August 28, 2017 Trimester:172 Course ID: MGT 3224 Course Title: Production and Operations Management

1. REPORT
Prepared For
Mimnun Sultana
Asst. Professor
School of Business & Economics
Prepared By
Group Name: Enigma
Section: G
Production and Operations Management
MGT 3224
August 28, 2017
United International University

2. ii
Group Members
Class Serial No. Name ID
12 Shagufta Rahman 111151022
24 Taiyeb Ahmed 111151349
25 Sharmin Jahan 111151396
30 Ruhama Tabassum 111151446
31 Tanzib Wasif 111151470

3. iii
Letter of Transmittal
August 21, 2017
Ms Mimnun Sultana
Asst. Professor
School of Business and Economics
United International University
Subject: Submission of report.
Dear Ma’am
We are pleased to submit the report that you asked for and give us the authorization to work on
“CNBC’s BIG MAC Inside The McDonald’s Empire”. We tried our best to work on it
carefully and sincerely to make the report informative.
The study we conducted enhanced out knowledge to make an executive report. This report has
given us an exceptional experience that might have immense uses in the future endeavors and we
sincerely hope that it would be able to fulfill your expectations.
We have put our sincere effort to give this report a presentable shape and make it as informative
and precise as possible. We thank you for providing us with this unique opportunity.
Sincerely yours,
On behalf of the group members,
Shagufta Rahman.

4. iv
Acknowledgement
It is our esteemed pleasure to present the report on “CNBC’s BIG MAC Inside The
McDonald’s Empire”.
We express our deep gratitude to our course guide, Ms Mimnun Sultana (Asst. Professor, School
of Business and Economics), who gave us the inspiration to pursue the report and guided us in
this endeavor. She has been a constant source of motivation and encouragement for us. We thank
her for all the initiative and zeal she filled us with throughout the repot work.

5. v
Summary of CNBC’s BIG MAC (Inside McDonalds Empire)
McDonald’s is a global icon. It took 15 years in the making. It serves 15 million customers a
day. It has 31 thousand stores around the world. It has a secret test kitchen inside, where new
creations live or die. McDonald’s train its army of workers. How profitable a franchisee is, it can
be knew only knowing McDonald’s. From a few hamburger stands, visionary Ray Kroc
(Founder of McDonald’s) created a food empire. It earns $21 billion in year revenue. It uses 2
million pounds of beef a day. It also has a lot of controversy. One of it is, a big Mac, large fry
and a large coke contains 1430 calories 59 grams of fat. MacDonald’s CEO James A Skinner
said about this that one have to make choices about what they eat. Marion Nestle nutritionist of
NY University said that McDonald’s is a business, its job is to sell more foods, it doesn’t care
what kind of food it sells. McDonald’s new frontier China now believes in “Out with the old, In
with the new”. Looking at China’s 1.3 billion populations, Jeff Schwartz, CEO of McDonald’s
China said that the opportunity is endless for McDonalds.

6. vi
Contents
Letter of Transmittal......................................................................................................................... iii
Acknowledgement.............................................................................................................................iv
Summary of CNBC’s BIG MAC (Inside McDonalds Empire) ...............................................................v
BIG MAC..........................................................................................................................................7
McDonald’s Operations Management................................................................................................12
SWOT Analysis ...............................................................................................................................17
References.......................................................................................................................................20

