Module: BUSM4304/ International Operations Management
Executive Summary
The main objective of this study is to critically analyse the operational activities of McDonald’s and challenges while expanding the business in domestic and international context.
It is determined that company’s operational management is customer centred and based on reducing the inventory cost so that company can provide the products at affordable prizes. In addition, company operational objectives are helpful to manage the operation management efficiently by delivering the services on time, to be cost effective and offer the flexible services to the customers.
However, there are certain challenges faced by company in domestic and international market in internalisation process such as cultural differences, application of standardized system and supply chain management, mass customization, manage the human resources and global competitive environment.
In addition to this, it is recommended to company to overcome the challenges while managing the operational activities and internalisation process to adopt the transparent supply chain system with more participation of local distributers.
Also, it is important to review the cultural beliefs and customs to mitigate the cultural issues as it play essential role in business expansion other than domestic market. Apart from that, company need to focus on innovations in order to provide the low cost services to customers.
The internationalization process have been given special attention by organizations that wants to expand beyond the domestic markets at some point of time and aim to enter the international market for increased growth, revenue, and profits.
The internationalization process is associated with operations management as international business actions to modify their resource inputs such as labour, material, and other resources) into final goods/ products/ services and to respond to new changes, to meet the local and global demands, eliminate quality differences, pricing, competition technology developments and consumer tastes and preferences.
Many organizations have faced complexities in the management of international operations in relation to the resources, production inputs, supply chain management, logistics and location that affects their operation functions for goods/ service production to supply to the customers.
Mc Donald’s is one such organization that has successfully managed the internationalization in outside their home country however, the faced server significant issues in internationalising their operations.
Thus, the focus of the report is to analyse the operational activities of Mc Donald’s and to identify the critical issues associated with internationalising their operations. This report also includes recommendations for the organization in relation to the operations improvements in domestic and international aspects.
Analysis of the operational activities of the chosen organization
McDonald’s is focused on its operational activities to make it more effective and to produce the high quality product. In order to this, company adopt various strategic tools such as cost reduction, product quality improvement, timely delivery, quick response, fulfil the customer and excellent customer service and advanced technology etc.
McDonald’s is a very famous food brand that serves in more than hundred countries having more than 32000 restaurants (McDonald’s, 2019). it operates the business by performing the operational activities such as Design of Goods and Services, Quality Management, Process and Capacity Design, Supply Chain Management, Inventory Management that are repetitive in nature.
It offers the fast serve meals such as breakfast. salads, vegetables and dairy products and provides the similar good menu in all its restaurant. Also, it offers the some local and regional food in country like, Japan, Taiwan and Brazil. Mc Donald’s performed the following operational activities:
Design of Goods and Services: McDonald’s design its products with aim of providing the affordable products to the customer (Xu et al., 2016). As to why the size of products and prices are depends on the consumer expectations, also company has minimized the size of its products in order to make it affordable.
Quality Management: This company is more focused on maximizing the products quality overcoming the cost and price issues. In regards to this, company use the production lime method in order to maintain the products quality and to deliver the satisfactory services to customers (Chon and Lu, 2012). This practice benefits the company to establish the brand into the market.
Process and Capacity Design: McDonald’s process and capacity design is based on the cost minimization and enhancing the process efficiency. So that, company can fulfil the market demand to be cost effective. In regards to this, the adoption of production line method maximizes the process efficiency and utilization capacity.
In regards to this, the theory of process choice is applicable on McDonald’s product and process design. According to Peng and Lai (2012), organisation adopted the different types of processes to manufacture their products; it includes the hand making articles, job-shop operations and mass production products.
However, later it is majorly categories into two section such volume and variety of products, Similarly, McDonald’s has established its operational system in such a way so that production activities can be divided into simple steps as per the staff population with the support of technology. So that can customer can be served on time.
The process design of McDonald’s showcases the theory of swift and even flow. In the words of the theory Smith et al., (2014) of swift and even flow explains that the more swift and even the flow of materials through the process, the more productive the process is.
Similarly, McDonald’s designed its infrastructure considering the operational requirement. At the same time, it adopted the standard operating procedure for preparing and delivering the food to the customer. Also, it has fixed the cooking time for every food so that its cooking process can be swifter.
Apart from that, McDonald’s has applied the lean manufacturing theory to in its food delivery system through automation and eliminating the waste in food preparing and storage.
Supply Chain Management: McDonald’s is global fast food chain having he different location around the world. Its supply chain management is diversified as per the decision the regional operation management. Its supply chain management involves the invite the more number of suppliers in order to reduce the supply chain risks (Panmore Institure, 2019). Additionally, its supply chain management is concerned with managing the flow of materials and information between the operations.
Inventory Management: In order to manage the inventory company does not sell the products and indigents to its restaurant, instead of this local and regional distributers and supplier contact the restaurants to manage their inventory.
