This document analyzes McDonald's Baclaran, Pasay City location operated by franchisee McPhilip's Food Industries, Inc. It discusses the Philippine fast food industry environment using Porter's Five Forces. It also analyzes McDonald's business operations, organizational structure, leadership style, employee skills development, shared values, systems, and inbound logistics. McDonald's aims to serve the Filipino community by providing great tasting food and customer experience.

1. Systems Engineering Study:
McDonald’s Baclaran, Pasay City
McPhilip’s Food Industries, Inc.

2. The Food Service Industry
•The industry which deals with preparing food items or products refers to the
food service industry.
•Restaurants and fast foods mainly contribute to the food service industry.
•“Fast food” generally refers to the type of restaurants that sell quick, inexpensive
take-out food.
•Restaurants and fast foods are meant for same services except that restaurants
offer a large menu including a variety of cuisines as compared to fast foods, which
usually offers a small menu with quick service.

3. The Food Service Industry
•Fast food retains its position as the largest and the fastest-growing category in
the Philippine consumer foodservice industry.
•During 2012, this category reported total foodservice revenue of Php 121.9
billion, taking 30% of total value sales in consumer foodservice.
•Filipinos spend approximately 12% of total income eating out and the sector is
valued at $US3 billion, with growth of 10%-15% in the last decade. Traditional
food service formats still enjoy a majority market share in the Philippines, but the
modern food service market, driven by convenience and price and dominated by
fast food restaurants/chains such as Jollibee, McDonalds and ChowKing, is
increasing its presence with speed.

4. Threat of
Substitute
Products
Intensity of
Rivalry
Bargaining
Power of
Consumers
Bargaining
Power of
Suppliers
Threat of New
Entrants

5. Threat of
Substitute
Products
Intensity of
Rivalry
Bargaining
Power of
Consumers
Bargaining
Power of
Suppliers
Threat of New
Entrants

6. Intensity of Rivalry:
STRONG
-Very competitive fast food industry
-Competitors advertising capabilities
-Location of outlets
-Major competitors (Jollibee, KFC,
Chowking, Burger King)
-Operators compete on the basis of
price, location, food quality and
consistency, style and presentation,
and food range.
-New products are constantly being
introduced because variety greatly
affects consumer demand.
-Service is also expected to increase in
quality.

7. Threat of
Substitute
Products
Intensity of
Rivalry
Bargaining
Power of
Consumers
Bargaining
Power of
Suppliers
Threat of New
Entrants

8. Threat of Substitute Products: STRONG
-Filipinos prefer “Lutong-bahay”
-Other dishes serving pasta, pizza, rice, course meals, heavy meals
-Diet foods
-Convenience stores and groceries
-Fast foods are discretionary items that are easily substituted by other
types of meals.
-Since customers have become more aware of the health effects of fast
foods other substitutes are becoming more and more attractive.
- Other fast food restaurants serving the same food.

9. Threat of
Substitute
Products
Intensity of
Rivalry
Bargaining
Power of
Consumers
Bargaining
Power of
Suppliers
Threat of New
Entrants

10. Threat of New Entrants: WEAK
-Regulation of limit
-Difficult to compete with established leaders in the industry.
-The fast food industry is made up of large chains that already count with
economies of scale, distribution channels, and technological advances.
-It is very unlikely that the new entrants will take any significant market
shares.
-Fast food giants like McDonald’s count with brand loyalty that makes it
hard for new entrants to pose a threat.

11. Threat of
Substitute
Products
Intensity of
Rivalry
Bargaining
Power of
Consumers
Bargaining
Power of
Suppliers
Threat of New
Entrants

12. Bargaining Power of Customers: WEAK
-Highly competitive with product pricing.
-Fast food already offer selections at various points that cater to all budgets.
-Although customers do not have the power to influence price directly, they
influence it greatly.
-With the social media and health concerns customers can readily supply
opinions and influence others with these.
-All companies in the fast food industry must stick to social regulations.
Spend in enhancing their brand reputation, and promoting quality standards
so that customers feel safe and content when consuming their products.

