McDonalds is a global restaurant chain company whose profitability turnaround started in 2004 after a change in the management of the business. The company is now more responsive to the changing environment of the restaurant business. This article is about how the company engages the principles of management and how that has led to an increase in its revenue and market share. The restaurant leadership continues to follow the founder’s management principles; however, subsequent CEO turnover has led to a refinement of the strategic plan of McDonald.
The restaurant chain has rethought its vision of being the provider of fast foods meals for lunch and dinner. In addition to day meals, McDonald’s vision now includes provision of breakfast as a first food. In addition, the company seeks to cater for all meal times irrespective of individual customer schedule. The new selling point and overall long-term plan is being a restaurant business containing specialty restaurants to cater for different clients and different meal types .In addition, the restaurant chain is shifting its image from association with high fat content. Instead the restaurant is seeking to be identified with healthier meals and is thus increasing the number of greens available in its menu.
After more than two decades of concentration on traditional store expansion strategy to increase sales, McDonald’s management is now shifting its marketing strategy. The new strategy aims at increasing the income revenue for every restaurant McDonalds restaurant. The management at McDonalds has turned the franchise into a 24-hour business in order to tap into customers who cannot make it to the restaurant during regular meal times.
Franchising allows different restaurants to be modified within the standards allowed by McDonalds so that they fit into the expectations of the local community that they serve. Thus, rather than having to control operations in its numerous operating location, McDonald’s top management remain focused on the overall growth and performance of the business. This makes the company more responsive to arising issues because of the ‘big picture’ view.
The top management at McDonald comes up with marketing strategies and asks each franchise holder to implement them in their respective location. The implementation by various franchise holders, rather than the top management provides room for customization and personalization of services in a manner suitable to local clientele. During the introductory stages of the 24-hour restaurant operation concept, the management was responsible for marketing the concept to potential customers. This includes marketing initiatives like the use of coupons and organization of contests that help to drive awareness of the 24-hour concept.
On the other hand, individual franchises redesigned their restaurants to provide specialty areas and facilities that resonate well with the different meals that they sell to customers at any given time. One positive outcome of the redesign of restaurants to reflect on the customer preferences and their cultural context has been the increased revenues from European McDonalds restaurants that surpassed that from their American counterparts despite the fact that they are fewer.
A large turnover of CEOs for McDonalds has been beneficial for the company in the long run. McDonalds has undergone a rapid transformation with different management strategies executed by its many CEOs. As a result, the organizational learning of the company has been rapid. One major result of the high CEO turnover has been the current profitable marketing strategy of serving breakfast and having always-open restaurants. McDonald’ss has adopted a marketing strategy that first captures and influences the tastes and preferences of minority ethnic groups before majority groups. The success of the strategy lies in the ability of the company to analyze trends in the restaurant industries and other related industries, taking cues that when implemented lead to similar successes for the company.
Introduction of new menus and other restaurant concepts like terms of service targeted at minority groups helps the company to maintain its market leadership as a trusted brand commanding substantial loyalty. Country and regional leaders of the McDonald’s franchise business hold the key to individual successes of their respective operations. As a result, they are tasked with the formulation of strategic plans, customization of marketing initiatives and introduction of new concepts as well as abolition of obsolete concepts. The main aim of this practice by McDonald’s is to be customer focused rather than meals focused.
The success of the franchise business at McDonald’s likes in the strict control of management on the standards of meals provided and the location of restaurants. Another major control factor is the design of individual restaurants. Management also monitors the time it takes for customers to be served their orders. The response on customer service serves as a performance measurement that management uses to rate individual franchises. Moreover, the results assist management to come up with new standards applicable to all its franchises .
Management is in charge of research and development of new products. It develops new prototypes on a specific number of restaurants and when the concept proves a success, it pushes it to every franchise restaurant within the company chain. Under this arrangement, items used in serving meals, packaging take-away meals maintain the same standard in all franchise stores irrespective of the owner customization of the store design and service. Senior company management at McDonald’s is also responsible for the location of each franchise restaurant. It maintains a tight approval process that ensures only locations with potentially high customer traffic get to have a McDonald’s restaurant. This ensures that new restaurant establishments do not become a financial burden to the company by making losses due to lack of a sustainable customer number.
Other than the use of specific restaurants on the pilot projects, McDonald’s senior management uses well-crafted focused groups to test its strategies for expansion, revenue increase and brand command. The use of focus groups allows the company to identify with minute details of its marketing strategy and products that would otherwise not be captured in a mass-market approach. In addition, the introduction of specific caterings suitable for the focus groups serves as an inexpensive way of market research that saves the company a huge budget financing and time allocation.
The relaxation on restaurant design standards in a move to make McDonald’s more responsive to cultures in several countries has had a tremendous effect on boosting customer experiences. The key concept for McDonald’s operations is staying true to the roots of the company founded in America. Moreover, going on with massive localization efforts to make the restaurant part of the local culture, just like in America, serves as part of the concept .
In conclusion, the result of the observance of key principles of management at McDonald’s is the increase in overall profitability of the company franchise business. The independent operation of more than 80 per cent of the company restaurants by independent business allows the company to conduct inexpensive market research, test concepts independently before mass execution and fit into local cultures in order to increase its market share. Without the franchising of more its restaurants and maintain a strict control of McDonald’s practices and plans for its operation, the company might not have been able to have more than 32,000 restaurants in 117 countries. This essay has brought out the planning, organizing, leadership and controlling principles of management as practiced at McDonald’s.
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