January 18/Initial Blog/MGMT 340

75 thoughts on “January 18/Initial Blog/MGMT 340”

• The Panmore author’s use the quote listed above in order to give readers a reasoning behind McDonald’s 10 strategic decisions. In other words, it is basically a thesis statement that will be explained below. Without using this thesis, all of the 10 strategies listed below would merely be extra facts about McDonald’s organization that wouldn’t give the reader an idea of why they focus on these areas of their business. Considering this is an article rather than an essay, the supporting arguments for the thesis are broken down into smaller, more organized and straightforward sections to be more easily read. In order to analyze McDonald’s productivity and performance, we could use their order fulfillment rate, stockout rate, or timey delivery rate. All these options relate back to our class discussion on ratios, specifically measuring productivity of a company in mathematical terms. As the article explains, the order fulfillment rate measures their productivity. In other words, how long does it take McDonald’s to prepare an order from the time they receive it, to the time the food is served. The Stockout rate refers to how well McDonalds is able to keep their inventory in stock and their relationships with intermediaries and distributors. Lastly the timely delivery rate relates to how effectively the restaurants are able to deliver the food to customers. All of these productivity ratios give a better understanding of how the company is managed and allow McDonalds to easily be compared to similar companies.

  • I agree with Laura that this sentence is used to give context to the ten strategic decisions that follow. I also think that the authors use this sentence to let the reader know that McDonald’s is an industry leader. Emphasizing the fact that McDonald’s is a leader tells the reader that the following strategic decisions are examples of decisions made right, so the reader knows to learn from these decisions. In addition, the authors use the first sentence to let the reader know that the reason why McDonald’s is an industry leader is because it maximizes productivity and performance. Maximizing productivity and performance seem like obvious ways to be successful, but this could be done in a number of ways. By stating that there are ten different decisions McDonald’s made in order to be successful, the author enforces the idea that all strategic decisions are important in making a successful company.

  • Laura makes strong points about measuring productivity on a performance basis. McDonald’s certainly prioritizes timely yet consistent products to its customers and can track its employees’ performance based on these metrics. This is similar to how much of the financial services industry is measured in terms of its operations management. Wealth managers are paid to deploy capital in the most effective way given the constraints of its customers, and the results are measured based on the rate of return to the investors. The difference between the financial firms and McDonald’s is that the financial firms will take its customers’ inputs and return an output corresponding with the firm’s performance. In my experience interning for the Seraph Group, a venture capital fund, the firm created funds with its limited partners’ capital and (given a long time horizon) deployed this capital with investments in many early-stage technology companies that will eventually give some level of return. There is significant risk in this investment class meaning that returns are highly volatile, but given the amount of risks the results are often favorable for Seraph’s clients.

  • It’s crazy to think about the stockout rate for a company like McDonalds because they serve so many customers but rarely ever do you here about McDonalds running out of food.

• McDonald’s consistency on quality management and its ability to satisfy consumers have led it to major success among the fast food industry. McDonald’s attempts to maximize quality “within constraints, such as cost and price limits” (Panmore) In doing so they manage to put out decent quality products at an attractive price for the consumer. This strategy creates draw for customers to attend their restaurants to take advantage of the cheaply priced food. McDonald’s second priority in addition to maximizing quality under price constraints, is quality consistency, which brings customers back to their locations for repeat business. Being able to expect the same thing at a McDonalds every time, makes customers attend across the world. By meeting and satisfying consumers expectations they continue to grow and expand.

  In contrast, Whole Foods uses systems and measures to ensure that only the top quality products will be offered in their stores. Whole Foods goes above and beyond to ensure that all their food was purchased using fair trade practices with sustainable growth methods. They utilize the highest caliber goods to compliment their premium pricing model, where customers are willing to pay for the best foods. This is quite different from McDonald’s which uses a lower priced model in order to attract customers.

  I believe that the quality model is very important to McDonald’s overall success as it keeps prices low which is one of the main attractions to eating there. The consistency of its product offerings is perhaps its most valuable assets and has allowed the company to become so widespread. The ability to order and expect the same items everywhere has allowed it to grow across the world and receive items of similar quality that satisfies customers expectations.

  • I agree with Blake’s point about McDonald’s consistency being their most valuable asset, as the McDonald’s brand has become synonymous with reliability both in regards to price and location. Even in the most remote spots in America, one could probably still find a McDonald’s not too far away. I think the comparison with Whole Foods also brings up an interesting point of each respective management’s process of selecting new locations. In looking at the potential for a new store, Whole Foods managers must look much more closely at residents’ incomes, while McDonald’s probably looks a lot more at sheer population density. These different processes exemplify the two alternate competitive strategies of Whole Foods and McDonald’s.

    • I totally agree that, in order to open up a new place McDonald´s probably looks a lot more to the population density, because, in Europe (at least Spain), you can only find a McDonald´s in the big cities and some towns (but big towns, at least 25,000). Also, in those big cities, most of their places are in the center of the cities, so they look for places with a lot of transit.