13. Threat of
Substitute
Products
Intensity of
Rivalry
Bargaining
Power of
Consumers
Bargaining
Power of
Suppliers
Threat of New
Entrants

14. Bargaining Power of Suppliers: MODERATE
-Having many food suppliers they have little influence of the industry.
-Suppliers closer to the operators influence transportation costs.
-Supplier relations are very important to this industry.
-The prices charged by suppliers are the major factors that affect net income.
-Although the supplies are commodities and suppliers do not have the ability to charge
more than the market, operators do not have the chance to bargain for cheaper products or
large quantity discounts.
-The fact that suppliers do not have the ability to increase prices but operators do not have
the ability to bargain makes supplier power moderate in the fast food industry.

15. External Forces Analysis: POLITICAL
-Its international operation is highly affected due to
individual countries policies enforced by its
government.
-There are policies regarding regulation forbidding
the use of materials like plastic and Styrofoam.

16. External Forces Analysis: ECONOMIC
-Fast food retains its position as the largest and the fastest-growing
category in the Philippine consumer foodservice
industry.
-During 2012, this category reported total foodservice
revenue of Ps121.9 billion, taking 30% of total value sales in
consumer foodservice.
-Growth in terms of outlets, transactions and value sales
remains vibrant.
Outlet growth was estimated to be at 8% in 2012 while
transactions and value sales ballooned by 9% and 11%
respectively.

17. External Forces Analysis: SOCIAL
-Filipinos spend approximately 12% of total income eating
out and the sector is valued at $US3 billion, with growth of
10%-15%in the last decade.
-Traditional food service formats still enjoy a majority market
share in the Philippines, but the modern food service market,
driven by convenience and price and dominated by fast food
restaurants/chains such as Jollibee, McDonalds and
ChowKing, is increasing its presence with speed.

18. External Forces Analysis: TECHNOLOGICAL
-The food industry has increasingly developed by adopting more advanced
technologies that can deliver us healthier, fresher and more varied food.
-Advanced technologies are used in all the stages of food production.
-Operations is infused with new technology:
-Uses new POS systems
-The way advertising has improved not only through newspapers but also
through television and in online social media networks.
-The delivery can not only be made through phone deliver but also
through online delivery.

19. External Forces Analysis: ENVIRONMENTAL
-McDonald's is growing day by day by increasing the number
of restaurant. The main source of ingredient and packaging is
nature.
-The continuous and enormous use of natural resources can
disturb the balance in the ecosystem.

20. External Forces Analysis: LEGAL
-Different country got own law is impacting McDonald's.
Health and safety has a distinct impact on the functioning of
chains in different countries.
-Other legal requirements that the business owner should
follow as stipulated in laws are such as operating hours,
business registration, tax requirement, labor and
employment laws and quality & environment certification
(such as ISO) in which the outlet has been certified.

21. External Forces Impact to 5-Forces
• From the Political Policy prohibiting the use of plastics
and styrofoams, supplier relationship is affected due to
change to papers and cartons.
• Economically, the food service industry continues to
improve and increase their performance in service and
generating revenues, thus rivalry among competitors
gets more and more intense.
• Due to the influence of the customers through social
media with health concerns, the industry players step-up
with adapting to new advancements in technology
that may help them develop healthier, fresher and varied
food products that help address social health concerns.

22. Opportunities
• McDonald’s must take advantage of the growth of the
economy of the Philippines. Since the food service
industry is one of the leading industries in the Philippines
as well.
• McDonald’s can continuously improve and develop new
products that their competitors are not yet offering to the
public.
• McDonald’s can continue with their service expansion, in
reaching out different locations all over the Philippines to
be able to meet every Filipino nationwide.
• McDonald’s has the capability of adapting new systems
and technologies that can develop new products that will
addresses health concerns.

23. Threats
• Customers now look for menu offerings that are more
for a healthy lifestyle. Since McDonald’s is known for
offering fast food menu of burgers, fries, chicken, etc. the
customer’s idea of their menu is not healthy.
• McDonald’s has a lot of strong competitors like Jollibee
which is the number 1 leading fast food in the
Philippines. So as other restaurants like Chowking, KFC,
Burger King, etc.
• Since McDonald’s belong to the food industry, they have
a lot of substitute products, in which customers may
choose over than their products.