Scheduling: The company apply the corporate conditions for scheduling based on the local market conditions and laws in order to fulfil the supply chain requirements (Furman et al., 2013). At the same time, company’s strategy involves the consistent and seasonal scheduling to address the local market fluctuations.
Advertisement: McDonald is considered as leader to promote its offerings and brand through marketing and advertisement. it incorporates the innovative and extensive advertisement.
Apart from that, company has wide range of products including healthy and dairy products, It Mainly focuses on the five main ingredients: beef, chicken, bread, potatoes and milk. The main menu items are: The Big Mac and French fries which is one of the main sellers along with local offers and new products that consumers want (Sandbacka et al., 2013). There is huge demand and popularity of these products all across the world.
In addition, following are the operations objective that helps the company to manage the business and gain the customer satisfaction.
Quality: In order to deliver the quality food and error free services, company has trained his employees to prepare and present the food particularity raw and cooked foods. McDonald’s fulfil all criteria to maintain the hygiene at the restaurant (Panmore Institute, 2019). Also, it asks the customer for feedback for continues improvement.
Speed: McDonald’s designed its operational management in such a way so that customer gets served quickly and within the timeframe of few minutes. Company has set the time for every menu for delivering the customer.
Flexibility: McDonald offers the wide range of food items and new products as well. At the same time, it also offers the flexibility in order to meet the customer preference and includes the balanced range of food including the cultural taste to the food for all age of customer.
Cost: Company has well panned cost control strategy and manages the low cost supply chain. company has adopted the just in time strategy to eliminate the waste and unnecessary waste (Basu et al., 2015). Additionally, company also offers the discount rates when they buy then purchase together.
Dependability: Company delivers the premised order on time having the efficient work process.
Moreover, having the proper planned process design, McDonald’s is able to deliver the quality food on time and delivering the high quality services to customer.
Identification of the critical issues associated with organization choices in internationalising their operations
From the case study of Mc Donald’s, it is identified that the organization has faced several decisive issues in internationalizing their operations outside United States.
One of the major issues was the application of standardized system for the manufacturing of the food items and also standardized system for the fast food delivery (fast service). In United States, Mc Donald’s have applied standardized system of assembly-line process for the food production which has helped to keep the meal prices low.
Also, this also requires low –skilled labour and part time labour so the lower meal processes were maintained. However, in its international expansion in Caribbean and Canada, this application of standardized system was not possible to get standardized inputs for items purchased in large quantities and in production of food.
Also, in going international in their Holland expansion, McDonalds face issue in obtaining the desired standardized inputs in high volume similar to the US operating model. There was suppliers issue in acquiring standard size Idaho potatoes, moisture quota, particular shaped and consistency of hamburger and special size and flavor of pickles so there was high cost involved in import to ensure standardized system in food product in new country.
Thus, it can be said that application as well as weakened standardized operating systems model of Mc Donald’s was seen as a critical issue in their process of internationalizing operations.
Another critical issue was indentified in Mc Donald’s supply chain management as there was few supply chain implications in the internationalization process in relation to sourcing of production inputs as well as international supply chain operations and management due to change in distribution culture and macro-environmental factors which impact the sourcing polices.
Mc Donald’s has less familiarity with the suppliers in matching their demands for standardized inputs and faced difficulty in sourcing input with acceptable quality, size, texture, etc, beyond their domestic market (Schmitz and Strambach, 2009).
This has lengthened their supply chain operations and also raised its cost of manufactured products as imported many of its supplies which made it difficult for the organization to maintain its lower price of meals in new international markets.
The cultural differences also formed a significant issue for Mc Donald’s in internationalizing their operations in India, China, Venezuela and Mexico to sell their products as they were perceived as American taste and brand which initially did not that suit to local consumer preferences and taste.
Here, the Uppsala model theory of internationalization can be referred for Mc Donald’s internationalization in India and China as it is seen as a slow incremental process as less market knowledge of the market and culture was transformed into an experiential learning process which has increased the acceptance and sales as the menu was localized so that the fast food business of Mc Donald’s can be conducted in the international market.
Thus, Mc Donalds in entering India and China gained knowledge of the cultural differences to initiate the expansion to fit the needs and food preferences of these markets. However, it can be said that Mc Donalds have been influenced by home country culture and have difference in cultural aspects when expanding in other countries.
The organizational also faced issue in relation to the attempt towards the mass customization in the entry to other marketers to merge the operational performance and the provision of customized fast food products especially with the burgers and fast services on a mass scale with the objective for lower costs so that it is affordable among the mass market. Here, the organization concern was to meet the consistent quality in the mass production system across its franchisee.
The organization have been actively involved in the new inventions/ product innovations to facilitate the process of mass customization but faced difficulties in its implementation and also have been standardizing its technology (Bettiol et al., 2015).
The issue is also indentified in relation to developing a link among the operational management and system design that is capable of delivering consistent services and producing quality food products to meet the demand of MC Donald’s customers in quick service fast food framework.
