McDonald’s is among the largest food chains globally with more than 35,000 stores serving millions of customers every year (Morgan " Sonnino, 2010). A franchise or the McDonald’s corporation are responsible for running each store. In United Kingdom, a majority of the restaurants are managed by a franchise. To ensure that the company remains highly productive and environment friendly, it states several requirements necessary to become a franchisee which include a high integrity level, experience within the food industry, and a great commitment to the business. In this way, all franchisees contribute to the strength and dominance of McDonald’s in the fast food market.
The corporation has been able to maintain its positions as the top player in the fast food industry through several strategies which maximize its potential in the industry. The purpose of the strategies is to address the external factors which impact the environment of the organization along with the high competition which entails companies like Burger King and Starbucks Coffee company. Based on the fact that it is the largest fast food restaurant chain the world, McDonald’s uses its key strengths to adapts to the changes in the environment. In this study, the central focus is on how business functions like marketing and human resource management influence the corporation’s objectives. Additionally, it will evaluate the corporate sustainability practices and the relevance of diversity within the company. In this way, it will identify the key challenges for McDonald’s and how it can address them to remain the top player in the fast food industry.
Interrelationship between Business Functions and Objectives
In any business where there are various executives who work together, people often have different perspectives on how they should approach varying issues. Therefore, corporations are forced to have objectives and aims which help the entire team to focus on a single aspect regardless of whether one deems it important or irrelevant. Business objectives are meant to help an organization grow and serve like a guideline.
McDonald’s Objectives
Among other goals, McDonald’s purposes to ensure that none of the job applicants is treated unfavourably on the basis of gender, colour, disability, marital status, religion, origin, gender identity, and sexual orientation among others. Every employee and applicants ought to be given similar conditions, requirements, and policies which should be just. Again, one of the most important goals for McDonald’s is to make sure that the products and service are of high quality (Preble, 2005). It means a lot to the company that all the products should be of high quality with different varieties.
Overall, the key aims of McDonald’s is to serve quality food in a friendly environment which leaves the clients satisfied and happy (Schroder " McEachern, 2005). Also, it has an objective to remain socially responsible and provide great returns to the shareholder. Mainly, it is able to achieve the satisfaction of customers by offering quality services which shows true value for their money.
Business Functions
McDonald’s employs all the Human Resource Management theories and techniques to attain success in the industry. The culture of the company provides an environment which motivates the workforce to ensure that they achieve the mission of McDonald’s. The employee recruitment and training processes support the business aims. To ensure that there is no discrimination in the recruitment and selection process, McDonald’s HRM team has a three-step application process which applicants have to go through (Ulrich, et al., 2008). First, the first step is done online after which the candidate has to attend an interview conducted by a HR officer. Finally, they have to meet with the business manager who makes further assessment on the candidate.
McDonald’s advertises its products extensively and uses various means to markets its products to the public. For instance, it uses the usual media like television and radio besides the significant use of billboards and signage. Television ads are the primary form of marketing although it also makes coolers of orange drink which feature the logo for McDonald’s and ensures that the drink is presents in all kinds of events. However, its marketing mostly focuses on children which, unfortunately, has been a problem before. The main issue with this type of marketing is linked to the fact that a majority of its products are not healthy which should not be encouraged among children. All in all, this kind of marketing enables McDonald’s to attain high sales making it a successful company. Also, it is in a position to enhance the stakeholder relations.
Corporate Social Responsibility
Corporate Social Responsibility refers to the idea that companies ought to behave in a socially responsible way to avoid the degradation of the available resources (Campbell, 2007). While this had not been an issue decades ago, the realization that companies had a tremendous impact on the environment prompted everyone to shift their focus to CSR of companies. The public is now aware about the need for companies to employ activities which are socially responsible. Being the largest chain of fast-foods, McDonald’s has to integrate activities which are friendly to the environment.
McDonald’s works closely with the suppliers to ensure that they only use responsible practices in the supply chain (Tate, et al., 2009). The corporation clearly states this on its website where it provides a framework on how it expects the suppliers to treat the employees. Additionally, it seeks to extend the social accountability through the supply chain which forms its strategy (Working with suppliers to protect Animal Health and Welfare, 2018). The corporation has been successful in providing support to the suppliers who have given up the sow gestation crates in the supply chains. Again, it is currently ensuing a project whose purpose is to improve the conditions for the farm workers. As a result, this helps in promoting favourable environmental practices in the land-based agricultural supply chain which in turn makes the farm a sustainable business.
