McDonald’s: Organizational Change essay

McDonald’s: Organizational Change essay

Introduction

McDonald’s Corporation is an American company, which is famous all over the globe. It attracts people from everywhere mainly because of its delicious food and drinks. Product range presented in restaurants is very different, which is also updated with seasonal offers. However, this company has both strengths and weaknesses. It is a great example of a successful campaign with its different marketing strategies on the one hand. On the other hand, its product affects people health. It has been noticed that most of the Americans are obese mainly because fast food is their main food. There are also lots of facts confirming main McDonald’s employees are teenagers up to 20 ages. Moreover, many of them are of other minorities who are operated for the lower salary.

Thus, the given essay is aimed to discuss the company’s overview in order to know its organizational structure, the workflow, turnover and other facts. Diagnosis will help to understand the need for change and present a plan to transform the organization, utilizing Kotter’s 8-Step Approach.

Company Overview

McDonald’s Corporation is an American company, which is the largest chain of fast food restaurants in the world. It is a public company with its own shares. The company’s motto: “That’s what I love (I’m loving it)” McDonald’s Corporation was founded by Dick and Mac McDonald, who was the founders of the concept of restaurants, and Ray Kroc – the founder of the corporation. Its Headquarters is located in Oak Brook, a suburb of Chicago, the USA. James Skinner is the Chairman of the Board of Directors and Chief Executive, and Don Thompson is the President of the company. Company operates in the food industry, the main product of which is fast food. Almost 100% of the shares are free circulated. Capitalization at the middle of June, 2009 was about $64.2 billion (Mcdonalds.com).

At about 32,060 restaurants in 118 countries of the world (including approximately 14,000 of them are located in the U.S.) run under the McDonald’s brand name in the middle of June, 2009. A significant portion of these restaurants (about 25,578) is ruled on franchising. This is why an assortment of restaurants, the size and composition of portions can vary in different countries. The product offering of restaurants includes burgers (including the “Big Mac”), sandwiches, fries, desserts, drinks, etc. Beer is put up for sale in most of countries of the world. McDonald’s is involved in social activities in many areas in the places, where it operates. For example, McDonald is a leader in the fight against environmental pollution. It supports and improves the lives of children and their families, developing a charitable program “Ronald McDonald House”. The company is a partner of non-governmental organizations that support education and health, fight against discrimination, and are involved in similar issues.

“Ronald McDonald House” holds annual World Children’s Day, constantly offering visitors to purchase anything despite the fact that money paid by them will go for charitable uses. In 2008, the restaurant offered customers to buy special gloves and special design Sticker – a palm with the words “I helped the children”. Money received from the total sales of these goods will go to the organization and support of parent rooms in hospitals where children are forced to spend a lot of time. These rooms allow parents to see their children.

Corporation “McDonalds” has its own vision of purpose – “To be the best in the world of fast food restaurant”. This means that the McDonald’s restaurants will be the best place where all visitors can get fast, friendly service and favorite dishes that will be fresh and hot in clean and pleasant atmosphere. This place will be interesting and all the products will be at an affordable price.

At the moment, more than 750,000 people work for this company who serve visitors of restaurants around the world. Performance in McDonald’s opens the door to a world of opportunities to people who already work for it and people from outside. For example, more than half of middle and senior managers began their careers in the restaurant. In fact, one-eighth of the working population worked for this company in the U.S. in different periods (Mcdonalds.com).

McDonald’s management appreciates different people. Besides the fact that people of different nationalities and cultures work in this company, it does not put obstacles in hiring people with disabilities. McDonald’s takes for training and senior citizens who are already retired. Young people who work the first time in their life are also there.

Job descriptions are spelled out for each position that match the specific job, and with which employees are introduced at the signing of an employment contract. In 1958, the first 75-page manual appears in McDonald’s, which described in details the procedure of all the actions for food preparation and ways of communication with customers. Today this book is 150 pages long, which is called “the bible of McDonald’s”. Also, the company has its own code of ethics – Obligation of “Golden Arches”, which spelled out the rules of behavior of all employees.