    • I would also agree with Blake’s argument that consistency is the most important. This is because when McDonalds first started to be franchised, the ones that didn’t follow the company guidelines perfectly ultimately failed. While the branches that didn’t follow the guidelines lead the way for long lasting success. After consistency was mastered by McDonalds they were then able to focus on other operations management factors.

  • The contrast between Whole Foods and McDonald’s is an interesting one, as they occupy opposing ends of the spectrum. Although there is a difference between the restaurant and grocery industries, your point remains that Whole Foods’ interpretation of providing quality is focused on luxury while McDonald’s looks at avoiding variation. Another restaurant, Chipotle, may be an example of a company that tried to straddle too many features. Per the company’s website, they have a similar focus on providing top tier, well-sourced foods to customers, but due to the quantity of food they sell and the nature of the chain restaurant business, need to supply a similar level of consistency as McDonald’s achieves. Recently, they have been in the news for health code transgressions, perhaps highlighting the difficulty of taking on both tasks at once.

    https://www.chipotle.com/food-with-integrity

    • That’s an interesting point you made in shedding light on Chipotle’s model. I personally never thought about the chain restaurant trying to integrate too many features that perhaps was not sustainable–especially the point about striving to achieve consistency and quantity of food like McDonald’s combined with focusing on well-sourced foods. Thus, Chipotle is a great example of a varying point on the restaurant spectrum but with similar underlying struggles as its restaurant comparison.

    • I agree with your assertion that it can be difficult for a company to maintain quality as it expands. Perhaps this is why it took Chipolte so long before they offered queso. But when it comes to growth strategies and maintaining quality I think Wegmans is a very interesting company to look at. Despite having an incredibly loyal consumer base Wegmans is very slow to build new stores. The company is extremely conscious of how when big businesses grow they can lose the culture that made them so popular at the start. Because of this Wegmans makes sure that each store is established and exemplifies the Wegmans culture. They spend a lot of time and resources to ensure if you walk into two Wegmans stores in different states you will still feel at home there. Being from Rochester, where Wegmans was founded, I would love to see Wegmans all over the country but they curtail their expansion to maintain the quality, something that other stores like Chipolte may have struggled with.

  • Even though McDonald’s and whole foods have very different strategies, they are both following the same principle of knowing what their customers want. McDonald’s knows that they don’t need to have the best quality products because their customers are just looking for affordable and consistent products, like Blake explained. Whole Foods knows that quality is the number one thing its customers look for, so they have to deliver on high quality no matter what, even if that means sacrificing affordable prices. Either way both companies are successful because they have a strong consumer base who respect either convenience or quality.

  • I do believe as well that the quality model is very important to McDonald´s overall success, but, as a person that comes from Europe, I have to say that the cost model, in my opinion, is more important. I do not know about the States but people in Europe are attracted to McDonald´s because the food is very cheap in comparation with other chains and restaurants. McDonald´s has only places in cities, not small town, like in the US. So I believe that europeans do not go to McDonald´s as much as americans, and there are not many places as in this country, so the delivering of the same quality in any place is not as important as the price.

    • I think Carmen raises a very interesting point regarding differences between McDonald’s in the United States versus Europe. The quality of the fast food definitely differs nation to nation. As a result, prices tend to fluctuate globally and McDonald’s is viewed differently in various countries. After spending some time outside of the United States, I noticed that the quality of McDonald’s fast food is actually better in other counties. I learned that this was a result of legislation calling for better chicken and meat practices, raising the quality and additionally raising the price. Even though the price was higher, demand remained constant as native of the country enjoyed the higher quality of food despite the change in price.

      • I agree withe Andrew that McDonalds in the United States is considerably different from McDonalds in other locations. He gives a good explanation for the difference in quality and price of McDonalds’ food by talking about the legislative differences in countries across the world. However, the way people perceive international brands could be another reason why there might be a difference of quality and price. In colonized countries, people tend to associate high quality, worth, and price with international or “westernized” brands. Therefore, in countries like Pakistan, Bangladesh, Nepal etc. McDonalds not only serves better quality food when compared to the US, but also targets medium to high income customers.

    • In the US, or at least in CT where i live, their are so many different options when it comes to fast food with low cost, that i do not think its the primary reason people go to McDonald’s. People choose fast food restaurants for the low costs, the specific fast food restaurant that they choose is more based on the quality strategy or how good is the food, and how consistent is the product.

      • I strongly agree with Tommy- with the high density of fast-food restaurants all around the US, picking one to choose has a lot more to do with consumer preference than just price. Wherever there is a McDonald’s, there is very often a Wendy’s or Burger King nearby with comparable products and similar prices. So what makes the consumer choose one over the other? Most likely it has more to do with taste preferences, convenience, or experience with consistency, rather than price.

