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God Al-Mighty is worthy of all acknowledgements whose Grace has no limits and Who gave us the strength and will to complete this project. We are thankful to our teacher Sir Israr Raja for his support and guidance to compile this report. We would like to pay special thanks to the Management of MacDonald for their co-operation during the survey.


Companys Profile
History of the Organization:
Ray Kroc mortgaged his home and invested his entire life savings to become the exclusive distributor of a five-spindled milk shake maker called the Multi mixers. Hearing about the McDonald's hamburger stand in California running eight Multi mixers at a time, he packed up his car and headed west. It was 1954. He was 52 years old. In 1965 McDonald's went public with the company's first offering on the stock exchange. A hundred shares of stock costing $2,250 dollars that day would have multiplied into 74,360 shares today, worth approximately $3.3 million on December 31, 2006. In 1985 McDonald's was added to the 30-company Dow Jones Industrial Average. The First Ronald McDonald House in Philadelphia, PA - In 1974 Fred Hill of the Philadelphia Eagles teamed up with McDonald's to create Ronald McDonald House. Here the families of critically ill children have a place to call home while they're away from home as the young patients undergo treatment for their conditions. The greatest strength of McDonalds was creating an image in the minds of the people and introducing them to the fast food culture. Delivery speed, customer care and cleanliness are the core strengths on which these stores expanded. They created a corporate symbol and their advertisement campaigns were highly successful in establishing the brand image and logo in the minds of the millions.Two main global competitors generally identified with McDonalds are the Burger King and the KFC.McDonald's Corporation sales grew by 4.8% in February 2010 compared to last year.Performance by segment was as follows: U.S. up 0.6%Europe up 5.4%Asia/Pacific, Middle East and Africa up 10.5%

McDonald Pakistan:
Aiming to be the world's best quick service restaurant, McDonald's Pakistan opened its doors in September 1998 at Lahore and presently operating in seven major cities with a network of 23 restaurants. McDonald's Pakistan is a part of the Lakson Group of Companies, with a Head Office in Karachi and a regional office at Lahore. Lakson Group also owns, Lakson Tobacco Co. Colgate Pakistan Ltd, Century Insurance Ltd. Express Newspaper, Cyber Net and various others businesses. McDonalds located in Pakistan are currently employing about 1,200 Pakistanis and 2|Page

each store is managed by Pakistani managers. They have also contributed in other ways than food service. McDonalds has investment of over Rs300 crore in the country .Since McDonalds is doing so well in Pakistan they will continue to grow and add more stores in more cities in the future

McDonald's has an open-door culture; any employee can go to the Restaurant Manager and can discuss any problem or new ideas for the improvement of the restaurant. Nobody has any hangups; everybody does everything. McDonald's also believes in value to the customer, that is, why prices are value oriented as Amin Mohammad Lakhani put it in his word; nothing sells forever unless it is value for money

McDonald outlets:
McDonald has many outlets in following cities of Pakistan Islamabad Rawalpindi Faisalabad Sialkot Karachi Hyderabad Lahore


Supply Chain Management in Pakistan:

These strategies determine what is to be made and what is to be purchased. So McDonalds follow these strategies and have a just-in-time inventory system. Which means that the orders are placed as the raw material comes to near finish. McDonalds maintain no inventory levels for perishable goods.

Supply Chain Management at McDonalds:

McDonald's is committed to providing quality products while supporting other Pakistan businesses. And so, we spent a few years setting up a unique Supply Chain, even before we opened our first restaurant in Pakistan. A Supply Chain is a network of facilities including material flow from suppliers and their "upstream" suppliers at all levels, transformation of materials into semi-finished and finished products, and distribution of products to customers and their "downstream" customers at all levels. So, raw material flows as follows: supplier - manufacturer distributor retailer consumer. Information and money flows in the reverse direction. The balance between these 3 flows is what a Supply Chain is all about. When there is a balance in the finished product ordering, the Supply Chain operates at its best. Any major fluctuation in the product ordering pattern causes excess / fluctuating inventories, shortages / stock outs, longer lead times, higher transportation and manufacturing costs, and mistrust between supply chain partners. This is called the Bullwhip Effect. Depending on the situation, the Supply Chain may include major product elements, various suppliers, geographically dispersed activities, and both upstream and downstream activities. It is critical to go beyond ones immediate suppliers and customers to encompass the entire chain, since hidden value often emerges once the entire chain is visualized. For example, a diesel engine manufacturer may be able to integrate a GPS locator system into its engine control system. Its immediate customer, a heavy truck manufacturer, may see no need for this functionality. However, the McDonalds Supply Chain downstream customer, a trucking company with a large fleet, may be very interested in a locator system. Understanding the value to the downstream customer is part of the supply chain management process. Synchronization delivers significant business benefits to both the customer 4|Page