The company is characterized by a democratic style of leadership. Responsibility is not concentrated, but distributed in accordance with the delegated powers and active participation of employees in decision making process. The administration of the company has created an atmosphere in which the performance of official duties is an attractive business and achieving success is a reward. Instructions are given in the form of suggestions, not just dry speech, but in a friendly tone, praise and blame – taking into account the opinion of the collective. Events are planned in a team. Orders and prohibitions are conducted on the basis of discussions. The supervisor’s position is within the group. That means that a leader behaves himself/herself as a member of a group. Each employee can freely express his/her thoughts on various issues in his/her presence. This situation creates conditions for the expression of subordinates. They develop independence, which contributes to the perception of achieving the organization’s goals.

McDonald’s has the following organizational structure and management. Director of restaurant ensures complete organization of the restaurant. First Assistant of Director of the restaurant is responsible for the productivity of systems in restaurant. He/she also manage shifts. Second Assistant of Director of restaurant manages shifts. Swing Manager is responsible for the managing one of the sections of the restaurant or the entire shift. Instructor trains employees on manufacturing procedures. A restaurant worker works at the production plants and with visitors.

Here are some interesting facts about this organization. First, in 2006, McDonald’s changed the shape of the cups for an ice cream McFlurry under pressure of the protection activists of urchins. The fact that urchins, licking the remnants of ice cream from discarded cups, sometimes put their head inside. The problem was that they could not stick their back and died of starvation. The hole in the lid of the cup has been reduced so urchins will be able not to fall into the trap. Second, an average American eats 3 hamburgers and 4 servings of potatoes every week. Third, McDonald’s consumption of pork, beef and potatoes is the biggest in the U.S. Fourth, a special breed of chickens with huge breasts, which is called “Mr. MD”, has been bred especially for the McDonald’s. Chicken McNuggets, a popular dish in the menu, is made of white breast meat. It has changed the entire industry of chicken production. A chicken is begun to sell not bodily, as 20 years ago, but chopped into pieces. Fifth, two-thirds of all employees of fast food are under 20 ages. They work for a very small salary, performing simple operations. Sixth, staff turnover in this company is up to 400%. The typical worker leaves the café after 4 months. There are many teenagers from poor families and immigrants among the employees, especially from Latin America, who know in English only the name of dishes in the menu (Katie, 2013).

Diagnosis

It is hard to imagine that the company McDonald’s, named around the top brads of the world, is in a difficult position among its competitors. However, it has such position at home, on the American market. With having 21,000 outlets in 101 countries of the world (a new restaurant opens every three minutes) and the level of sales in $32 billion, in the foreseeable future McDonald’s with no doubts will remain the world’s largest chain of fast food. However, there are already signs that the company is gradually hands over positions to competitors in the U.S.

For 40 years the need for BigMac seemed an inexhaustible, and the golden arcs emblazoned on the sign outside the company, have become commonplace in all corners of the world. However, in the United States the sign of the company does not carry any symbolism. McDonald’s is developing only thanks to its aggressive and permanent campaign for the opening of new offices. It often leads to a reduction in sales in existing locations. In 1997, sales in the old outlets declined by 5%. Ironically, the opening of new outlets constitutes one of threats to the sales growth in the old ones (Rolypoly.com).

The fact that McDonald’s is still ahead of the competition, is due to a significant advantage in the number of retail outlets, but not the fact that its product more creative and more profitable to consumers. Competitive advantage is provided by the omnipresence of its emblem.

McDonald’s competitors have long been focused on the taste of the product and determined it to its competitive advantage with identifying the weaknesses of the company, which has been the reverse side of its benefits. This is a mass, conveying production method, when the product is prepared in large quantities and kept hot until it is discharged by an order. This is convenient for a large influx of visitors when storage is not more than a minute. However, what happens in quiet periods?

Choosing a strategy of open clashes, the company Burger King (as a strong player, occupying a position at the market) tried to turn the uniformity of McDonald’s meals in weakness. An advertising of its products for some time conducted under the slogan “it’s your burger”, emphasizing that each piece is produced only after the order, and showing tasty pictures.

Without wishing to understand that consumers really can see weaknesses in its core products, the company McDonald’s tried to resort to differentiation, expanding the range of courses for adults. In 1997, it proposed Arch Deluxe, an advanced burger with mayonnaise brand or two kinds of mustard, and with a slice of bacon upon the request. The new product ought to attract adult clients who care about taste. However, this burger was too fat, high-calorie and expensive. Thus, the customers decided that once they chose an unhealthy food and decided to eat a hamburger then let it be a traditional hamburger for 99 cents instead of an improved one for $1.79. The company had no choice but to resort to the only remaining tools at their disposal – to reduce the price (Katie, 2013).

