OPM300: Introduction to Operations Management Module 1 Session Long Project By Laura Tucker

McDonald's is the leading global foodservice retailer with more than 32,000 local restaurants serving more than 64 million people in 117 countries each day (1). To any operations management professional, McDonalds is the model of long term proficiency and productivity from a strategic perspective. Operations and productivity at McDonalds have not always have been so well planned though. In this paper I will highlight the operational successes and failures of this strategic company, as well as the future productivity goals. In order to understand McDonalds successes, one must start at their crossroads. In the 1960s through the 1980s, McDonalds was the model of efficiency in the service industry. But in the 1990s, things seem to go terribly wrong. They tried a number of new products, most notably the McPizza, McLean, and Arch Deluxe, which were failures. Although they had a strong childrens market, they were focusing all their new products on the adult market, under the assumption that children wouldnt like the new products. It was also a changing world in which American waistlines were a concern, and the products McDonalds delivered were not in line with the modern demands of American fast food culture. A strategy they tried was to make their menu, Made-for-You. The main issue with this strategy was that it moved from the Made-to-Stock strategy that made McDonalds successful in the past, to a custom made order that was lacking in fresh ingredients, and a menu that didnt connect with Americans focus on low fat/low carb fast food. To add insult to injury, McDonalds bought Boston Market and Chipotle, two food chains that were out of touch with the direction McDonalds needed to be going. At this moment in time, it was without a doubt that changes needed to be made. (2) But in the early 2000s (2003), McDonalds started to turn things around. They focused more on healthier menu options, broadened their menu to include products that would appeal to both children

and adults, and sold off their acquisitions that didnt get in line with the modern strategy of the company. A key to their success has been the Play to Win strategy. This strategy focuses on five Ps: People, Products, Place, Price, and Promotion. This shift of a value driven menu/product that people wanted, represented a positive strategic change in direction for McDonalds. (3) Future productivity goals also represent McDonalds current core strategy. As of the last quarter, sales increased 2.9% based on their core products; including the McCafe line-up, the new Fruit & Maple Oatmeal and featured products including the 20-piece Chicken McNuggets and the Chipotle BBQ Bacon Angus burger. (4) Chief Executive Officer, Jim Skinner commented, For the quarter, McDonald's delivered double-digit earnings per share growth led by higher comparable sales and guest counts across all geographic segments and strong franchise margin performance. Despite the challenges of the current economic environment, I am confident that McDonald's can continue to grow by listening to our customers and remaining true to our proven Plan to Win strategy." He concluded with, We remain focused on strategies that will keep the McDonald's brand relevant, contemporary and compelling to our customers and deliver sustained profitable growth. I am confident that by harnessing the collective talents, resources and capabilitieswe will continue to grow our business in 2011 and for the long term. As we begin the second quarter, our top-line momentum continues withsales trending in-line with or better than first quarter sales." (4) It seems, McDonalds future productivity goals will be an operational management success if they follow their Play to Win strategy. To say that McDonalds is a lesson in successful operational management transformation is an understatement. From decades of success, to a decade of productivity and operational management failure(s), McDonalds has transformed themselves into a dominant force (again) by adhering to strategic goals of the five Ps, most notably product and people. Their current Play to Win strategy even has

them on track to beat 2010s financial report. One could conclude, given the nature of McDonalds current operations, they will be around for a long time.

References:

1. McDonalds Website (2011) > Our Company. Getting to Know Us Accessed May 30, 2011, at

http://www.aboutmcdonalds.com/mcd/our_company.html

2. Value in Action > Newsletter #2 (2004). Melnyk and Swink, Value-Driven Operations Management: An Integrated Modular Approach Accessed May 30, 2011, at

http://www.mhhe.com/omc/MelNewslttrNo2.PDF

3. McDonalds Website (2011) > Investors > Publications. 2010 Annual Report Accessed May 30, 2011, at http://www.aboutmcdonalds.com/etc/medialib/aboutMcDonalds/investor_relations3.Par.56096.File.da t/2010%20Annual%20Report%20(print).pdf

4. McDonalds Website (2011) > Investors Information. McDonald's Announces Strong Sales and Earnings Growth for First Quarter 2011 Accessed May 30, 2011, at