7. 7
CNBC’s
BIG MAC
Inside The McDonalds
Empire

8. 8
CNBC’s reporter: Karl Quintanilla
The McDonalds museum was a working McDonalds in 1955. In fact this was the first store ever
opened by company founder Ray Kroc.
Back in 50’s one can open a McDonald’s with just about $30,000. Today it would cost a million
dollar or more to buy a McDonalds franchisee but it can still pay off. McDonald’s is the most
biggest and successful food enterprise in the world.
Darien, America, largest busiest city, has the biggest, busiest McDonald’s outlet. It’s the busiest
chain and the most biggest and successful food enterprise there. George Michael is the owner
operator; he took over the struggling franchisee in 1990. It is the first in 6 stores that he owns. He
still cleans windows, and work in the register. He works 80+ hours a week or 14 hours a day, this
dedication made him wealthy and rich. Like all successful owner operators he has a key partner
and top manager Tyron Davis. Davis was a crew man 18 years earlier, now he is an Operations
Manager. Now he manages $18 million worth of business with more than 300 employees, where
low wages and staggering turnover is common. A good McDonald’s manager can earn a
$100,000 or more. Soon Davis will own his own McDonalds where he will be an owner
operator. He is very much concern about quality. His work includes crew supervision and
customer service. He said the first priority should be a clean washroom or you will lose
customer.
Obsession, detail and efficiency made McDonalds bigger, successful and profitable than any
other. McDonalds has more than 31000 stores in 118 countries.
In 2002 McDonalds announced quarterly loss. McDonalds CEO James A. Skinner said this
happened because of a growth strategy of opening more than 2000 restaurants a year, which was
unsustainable. $4 billion investment in opening them in 3 or 4 years, but there was no
incremental income growth. This made a scenario of dirty stores, cold food, which led to
customer dissatisfaction. For company executives like, President Don Thompson it was a
wakeup call. He assured quality, control and cleanliness. The kitchens were revamped;
sandwiches were no longer stockpiled but instead were made to order. They added more chicken
and salad. They spent less time in building stores, and more time in focusing the ones they have.
Two chief officers died. But the plan was in motion. Most of the stores were renovated.
McDonalds launched coffee which backed up many of its customers from Starbucks. They also
launched breakfast menu. Thus, they were back on track.
50 years ago company founder Ray Kroc took a small hamburger business and transformed it
into a global food empire. He is the man who turned hamburger into a world’s wild ambition.
The McDonald’s brothers realized that customer needs faster service. Then in 1948 they opened
customized hamburgers featuring their “Speedee Service” system. They targeted the kids
because they thought if they get the kids they can get the parents too. By the year 1950 the
McDonald brothers were earning nearly $500000 a year in sales. Chicago salesman named Ray

9. 9
Kroc used to sell multi mixture, a machine that could make 5 milkshake at a time. He got an
order from McDonalds for eight machines. And in 1955 Kroc signed a contract with McDonald
brothers to be their exclusive franchise representative.
Quality, service and cleanliness became the McDonalds main mantra enforced by a team by Fred
L. Turner. He opened a management training centre named “Hamburger University”. After that
McDonald became every franchisee’s landlord to earn more profit. And then the franchisees
became their real marketing innovator within McDonald’s system. Washington D.C. used a
clown in their commercial and that was the birth of Ronald McDonald played by Willard Scott.
Franchisees were also menu innovators. The first addition to the original menu was created by a
franchisee which was “fish sandwich”. In 1965 the company went public and offered their share
in the market.
Dan Coudreaut was the head chef of MacDonald. Chef Dan served some other fanciest
restaurants including Four Seasons Resorts. McDonald’s have many more items like fruit’n
yogurt parfait, the triple shakes, the salad, French fries beside burgers. Chef Dan added some
new types of salad in their appetizer menu. Their new creation snack wrap has quickly become a
hit. As they have thirteen thousand and more branches in all over the world, preparation must be
easy to duplicate. Each year some eighteen hundred menu ideas tossed around in the chef Dan’s
kitchen but only 3 or 4 make it to the stores. By the time a product reaches the menu it’s gone for
upwards and two hundred test.
Deborah Mc Daniel is the head of McDonald’s food innovation and menu management. Her
team improved Angoon Third Pounders burger. There are 34 suppliers for this one product.
There are penalty test for each supplier to make sure that every customer at every McDonald’s
gets the exact same test. With fifteen tests behind them many more evaluations lie ahead for the
Angoon burger before it rolled out nationally.
McDonald’s sold two million cups of hot coffee each day in US. McDonald’s reportedly kicked
out hundred millions of dollar for research, production, and marketing.
Over the year McDonald’s has expanded the portion size of their burger. In 1950 they offered
only one size of burger. Today’s double quarter pounder contains 500% more hamburger meat
and the largest serving fries have increased by 250%. Food critic and obesity expert Kelly
Brownell opined that nowadays people demand large portion when they are having foods by
spending money. Since 1960 obesity among children and adolescent has more than triple and
today more than nine million children in US are obese and children face the more risk according
to Kelly Brownell’s opinion. Marion Nestle, professor of nutrition food studies and public health
at NY University explained the misery of having too much McDonald’s food. McDonald's
largest portions are smaller than two competitors Burger king and Wendy's and many
McDonald's are adding healthy items are given. But hamburgers and fries are still the heavy
weight. And they think it's good to selling apple and selling salad but their main focus is