24. Business Analysis: McDonald’s
-McDonald's Corporation earns revenue as an investor in properties, a franchiser
of restaurants, and an operator of restaurants.
-Approximately 15% of McDonald's restaurants are owned and operated by
McDonald's Corporation directly.
-Others through a variety of franchise agreements and joint ventures operate the
remainders.
-George T. Yang opened the first McDonald's restaurant in the Philippines in
1981. In 2005, McDonald’s Philippines became a 100% Filipino-owned Company.
-Today, McDonald’s has grown to become one of the country’s leading fast food
chains with more than 365 restaurants nationwide.
-With Kenneth S. Yang now at the helm as President and Chief Executive Officer,
McDonald’s is now a multi-billion peso company that continues to grow serving
Filipinos all over the country.

25. Business Analysis: McPhilip’s Food Industries, Inc.
• The first franchisee of Golden Arches, McGeorge is McPhilip Food Industries who
owns McDonalds Roxas Blvd, Pasay city, and was establish in the year 1985.
• Now, McPhilip’s Food Industries, Inc. has now seven McDonald’s branches
located in:
• Vito Cruz, Taft
• Vito Cruz, Pablo Ocampo St.
• SM Mall of Asia
• MOA One E-Comm Building
• Baclaran, Pasay city
• Blue Bay Walk, Macapagal, Pasay city
• SM Cyberzone Gil Puyat, Makati.

26. Products: Burgers

27. Products: Chicken and Spaghetti

28. Products: French Fries

29. Products: Breakfast

30. Products: Desserts, Apple Pie and Coffee

31. Strategy
Franchise Model: The growth of the
McDonald’s fast food restaurant
business is majorly operated by
franchisees. The whole of the company
restaurants including the franchise
restaurants are to follow only one
framework of training, monitoring and
operations.
McDonald’s continue to improve their
product offerings through innovation
of flavours, and products. Seasonal
products are and new menu items are
being offered to be able to catch the
hearts of their customers.

32. Structure
The operation of the store has a crew being
looked after by a custodian and a leader,
then reports to the manager of the store.
The store has 2 assisting managers, an
internal manager that also trains
employees, these managers report to the
restaurant’s manager that leads the daily
operations.
Staff
Staff trainers work shoulder-to-shoulder
with trainees while they learn the
operational skills necessary for running
each of the workstations in the store, from
the front counter to the grill area. All of the
employees learn to operate all of the food
service equipments, gaining knowledge of
the operational procedures.
Step-by-step manuals cover every detail,
from how to make a burger, to how to
deliver their service to customers. In time,
they also get to learn how to train and
supervise others.

33. Systems
Preparation of raw materials, tools and
equipment, order processing, billing and
payment collection, cooking of the food
products, order preparation and service
delivery for the customers. Cleaning of the
tables, trash and the facilities may be
considered part of their daily operations to
keep customers coming.
Skills
Employees enjoy competitive incentives,
support, training and opportunities in order
for them to deliver the best possible results
and advance their career. Learning and
development of the employee skills such as
teamwork, communications, problem
solving, responsibility and customer service
in a fun and exciting environment is
important for the company.
Style
From the influence of the company’s upmost
leader, the leadership style of McDonald’s
management is democratic. Leaders should
be able to rely on their teams to work
together and make decisions. Personality and
experience are great factors considered in
their way of leading people.

34. Shared Values
Customer Driven: Conscious and deliberate
action to exceed the needs and requirements
of both internal and external customers.
Malasakit: Concern for the customer,
employees, co-workers, business partners,
community and the company.
Integrity: Being upright in character and
action, upholding the standards of one’s
profession and position through honesty,
responsibility and trust.
Teamwork: Working as one towards achieving
a common goal.
Excellence: Day to day drive to deliver the best
results.
The Ronald McDonald House Charities:
McDonald’s gives back to the community
through its charity of choice. Established in
1996 in the Philippines, RMHC carries out
programs to support the needs for shelter,
education and happiness of Filipino children.