And the supply chain

One stop shopping concept Central file management Inventory management Restaurant simplification

Synchronizing the perishable Supply Chain

1. Demand forecasting Promotional + Continuous Supply Restaurant and DC level 2. Supply Planning Restaurant and DC level 3. Visibility and Collaboration across the chain

Supply chain:
A supply chain consists of all parties involved, directly or indirectly in, fulfilling a customer request. Within each organization, such as manufacturer and suppliers, but also transporters, warehouses and even customers themselves.


Supply Chain Management involves the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, and customers. Supply chain management integrates supply and demand management within and across companies. Supply Chain Management is an integrating function with primary responsibility for linking major business functions and business processes within and across companies into a cohesive and high-performing business model. It includes all of the logistics management activities noted above, as well as manufacturing operations, and it drives 6|Page

coordination of processes and activities with and across marketing, sales ,product design, finance and information technology

Pull processes are initiated by a customer order while the push processes are initiated by the anticipation of customer order. Mcdonalds use both pull as well as push process, to a certain extent push is created and after that level the pull created by the firm did its task. One important question can be asked to what level that push can be applied. The products will be pushed to the restaurants where the customers automatically demand that product and hence a pull is created.

Various Suppliers supplies the materials

Products delivered to Distribution centres

Push stops , pull starts here

Products delivered to restaurant

Customer order at restaurant,

showing the boundary of pull and push, push last till the product reaches the restaurant and pull starts when a customer orders the product.



The processes in the supply chain are divided into a series of cycles, each performed at the interface between 2 successive stages of supply chain


Customer order cycle

Retailer/ McDonalds restaurants

Replenishment cycle


Procurement cycle Suppliers


Competitive Strategy:
Consistent Taste and Quick services.

McDonalds predominantly sells hamburgers, various types of chickens sandwiches and products, French fries, soft drinks, breakfast items, and desserts and. In most markets, McDonalds offers salads and vegetarian items, wraps and other localized fare. This local deviation from the standard menuis a characteristic for which the chain is particularly known, and one which is employed either to abide by regional food taboos or to make available foods with which the regional which the regional market is more familiar.

What is sustainable supply chain?

Focused on the 3E's: Ethics, Environment, and Economics The McDonalds supply chain is a complex web of direct and indirect suppliers. We manage this complex system by working with direct suppliers who share our values and vision for sustainable supply. We hold them to clear standards for quality, safety, efficiency and sustainability. We expect them to extend those requirements to their suppliers. We also partner with them to identify, understand and address industry-wide sustainability challenges and achieve continuous improvement. Overall, McDonalds and our suppliers are collectively focused on three areas of responsibility: ethics, environment, and economics. Our supply chain focus areas include:

Sustainable Land Management Commitment Animal Welfare


Supplier Workplace Accountability Sustainable Fisheries

Our Sustainable Supply Chain Vision We envision a supply chain that profitably yields high-quality, safe products without supply interruption while leveraging our leadership position to create a net benefit by improving ethical, environmental and economic outcomes.

Ethics - We envision purchasing from suppliers that follow practices that ensure the health and safety of their employees and the welfare and humane treatment of animals in our supply chain

Environment - We envision influencing the sourcing of our materials and ensuring the design of our products, their manufacture, distribution and use to minimize life-cycle impacts on the environment.

Economics - We envision delivering affordable food, engaging in equitable trade practices, limiting the spread of agricultural diseases, and positively impacting the communities where our suppliers operate.

