Haroon Zahid Qureshi
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Consultancy Project Report McDonald’s By Haroon Zahid Qureshi CIIT/FA14-EMBA-207/CVC Master’s in Business Administration (Executive) COMSATS Institute of Information Technology Virtual Campus – Pakistan INTRODUCTION OVERVIEW OF FAST FOOD INDUSTRIES The food industry is on a high as Indians continue to have a feast. Fueled by what can be termed as a perfect ingredient for any industry - large disposable incomes - the food sector has been witnessing a marked change in consumption patterns, especially in terms of food. An increasing number of international fast food chains rushing to India is because all of them see tremendous potential in for this type of business. The large upwardly mobile population in the urban areas tend to eat out more often or business or for leisure. The various players operating in India are the well-established Indian chains like Nirula's, Haldiram's and multinational companies like McDonalds, Pizza hut, Domino's pizza, etc. In addition to these, apparently some of the best known international food chains are looking at India. Among them are Great American Disaster, The Burger King, Mexican food chain Tacogrill, Move-n-pick, etc. are some of them to name. The players are fighting on products, pricing, positioning and trying to convert their first trials into regular purchase by providing delightful service quality. The focus is on product quality and standardization on taste. Consistency is the key, as its standardization in fast food as the consumer is short on time and wants to satisfy his taste buds with a consistent taste experience. Beyond this each player has its own strategy to expand consumer base. Some feel that pricing is not the deciding factor since fast food is not price sensitive market because it is not a single diet of Indians. Some others are competing on positioning which is surprisingly varied, giving the small size of the market. For most, targeting children seems the right strategy. Advertising is popular. However, with competition hooting up most chains are increasing reach as well as working on establishing a national presence. The wind of change is blowing through the empire of fast food. The vision of endless growth through new markets across the planet for fast food companies now looks unsustainable when it’s time to adapt or die. As the fast food companies have expanded around the world, they have had to adapt to local sensitivities. The aim of this project is to conduct a market study on a thriving fast food restaurant, going deep into its formation, history and growth; then to analyze the reason that make it so popular. MCDONALD’S AN INTRODUCTION McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 68 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice McDonald; in 1948 they reorganized their business as a hamburger stand using production line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He subsequently purchased the chain from the McDonald brothers and oversaw its worldwide growth. A McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporation's revenues come from the rent, royalties and fees paid by the franchises, as well as sales in company-operated restaurants. McDonald's revenues grew 27 percent over the three years ending in 2007 to $22.8 billion, and 9 percent growth in operating income to $3.9 billion. McDonald's primarily sells hamburgers, cheeseburgers, chicken, french-fries, breakfast items, soft drinks, milkshakes and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, wraps, smoothies and fruit. BUSINESS MODEL: Franchise Model – Only 15% of the total number of restaurants are owned by the Company. The remaining 85% is operated by franchises. The company follows a comprehensive framework of training and monitoring of its franchises to ensure that they adhere to the Quality, Service, Cleanliness and Value propositions offered by the company to its customers. Product Consistency – By developing a sophisticated supplier networked operation and distribution system, the company has been able to achieve consistent product taste and quality across geographies. Act like a retailer and think like a brand – McDonald’s focuses not only on delivering sales for the immediate present, but also protecting its long term brand reputation. 2. Objectives of Studying the Organization The McDonald’s main objective is to provide its customers with food of a high standard, quick service and value for money. They also provide good returns to shareholders. Evaluating the objectives McDonalds must set objectives in order to meet the aims of the business. A business objective needs to be SMART objectives. SMART is an acronym which stands for specific, measurable, achievable, and relevant and time specific. Specific: The business can make objectives to achieve their targets at the end of the year. The specific is important in the business plan to find out what kind of specific targets McDonald’s needs to make. For example, McDonald’s might set an objective of serving at least to per cent of single- order customers within a minute of the order being placed. Measureable: The objective needs to be measured so that managers can see whether it has been achieved. For example, McDonald’s could measure service times during a typical one-hour period and record the number of times single-order customers were served within a minute of placing their order. Achievable: The objectives should be achievable. McDonald’s have to make sure that they have different taste foods and serve the food as fast as possible. The manager of the McDonald’s needs to assess whether it is feasible for employees, if they work efficiently to serve single-order customers within a minute of the order being placed. Relevant to the aims: The objectives are very important to achieve the aims of the business, without making customer happy they will not be able to make the profit that they want to make. So the business won’t be able to grow. For example, by setting an objective to serve customers quickly, the McDonald’s hopes to increase its profits by attracting and serving more customers. Time: The objectives should set with start and finish dates. For example, McDonald’s manager might tell the employees that they have one month to achieve the one minute service time objectives. The key objective of McDonald’s is to reach their aims, because they want to do better than their competitors. McDonald's main aims are to serve good food in a friendly and fun environment, to be a socially responsible company and provide good returns to their shareholders. McDonald’s customers are mainly teenagers and kids. The company aims to provide its customers with food of a high standard, quick service and value for money. They also wish to be more eco-friendly and to serve healthier food. So they can gain more customers and it will help business to make a profit. Making a profit will maximize the increase in sales and in market share it will help business to grow. Objectives communicate what markers want to achieve, guide marketing actions and are used to measure how well a plan is working. They can be related to market share, sales reaching the market audience and creating awareness in the marketplace. Long-term objectives are broken down into shorter-term measurable targets. Results can be analyzed regularly to see whether objectives are being met. This type of feedback allows the company to change plans and allows flexibility. The main aim is to maximize profit and to provide goods/ services that are cheap and affordable to the consumers. The best way to achieve objectives is to make more customers and to do this McDonalds can advertise their business. If McDonalds gain more customers, that will help the business to make more profit. It will also maximize the increase in sales and the market share. If McDonalds makes more profit, they will be able to remain the number one retail company in the UK. This graph shows the differences in the market share between the other fast food restaurants. McDonalds has leading the market share out of all of them. This proves that McDonalds has achieved their aims of market share. 3. Overview of the Organization History: In 1954 in the USA there was a milkshake machine salesman named Ray Kroc. Ray received an order from the McDonald brothers' hamburger outlet in California, and was impressed by their company - the menu was simple and cheap but the hamburgers were good; the fries were made in-store; and the shakes were thicker than usual. Ray made them an offer. "Let me open new McDonald’s stores and I'll give you half of one per cent of the gross sales for the use of the name and the idea." The McDonald's brothers accepted and Ray opened his first store in Des Plaines, Illinois. He began to build the business by granting franchises to local entrepreneurs. By 1960, he'd opened 200 restaurants throughout the USA. In 1961 he bought the McDonald brothers' share of the business for $3 million and in 1965 the company became the McDonald's Corporation. Today, we've got more than 34,000 restaurants in over 118 countries. Every day, we're serving meals to more than 50 million people worldwide. Timeline 1955. Ray Kroc opens the first McDonald’s in Des Plaines, Illinois. 1957. 'Quality, Service, Cleanliness and Value' (QSC&V) becomes the Company motto.