    • I agree with Carmen to an extent. Though I choose McDonald’s the most often for their low prices, I believe quality goes beyond just taste. I can certainly get a better burger at another restaurant but when I go to McDonalds in Madrid or a McDonald’s on a street corner in Pennsylvania I know that what I am getting will meet all of my expectations. Even with McDonald’s huge number of locations around the world their food is very similar no matter where you are. This ability to maintain product quality across international borders is a huge reason for their success. I wouldn’t buy McDonalds in Europe if I felt the quality was worse than in the US. For this reason I believe quality management is of similar importance to cost management.

  • I agree that McDonald’s overall strategy is to provide lower quality products at an attractive price for consumers. This strategy in turn allows for consumers to believe they are getting the biggest bargain for their buck when they go to McDonalds. Consumers are initially drawn in to McDonald’s because of their low prices offered. In addition, McDonald’s other strategy is to promote product quality consistency. Consumers expect a certain level of product quality when they go to McDonalds. Although this expectation is not the highest, consumers have the perception of what products they should be given. When this expectation is met, consumers will return back for repeat business. Product quality consistency is the major reason for McDonald’s success in the fast food industry.

  • I really like the quote Blake took from the article. Upon first reading the article, that quote stood out to me because I never really thought about the sizes that McDonald’s offers. When I think of fast food I think of price rather quantity. I think that McDonalds has done a great job of aligning their prices with their sizes in a sensible way that therefore pleases customers. This translates to better customer relationships as customers can feel that they are being treated fairly and expect this with every trip to McDonalds. Although we talked in class about McDonalds as an example of quality strategy, I think cost strategy can also be applied. McDonalds focuses on the cost strategy through pricing their products at affordable prices for their customers then adjusting its sizes in order to keep their costs low.

  • I thought this post was interesting because of the comparison of McDonald’s and Whole Foods because the two brands are almost complete opposites, their only similarity is that they intend to deliver a reliable product. McDonald’s is reliable because they consistently deliver the same quality product, while Whole Foods reliability comes from the assurance that the products are high quality with superior ingredients. The most interesting difference to me was the process of choosing new locations and expanding their companies. McDonald’s can open stores wherever they like because their restaurants can succeed in almost any location in the United States. This is because of the combination of price and quality; consumers trust that no matter the location they will receive the same product. In contrast, Whole Foods has more of a niche market; they must have higher income communities. Also, the communities must place a considerable value on nutrition and health in order to be willing to pay the higher prices.

  • I would like to pose Blake, or anyone a question. As Blake mentioned, Whole Foods uses the “highest caliber goods” in their stores. These premium quality goods are often quite expensive, which results in an exclusion of a large part of society and a limited target market. Do you think that supermarkets, similar to Trader Joes that also sells premium quality goods (i.e. organic foods) at a much lower cost because they are supply off-brand goods, will begin to disrupt the market and overrun Whole Foods? As once a fan of Whole Foods, I have now converted to Trader Joes after discovering it this summer. I could never afford the goods Whole Foods had to offer, but now at Trader Joes I can.

    • I think Marshea makes some interesting points about the target market for McDonald’s advertising, but it’s also important to note the recognizable brand that follows the company. Through generations of excellent marketing, McDonald’s has arguably the most noticeable brand/logo in the World. The ‘Golden Arches’ are known across the globe. The ‘Golden Arches’ represent consistent products, cheap food, and a family oriented atmosphere like Marshea mentioned.

      These trends are found in Nike as well. The ‘Swoosh’ represents sleek, stylish, and quality athletic clothing which is the brand Nike has embodied for 40 years. They have always been a step ahead of competitors, using new technology, and taking advantage of their effective marketing to lead the athletic clothing industry for generations. To summarize, the ‘Swoosh’ follows the quality that Nike represents.

  • I agree with Blake that the consumer is drawn to McDonald’s consistency and low prices. This is achievable because of their limited product selection. In restaurants and stores that sell their goods at a higher price like Whole Foods tend to sell a wide array of products. Companies like McDonald’s sell a small amount of goods which makes the inventory less diversified, but this leads to low costs. In turn, the costumer knows what to expect and can buy it at a low price.

  • I agree with Blake that quality management has been one of the more influential keys to the firm’s historic success. I disagree, however, that price constraints is the main attracter of McDonald’s and quality consistency is the “second priority” as Blake has suggested. I believe that consistency is the main reason why McDonald’s and other fast food chains are becoming more and more popular. People want to be certain about what they are getting; they do not want surprises when they receive their food or goods. For this reason, people are more inclined to go to fast food chains and places where they are familiar with rather than trying something new. If the price of this consistency is higher than McDonald’s, people will still be attracted. For example, there are a number of fast food restaurants that are more expensive than McDonald’s, but they still have extreme popularity. Despite having to pay a few extra dollars for a meal, I am more inclined to go to chains like Five Guys, Chick-fil-A, and Jersey Mike’s since they ensure consistency but also have higher quality food.