“A special promotion 55” (named after 1955 – the year of the McDonald’s founding) offered a hamburger just for 55 cents if a customer buys it with fries and a drink. The sales networks of hamburgers have long adhered to this principle: free hamburger, fries for a price and the profits from the drinks. However, the offer was formulated not very clear (and could even be misleading), and customers did not realize that the “hamburger for 55 cents” had limits. Thousands of customers were annoyed and upset when it became clear that they needed to buy other dishes to take advantage of such a great deal. As a result of a failed advertising the company was forced to shut down its campaign in just six weeks after it began (Mieth, 2007).

Currently, the company seems unwillingly acknowledges that competitors offer a better product and plans to replace the mass production system for preparing meals on order, as other competitors have. However, these plans are not limited to it. It has been noticed that McDonald’s has better speed of service, and the company is not going to lose this advantage by changing the system.

Kotter’s 8-Step Approach

Having watching for decades the organizations who tried to improve their competitive advantages with the help of change, Kotter concluded that the process of change occurs in several successive stages. These changes are introduction of quality management programs, re-engineering, reconstruction, optimization of the size of business, improvement of corporate culture and others. Violation of this order or refusal of any of them leads to the illusion of rapid change, but leads away from the desired result.

Kotter’s 8-Step Approach consists of the next steps. First, it is necessary to create an atmosphere of urgency of actions having studied the market situation, the competitive position of the company, identifying and analyzing the real and potential crises and opportunities. For example, the company tries to promote the image of McDonald’s as an example of the quality, purity, and high customer value through an active campaign in the media and special events. Promotion is funded from the profits of restaurants (Smith, 2011).

Second, it is required to form a team of influential reformers combining the efforts of influential employees, agents of change, encouraging the activities of participants of the formed team. The company is aimed on developing yet covered markets with opening restaurants in 1750 (an average of one every 5 hours), pertly of their own, and partly – on a franchise with 90% of these new restaurants to be opened outside the United States. The management also tries to take a leading position in foreign markets. It has been also foreseen an increase the attendance of restaurants, offering new and affordable specialties, increasing portions while maintaining the same prices, organizing children’s play areas at restaurants. The administration of the company has also decided to explore the possibility of global infrastructure of suppliers and their experience in managing complex public catering establishments, selecting locations of restaurants and marketing activities. McDonald’s also issues a license to the franchise. However, this service is provided only for proactive, experienced entrepreneurs with a good reputation. Thus, it has an obligation to train them for active promotion of the McDonald’s brand at the local level. Franchise Agreements are not concluded with corporations, partners and passive investors.

Third, create a vision creating an image of a desired future in order to enhance the activity of employees, developing a strategy for achieving the vision. Fourth is to promote a new vision with the use of availability of exposition, metaphors, analogies, examples of models of behavior of new team of reformers. Fifth, is to create the conditions for the implementation of a new vision removing the blocking obstacles of the new behavior, changing the structure and responsibilities that are contrary to the new vision, encouraging creativity and risk-taking. McDonald’s has developed uniform standards for food preparation, technology, equipment, marketing strategies, training programs, organization of services, methods of co-locating facilities and supply chains. These standards are applied to all restaurants in any country of the world. In the future, the corporation sees itself as the world’s best quick service restaurant chain, and intends to outperform the competition in quality, level of service, sanitary condition and value (Smith, 2011). The strategic priorities of the company are called a guarantee of stable growth, flawless customer service, maintaining the status of an effective and high-quality products, professional development of staff at all levels, the organization of exchange experience between units in different countries, continuous improvement of the concept of fast food, encouraging the development of new courses, innovations in equipment, marketing, service organizations, and technology.

Sixth is to plan and achieve immediate results by planning a mandatory first step, rewarding and promoting early successes. Another company’s strategy is to offer a limited range of dishes, improve the taste (especially sandwiches). McDonald’s team also tries out new categories of fast food such chicken, Mexican salad, pizza, hot sandwiches and others, and by adding courses for the fans of healthy food. Company tries to launch quickly new potentially popular dishes and just as quickly removed from the production those ones that are not popular. It learns from their own and other mistakes and switches quickly to the development of new ideas. It is a new element of strategy, which replaced long0standing practice of rigorous testing before turning the dishes in the menu throughout the McDonald’s network. For example, Dish Chicken McNuggets has tested for 7 years before its appearing in the menu.