10. 10
hamburgers and fries. Marion Nestle also added that they are interesting to sell because
McDonald's is a business and its job is to sell more foods, it doesn’t care what kind of food it
sells. But their CEO James A. Skinner said that they are Hamburgers Company so they sell only
hamburgers.
McDonald's spend 2 billion dollar on advertising including every demographic imaginable, this
includes the cost of children. McDonald's advertising figure Ronald McDonald is one of the most
admired character among the children, second only they admire is Santa. It was a brilliant
marketing decision to take Ronald McDonald as advertising figure said Marion Nestle. When
asked is it brilliant or manipulated marketing, she answered that obviously it is manipulative.
Research found that the children under the age of 8 are manipulated by TV commercial. The kids
get a thought that McDonald's offer happy meal for example. McDonald's offer its happy meal
with toys. Some parents and children come to McDonald's twice a week. But McDonald's say it
marketing aims to push the children to healthier direction. Mary Dillon global chief of marketing
marketed burgers, French fries directly 2 years and pointed that promotion of McDonalds include
on the movie Shrek the Trekked. Mary Dillon said that they try to push children healthier
products like McDonald's apple dipper with happy meal. But in reality it can be noticed that
McDonald's happy meal come with the fries. Some strategy finds that people have no idea about
the calories content of their meal. No one notice that calories or nutrients information which
McDonald's provide in their outline, toll free number, website and even direct in the packagers.
Scientist, city and state governments require McDonald's and the other fast food chain
restaurants to list calories on their menu board. McDonald's food calories contain like Big Mac
540 cal, Quarter pounder w/cheese 510 cal, Double cheese burger 440 cal, Medium fries 380 cal,
Double quarter pounder w/cheese 740 calories. After this list in New York City McDonald's face
huge loss to maintain the regulation.
McDonald’s is now very popular in China. Two decades ago it was totally unknown here. But a
capitalist revolution changed the situation. Mainland China, which is still a communist country,
has 800 outlets of McDonald’s along with 200 more in Hong Kong. Jeff Schwartz, CEO of
McDonald’s China thinks that the opportunity is endless here in this country of 1.5 billion
populations. The opportunity is endless but not effortless. That’s why he and his boss Fenton
spend so much time in China on the road and on the move. Tim Fenton, who is the president of
McDonald’s for Asia, Middle East and Africa thinks that opening just 1 outlet is a mistake, but
building 4-5 outlets can save money. Because when a truck goes out from the distribution center
its carrying products for 3 to 5, not just 1. When McDonald’s 1st opened in China the roads were
filled up with bicycles. But prosperities brought an explosion in car ownership. McDonald’s saw
an opportunity in there called Drive-through. The very 1st Drive-through they opened in
November of 2005. This concept was very successful in China. Many Chinese didn’t know how
to use it, that’s why the crews not only had to learn how to run a Drive-through but also had to
teach their customers how to use one. McDonald’s has 26 Drive-through in China so far. But still
some customers didn’t catch on as fast as others. To change this situation in 2006, McDonald’s

11. 11
signed an agreement with the Chinese state oil company Sinopec. They granted it the right to
open McDonald’s store at any of Sinopec’s 30000 new or existing gas stations. The very 1st one
was opened in July of 2006. That in a nutshell has become a key of McDonald’s expansion
strategy in China. China has the world’s fastest growing economy and McDonald’s has the
willingness to bet on an area that may not be ready for them yet. When McDonald’s opened its
first mainland store in 1990, rival KFC had already been there for 3 years. Today there are more
than 1900 KFC stores in China which is more than twice of McDonald’s. So McDonald’s has a
lot of competition in China. The competitors are not only US brands but also local restaurants
like Mom n Pop. Taste, convenience and price are important in China just like the US. But the
issue here is food safety. It’s a big problem in this developing country where safe food handling
is still largely unknown. For this food safety concern all Chinese McDonald’s stores have hand
washing stations and hand sanitizers. Even their suppliers meet the same standards as those in the
US. Food safety is one more strength McDonald’s is hoping to market in China. McDonald’s
was one of the major sponsors of 2008 Olympics in Beijing. With more than half of its stores in
foreign countries McDonald’s has given up trying to count on how many burgers it sold. What it
is counting on is a future where the golden arches continue to spread across the globe and
generating more French fries, income and visibility than Ray Kroc could ever have imagined.