• Offering a differing set of criteria, the Panmore Institute lists varying evaluating competitive priorities that contrast in the level of specialization and specificity in comparison to the textbook list. The Panmore Institute lists similar priorities that overlap with many of the evaluative priorities that the textbook lists, but provides nuanced segmentation into larger umbrella terms such as cost, quality, time, and flexibility. The textbook list would be preferred and more useful than the Panmore list in the case of smaller start-up companies depending on the industry. For instance, I identify that the textbook list would be more useful when applied to the small real estate development company I intern for, Southern State Properties LLC. This company functions in the Nashville real estate market with rental properties and new construction, and furnishing. The CEO has his own process in acquiring doors and properties, but does not use the full list of priorities listed in the Panmore list, such as supply chain management and maintenance. Due to its very nature as a start-up in a much more personal process, Southern States finds that it focuses on priorities such as quality, flexibility in customizations, and cost. In this way, the Panmore list would be more suitable for companies that deliver specific, repetitive products that require consistency, whereas, Southern States adheres to general textbook priorities based on the highly customized, unique properties and services it offers in the niche real estate market.

  • I’ve attached a link here to Southern States Property LLC. that shows more about the CEO: https://rykwalder.com/

  • In comparison to your experience, I worked at a small mortgage bank called CBC National Bank. The textbook list applies much better to this bank, whereas the Panmore Institute list would better suit banks like Wells Fargo or Bank of America. The priorities “Supply Chain, Scheduling” and “Location Strategy” are not very applicable to CBC. The loan process can be very tedious and stringent, especially when going through a large bank. CBC knows that their strength lies in their flexibility, because of their size they are able to accommodate to each individual customer and give them a more personable experience. This connects to their location strategy. CBC does not operate in expansive territories because they know they receive most of their new business from word-of-mouth. Their customers tell their friends and colleagues about how personable their experience was. Therefore, it would not make sense for them to attempt service a wide variety of locations.

  • I agree with many of the points that Sarah has made. I have one main question that comes to my mind. Since Sarah mostly addresses small companies it has me wondering whether the textbook or the Panmore list would be more preferred for larger companies?

    I think that even for larger companies the detail in the list provided by the textbook is more important. It helps to categorize what each company has in mind and is much more specific. For example, the textbook lists three different definitions of time: Delivery Speed, Development Speed and Online delivery. However, all of these may fall under the Panmore definition of either “Supply Chain Management” or “Inventory Management”. However, for certain companies one of the most important aspect of their business may be Delivery Speed. This can be applied to Amazon.com Inc. Panmore has an analysis on Amazon as well, however, its Inventory Management section addresses the supply/demand of its inventory and use of linking its deliveries through an online platform, whereas its Supply Chain Management section addresses the supply and demand on the Amazon.com website along with the ability buyers have to track orders. However, from my personal experience, I use Amazon.com the most frequently when I am in need of an item and desire to have it delivered quickly. I think this is an essential pillar in Amazon’s foundation, and I think this is one of the many reasons the textbooks list applies better to larger companies as well, because of the detail and meticulousness of their list.

• (Answering the first question)

  The textbook’s list of criteria appears to be more flexible than Panmore’s. Prominently featured in Panmores list are two elements exclusively relevant to brick-and-mortar operations in “Location Strategy” and “Layout Design and Strategy.” While these two elements can be aptly applied to McDonalds by investigating the company’s choices on how to implement itself physically, they are less relevant to more modern companies. For example, Netflix has become a company whose physical presence is minimal. Interestingly, Panmore does not have an Operations Management summary on the company’s structure. Google, a similarly web-driven and less tangible company, does have a breakdown. On the issue of location, Panmore writes “this decision area of operations management is a minimal consideration because these products are distributed through the Internet.” (Panmore) In regards to layout design, instead of discussing a physical layout as they did with McDonalds, Panmore instead covered the work environment. This shows a degree of flexibility within the structure, although the aforementioned categories appear to be best suited for physical considerations.

  However, Panmore’s format is not entirely irrelevant to firms centered on innovative technology. Amazon, at the forefront of the e-commerce drive, can be effectively analyzed in regards to its location and layout. Instead of discussing stores, Panmore focuses on warehouses, an alternative but equally vital element to a firm. In order to effectively service customers, Panmore notes that for Amazon, “the emphasis is on the strategic location of warehouses.” (Panmore) Furthermore, these warehouses are designed with an eye towards “maximization of shelf space and minimization of aisles to achieve optimal capacity without reducing process efficiency,” (Panmore) thus addressing a key cog of operations management. In conclusion, Panmore’s list of criteria faces some challenges when investigating firms that supply more intangible services, but most firms will be able to be investigated through their lens in some capacity.

