as a percentage-of-sales and (b) a rent fee charged by McDonald’s for operating on its real estate holdings. Franchised restaurants account for 60% of its sales. McDonald’s also generates revenue from its company-owned restaurants, which currently accounts form less than 30% of its sales. Lastly, it also gets revenue from affiliated restaurant outlets (McDonald’s has a few other restaurant brands in its brand portfolio). Franchise Business Model One of McDonald’s strengths is its franchise business model, which was initiated by Ray Kroc who believed that in selling the franchises, each franchisee is treated as a business partner. The intention of this model was for every McDonald’s franchise to offer the same food experience with uniform operations. This business model has allowed McDonald’s to expand quickly domestically and internationally and deliver consistency across franchises – such standardization has been one of the key success elements of McDonald’s.
WEAKNESSES Customer Service McDonald’s received the lowest customer service rankings in the United States – not only the lowest among all national fast food chains (since 1994), but also lower than any of the US domestic airlines. Slow Service at Drive-Through Windows Although McDonald’s generated 60% of its revenue from its drive-through operations, its service times are about 40.67 seconds behind its closest competitors such as Wendy’s. Every 6 seconds increment translates into a 1% loss in sales. Annually, based on this translation, McDonald’s loses almost $97,000 in potential sales. Poor Order Accuracy Not only has McDonald’s been criticized for its speed, it has performed poorly in terms of order accuracy. Compared to the fast-food chain Chick-Fil-A’s 97,3% accuracy rate, McDonald’s only fulfills 84.41% of the orders accurately. In ranking against the other fast food restaurants, McDonald’s takes the 19th position. Poor Management McDonald’s management has gone through as series of missteps. McDonald’s poor management can be classified into two groups: Management at Corporate Level -Under Greenberg, the previous CEO, McDonald’s had too many broad initiatives simultaneously which none of them were implemented properly under his leadership. Franchise Management -McDonald’s have not been responsive to its franchisee’s needs. -Despite Ray Kroc’s vision of making every franchisee McDonald’s business partner, McDonald’s hunger for sales growth through aggressive domestic store expansion has led to cannibalization in existing franchisees. -To rid the franchisee tensions, previous CEO discontinued its QSVC evaluation system which led to lower customer service level. -Failed marketing effort “Made for You”, which produced undesired result, further deteriorated franchise relationships. -Series of franchise conflicts were left unattended resulting in poor franchise relationships. -With lack of effective franchise management, McDonald’s have been perceived to have inconsistent quality and service. Poor Marketing McDonald’s has not been attentive to customer’s needs in the past, which is especially crucial at a time where several consumer trends are prevailing. In addition, McDonald’s introductions of ‘healthy menu’ or low-fat products to respond to needs of consumer have failed. Continuous Struggles in Offering Value-Priced Items and Expensive Items In its international operations, McDonald’s has struggled to offer value-priced items and expensive items. McDonald’s wants to offer a series of menu at different price points to attract price sensitive consumers as well as those willing to pay premium. While some countries received value-menus well, others did not respond well to McDonald’s attempt to sell its menu at discount prices. In addition, its lack of product innovation and unresponsiveness to local taste needs will cause the company to continuously struggle in product introductions abroad. High Employee Turnover Rate Similar to the other players in the industry, McDonald’s has a high employee turnover rate. As far as the nature of the industry goes, the fast food industry employee turnover rate averages at 300% a year. McDonald’s turnover rate, however, tended to be higher than its competitors. Furthermore, such high employee turnover can contribute to the poor service ranking of McDonald’s.