12. 12
McDonald’s
Operations
Management
The causes of McDonald’s success

13. 13
McDonald’s Corporation’s operations management (OM) supports the company’s position as the
largest fast food restaurant chain in the world. McDonald’s maintains effective policies and
strategies for the 10 strategic decisions of operations management to maximize its productivity
and performance as a global leader in the fast food restaurant industry.
10 Decision Areas
1. Design of Goods and Services.
McDonald’s goal in this strategic decision area of operations management is to provide
affordable products. As such, the serving sizes and prices of its products are based on the most
popular consumer expectations. However, some McDonald’s products are minimized in size to
make them more affordable.
As we saw in the earlier chapter of CNBC’s BIG MAC, over the year McDonald’s has expanded
the portion size of their burger. In 1950 they offered only one size of burger. Today’s double
quarter pounder contains 500% more hamburger meat and the largest serving fries have
increased by 250%. This proves how their serving sizes expand to satisfy their customers as
changing customer expectations.
2. Quality Management.
The company aims to maximize product quality within constraints, such as costs and price limits.
McDonald’s uses a production line method to maintain product quality consistency. Consistency
satisfies consumers’ expectations about McDonald’s and its brand in this strategic decision area
of operations management.
McDonald’s succeed to overcome the 2002’s quarterly loss by reassuring quality. Deborah Mc
Daniel who is the head of McDonald’s food innovation and menu management improved
Angoon Third Pounders burger with her team. There are 34 suppliers for this one product and
there are penalty test for each supplier to make sure that every customer at every McDonald’s
gets the exact same test. This is how McDonalds assure quality consistency among its food
offerings.
3. Process and Capacity Design.
McDonald’s process and capacity design is centered on efficiency for cost-minimization that
supports the company’s strategies. This strategic decision area of operations management
focuses on maintaining process efficiency and adequate capacity to fulfill market demand. At
McDonald’s, the production line method maximizes efficiency and capacity utilization.
McDonald’s has embraced the importance of managing processes, by ensuring that every second
is accounted for in the making of each product. Service time is critical to McDonald’s success, as
McDonald’s tries to increase customer satisfaction within the competitive fast-food industry. It

14. 14
currently aims to serve most customers within 90 seconds of taking their order. McDonald’s
realizes the key to creating customer satisfaction within their market niche: Fast service and fast
food. Without detailed workflow processes, McDonald’s is unlikely to be able to maintain their
position within the fast-food industry.
4. Location Strategy.
McDonald’s goal in this strategic decision area of operations management is to establish
locations for maximum market reach. McDonald’s marketing mix includes restaurants, kiosks,
and the company’s website and mobile app as venues. Through these locations/venues,
McDonald’s reaches customers in traditional and online ways.
In 2006, McDonald’s signed an agreement with the Chinese state oil company Sinopec. They
granted it the right to open McDonald’s store at any of Sinopec’s 30000 new or existing gas
stations. The very 1st one was opened in July of 2006. That in a nutshell has become a key of
McDonald’s expansion strategy in China.
5. Layout Design and Strategy.
McDonald’s uses practicality for this decision area of operations management. The strategy
involves maximizing space utilization in restaurants and kiosks, rather than focusing on comfort
and spaciousness.
When McDonald’s 1st opened in China the roads were filled up with bicycles. But prosperities
brought an explosion in car ownership. McDonald’s saw an opportunity in there called Drive-
through. The very 1st Drive-through they opened in November of 2005. This concept was very
successful in China. McDonald’s has 26 Drive-through in China so far.
6. Job Design and Human Resources.
McDonald’s human resource strategies involve training for skills needed in the production line in
restaurant kitchens or production areas. For this decision area of operations management,
individual and organizational learning are also emphasized to support McDonald’s
organizational culture.
Fred L. Turner opened a management training centre named “Hamburger University”.
Hamburger University is a 130,000-square-foot (12,000 m2) training facility of McDonald's,
located in Oak Brook, Illinois, a western suburb of Chicago. This corporate university was
designed to instruct personnel employed by McDonald's in the various aspects of restaurant
management. More than 80,000 restaurant managers, mid-managers and owner/operators have
graduated from this facility.