  • I had the exact same thoughts on Location Strategy and Layout Design Strategy. Those priorities were the first two that stood out to me and made me decide that Panmore’s format is more suited to brick and mortar and the textbook’s list is more suited to e-commerce organizations. As we both noted Panmore’s can be applied to Amazon when discussing the organization of warehouses but even this trait does not directly affect consumer buying behavior. I think the key factor In distinguishing a difference between the two, is that although you can apply location strategy and layout design strategy to Amazon it is not seen by the consumer which to me is not equally as vital. The setup of a warehouse does not directly affect the consumer whereas the setup of a McDonald’s has a direct impact. For example I am influenced by the distance in which it would take me to drive to a McDonald’s and how the McDonald’s is designed. If it is an hour away and is cramped and disorganized inside I am more than likely to not go in and purchase anything. In terms of Amazon on the other hand, I have no idea how their warehouses are set up or what they look like so personally I won’t be influenced by such priority when I place my order. Not saying that those strategies aren’t vital to Amazon’s operations, just that their level of importance isn’t as great to companies such as McDonalds.

• A process is defined as an activity which transforms inputs into outputs. An operation is then defined as a collection of processes. Finally, operations management is anything related to the implementation or control of processes and operations.

  The most significant process discussed in Panmore’s analysis of McDonald’s is the production line method, which allows for a consistent product quality along with maximum efficiency and capacity utilization. The McDonald’s business is reliant on their ability to provide the most consistent product to consumers. With their low prices and reliability, customers deciding to eat at McDonald’s know the quality of food they are buying and the environment they are eating it in.

  Another important process McDonald’s utilizes is supplying their restaurants with local or regional distributors as opposed to directly selling to them. By doing this over time, they are able to get an accurate sense of local market trends and can adapt considering fluctuations and supply chain needs, providing McDonald’s with greater consistency. This process also reduces costs due to less time and distance supplies are being shipped.

  In setting their own standard of consistency, the lack of high quality food or a spacious place to eat does not affect McDonald’s revenues. Thus, in utilizing the production line method with their operations management strategy centered on practicality, they are able to successfully provide a consistent eating experience, rather than a comfortable or luxurious one.

  • Panmore’s analysis of McDonald’s production line method explains why the fast food restaurant maintains such consistent low-quality and cheap fast food. This criterion benefits the revenue of McDonald’s significantly. I think it is also important to mention that Design of Goods and Services promote higher revenues as well and complement the Process and Capacity Design criterion. Because the portions and serving sizes remain constant, prices drop low and consumers are satisfied with stable food. This coupled with the universal low and cheap quality decrease the price of McDonald’s food, raising demand and revenues.

  • Justin’s post brings up the quality strategy that McDonald’s is known for. As we talked about in class, no matter what McDonald’s you go to, you have an accurate idea of the quality of food you will receive. However, this is not the only strategy they apply. Additionally, you can find the cost and time strategy in play at McDonalds. Even on their busiest days, you know that you won’t have to wait more than 10 minutes for your order. Additionally, they price their food in order to maintain a certain level of quality while also remaining affordable for their customers. As Justin said, their focus is on practicality and affordability rather than on luxury.

  • I agree with Justin that the most important process for many companies is the production line method. This enables companies to be very consistent with their product quality and can improve the efficiency of any company. Two summers ago I worked for an ice cream company. The company was fairly successful and had 4 workers. When I originally started to work there each worker would handle the entirety of the customers order (taking the order, scooping the ice cream and handling the payment). This caused a variety of issues: the workers would be in one another’s way from time to time, it was not extremely sanitary (workers would handle money, followed by ice cream) and the amount of ice cream received by customers was inconsistent and could lead to complaints. I made a suggestion to the manager that we re organize in a supply chain fashion and he allowed us to test it out. In the end we had one worker on the register, one on the milkshake machine and two scooping ice cream or handling milk shakes. This led our quality to be extremely consistent, more sanitary and more efficient. I think that this shows that for any company, large or small, an effective production line can make a drastic difference on the overall quality of the product.

• For the third question:
  I’m comparing McDonald’s design of goods and services with that of Costco. Both McDonalds and Costco aim for low costs, but Costco has an additional goal of high quality. Each company achieves low prices through different strategies, that adhere to their overall goal for the company.

  McDonald’s strives for affordability and convenience. Low prices are achieved by sacrificing quality. Customers go to McDonald’s for a cheap burger, not a quality burger. This is a successful strategy because what McDonald’s lacks in quality, it makes up in convenience. There is a drive-through so that customers can get food quickly. The food comes in nice packaging that is easy to carry and fits into cup holders. There is a playground so that adults can distract their children.

  Costco strives for affordability and quality products. It is able to maintain low prices and high quality because it sacrifices convenience. The products are not displayed nicely. Instead they are shelved like they are still sitting in a warehouse. Customers are expected to bag and carry their own groceries. Yet customers are willing to do the extra work because they feel they are getting a deal, since the food is good and cheap.

  McDonald’s business model makes sense for them because they need to keep up their low prices and convenience in order to continue to attract customers. People normally go to McDonalds when they don’t have a lot of time or are looking for a quick meal. There is no expectation of quality food, so McDonald’s is not “failing” for not providing quality food.