We view this vision and our responsibilities holistically. As sourcing decisions are made, we consider our priorities for food safety, quality and costs, as well as our ethical, environmental and economic responsibilities. Our global progress on beef and coffee sustainability illustrate THREE LOGISTICAL DRIVERS: 1) Inventory It includes raw materials, work in progress, and finished goods within a supply chain. Venus distributor usually keeps the stock for 1 month and 45 days. There are 2 ware houses 1 in Lahore and 1 in Karachi. They usually keep McDonalds supply in Frozen (-18 to 22 degree) ,chilled( 0 to 4 degree) and dry rooms as required by the product. At McDonald's, all raw materials, work-in-progress and finished products are handled on a First In, First Out (FIFO) basis. This means raw materials are used in the order they are received. 10 | P a g e

Therefore stock is always fresh because products are sold in the order they are made. If the process First In, Last Out (FILO) was used, then the finished product would be dry and unappealing because the first one prepared is the last one sold. 2) Transportation It is the process where the inventory is moving from place to place. Refrigerated vans are used here in this case. For McDonalds Pakistan they maintain a good fleet .for containers they use 40 ft and 20 ft fleet. Which they use in transferring containers from port to their ware house. On the other hand they have a reefer express fleet which they use for transferring McDonalds food ingredients to their retail outlet in order to maintain a good 22degree temperature while delivering. Venus provides the transfer of all the goods of McDonalds from the port to their ware house and then they are responsible to provide the retail outlet with all the supplies on time. 3) Facilities They are the actual physical location in the supply chain network where the product is stored, assembled, or fabricated. The two main facilities are production sites and the storage sites. Venus has 2 ware houses, one in Karachi and other in Lahore. From Lahore they distribute the supplies to other different cities near to Lahore. The company generates its own power by way of 2 x 390 KVA generators at each location thus ensuring a constant temperature of 22c at all times Below is the specification of their warehouses. 120,000 sq ft warehouse at Maripur Karachi 60,000 sq ft warehouse at Rawind road Lahore, 12,000 sq ft of world standard Freezer/Cold Storage facilities in Karachi 8,000 sq ft in Lahore, respectively. The group head office is in Karachi with a nationwide distribution network that is managed in coordination with our regional offices in Lahore, Hyderabad and Islamabad. The address of Karachi head office is 9/1, K-28, TRANS LYARI HAWKSBAY ROAD. 11 | P a g e

For McDonalds Pakistan they maintain a good fleet .for containers they use 40 ft and 20 ft fleet. Which they use in transferring containers from port to their ware house. On the other hand they have a reefer express fleet which they use for transferring McDonalds food ingredients to their retail outlet in order to maintain a good 22degree temperature while delivering. They have total 20 retail outlets Karachi 7 Lahore 8 Sialkot 1 Faisalabad 1 Islamabad 1 Rawalpindi 1 Hyderabad 1

THREE CROSS-FUNCTIONAL DRIVERS: 1) Information It includes data and analysis related to facilities, inventory, transportation, cost, prices and customers in the whole supply chain. Previously they used American software which was used by McDonalds globally and these were provided by McDonalds international to them. Later on they found out that Siza foods need to customize the software because the previous softwares not meeting their demand. So now they have made their customized inventory control software which is not having any specific name for them. 2) Sourcing It who will perform which activity( production, storage, transportation, and distribution) in a supply chain. International Palm oil From Malaysia (Cargil palm products) 12 | P a g e

All kinds of machinery and other equipments from America .

National Packaging (Previously the packing was imported from Kuwait and now Siza foods is depending on Pakistan to manufacture the packaging for their food items. Cream and the milk is provided to McDonalds by nestle, which is used in making coffee, ice creams and other items. Ketchups, Maya sauce and other sauces ( bigmac sauce etc) from unilever Pakistan. Bread and buns rarely from dawn bread. Now they use buns from their own bakery. For one of their product they have started using chicken patty from K&N and have future plans to rely more on K&N and make all their chicken items with the help of local company K&N. Even the coffee is provided to them by nestle. 3) Pricing McDonald's also believes in value to the customer, that is, why prices are value oriented as Amin Mohammad Lakhani put it in his word, nothing sells forever unless it is value for money. Prices may vary at Airport Kiosks, Rawalpindi/Islamabad In-store & McDelivery. Small Sandwiches Beef Burger Cheese Burger Spicy Chicken Burger Double Cheese Burger File-O-Fish 6 Pcs Chicken McNugget Large Sandwiches McRoyale In-store & Drive thru 100 120 120 245 245 255 In-store & Drive thru 295 13 | P a g e

