5/30/2019 Critical Evaluation of McDonald’s Performance Objectives – Barbra Dozier's Blog

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Critical Evaluation of McDonald’s Performance Objectives

June 8, 2015 barbradozier

Critical Evaluation of McDonald’s Performance Objectives

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Contents

Introduction. 3

Performance Objectives. 4

McDonald’s Performance Objectives. 5

Diagram 1: McDonald’s Customer Satisfaction Index from 2010-2014. 6

Quality Control 6

Diagram 2: McDonald’s E-procurement Model 9

Global Expansion. 9

Diagram 3: McDonald’s Market Share. 10

Conclusion. 11

Reference list 13

Critical Evaluation of McDonald’s Performance Objectives

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Introduction

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

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

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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 Performance Objectives

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.
Customer Satisfaction

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).

Diagram 1: McDonald’s Customer Satisfaction Index from 2010-2014

Quality Control

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
a end 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).

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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 a end 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.
Production Process

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 be er 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 li le be er. 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).

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Diagram 2: McDonald’s E-procurement Model

Global Expansion

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
a ained 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 a acks. 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.

Diagram 3: McDonald’s Market Share

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Market share

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 a ract 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 a ract 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).

Conclusion

Performance objectives are prepared by a business as a guide on the kind of results it wants to a ain 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.

Reference list

Baum, M. 2012. Comparison and contrast of the operations strategy of two ‘manufacturing firms’ with
two ‘service’firms.
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5/30/2019 Critical Evaluation of McDonald’s Performance Objectives – Barbra Dozier's Blog

Daniel, E. M., & Wilson, H. N. 2003. The role of dynamic capabilities in e-business transformation.
European Journal of Information Systems, 12(4), 282-296.

Gereffi, G., Lee, J., & Christian, M. 2009. US-based food and agricultural value chains and their relevance
to healthy diets. Journal of hunger & environmental nutrition, 4(3-4), 357-374.

Gilbert, G. R., & Veloutsou, C. 2006. A cross-industry comparison of customer satisfaction. Journal of
Services Marketing, 20(5), 298-308.

Kaplan, R. 2009. Measuring performance : expert solutions to everyday challenges. Boston, Mass: Harvard
Business Press.

Kiley, D. 2007. Best global brands. Business Week, 6(2007), 56-64.

Linn, S., & Golin, J. 2006. Beyond commercials: How food marketers target children. Loy. LAL Rev., 39,
13.

Peters, N. 2009. Operational Exellence-Identifying qualifying and order winning factors.

Rugman, A. M., & Verbeke, A. 2004. A perspective on regional and global strategies of multinational
enterprises. Journal of International Business Studies, 35(1), 3-18.

Slack, N., Chambers, S., & Johnston, R. 2009. Operations management. Pearson Education.

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