35. Mission
To serve the Filipino community by providing great-tasting
food and the most relevant customer delight experience.
Vision
“Una sa Pamilyang Pinoy”
• First to respond to the fast changing needs of the Filipino
family.
• First choice when it comes to food and dining experience.
• First mention as the ideal employer and socially
responsible company.
• First to respond to the changing lifestyle of the Filipino
family.

36. Organizational Structure: Departments

41. Leadership Style
According to Kenneth S. Yang, President and
CEO of the Golden Arches Development
Corp. (McDonald’s), “Leadership is the
ability of an individual to take on a group of
people, harness their strengths, and be able
to guide them towards a definite direction”.
From the influence of the company’s upmost
leader, the leadership style of McDonald’s
management is democratic. Leaders should
be able to rely on their teams to work
together and make decisions. Personality
and experience are great factors considered
in their way of leading people.

42. Employee Skills
All new hired employees of McDonald’s begin their experience
with an introduction to the company. Staff trainers work
shoulder-to-shoulder with trainees while they learn the
operational skills necessary for running each of the
workstations in the store, from the front counter to the grill
area. All of the employees learn to operate all of the food
service equipments, gaining knowledge of the operational
procedures.
Step-by-step manuals cover every detail, from how to make a
burger, to how to deliver their service to customers. In time,
they also get to learn how to train and supervise others.

43. Employee Development
Employees enjoy competitive incentives, support,
training and opportunities in order for them to
deliver the best possible results and advance their
career. Learning and development of the employee
skills such as teamwork, communications, problem
solving, responsibility and customer service in a fun
and exciting environment is important for the
company.

44. Shared Values
• Customer Driven: Conscious and deliberate action to exceed the needs and
requirements of both internal and external customers.
• Malasakit: Concern for the customer, employees, co-workers, business
partners, community and the company.
• Integrity: Being upright in character and action, upholding the standards of
one’s profession and position through honesty, responsibility and trust.
• Teamwork:Working as one towards achieving a common goal.
• Excellence: Day to day drive to deliver the best results.
• The Ronald McDonald House Charities: McDonald’s gives back to the
community through its charity of choice. Established in 1996 in the
Philippines, RMHC carries out programs to support the needs for shelter,
education and happiness of Filipino children.

45. Automated Systems
Point-of-Sale System (POS) is a software and hardware
networked together to track the sales and inventory
of the store.

46. Value Chain Analysis: Inbound Logistics
McDonald’s uses 100%
pure beef for all of their
burger products. Everyday,
burger patties are
prepared and packaged at
their approved meat plant
in Australia.

47. Value Chain Analysis: Inbound Logistics
McDonald’s chicken
McNuggets and chicken
patties are made from
boneless breast and thigh
meat. The fried chicken is
made from bone-in
chicken sourced from
reputable suppliers in the
Philippines.

48. Value Chain Analysis: Inbound Logistics
Skinless, prime white fish
meat is used for the
McDonald’s Filet-O-Fish.
The fish is sealed and then
stored in a temperature
controlled environment.

49. Value Chain Analysis: Inbound Logistics
The French Fries of
McDonald’s are produced
and imported from the
potatoes of the Russet
Burbank, Russet Rangers
and Shepody variety.

50. Value Chain Analysis: Inbound Logistics
McDonald’s use local,
farm-fresh and grade-A
eggs each going through a
candling process. The eggs
are washed and sanitized,
then re-coated with
mineral oil. These eggs are
chilled and are only
cracked before cooking.

51. Value Chain Analysis: Inbound Logistics
McDonald’s buns are
baked locally and delivered
fresh regularly.

52. Value Chain Analysis: Inbound Logistics
Vegetables are sourced
from the cold mountains of
Baguio and Bukidnon.
Shredded in McDonald’s
approved facility.

53. Value Chain Analysis: Inbound Logistics
McDonald’s Sundaes are
made from milk, sugar,
palm oil and stabilizer
which is a necessary
ingredient to give the
smooth creamy taste.