Quarter pounder with cheese Big Mac 9 Pcs Chicken McNuggets 20 Pcs Chicken McNuggets Spicy McCrispy Chicken Deluxe McArabia Chicken McChicken Chicken Big Mac Big Tasty MEDIUM EVM's Filet-O-Fish Double Beef n cheese 6 Pcs Chicken McNuggets McChicken Big Mac Chicken Big Mac Quarter pounder with cheese 9 Pcs Chicken McNuggets McRoyale McArabia Spicy McCrispy Chicken Deluxe Cheese Burger Big Tasty LARGE EVM's

275 275 325 565 285 295 235 270 390 In-store & Drive thru 375 375 375 390 415 415 420 415 430 430 415 425 475 In-store & Drive thru

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Filet-O-Fish Double Beef n cheese 6 Pcs Chicken McNuggets McChicken Big Mac Chicken Big Mac Quarter pounder with cheese 9 Pcs Chicken McNuggets McRoyale McArabia Spicy McCrispy Chicken Deluxe Cheese Burger Big Tasty Happy Meal Happy Meal Beef Burger Happy Meal Cheese Burger Happy Meal Chicken Burger Happy Meal 4 Pcs Nuggets Fries Regular Fries Medium Fries Large Fries Drinks Coke / Sprite / Fanta

400 400 400 415 440 440 445 440 455 455 440 450 500 In-store & Drive thru 150 180 180 180 In-store & Drive thru 90 120 150 In-store & Drive thru

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Regular - 12 oz cup Medium - 16 oz cup Large - 21 oz cup Water Nestle Pure Life 0.5 Liter Shakes Regular Chocolate Shake Regular Vanilla Shake Regular Strawberry Shake Medium Chocolate Shake Medium Vanilla Shake Medium Strawberry Shake Large Chocolate Shake Large Vanilla Shake Large Strawberry Shake Desserts Sundae Chocolate Sundae Strawberry Regular Cone Regular choco Cone Large Cone Large Choco Cone Apple Pie Blueberry Custard Pie

70 80 90 In-store & Drive thru 45 In-store & Drive thru 120 120 120 150 150 150 175 175 175 In-store & Drive thru 120 120 40 55 60 70 120 120 16 | P a g e

McFlurry Oreo McFlurry Cornetto Chocolate McFlurry Cornetto Strawberry Special Offers Spicy Chicken with Reg Drink Rs.99 (4pm - 7pm) 4 Pcs Chicken Nuggets with Reg Drink Rs.99 (4pm - 7pm) Apple Pie with Tea Rs.99 (4pm - 7pm) Strawberry Custard Pie with Tea Rs.99 (4pm - 7pm) Medium Fries with Medium Drink Rs.99 (4pm - 7pm)

160 170 170 In-store & Drive thru 110 110 110 110 110

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Core Competency and sustainable advantage

McDonalds core competency is providing convenience when people need and want toeat fast food at prices that are competitive and provide best value for the customers money. One of McDonalds competitive advantages is its focus on consistency of quality, production of food and use of raw materials all around the world. The world recognition associated with the brand McDonalds itself is also one of McDonalds competitive advantages. 2 decisions for globalization 3 when they started in Pakistan

Competitors KFC, PIZZA HUT, Dominos.

Packaging (Previously the packing was imported from Kuwait and now Siza foods is depending on Pakistan to manufacture the packaging for their food items. Lettuce Cream and the milk is provided to McDonalds by nestle, which is used in making coffee, ice creams and other items. Ketchups, Maya sauce and other sauces (bigmac sauce etc) from unilever Pakistan. Bread and buns rarely from dawn bread. Now they use buns from their own bakery. For one of their product they have started using chicken patty from K&N and have future plans to rely more on K&N and make all their chicken items with the help of local company K&N. Even the coffee is provided to them by nestle.