Thus, to design a system across all its international franchisee was a key challenge for the organization operational managers. There was also challenge related to the overproduction as in new markets the practice was followed to prepare/ produce in batches for sandwiches to reduce the serving time and it reduced the operational efficiency as it increased the wastage and also led to reputation loss for waste (Germar, 2018).
This was also related to operational sustainability issue for the organization in internationalizing its operations so that the fast food business can maintain its business practices in new markets without posing risk to the future resources.
Apart from these, the organization faced issue in relation to the human resources challenges. Mc Donald’s faced complexity in managing the human resources management on an international scale for the training and audits and also due to consideration of regulation and law of international human resource management.
There were also issues in relation to relocation and orientation of staff members and to make sure that the international employees meet the terms of the work permits, immigration requirements, expatriate training along with housing and medical provisions (Briscoe et al., 2009). For instance, to meet the need of training Mc Donald’s has spend two years to develop the staff and orient them to meet the standardized service standards in Japan and also set up Japanese Hamburger University for the training of managers and staff.
Recommendations of operationally feasible solution in domestic and international context
In order to overcome the operation management issues, company need to review the cultural environment to avoid the cultural differences. This practiced would help the company to follow the religious and cultural beliefs of particular region.
Just like in India, food companies cannot sell the beef products in Hindu community and Pork products in Muslim community (McQuillan, and Sharkey Scott, 2015) Thus, it is very important to have knowledge about social and cultural values in order to mitigate the cultural issues. In this way, company need to offer the food products as per the regional customs and preferences.
Apart from this, company need to improve its domestic supply chain management, At the same time, it needs to adopt the more transparent supply chain system and company can also invite the domestic distributers in the business for inventory supply.
Connection with local distribution will lead to cost effective supply chain management and also fulfil the demand of raw material adequately (Militaru and Zanfil, 2014). In addition to this, company need to adopt the standardize product and process development procedures in order to meet the customer’s expectation in time.
Apart from that, company should adopt the innovative practices to reduce the cost material so that company can offer the products at affordable prizes at mass market, also, to attract the new customers. Furthermore, company need to provide the training to the staff members to learn the standardize practices for preparing and presenting the food (Alkaabi, and Dixon, 2014).
This price is helpful for the company to reap the competitive advantage in the market by enhancing the workforce efficiency.
In international context, to improve the operational management it is recommended to the organization to develop specific skills in their international staff to perform diverse operational functions.
The skills such as organizational abilities to plan and priorities operational processes , their implementation and monitoring, coordinating skills to maximize the operational efficiency though coordinated problem solving or decision making and analytical skills for understanding of operational process and functions for its analysis and improvement.
In addition, people skills are also recommended for effective communication and interaction with employee from different culture to navigate them to achieve operational goals and improve the operational productivity.
Another recommendation is to continue to adopt the lean focus strengthen the lean manufacturing to provide high customer satisfaction by creative positive customer value and taking care to eliminate waste.
This will also improve the operational efficiency and improvement in processes to reduce inventory costs, reduce waste, achieve low cost products, and increase output in running their business in new markets (Nandini, 2014).
The new lean concept also know as agile in operations management can provide fast decision making for product development/ modification, flexibility in processes and deal with uncertainty and changes in the demands in the new market (Kumari et al., 2014).
Apart from this, it is recommended to develop and make use of a positioning system in their operational strategy for their food production system to make effective use of resources to optimize the operational efficiency and function in their international business operations.
For this, it is suggested to Mc Donald’s to select an optimum production design in their production system as well as in their inventory policy for each of their major product line like burger, wraps, etc. This will ensure product focus for mass customization to achieve a competitive edge and also towards achieving their operational sustainability.
At the same time, the process can also be focused to improve the operational efficiency and function in the performance of the staff members for the packing service for take away customers thus; positioning system for their food production system can be flexible enough to support different product design.
On the basis of above discussion, it can be concluded that McDonald’s performed the operational activities applying the operational management theories. This company majorly focuses on delivering the quality products to customer by minimizing the product costs.
These operational management frameworks help the company to achieve the strategic goals. At the same time, company aims at reducing the cost of the products and eliminating the waste to fulfill the customer requirement.
Apart from that, company has designed its operational management system, in such a way so that it can deliver the food to customers in minimum time frame. Such practice establishes the brand image in the market and facilitates the competitive advantage to the company.
It can be concluded that there are several issue identified in the internationalizing of operations of Mc Donald’s thus, the process of internationalization was multifaceted.
There have been significant issues in relation to their production management towards the standardization of the system as the operating model of home country with the new international markets, supplies, sustainability, mass customization, system design to ensure consistency in products and quality and human resource challenges.
It can be concluded that despite the operational related challenges Mc Donald’s have management the internationalization process successfully and developed their international learning to manage their international operations management.
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