Seventh is to attach the achievements and extend transformation creating an atmosphere of confidence in the new approaches, changing staffing and providing management reshuffle, spreading the successful experience of the entire organization. Eighth is to institutionalize new approaches formalizing the rules of conduct, building a relationship between results and rewards, creating conditions for the development of new qualities of employees (Smith, 2011).. The location of restaurants should be convenient for customers and profitable for the company. Conducted by the company surveys showed that 70% of decisions about visiting McDonald’s are taken spontaneously. This is why it was decided to located restaurants in areas where profitability can be maximized. In the U.S., in addition to traditional accommodation of restaurants in the suburbs, the company opens its outlets in airports, hospitals, universities, major shopping centers such as Wal-Mart and Home Depot, and at service stations. Abroad, the U.S. strategy is the following. First, it is required to open restaurants in the city downtowns, then organize service motorists in institutions McDrive when customers can eat in the comfort of the car, and then explore the other areas. The company’s strategy is based on reducing costs of preparatory and construction work due to standardization and efficiency projects, pooled procurement of equipment and construction materials through the global supply chain. The McDonald’s attractiveness is increased both inside and outside (Mieth, 2007).

The company also tries to support the diversification of employment and voluntary social activities. It supports institutions that are in franchising in hands of representatives of different minorities, education at the expense of the special grants, awards for teachers and establishment of a fund of free educational guidance. McDonald’s management also implements programs for environmental protection and provides consumers with information about composition of the McDonald’s products.

Conclusion

McDonald’s Corporation is an American company, which is the largest chain of fast food restaurants in the world. At about 32,060 restaurants in 118 countries of the world (including approximately 14,000 of them are located in the U.S.) run under the McDonald’s brand name in the middle of June, 2009. A significant portion of these restaurants (about 25,578) is ruled on franchising. Corporation “McDonalds” has its own vision of the purpose – “To be the best in the world of fast food restaurant”. The company is characterized by a democratic style of leadership. Responsibility is not concentrated, but distributed in accordance with the delegated powers and active participation of employees in decision making process. The administration of the company has created an atmosphere in which the performance of official duties is an attractive business and achieving the success is a reward.

With having 21,000 outlets in 101 countries of the world (a new restaurant opens every three minutes) and the level of sales in $32 billion, in the foreseeable future McDonald’s with no doubts will remain the world’s largest chain of fast food. However, there are already signs that the company is gradually hands over positions to competitors in the U.S. In the United States the sign of the company does not carry any symbolism. It is developing only thanks to its aggressive and permanent campaign for the opening of new offices. It often leads to a reduction in sales in existing locations. Currently, the company seems unwillingly acknowledges that competitors offer a better product and plans to replace the mass production system for preparing meals on order, as other competitors have. However, these plans are not limited to it. It has been noticed that McDonald’s has better speed of service, and the company is not going to lose this advantage by changing the system.

Kotter’s 8-step approach consists of the next steps. First, it is necessary to create an atmosphere of urgency of actions having studied the market situation, the competitive position of the company, identifying and analyzing the real and potential crises and opportunities. Second, it is required to form a team of influential reformers combining the efforts of influential employees, agents of change, encouraging the activities of participants of the formed team. Third, create a vision creating an image of a desired future in order to enhance the activity of employees, developing a strategy for achieving the vision. Fourth is to promote a new vision with the use of availability of exposition, metaphors, analogies, examples of models of behavior of new team of reformers. Fifth, is to create the conditions for the implementation of a new vision removing the blocking obstacles of the new behavior, changing the structure and responsibilities that are contrary to the new vision, encouraging creativity and risk-taking. Sixth is to plan and achieve immediate results by planning a mandatory first step, rewarding and promoting early successes. Seventh is to attach the achievements and extend transformation creating an atmosphere of confidence in the new approaches, changing staffing and providing management reshuffle, spreading the successful experience of the entire organization. Eighth is to institutionalize new approaches formalizing the rules of conduct, building a relationship between results and rewards, creating conditions for the development of new qualities of employees.

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