McDonalds Distribution systems:

McDonald uses three types of Distribution strategy Franchising Licensing Joint ventures I will discuss them briefly McDonalds Distribution systems Franchising McDonald require franchising from countries on conditions like this The entrepreneur should be trained.45000$ in franchise fees which is higher 18 | P a g e

than other fast-food companies Total investment would range from 1 million to 1.8 million After setting the entrepreneur will have to pay 12.5 % as royalty tax Contract will be for 20 years Cash liquidity should be around 250000 McDonalds Distribution systems Licensing The Lakson Group of Companies is one of the largest and most well-diversified companies in Pakistan with a range of foreign affiliated partners that include Tetley Tea, Colgate-Palmolive, McDonalds, Kraft Foods and Phillip Morris International. Colgate-Palmolive Inc. 30% equity ownership in Colgate- Palmolive (Pakistan) Limited McDonalds Corporation: Siza foods (Pvt.) Limited holds an exclusive Country Development License for Pakistan. Kraft Foods: Holds an exclusive licensing exclusive Country Development License for Pakistan. Tetley Overseas Holdings Ltd:50% equity ownership in Tetley Clover McDonalds Distribution systems Samsung Corby Crave Hit McDonalds: Samsung Electronics Company Limited, as a joint promotion with McDonalds Pakistan, has introduced the latest Samsung Corby Series mobile phones at McDonalds outlets across Pakistan. McDonalds customers are provided with a chance to win this fabulous cellular product through participation. The youth oriented series is focused on interactivity and is laced with exciting features such as video, images, sound, music and data sharing. The joint promotion aims to generate excitement among the youth and providing them a feel of the touch phones and boosting their comprehension. Other than this McDonalds have license on Airports, Railways etc. McDonalds Distribution systems Joint venture GAM Corp (Private) Ltd is a joint venture company of McDonalds Corporation USA. Mc Donalds is worlds leading Fast Food chain having over 30,000 restaurants world wide. Total strength of staff in Pakistan is 1800 person. It has successfully opened 14 restaurants in Punjab. Other than this TOYS R US is another joint venture.

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McDonalds Inventory Management:

The Inventory Management Problem All businesses face challenges every day. One of the major challenges facing McDonald's is managing inventory. Inventory management involves creating a balance between meeting customers' needs whilst at the same time minimizing waste. Waste is reduced by: 1. Accurate forecasting of demand so that products do not have to be thrown away as often. 2.Accurate Inventory control of the raw materials.

Inventory management involves creating a balance between meeting customers' needs whilst at the same time minimizing waste. This is an increasingly tough balancing act. As customer tastes change, McDonald's needs to increase the range of new products it offers, so the challenge of reducing waste becomes even greater.

McDonalds Old System

In the past, stock ordering was the responsibility of individual restaurant managers. They ordered stock using their local knowledge, as well as data on what the store sold the previous day, week and month. For example, if last week's sales figures showed they sold 100 units of coffee and net sales were rising at 10%, they would expect to sell 110 units this week. However, this was a simple method and involved no calculations to take account of factors such as national promotions or school holidays. It took up a lot of the Restaurant Manager's time, leaving them less time to concentrate on delivering quality food, service and cleanliness in the restaurants.

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McDonalds new system

In 2004, McDonald's introduced a specialist central stock management function known as the Restaurant Supply Planning Department. This team communicates with restaurant managers on a regular basis to find out local events. The team builds these factors into the new planning and forecasting system (called Manugistics) to forecast likely demand of finished menu items (e.g. Big Macs). Types of stocks Stock is the physical product a company buys, creates or sells. Every business has three main types of stock: Raw materials The raw materials are the ingredients that will go into producing the finished product. For McDonald's, these will include the buns, beef patties, paper cups, salad ingredients and packaging. These are delivered to the restaurants between 3 and 5 times a week. The raw materials arrive together on one lorry with three sections so that each product can be stored at a suitable temperature. The three sections are:

frozen Chilled Ambient which means foods that can be stored at room temperature. This applies to items such as coffee or sugar sachets. Work-in-progress (WIP) Work-in-progress refers to stocks that are in the process of being made into finished product. A Big Mac consists of a bun, two beef patties, lettuce, cheese, pickles, onions, sauce and a small amount of seasoning. The restaurant will only combine these items just before the customer orders them so the Big Macs are hot and fresh when served.