One of the best ways through which McDonald’s has been able to portray CSR is through community-based projects. A perfect example of this is seen in its launch of the Flagship Farms Initiative in Europe which represents several progressive farms which have adopted innovative farming practices in Europe (Flagship Farmers Inspiring Change, 2017). Consequently, the company is able to prove how businesses can incorporate ethical practices.
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Established brand and reputation
Moderate market diversification
Standardized processes
Vulnerable to the decline of the Western economy
Limited flexibility of the company processes
Limited diversification of products
Diversification of products
Can enter new markets in countries which are still developing with favourable market characteristics
Development of the market in the Middle East
High competition
Regulations of animal welfare and health
People turning into healthy lifestyles
Increasing diversity of culture
Chinese economy significantly reduced its growth
Public health policies
Key Challenges for McDonald’s
While McDonald’s is one of the largest chains in the fast food industry, it continues to face significant challenges which have even impacted its sales. Particularly, the sales reduced by 3.3 percent recently, marking this the fourth straight quarter of decline (Maze, 2018). Especially since the company has more than 35,000 stores, it is more difficult for the management to boost the sales.
Bad Food Image
People who usually have very busy schedules are forced to rely on fast foods since they offer convenience especially since they are timely. However, this comes with a lot of nutritional consequences which has been the biggest challenge to McDonald’s. The fast-food industry has grown drastically and most companies, like McDonald’s, have also revolutionized their business practices to cater the growing demand. The businesses receive a lot of people and they, therefore, have delivery hotlines which the clients can use to order food which can be delivered within a few minutes. Moreover, there are drive-thrus which would take a person less than 15 minutes to get their food making it easier and faster to deliver the fast food to the clients.
Upon realizing this potential of the industry, McDonald’s adopted aggressive marketing strategies which included marketing on radio, billboards, the Internet, newspapers, and magazines. The move was seen as an effort to put an idea in the heads of the customers that fast foods are the best option. McDonald’s is very efficient in achieving this as it provides easy remember contacts and clients can make orders at anytime and they will have the food delivered. They are also open 24/7 and customers can reach them anytime which has contributed to the popularity of fast-food companies.
In the 1990’s, McDonald’s was operating without people raising concerns about the food content. However, in the 2000’s, the need for living healthy lifestyles caused people to be interested with the food content which was in the cheap alternatives offered by McDonald’s. Ideally, the corporation did not list the ingredients in the food options it offered to the public and it was realized that it comprised cheap ingredients with high concentration of sodium, cholesterol, calories, and fat (Dumanovsky, 2012). The consumption of these nutrients is extremely harmful and the leading cause of obesity which leads to high number of deaths. As such, the image of McDonald’s was destroyed and the corporation has been affected since this time. Despite efforts to include healthy food options in its menus, the declining sales observed this year justify this fact.
Increased Competition
Even though McDonald’s is one of the fast-food giants and has maintained its position for a long time now, it is beginning to feel the impact of rivals in the industry. It first reported the declining sales in 2009 which occurred simultaneously with the growth of The Golden Arches. The latter was committed to growth as it advertised new products, incorporated more value menus, and increased the number of hours it was open (Rowley, 2004). Since this time, McDonald’s has been holding up relatively well but now it turns out to be a significant problem that needs attention given the growth of other companies like Pizza Hut, KFC, Taco Bell, and Burger King Holdings. These companies are becoming global with stores in countries worldwide which makes them more competitive with more experience and funds to compete with McDonald’s.
Unmotivated Employees
McDonald’s aims to attain a high level of efficiency and productivity but this is not possible when working with unmotivated employees. The most significant factor which has hindered the further growth of the company is the lack of a sound motivational environment. According to Maslow’s theory of motivation, compensation is directly associated to the level of motivation of a worker. The plausible wage per hour should be $15 (Tsao, 2016), but most McDonald’s employees receive around $10 which is not sufficient. In addition, the company mostly targets students and is, therefore, able to pay them any amount of wage no matter how small it is. In this way, McDonald’s also does not adjust the shifts for the employees, which is not reasonable given that most of them are students who have other commitments. The continued decline in sales and quality of service is associated with the poor treatment of the employees.
