Critical Evaluation of McDonald’s Performance Objectives
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Critical Evaluation of McDonald’s Performance Objectives
McDonald’s is one of the leading food service retailers in the world with over 36,000 food stores around the world. It is estimated that McDonald’s serves up to 69 billion customers on a daily basis. Most of McDonald’s stores are franchise and are run by independent businessmen and women. The food retailer is best known for its World Famous Fries, Quarter Pounder, Chicken McNuggets, and the Big Mac. These are its main products and are what make McDonald’s a household name. The business which was started in the early 1940’s has grown to become a household name in most countries in the world. The business has been even more successful in its efforts to franchise the business making it a classic example of success in the business community.
McDonald’s Component Activities
McDonald’s is a fast food chain whose main activity is provision of fast foods. The company also carries out franchise as part of its activities McDonald’s receives royalties from the independent franchise owners. McDonald’s serves a variety of foods and beverages such as burgers, French fries, vegetable salads, milkshakes desserts and ice cream sundaes. It also has some innovative products which include the Quarter Pounder with Cheese, Big Mac, the Filet-O-Fish and Chicken McNuggets. The company has franchise stores all over the world.
Performance objectives are what an organization use to describe what right or acceptable performance on the job is. These are measures that are developed by an organization’s management so that they may act as guidelines for their goal to achieve exemplary performance in all aspects of the organization. Performance objectives are set based on the activities and operations that are carried out in an organization (Kaplan, 2009).
Performance objectives define what is acceptable in terms of behavior and output. Performance objectives are set such that they align themselves with the overall goal of the organization. These objectives should be in line with the set organizational budget. The set objectives should be specific, measurable, achievable, realistic and time-bound (SMART). An organization could have organizational performance objectives as well as departmental performance objectives. The key point is that all these objectives should not collide with one another, rather should focus on the achievement of the organization’s ultimate goal and which is to be the best in the industry it operates in (Kaplan, 2009).
Performance objectives enable an organization to be efficient in its operations. The business can achieve customer satisfaction through the provision of quality products and service at the right price. Performance objectives assist the company to be efficient in the management of its operations costs such as cost of production, purchase of materials, among others. It also helps the business in the achievement sales and market share targets. Performance objectives also set out the kind of behavior and output that is expected from their employees. In general performance objectives enable a business to come up with strategies that will assist the organization in creating a competitive advantage as well as being a leader in the industry it operates in (Kaplan, 2009).
McDonald’s has set up its performance objectives whose aim is to help the business to maintain its market share as well as be the best in the food service industry. The company has ensured that its performance objectives are SMART and therefore well suited for the enterprise. McDonald’s key performance objectives are discussed below.
The performance objective of customer service is to provide quality service in the least time possible. Being a service-based business, customer satisfaction is important for McDonald’s. The business has to be efficient in delivery of services such that customer wait time should be minimized to the least time possible. This requirement means that employees must be efficient in picking customer orders and delivering them correctly and efficiently. McDonald’s has tried to ensure that the customer’s experience in each of its store regardless of the country is the same (Gilbert & Veloutsou, 2006).
The business can achieve efficient service delivery through its use of advanced technology that enables the business to serve so many customers at any given day. The company has invested in its kitchen equipment its cash registers as well as automatic drink makers so that it can satisfy its customers efficiently. McDonald’s always looks out to invest in the latest technology that will improve its service delivery to its customers (Peters, 2009).
Quality control involves the business working towards maintaining and improving the provision of quality service and products. McDonald’s has made this an important performance objective. The company has made it compulsory for any individual who wants to own a McDonald’s franchise to attend a course where they are taught on the main operations of a McDonald’s store. These activities are split into operations in the McDonald’s kitchen and employee management. This course aims at ensuring that the food quality at McDonald’s store is not compromised and that there is proper working order in all stores. The interior and exterior décor and architectural design of all stores are consistent in all stores. This requirement ensures that the environment of all stores is the same thus the customer is assured of the same ambiance in all McDonald stores. To maintain the quality of supplies, McDonald’s has a list of approved suppliers that all franchisees must adhere to. This ensures that the quality of food is not compromised (Peters, 2009).
Quality control is also practiced in the selection of potential franchise owners. The selection process is rigorous as all applicants must satisfy all the set out requirements. The first element is that an applicant must comply and be conversant with the operations and training manual that is prepared by McDonald’s. The 600-page manual explains McDonald’s business standards and procedures in detail which may be a challenge for most applicants to grasp all the content in it. Second element is the training program that potential franchisees must pay to attend at the Hamburger University. Third element is that those that graduate from Hamburger University and are allowed to open a McDonald’s franchise store, have to sign a franchise agreement that outlines the obligations of the owner and the corporation with regards to quality control.
The business has field consultants who regularly monitor if the franchise stores are adhering to the signed agreement. These officers frequently inspect the stores and fill out an items checklist as well as an inspection form. Franchise stores that perform poorly on these inspections are at a risk of losing their franchise license on the basis of failure to meet the setout standards.