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Finished products Finished products are goods that are ready for immediate sale to a customer. At any one time, a restaurant will have a range of products ready for sale. Many of these will include finished products like Filet-o-Fish, Big Macs and side salads. Using stock At McDonald's, all raw materials, work-in-progress and finished products are handled on a First In, First Out (FIFO) basis. This means raw materials are used in the order they are received. Therefore stock is always fresh because products are sold in the order they are made. If the process First In, Last Out (FILO) was used, then the finished product would be dry and unappealing because the first one prepared is the last one sold. Stock management: Holding too much stock carries costs, so McDonald's runs a lean stock control to save money. Stock management is the process of making sure there is enough stock at all times to meet customer demands whilst minimizing expensive waste. Planning and managing supply: Ongoing communication between the central Restaurant Supply Planning team and individual restaurants helps to manage the stock more effectively. A mixture of specialist stock controllers and employees who previously worked in the restaurants makes up the central team. This team of regional planners works with restaurants each communicates on a regular basis with them via email/telephone. Anything that would affect the number of customers visiting their restaurant needs to be logged with the team. This is taken into account in the calculating of the forecasts.Supply Planners work with the new stock control system, Manugistics, to ensure enough raw materials, e.g. beef, tomatoes, lettuce, etc., leave the McDonald's distribution centers. This ensures restaurants can produce the meals required for the level of demand forecasted.

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Forecasting at McDonald
A forecast is an estimate of future sales of finished products. Forecasts are calculated using:

store-specific historic product mix data from the last two years Store-specific and national causal factors. These specify dates for events such as national promotions and school holidays Information from store managers about factors that might affect demand, e.g. road closures or local events and promotions. Causal factors Supply Planners working for McDonald's include a range of causal factors in the calculation of the forecasts, so that based on past performance they can predict future demand for each restaurant. For example, Big Mac sales increase during a 'Buy One Get One Free (BOGOF)' promotion. The planners use this data in the forecasts for all stores that took part in that promotion. Analyzing how weather affects demand for particular products, such as McFlurrys and salads, can also be built into the model. The forecasts then become more accurate, decreasing costs and improving customer satisfaction.

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Stock control charts

A stock control chart shows the balance of orders for new stocks against sales. The system is dependent on figures for expected sales. For example, if sales of burgers are going out of the system, then stocks of beef patties need to be coming into the system.

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Manugistics uses two years' worth of product mix history to produce forecasts for each restaurant. This uses time series analysis. The planner will apply a causal factor (the blue blocks in the example) to the time series for the start and end date of this promotion. Using complex calculations, the graph then produces a forecast - seen below circled red. Entering data Any system is only as good as the data that is provided. Therefore, McDonald's Restaurant Managers need to ensure that the data they enter into the system is as accurate as possible. For example, each day, Restaurant Managers record opening and closing stocks of key food items. They record all other items weekly. The store computer system identifies any stock count deviations from the last stock count so managers can investigate. For example, the manager may have missed off a box of organic milk whilst counting them earlier on in the shift. Buffer stock Restaurants hold a small buffer stock. This is an extra quantity of stock held to meet unexpected higher demand. It is also the point at which more goods are ordered the re-order level. Ordering

McDonald's store managers use a simple web-based communication tool called 'WebLog' to view and amend store Order Proposals. Every day WebLog creates a proposed order for the manager to analyze and demand if necessary. Weblog enables managers and central planners to see what quantities have been ordered, what the current stock levels are and exactly how much stock is due to be delivered at a particular time. 25 | P a g e

In the past, managers would have had to check their delivery for any shortages and input every item they had received. The system now automatically generates a delivery note that gives the exact quantities and descriptions of the delivery. All managers need to do is simply click 'confirm' on Weblog. This saves valuable time and makes the process more cost-effective.