Recommendations and Actions
The best way for McDonald’s to overcome these challenges and maintain its position as the largest fast food chain is to change its reputation from a “fast food’ to ‘good food served fast’ company. It should mainly focus on changing its menu to include more healthy alternatives. McDonald’s should consider adding menu items such as egg-white McMuffins and salad rather than fries. In this way, it will overcome other competitors since they also provide alternative although they cannot be categorized as healthy. McDonald’s should increase their advertising but through emphasizing that it now provides healthy alternatives without reducing speed and taste. Moreover, the management should increase the compensation rates offered to the employees and introduce a reward system to increase their motivation and productivity. In addition, McDonald’s ought to introduce training sessions for the workforce to increase their expertise and knowledge which will improve the quality of service.
Conclusion
McDonald’s remains to be one of the largest corporations worldwide in the fast-food industry and integrates the business functions to support the business aims. However, it is now faced with huge threats which have caused its decline in sales recently. The biggest challenges include competition, bad image, and lack of motivation among the workforce. But it can overcome this by including healthy options in its menu and increasing the wages for the workforce to improve the company’s efficiency and productivity.
References
Anon., 2017. Flagship Farmers Inspiring Change. [Online]
Available at: https://www.flagshipfarmers.com/en/
[Accessed 15 December 2018].
Anon., 2018. Working with suppliers to protect Animal Health and Welfare. [Online]
Available at: https://corporate.mcdonalds.com/corpmcd/scale-for-good/our-food/animal-health-and-welfare.html
[Accessed 14 December 2018].
Campbell, J. L., 2007. Why would corporations behave in socially responsible ways? An institutional theory of corporate social responsibility. Academy of Management Review, 32(3).
Dumanovsky, T., 2012. What People Buy From Fast‐food Restaurants: Caloric Content and Menu Item Selection, New York City 2007. Obesity: A Research Journal, 17(7), pp. 1369-1374.
Maze, J., 2018. McDonald's 3Q same-store sales fall 3.3%. [Online]
Available at: https://www.nrn.com/same-store-sales/mcdonalds-3q-same-store-sales-fall-33
[Accessed 16 December 2018].
Morgan, K. " Sonnino, R., 2010. The urban foodscape: world cities and the new food equation. Cambridge Journal of Regions, Economy and Society, 3(2), pp. 209-224.
Preble, J. F., 2005. Toward a Comprehensive Model of Stakeholder Management. Business and Society Review, 110(4), pp. 407-431.
Rowley, J., 2004. Online branding: the case of McDonald's. British Food Journal, 106(3), pp. 228-237.
Schroder, M. J. A. " McEachern, M. G., 2005. Fast foods and ethical consumer value: a focus on McDonald's and KFC. British Food Journal, 107(4), pp. 212-224.
Tate, W. L., Ellram, L. M. " Kirchoof, J. F., 2009. Corporate social responsibility reports: a thematic analysis related to supply chain management. Journal of Supply Chain Management, 46(1), pp. 19-44.
Tsao, T.-Y., 2016. Estimating potential reductions in premature mortality in New York City from raising the minimum wage to $15. American Journal of Public Health.
Ulrich, D., Younger, J. " Brockbank, W., 2008. The twenty‐first‐century HR organization. Human Resource Management, 47(4), pp. 829-850.
Appendices
PESTLE analysis
Political factors
Changing policies on public health
Improving international trade agreements
Government directs practice on health and diet
Economic
Stable growth of rich countries
High growth rate of developing countries
Chinese economy’s growth limited
Sociocultural
Healthy eating
Busy lifestyles for people residing in urban areas
Cultural diversity
Presence of disposable incomes
Technological
Business automation
Enhanced sales through mobile devices
Environmental
Changing climate conditions in various regions
Emphasis on sustainable business practices
Increasing interests for corporate environmental programs
Legal
Animal welfare regulations
Health regulations
Legal minimum wages
Porter’s Five Forces
Bargaining power of suppliers
Low-Abundance of suppliers and limited uniqueness between distinct products offered
Rivalry
Fierce-Many fast-food establishments and restaurants
Threat of new entrants
Moderate-the market is almost at the point of saturation in various locations
Threat of substitute products
Strong-low costs of switching and high performance of the products
Bargaining power of buyers
Strong-too many providers and number of substitute products