54. Value Chain Analysis: Inbound Logistics
Imported pasteurized
processed American
cheese slices.
McDonald’s Premium
Roast Coffee is made of
100% pure Arabica coffee
beans.

55. Value Chain Analysis: Inbound Logistics
Heinz Tomato Ketchup
Coca Cola products for
their beverages.

56. Value Chain Analysis: Inbound Logistics
The procurement, storage, handling and
distribution of all of these raw materials are
by HAVI Logistics.

57. Value Chain Analysis: Operations
All the products of McDonald’s, Baclaran are “Grilled
Direct” which means they cook batches of food products
according to the expected volume of customers. The
cooking processes of the different products include:
- Frying of the burger patties on the grill,
- Breading and deep fry-cooking of the chicken,
- Deep fry-cooking of the pies and fries and storing to
the warming bin as temporary storage.
- Taking customer orders
- Collection of payments
- Preparing and serving customer orders

58. Value Chain Analysis: Operations

59. Value Chain Analysis: Operations

60. Value Chain Analysis: Operations

61. Value Chain Analysis: Operations

62. Value Chain Analysis: Outbound Logistics
They offer seasonal food products like twister fries,
“shake-shake” flavoured fries, flavoured floats and other
movie related themes in their products.
Kiddie meals that offer product bundles along with a
kiddie toy.
Birthday and special occasion party packages for the
young and the old.
Delivery services thru calling 8-MCDO or online ordering
at mcdelivery.com.

63. Value Chain Analysis: Marketing and Sales
- Advertisements through television commercials, print ads,
social media and website.
- Customers can create their own online account for updates
in product offerings, promos and online delivery available
24/7.
- Fixed delivery fee of 40 pesos.
-Product bundles and packages (BFF bundles, kiddie meals,
50 pesos meals).
- Kiddie crew workshops every summer.
- McCelebrations (Celebrate anything).

64. Value Chain Analysis: Service
• Online customer care.

65. Value Chain Analysis: Procurement
HAVI Logistics in the Philippines is the one
responsible for the procurement of raw materials
in McDonald’s: Frozen goods and other products
from Australia, Vegetables from Bukidnon and
Baguio, Ketchup from Heinz Company and Coca
Cola products for beverages.

66. Value Chain Analysis: Human Resource Management
The Human Resource Management of McDonald’s is
responsible for recruiting and hiring of employees. This
includes the restaurant staff, management team, operations
group, marketing and human capital group.
The employees of McDonald’s enjoy competitive incentives,
support, training and opportunities that help them deliver
their best results ad advance their career.

67. Value Chain Analysis: Technology Development
Point-of-Sale System (POS) is a software and hardware
networked together to track the sales and inventory
of the store.

68. Value Chain Analysis: Infrastructure
• McDonald’s, Baclaran, Pasay City branch
• The branch’s head office is the McPhilip’s located
in the Diplomat Building in Baclaran, Pasay City.
Where the accounting and human resources
departments are based.

69. Financial Analysis

70. Financial Analysis

71. Financial Analysis

72. Financial Analysis

73. Strengths
McDonald’s have a strong brand image throughout the years not just locally but
also in other countries.
They have a systematic way of preparing their food from procurement to
distribution to storage to processing and cooking.
McDonald’s has their operations centralized. All of their processes are standard in
every McDonald’s branch in order to deliver their own way of giving service to
their customers.
There are different branches open to serve customers 24 hours and seven days a
week.
McDonald’s has a fixed delivery rate of only 40 Pesos. With different branches that
are open 24 hours, there are different locations that are available for delivery 24
hours.
McDonald’s Philippines has online accounts for customers that can inquire about
their menu, make orders and delivery online. In addition, they also have an online
support for their customers.

74. Weaknesses
High employee turnover and frequent reshuffling of employees
and management in the different branches of McPhilip’s.
Their expenses are increasing from PhP319, 400,114.30 in
2012 to PhP385, 097,381.50 in 2013.
Based from our KPI data, only 240 table turnovers are
encountered throughout the month which is low and not a good
indicator for having enough sales.
Not up to date service process.