Environmental Analysis of Fast food Industry

Before starting analysis of an industry we should keep in mind the following two things that are more relevant and appropriate for the managers: First simple & complex. second stable & dynamic. The environment for McDonald's is not stable as all the major competitors (KFC, Pizza Hut, Subway, etc.) are planning to open new restaurants in near future, i.e., there is a lot of change in environment. Also there are lots of variables involved, e.g., Number of direct competitors Local fast food Continental food restaurants All this makes the environment complex. So we have to see all the factors prevailing in the market and these forces are crucial for the effective performance of the McDonalds. Following are the major environment forces important in this context: 1- Economic Environment Many fast food chains and franchisees have come to market attracted by large size and buying power of market, so it shows a lot of scope in the existing market. Also, all raw materials except buns are imported. This will become expensive with successive devaluation and decreasing value of rupee so we can say that the exchange rate directly affects the industry. The interest rate for short-term loans is high, this makes it difficult for any organization to use short-term financing in its operations. 2- Socio-Cultural Environment The demand for foreign food items is increasing at faster rate in Pakistan because now people are more conscious about their health especially upper middle and middle class, they avoid local 26 | P a g e

foods full of fats. McDonald food is offered by USA and people have the perception about their brands as pure and hygienic. But on the other hand most of the people hate America because of religious grounds and other factors like the beef used in McDonald foods. So McDonald has to offer those things that are according to the Islamic culture. So at all the times they have to offer such type of products because it is an Islamic nation. 3- Political and Legal Factors In Pakistan political instability is very common and it is too much because sometimes the Govt. changes over a night, new rules and regulations, the new Govt introduces policies and procedures. It makes difficult for the foreign as well as local investors to run their operations effectively. Sometimes it leads to poor investment in this industry and existing investors try to withdraw all their investment. In this way the economic growth of the country declines, because the economic activity is reduced. Another cause of the poor law and political situation also is the result of terrorism in Karachi. So this sector requires a lot of Govt. support to run its operations as wanted by the investors. 4- Competitors As the McDonald has captured very large market in terms of fast food items it is due to its large number of franchisees and better quality products and services to its potential customers. At the same moment the competitors are also increasing their operations in either way locally or joint venture with the foreign and local investors. Local investors are also putting pressure on McDonald and they are also increasing their branches by offering low cost products to the customers and thats why they are attracting the large number of customers and it will lead to high competition in the market and every one will be competing on the low cost of offering. In this dynamic and uncertain environment McDonald is sustaining its operations smoothly and effectively. 5- Technological factors: Food processing technology is very much important in fast-food industry. So any improvement in this technology can give competitive to any fast-food business. McDonalds also uses updated & latest food processing technology, so as to complete at international level.

McDonalds Supply Chain Challenges and problems:

Freshness 27 | P a g e

McDonalds have even stronger focus on freshness and quality. Because of the nature of the product they are offering the focus on quality is a key factor in the success of their business. So the supply chain plays an important role in their business because without the proper supply chain they cant deliver the fresh items required in making the items being offered at McDonalds. Innovation On-going product innovations are also a big challenge for the supply chain of McDonald. The continue innovation of the products at McDonald require them to continuously alter the supply chain and manage it accordingly. With the ongoing introduction of new products like new burgers and items require. McDonalds Supply Chain them to continuously update the supply chain which requires supply chain management to be much more extensively used. Fluctuation in Demand Strong customer demand fluctuations based on promotions make difficult to manage the supply of the items. They have to continuously change the supply of their items as per the seasons. Like in Ramadan they have to totally drop the supply in the day and are much focused on limited items. The high fluctuations make the forecasting difficult and supply chain management to be very active. Bull Whip effect Because customer demand is rarely perfectly stable, McDonalds must forecast demand to properly position inventory and other resources. Forecasts are based on statistics, and they are rarely perfectly accurate. Because forecast errors are a given, McDonalds often carry an inventory buffer called "safety stock". Moving up the supply chain from end-consumer to raw materials supplier, each supply chain participant has greater observed variation in demand and thus greater need for safety stock. In periods of rising demand, down-stream participants increase orders. In periods of falling demand, orders fall or stop to reduce inventory. The effect is that Variations are amplified as one move upstream in the supply chain (further from the customer).