  • It is interesting to look at the comparison between two companies that provide low prices but in different ways. McDonald’s strategy is that its products are low cost and consistent with its quality. This does not mean that their products are high quality by any means. Convenience is another great view of McDonald’s successful strategy. Their strategy looks at ways to optimize just how fast and efficient they can be. The company’s model is based on the idea that it is a company that provides cheap food that is fast and convenient. Costco strives to provide low priced products but with higher quality. I agree that the major way Costco is able to allow for this higher quality is through its lack of convenience. When you walk into a Costco, it is not visually appealing. It is, as a result, harder to find the products you are looking for. It seems to me that their is a major trade-off in providing higher quality products at a low price with having convenience.

  • An additional aspect to look at when considering Costco’s model is their membership. This sense of exclusivity, while narrowing their customer base, draws their members closer to the McDonald’s model. Members are given an increased level of convenience and service at Costco relative to other big box stores. While this convenience and service does not come in the form of bagging, as you mentioned, it comes in the ability to save money. For example, this Christmas I bought a Christmas tree from Costco, and while talking to the attendant, he mentioned that Costco’s low pricing on the trees was solely goodwill. They choose to provide such low prices on trees as a reward to their customers for their loyalty. It is a unique form of convenient service, but Costco’s members know that they will be rewarded for consistently shopping at the store.

    • You do have to take into account the loss of customers that Costco faces with requiring a membership. It would be very interesting to poll prospective membership buyers in if that are only buying the membership because they have to, or do they feel that their membership allows them a higher quality of service. Customer loyalty is very important however as any marketing professor will tell you that it is way easier to keep an existing customer then it is to gain a new customer. Knowing this, Costco membership requirement may not be keeping their members purchasing from their stores more than they already would if Costco just provided favorable products to everyone.

  • It is interesting though, Costco does provide convenience in a way. By buying in bulk, consumers have to shop less overall. So for each shop, it does take longer than shopping at a Whole Foods or a Kroeger, but I’m curious if the total time spent shopping is less by going to Costco along with the added benefit of cutting down on transportation costs. Another interesting perspective is that in many European countries, McDonald’s actually has higher quality food than what we are used to in the U.S. Looking in greater depth, it can be hard to distinguish companies by these operations management standards due to variations within the company by location along with all competitive strategies playing some sort of role in a company’s operations.

    Here is the link to an article about McDonald’s in France. It very much shows how cultural norms play a role in shaping how a company advertises itself within different countries (e.g. “French McDonald’s are spacious, tastefully decorated restaurants that encourage people to take their time while eating”).

    https://www.npr.org/sections/thesalt/2012/01/24/145698222/why-mcdonalds-in-france-doesnt-feel-like-fast-food

  • One thing we did discuss in class was that although McDonalds was not high quality in the sense of its taste and aesthetics, it can still be quality through its consistency. You know what you are getting when you order a Big Mac or Chicken McNuggets from McDonalds. So while it is not the same exact type of quality a place like Costco is, it is still a place of consistent quality.

    Convenience, I agree, is something Costco does not do and McDonalds does. To add to your point, not only are things easy through the drive through to get your food as quickly as possible, McDonalds is improving their technology within the store through kiosks so you can order your food without even talking to a cashier. A couple of clicks on a screen and then your food is ready to go. That helps McDonalds save incredible amounts on labor and possibly even training.

    Costco instead focuses on receiving items in bulk and selling that bulk to their customers. While these are two different food markets (grocery vs. fast food) a fair contrast can be made in each company’s strategies for maximum convenience.

  • What I think is very interesting is how priorities can have a variety of meanings depending on what the business is striving to achieve. When I think of quality my first assumption would be wholesome, healthy foods that you can purchase at Whole Foods, Fresh Market, etc. I would definitely not think of McDonald’s because their food doesn’t exactly contain the safest ingredients and fit my idea of “quality”. Their definition of quality however doesn’t mean the same thing as Whole Food’s. Whole Food’s quality assurance is “natural food products”, “sustainable food” and McDonald’s quality assurance is “the warmth of a homely touch” and “convenience”. One focuses on the quality of food while the other focuses on the quality of their service. Like you said McDonald’s business model suits their goals by ensuring their idea of quality even though it may have a different meaning to other companies.

  • I like the approach Jordan has taken here, where she has compared two different food distributors. It is interesting to examine the variances between the two. Ultimately, McDonald’s distributes its food in a production line method, whereas Costco is similar to a grocery store where the customer can go choose whatever food item they would like. Some goods are pre-made and packaged, while others require cooking. Regardless of the distribution process, both McDonald’s and Costco are both successful in this.