The performance objective in this area is to minimize costs and maximize output and thereby becoming a cost leader in the food service industry. McDonald’s has sought to increase its efficiency in production such that minimum cost possible is used in the inputs required without compromising the quality of the desired output. McDonald’s has been able to reduce its input costs by simplifying the processes involved in cooking of food. These processes are easy to learn and execute and their failure rate is minimal. The simplified processes ensure that production and delivery are carried out quickly and efficiently (Peters, 2009).
McDonalds follows a Just In Time (JIT) inventory management system. Use of JIT means that they only cook or assemble their food only after a customer makes an order. This method was recently introduced after they realized that a lot of food was wasted as a result of overproduction when the food was pre-cooked. Additionally, their customers were not able to enjoy freshly made food, or they would only eat fresh food after making a special order. However the JIT system is made even more reliable by the introduction of sophisticated burger making technology.
Some of the benefits of using JIT include the quality of food is better as it is fresh, and the cost is also low. The customer confidence is enhanced as the quality of customer service is high. The system has enabled McDonalds to adapt to demand a little better. Initially higher demands would cause panic as the safety stock may not be sufficient. The system has also enabled the business to save ordering and holding inventory costs (Gereffi, et al, 2009).
McDonald’s has a list of its approved suppliers where all its franchise stores get their supplies from. The suppliers are expected to deliver quality products and services in a timely manner. The fact that McDonald’s has a list of suppliers means that costs that are involved with delays in delivery, and the delivery of poor quality supplies are eliminated. The business is also able to negotiate purchase prices with their suppliers. The company has an e-procurement system that ensures purchase orders are made on time in all its franchise stores. The figure below illustrates how the e-procurement system works (Baum, 2012).
The performance objective is to become a global food retail store with the largest market share in the industry. Currently McDonald’s is the leading food store in the world with over 36,000 stores in over 100 countries in the world. The business has been successful in its expansion strategy because it can identify the cultures of the various countries that it has set up stores. The business can connect with the locals by using their incorporating culture into its advertisements therefore the locals get to identify with the brand. The business continues to franchise its brand to willing business men and women who have attained the threshold of running a McDonald’s store. The use of franchise to expand its territory has seen the business grow to achieve its current market of serving billions of individuals in a single day (Rugman & Verbeke, 2004).
Ways that McDonald’s Can Improve on its Performance
McDonald’s is considered a classic example of a business model that many businesses can emulate. This, however, does not imply that the business has not had its fair share of challenges that have affected its performance in one way or another. This section will identify those challenges, how performance was affected, and how it can be improved.
McDonald’s serves its customers with fast food which is considered unhealthy especially to children. In the US fast foods such as those served in McDonald’s are believed to be the leading cause of obesity among the young population (Linn, & Golin, 2006). Obesity is found to lead to other chronic diseases such as diabetes and heart attacks. Such adverse effects have caused a drop of up to 13 percent of the young people who buy fast foods at McDonald’s. Being the primary target market especially in the US, this is bound to affect the financial performance of the business as sales revenue will reduce (Daniel & Wilson, 2003). The graph below illustrates how McDonald’s market share was affected in the periods of 2005-2009.
2005 2006 2007 2008 2009 2010 (Years)
To overcome this challenge, McDonald’s has up with new products that are healthier and have nutritional value such as salads, fruits, oat meals among others. Such products will attract those customers that are sensitive on what they consume. This has enabled the company to increase its market share in the period of 2009-2010 and has continued to rise since then (Peters, 2009).
Another challenge is the globalization of its franchise stores. The business men and women are bound by the franchise agreement which does not allow them to offer other products that are not included in the franchise agreement. The challenge is that these businesses are not given a chance to be creative in the delivery of their services and especially on menu decisions. The franchise agreement assumes that the market wants, and needs are similar in all regions. The business has however thought it wise to give these franchise stores autonomy on menu decisions so that they can be able to compete effectively with local stores. Productivity will be enhanced as a broad menu will attract more customers (Baum, 2012).
McDonald’s can improve its performance by being aware of the current wants and needs of the customers. The business needs also to be creative and innovative when coming up with new products. These products should appeal to a majority of the market so that the business can maintain its customers. The business should identify ways in which it can incorporate technology in its business so as to increase its efficiency and effectiveness in service delivery (Slack, Chambers, & Johnston, 2009).
Performance objectives are prepared by a business as a guide on the kind of results it wants to attain in the running of its operations. Performance objectives assist an organization in the achievement of the overall objectives of the organization which include profit maximization, revenue maximization, and reduction in cost, commanding a significant market share and venturing into global markets among others. McDonald’s performance objectives have enabled it to become a global leader in the food industry. The business has grown in sales revenue, market share, and profits. McDonald’s has continuously improved its performance by ensuring that customer satisfaction is the ultimate goal. This satisfaction has been fulfilled through the provision of quality services and products at the reasonable price. The employees of McDonald’s have been trained to provide quality service to customers using the least time possible. The business has incorporated technology in its operations enabling it to reduce costs in the service production process. However, the business has faced challenges that have had a negative impact on its performance. These challenges which include customer health have been addressed by the business with the introduction of healthy foods on the menu.
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