Cannibalization Cannibalization occurs when a McDonalds discounts a particular product. The tendency of consumers is to buy the discounted product rather than competing products with higher prices. 28 | P a g e

When the promotion event is over and prices return to normal, however, the effect will tend to disappear. McDonalds Supply Chain Decentralized Structure McDonalds has Change Management in almost every franchise because of de-centralized structure. This again leads the supply of the McDonalds to be altered as per the every franchise which again creates new challenges for the supply chain management.

Recommended strategies for MacDonald:

Market Development As we know there is increasing trend in fast food industry and people are more conscious about their health. Similarly McDonald international should open as many branches in other cities of Pakistan like Multan, Gujranwala, Hyderabad, and other cities like these. Because this step will not only reduce their business risk but also improvement in their profitability. In the said cities there is a lot of potential for the fresh investment in the fast food industry. So it should develop the market for its products, only in this way it can maintain its competitive advantage over its competitors like KFC and Pizza Hut. Diversification Currently McDonald is importing Potatoes from abroad, this makes the product cost so high, so it becomes very difficult for it to capture the middle-income people. By diversification we suggest that McDonald should go for backward integration because Pakistan is an agricultural country and it also exports potatoes to other countries of the world. By growing potatoes in Pakistan McDonalds can maintain the same quality at lower cost of operations. Similarly McDonalds should go for its own cattle farm in Pakistan so it will reduce its input cost and it will lead to lower market price of its products as compared to its competitors. In this way the sales of McDonald can be increased by at least 50% of current sales volume. By this type of diversification McDonalds can also save its time and other energies that can be better utilized in customer service. And can improve the quality because if the inputs are fresh, they can have more quality products. By doing this backward integration McDonalds can avoid the problems like Govt. heavy duties on inputs imported from other countries and similarly it can avoid the problems of continuous devaluation and exchange rate etc. 29 | P a g e

Product Development The natives of Pakistan are more concerned with the taste of the products rather than the other things, so McDonalds should consider the changes in the customer mind about its products and services. So it is highly essential for the McDonald Pakistan to think about it and serve as the changes are taking place in the customer minds. Because the near future period will be a different from today, so it is crucial for McDonalds, it should introduce all the time new products that make it differentiated and it must sustain it so that no other competitor can copy their products and there should be lesser chances of product imitation. If product imitation is possible then it should keep on introducing new products.For this it may altogether change the whole product and can bring a new product or sometimes any major modification in the existing products. So we recommend that McDonald should apply the Product Development at all times whenever the need arises. Market Development In spite of making a cluster in a single city, McDonald's should open new restaurants in other cities too. There is potential in other cities like Hyderabad, Rawalpindi and Islamabad. It will be of importance to mention that KFC is planning to open its branches in Hyderabad and Islamabad. It will add to the image of being Nationwide company as well it will create more customers. This will eventually reduce the risk, which in other case lies in creating cluster in a single city. Strategic Alliances McDonalds international should go fro strategic alliances with other firms operating in all other countries, in this way it should develop alliances with the petrol pumps owners. It will enable the customers to get their cars filled with petrol along with the purchase of lunch boxes and other lunching and dinner facilities to the community. We think that it should develop alliances with the petrol pumps on our Motor Way. As McDonalds international is doing this in other countries. Likewise the other McDonalds franchisees in Pakistan must do this in order to create extra uniqueness, in this way it can create competitive edge over its competitors.

Conclusions and suggestions:

Through effective Supply Chain McDonalds operates in a famously competitive market and delivers good value for consumers. 30 | P a g e

Not by searching on the commodity market for the lowest cost suppliers. It sources only from dedicated suppliers. Not at the expense of safety or quality. It operates an extremely strict auditing regime. Not by pressurizing suppliers. It believes in a policy of paying for performance and long term sustainability for suppliers. The secret is a Lean and efficient chain via rigorous measurement, the Spreading of knowledge and a real sense of teamwork.

.Case study managing stock to meet customer need www.mcdonalds.com www.mcdonalds.com.pk www.answers.com/whatisTQM http://www.docstoc.com/docs/ http://www.scribd.com

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