15. 15
7. Supply Chain Management.
The firm’s global supply chain supports its various locations around the world. McDonald’s has
a strategy of supply chain diversification for this decision area of operations management. Such
strategy involves getting more suppliers from different regions to reduce McDonald’s supply
chain risks.
According to McDonald’s, it is creating long-term supply chain success based on a “System”
where everyone wins. University of Tennessee researchers studied McDonald’s System as part
of its research into what is known as the vested business model. McDonald’s relationships with
its suppliers embody the vested mindset of expanding the pie and sharing the pie. Suppliers that
help McDonald’s succeed also succeed by building their own businesses. Both McDonald’s and
its suppliers create value rather than simply exchanging value.
8. Inventory Management.
McDonald’s goal for this strategic decision area of operations management is to minimize
inventory costs while supporting restaurant operations. The company does not directly sell
products and ingredients to its restaurants. Instead, local and regional intermediaries and
distributors coordinate with McDonald’s restaurant managers to manage their inventory.
McDonald’s is one of a few brands that succeed in inventory management in virtually every
country in the world. It owns more than 30.000 restaurants in 119 countries and regions, with 50
million customers every day.
Inventory management, specifically stock management, is a challenging task for every
McDonald’s manager. Stock management includes two parts, forecasting demand so that
products will not be thrown as waste, and controlling stock accurately for raw materials.
Between the central restaurant supply planning manager and individual restaurants, there are
constant communication which helps to manage the inventory more accurately. A central team,
including employees who have worked in the individual restaurants as well as stock control
specialists, serve as the regional planner.
Each regional planner works with 100 restaurants and communicates with them on a daily basis
via emails and tele-conferences. Any factors that would influent the inventory level need to be
discussed within the team. Regional planners also work with the new ICT stock control system
called Manugistics to ensure enough raw materials such as beef, potato and bread.
The regional planner include a range of ad-hoc factors in calculation of the forecast for
inventory, so that they can predict future demand based on both past performance and future
sales campaigns. For example, the sales of Big Mac will increase during the “Buy one Get one
Free” campaign

16. 16
9. Scheduling.
McDonald’s uses corporate conventions for scheduling, based on local market conditions and
laws, as well as supply chain needs. For example, the company’s strategy involves regular and
seasonal schedules to address fluctuations in local market demand. Thus, in this decision area of
operations management, McDonald’s is flexible and adapts to local market conditions.
10. Maintenance.
McDonald’s lets restaurant managers or franchisees select maintenance service providers.
However, for kitchen/production equipment, McDonald’s Corporation also has
certified/approved maintenance providers. Thus, the company addresses this strategic decision
area of operations management through local and corporate control.
The issue McDonald’s faced in China is food safety. It’s a big problem in that developing
country where safe food handling is still largely unknown. For this food safety concern all
Chinese McDonald’s stores have hand washing stations and hand sanitizers. Even their suppliers
meet the same standards as those in the US. Food safety is one more strength McDonald’s
utilized to expand its market in China.