Growth in Global Food-Service Industry Between the year 2002 to the year 2006, the global food-service industry is expected to grow by more than $200 billion. And thus, international expansion is an important opportunity that McDonald’s will need to capitalize. It has been anticipated that growth in other countries, other than the domestic market will be one of the few sources of sales growth in the near future. Initial Public Offerings in Other Countries McDonald’s has an opportunity to raise more funds by launching initial public offerings in other countries, especially in those that they are performing well in. Currently, McDonald’s stocks are active in the US market and its recent IPO launches in the Japanese market proved a success. In evaluating the potential of each market, McDonald’s has a choice of 120 countries to choose from where it can raise more funds for its operations. Acquisition of Other Restaurants In reacting the slow growth of the sandwich segment, McDonald’s has had, in the past, tried to diversify its portfolio by acquiring other restaurant brands (namely the Boston Market, Chipotle, Donator’s Pizzeria, Pret a Manger, and Fazoli’s). But the company’s poor performance in 2001-2002 has prompted the new CEO, Cantaloupo to refocus McDonald’s operations on its core operation where he divested many of the brands in its portfolio. Nonetheless, acquisition of other restaurants will be an opportunity for McDonald’s to add to its revenue stream and can also pose as a strategy for diversification. Retail Sales of Merchandises McDonald’s has an opportunity to generate revenue stream from the retail sales of its merchandises. Its well-established Ronald McDonald and Friends characters and agreements with company’s such as Disney’s allows McDonald’s to develop merchandises for sale with its menus, most notably, its “Happy Meal” sets targeted at kids.
Increased Competition from Various Industries Not only is McDonald’s to face increased competition in the quick-service restaurants industry, it is beginning to face non-traditional outlets that provide re-heatable prepared foods (substitutes for fast food). These non-traditional outlets include grocery and convenience stores. Health Conscious Consumer Trend One of the many consumer trends currently impacting the fast-food industry is the increasing health consciousness of consumers. This has resulted in the decreased consumption of fried food, junk food, and red meat. Such consumer trend can also extend to hurt how consumers perceive the “McDonald’s” brand negatively – simply as a junk food restaurant. Value-Conscious Consumer Trend Not only are a large portion of consumers becoming more health conscious about their diet, consumers are also becoming extremely value conscious. Consumers are demanding quality, as well as good value for price. Saturation of US fast-food market After years of aggressive domestic expansion efforts, the US fast food market has reached saturation. Growth opportunities will come from international expansion while domestic expansion will likely result in cannibalization of McDonald’s own stores. With so many competitors in the industry competing for this saturated piece of the market, McDonald’s will need to realize domestic operational efficiencies and capitalize opportunities from markets abroad. Slow Growth in the Sandwich Segment In addition to the saturation of the US fast food market in general, the sandwich segment McDonald’s is competing fiercely in is also experiencing slow growth. Price War Business Practices In the recent years, to respond to the value conscious consumers’ needs, the industry engaged in price war business practices. Competition was intense and at a time when the economy was on the decline, price cuts were a major part of the industry’s focus. If industry continues to engage the price war, McDonald’s will suffer a drop in sales and may hinder future intentions to improve product quality.
Human Resource Management
Human Resource Management RECRUITMENT IN MCDONALDS
McDonald’s Pakistan is part of the Lakson Group of Companies, a leading business house in Pakistan.
With a head office in Karachi and regional office in Lahore.
Human Resource Management … to be our customers favorite place and way to eat with inspired people who delight each customer with unmatched quality service, cleanliness and value every time… McDonald's Mission
The part time and temporary workers are do hired by McDonalds as it saves money and increase the worker flexibility.
Human Resource Management Mission Statement: “ We value you, your growth and your contributions.” McDonald's People Promise
Human Resource Management GM Real Estate DO CEO Country HR Manager GM Finance Country Production Manager GM Operations GM Equipment GM Marketing Training Consultant HR M Karachi HR M Lahore HR Coordinator HR Coordinator Op. Manager Op. Manager 1 st Asst 2 nd Asst 2 nd Asst FM FM FM FM Op. Consultant Op. Consultant Res. Manager Training Coordinator Asst. HR M
There should be more than one feedback session for improvement of performance of employees
COUNTRY HR EXECUTIVE SHUMAILA HAMEED’S MESSAGE
“ People are hired on the basis of their personality traits (i.e. education, family, social class, style, experience, etc), but are fired due to character traits (i.e. dishonest, cheater, untruthful, corrupt, etc.)”