    I was curious to see how a company like Starbucks would contribute into this dialogue. Starbucks sells high quality coffee to its consumers, but it also has the element of convenience by providing a drive-through at select locations. In my marketing class last semester, we wondered whether having a drive-through at Starbucks and the online app that allows customers to just grab-and-go would deviate from its original mission. Starbucks once focused on the experience; being known as the “third place”, it was filled with a comfortable atmosphere with great conversation. Do you think that focus in speed of delivery will hurt their design of goods and services strategy?

  • It is interesting that both companies both focus on cost in order to maximize the benefit to the consumer. The fact that Costco has an additional focus on quality leads you to believe that it would put even more financial stress on the company to succeed. They are able to achieve success through their membership fees, which makes up almost their entire bottom line. This model is particularly interesting in driving Costco’s success in that they are not concerned about profiting from their goods at all, they are simply interested in selling them at the cost to provide them to the consumer. Costco’s main goal is to sell more memberships, as it is one of the lowest cost of goods sold items in their inventory, so they attempt to maximize it. This is in direct contrast to McDonalds who focuses on the lowest point they can turn a profit on their base goods.

• -Process is any activity that takes one or more inputs and transforms them into outputs.
  -Operations are collection of processes.
  -Operations management is the systematic design, direction and control of processes that transform inputs into services and products for internal, as well as external, customers.
  In the case of McDonald´s we can see several inputs that are transformed into outputs. Some of these inputs are the workers; McDonald´s trains his workers in the production line. Also the facilities, they reaches customers through traditional and online ways. They also focusses on maximization of their sapce (restaurants…) instead of making them confortable. Of course, the materials, in this case the food, are also inputs. At the end, all of these inputs are converted into outputs. These outputs are all their variety of food (menues…) that are affordable (most of the time big portions), and with a constant quality.
  McDonald´s competitive strategies allows the company to be succesfull because, in the first place, they focusses on an affordable product with a constant level of quality. External customers of McDonald´s expect to spend not a lot of money in an exchange for big portions of food. Also, even though the quality of the product is not good, it is constant, so customers know what to expect. McDonald´s manage his processes to at the end they can offer these products, and, in order to to that they had developed the 10 strategies mentioned in the article. In my opinion, the way that these 10 strategies are conected are what are making McDonald´s so succesfull. In order to offer affordable products they need to minimize cost, so their production line method maximizes efficiency. Also, they do not care about having confortable restaurants (kiskos…), because they foccuses on maximizing their space so the cost is less. They also advertise themself through traditional and online ways; which are not very expensive, so again, their cost decrease. They also trait their employees at the production line so, for example they could take advantage of job rotation, or, if a employee is sick, another that works in the production line (but not the same exact job) could cover him, so again, the cost would decrease. Having many suppliers also reduce the cost because suppliers do not have many power because they are not essential. They also minimize inventory. All these strategies are making the cost of the product low, so the company can offer what the customers are expecting; affordable product at a constant quality level.

• I am comparing McDonald’s quality management with Nike’s. Both of these companies are on the complete opposite sides of the spectrum in regards to the constraints they face in ensuring quality.

  McDonald’s goal is to maximize product quality within the constraints of cost and price. This makes sense as they strive to offer foods at the lowest price possible to consumers. In addition, McDonald’s also strives to maintain product consistency. McDonald’s uses the production line method in order to maintain product consistency.

  Product quality consistency is vital to McDonald’s success. Many consumers choose McDonald’s because they receive the same quality products at a low price every time. The consumer perception of McDonald’s is that the company provides products that are lower quality, yet they are consistent and at a lower price. This allows consumers to maximize on this lower quality product, as it is an easy alternative to a sit down meal. When the consumers continually receive the same quality, they are more inclined to come back to the company again.

  Nike emphasizes product quality without any constraints. Because of this, Nike is able to offer higher quality products because they are not concerned about the price and cost. The company’s biggest concern is satisfying customer’s expectations about their product quality. Nike does this by utilizing high quality standards through the application of total quality management. The consumer perception is that Nike provides high quality to their customers at a relative price.

  Both Nike and McDonald’s biggest concern is maintaining product quality consistency. Maintaining product consistency is viral to the success of both of these companies, as consumer perception relies on this. If McDonald’s provided products with a varying level of quality, the company would lose many repeat customers. In addition, if Nike were to start having varying levels of product quality, the company would lose its perception of being a higher quality athletic wear company.

  • As an athlete who has and still uses Nike products, I find that it is essential for Nike to produce high quality products all the time. Consumers of Nike products are involved in sport of somehow and are therefore very conscious of performance; using the best product can help achieve top performance. Therefore, it would be detrimental to Nike’s business if they adopted McDonald’s operations strategy of supplying low quality, low cost items.