17. 17
SWOT Analysis
McDonald’s Strengths, Weaknesses,
Opportunities and Threats

18. 18
The SWOT analysis framework identifies the most relevant internal and external business factors
that determine the firm’s success. McDonald’s faces considerable issues based on emerging
conditions in the global market. This SWOT analysis points out the most pressing concerns that
McDonald’s must address to keep its leadership in the industry. This also shows that the
company must address diversification and process flexibility, as well as business expansion and
innovation.
Strengths
1. Strong brand image: McDonald’s has a brand image that makes the business competitively
strong.
2. Moderate market diversification: based on the firm’s presence in most regions around the
world. This factor reduces market-based risks.
3. Standardized processes: McDonald’s has a comprehensive system of standardized
processes, which is a strength that contributes to business efficiency and product
consistency.
Weaknesses
1. Limited process flexibility: McDonald’s standardization ensures consistency but also
reduces the company’s flexibility in responding to market variations.
2. Low product diversification: Low product diversification corresponds to the firm’s focus
on food and beverage products, which is a weakness that makes the business highly
vulnerable to slowdowns in the restaurant industry.
3. Vulnerability to Western market decline: majority of McDonald’s revenues are from the
U.S. and other Western economies. This is a weakness because it makes the firm easily
vulnerable to economic decline in the Western world.
Opportunities
1. Expansion in developing countries: Considering its dependence on Western markets,
McDonald’s has the opportunity to grow and expand in developing countries, such as Asian
economies.
2. Market development in the Middle East: The Company can also use a market development
strategy to establish operations in Middle Eastern countries that it has not yet entered.
3. Product diversification: to address market-based risks, McDonald’s has the opportunity to
develop new products or enter new industries.
Threats
1. Aggressive competition: The restaurant industry is highly competitive. Aggressive
competitors threaten McDonald’s status as the market leader.

19. 19
2. Healthy lifestyles trend: The healthy lifestyles trend is a threat because it discourages
consumers from eating at McDonald’s, which is often criticized for unhealthful products.
3. GMO (Genetically Modified Organism) trend and regulations: GMO regulations are a
threat because they have the potential to limit McDonald’s products. The firm currently does
not have a comprehensive policy on GMO ingredients.

20. 20
References
 https://www.youtube.com/watch?v=Ln2P2bUmsRU
 http://panmore.com/mcdonalds-operations-management-10-decisions-areas-productivity
 Lawrence, K. D., & Weindling, J. I. (1980). Multiple goal operations management
planning and decision making in a quality control department. In Multiple Criteria
Decision Making Theory and Application (pp. 203-217). Springer.
 Liu, S., & Jiang, M. (2011). Providing Efficient Decision Support for Green Operations
Management: An Integrated Perspective. INTECH.
 McDonald’s Corporation Form 10-K 2014.
 Najdawi, M. K., Chung, Q. B., & Salaheldin, S. I. (2008). Expert systems for strategic
planning in operations management: a framework for executive decisions. International
Journal of Management and Decision Making, 9(3), 310-327.
 Schrunder, C. P., Galletly, J. E., & Bicheno, J. R. (1994). A fuzzy, knowledge‐based
decision support tool for production operations management. Expert Systems, 11(1), 3-11.
 Verdaasdonk, P. (1999). Defining an information structure to analyse resource spending
changes of operations management decisions. Production Planning & Control, 10(2),
162-174.
 Wild, R. (1983). Decision-making in operations management. Management
Decision, 21(1), 9-21.
 https://workflow101.wordpress.com/2009/12/14/mcdonalds-and-workflow-every-second-
counts/
 http://www.supplychain247.com/article/mcdonalds_secret_sauce_for_supply_chain_succ
ess
 http://cmuscm.blogspot.com/2014/11/how-mcdonalds-manage-its-inventory.html
 http://panmore.com/mcdonalds-swot-analysis-recommendations
 Hill, T., & Westbrook, R. (1997). SWOT analysis: it’s time for a product recall. Long
Range Planning, 30(1), 46-52.
 McDonald’s Corporation (2015). Are genetically modified organisms (GMO) ingredients
in your food?
 McDonald’s Corporation (2015). Company Profile.
 McDonald’s Corporation Form 10-K 2014.
 Pickton, D. W., & Wright, S. (1998). What’s SWOT in strategic analysis? Strategic
Change, 7(2), 101-109.
 Piercy, N., & Giles, W. (1989). Making SWOT analysis work. Marketing Intelligence &
Planning, 7(5/6), 5-7.
 Valentin, E. K. (2001). SWOT analysis from a resource-based view. Journal of
Marketing Theory and Practice, 54-69.

21. 21