75. Problem Analysis

76. Other Possible Problems
Frequent reshuffling and high turnover of employees.
Strong competition
Delay in order preparation
Dissatisfied customers

77. Problem Statement
• Opportunity loss for fast moving products is amounting
to Php1,455,430.00 with a percentage of 5% for month
of November 2013 to April 2014.
– 7percent of Chicken (1pc)
– 8 percent of McChicken with spaghetti
– 5 percent of Burger Mcdo
– 7 percent of Cheese Burger Mcdo
– 6 percent of Chicken Fillet
– 5 percent of Crispy Chicken Fillet
– 9 percent of McSpaghetti
– 2 percent of Fries
– 4 percent of Ice Cream
– 4 percent of Pineapple juice

78. Pareto Chart of Product Wastage
100.00
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
3500
3000
2500
2000
1500
1000
500
0
McChicken w/
Spaghetti
Cheese Burger
Mcdo
Burger Mcdo McSpaghetti 1 piece Chicken
w/ Rice
Chicken Fillet
Sandwich
Chicken Fillet
Total Count
Cumulative %

79. Objectives for Improvement
To be able to lessen the product wasted by a
minimum of 50%.
To be able lessen or eliminate human errors in
stating customer orders to the kitchen.
To be able to remove the expense of the product
waste and be able to add it in the revenue with an
average of PhP200,000.00 per month.

80. Discussion of the
Present System

83. Why – Why
Diagram

85. Decision Analysis

86. Alternatives to Address the Problem:
Alternative 1

87. Alternatives to Address the Problem:
Alternative 2

88. Alternatives to Address the Problem:
Alternative 3

89. Cost and Benefit Analysis

90. Cost and Benefit Analysis

91. Cost and Benefit Analysis

92. Selecting the Best Alternative

94. The Best Alternative is the Replacement of the Grilled Direct
System into Made-for-You System.

95. Develop and Design
Improvement:
Proposed Flow of
Transaction

99. New Policies and Procedures
Batch Cooker Grilled/Fried Key Point
• First person positioned in kitchen
• Has primary responsibility for managing UHC
product levels
• Works directly with the assembler
• Support prep line when needed
• Responsible for UHC Product quality
• First person to complete stock up (secondaries
person)

100. New Policies and Procedures
Chaser Key point
• When 3 or more orders appear on the KVS,
Production manager assumes ‘Chaser position’.
• Chaser dresses the burger assembler places
read/white meat On the burger, wraps and places
in Heated landing zone.
• Last person on the line, First person off the line.

101. New Policies and Procedures
Management Hotspot
• Correct positioning
• Remember a dedicated French Fry Person
• Prepare the Shift (Stock): 24/2
• Be prepared to open both preparation lines
• Communicate shift expectation to crew
• Watch all KVS screen at all times
• Effective UHC management
• Check your timing reports throughout the shift
• Pay attention to the order prep times
• Rubber bands analogy is in play down the line

102. New Policies and Procedures
Crew Hot Spot
• Stay in position
• Prepare the shift
• Be Prepared to open both prep lines with all
equipment on, and stock in place at all times
• Watch all KVS screen at all time
• Effective Universal Holding Cabinet management
• Check your timing reports throughout the shift
• Pay attention to order prep time
• 2 at a time saves time
• Rubber bands analogy is in play down the line.

103. System
Implementation and
Evaluation

104. How-How Diagram

106. CONCLUSION
The objective of McDonald’s is to offer quick service but still have
high quality meals. They came up with the production process that forecast
the number of demands depending on the time period per day. They
produce certain product volume depending on the prediction in that time
period. Using grilled direct system, they have product wastes brought about
the reason that the customer did not buy the product.
Using MFY system, they produce the meals upon the customer
order. Using this system they will eliminate up to 70 percent of the product
waste because with the MFY system, the orders of the customers are not
told by the front line crew to the kitchen anymore but the orders appear on
the KVS and then meal is cooked and prepared. The policy that the products
in the warming bin after 5 minutes will be considered as waste is already
eliminated, thus eliminating waste.