• Question 3: Comparing McDonalds’ Job Design and Human Resources to Home Depot’s

  Employees at McDonalds’ interact with customers on a daily basis. In order to achieve high sales and revenue, the workers must establish and display an energetic and friendly atmosphere to satisfy and please the customers. The HR team promotes diversity in McDonalds’ employees, contributing to the overall culture of the local store and universal brand. Additionally, workers receive training to efficiently manage the kitchen and production line. The Human Resources team must institute an organizational learning setting, but also encourage opportunities for independent learning so that the employees can continuously grow and better the overall work environment. This criteria area is important to McDonalds’ overall business success because the fast food it produces is dependent on the people who prepare and deliver it. Even though their fast food is premade and cooked by machines, employees operate the machines, assemble the food, communicate with customers, and sell their products.

  Accordingly, the Job Design and Human Resources criteria is significant to McDonalds’ business success.
  Workers at Home Depot interact with customers as well but do so at a more intense level. Not only are workers trained behind the casher, as they are at McDonalds, but the sales teams in Home Depot stores heavily communicate and assist customers looking to make a purchase. Because Home Depot sells various products across different departments, the salesmen have specific expertise in a sector whereas the McDonalds workers only understand and sell universal fast food. Due to the imperative skills and knowledge, Home Depot workers are trained by Human Resource staff like at McDonalds, but some workers also have previous experience from past jobs. For example, a veteran plumber would work in the plumbing department to explain, educate, and sell products that they have a previous history with. The Human Resources team is more important to Home Depot than McDonalds because of the specialized and complex products and services offered by Home Depot. Still, the Job Design and Human Resources criteria influences the success of McDonalds.

  • I agree with your point that customer service is an attractive feature in both companies and is a force for their success. In the fast food industry I would point to Chick-fil-A, a direct competitor to McDonald’s as one of the best in the business. While McDonalds does try their best in order to cultivate positive employee to customer interaction, a good portion of the time many of the workers seem like they hate every second of being in the restaurant. It feels almost the opposite at Chick-fil-A where I would say the customer service and HR do a phenomenal job in order to promote better customer relations in order to continue and have repeat business.

• A process is an activity that changes inputs into outputs, while operations are a collection of those processes as well as nested processes. Operations management is the design, direction and control of those processes and operations. McDonald’s has many processes that are described in the Panmore post. The first is a customer relationship process that is defined in the “Design of Goods and Services”; McDonald’s finds the customer expectations concerning serving size and price, and then delivers an affordable product based on those specifications. The Panmore post also details how McDonald’s process design is centered around efficiency in order to minimize costs. In order to create this efficiency in the order fulfillment process, McDonald’s uses a production line method. The “Inventory Management” section describes a supply management process, McDonald’s employs the use of intermediaries instead of selling products ingredients directly to locations. Local distributors communicate with restaurant managers in order to management the inventory and the flow of products.

• Answering Question 4:
  A process is an activity that changes inputs into outputs, while operations are a collection of those processes as well as nested processes. Operations management is the design, direction and control of those processes and operations. McDonald’s has many processes that are described in the Panmore post. The first is a customer relationship process that is defined in the “Design of Goods and Services”; McDonald’s finds the customer expectations concerning serving size and price, and then delivers an affordable product based on those specifications. The Panmore post also details how McDonald’s process design is centered around efficiency in order to minimize costs. In order to create this efficiency in the order fulfillment process, McDonald’s uses a production line method. The “Inventory Management” section describes a supply management process, McDonald’s employs the use of intermediaries instead of selling products ingredients directly to locations. Local distributors communicate with restaurant managers in order to management the inventory and the flow of products.

• Pick one criteria area from the lists above and compare/contrast how McDonalds applies this criteria vs. the other company you read about. Give examples of similarities and differences. Explain why you think this criteria area is important to McDonalds’ overall business success.

  -I’m comparing and contrasting McDonalds’ application of the criteria “Quality Management” to how Whole Foods Market applies these same criteria. As we have learned in the textbook “Quality Management” can have multiple meanings. The Panmore Institute solely refers to this as “Quality Management” , but our textbook breaks these criteria up in two separate categories, “Top Quality” and “Consistent Quality”. The success that both McDonald’s and Whole Foods have had shows that both of these separate quality strategies can be successful.

  McDonald’s aims to offer as high of a quality as they can, but within the constraint of cost, enabling them to keep their prices low for their customers, and also maintain a high profit margin for their shareholders. Their customers are very aware of this, and that is why McDonald’s focuses on the consistency of their product and they know that any customer anywhere in the world can expect the same quality product (Panmore Inc, McDonald’s).

  The Whole Foods Market on the other hand puts “Top Quality” at the forefront of their business. They make sure they properly label their organic and non-GMO products. This enables their customers to view the products and see how their products are very high quality. Whole Foods uses their marketing strategies to enable their name to come to the mind of any customer who wants “Top Quality” groceries (Panmore Inc, Whole Foods).

  It is interesting that according to the Panmore Institute both of these companies care very greatly about their “Quality Management”. However, to each company the term has a much different meaning and for these two companies it may be more beneficial to break “Quality Management” into the two categories that the textbook has: “Top Quality” and “Consistent Quality”. McDonald’s has been extremely successful for many years because the customers understand the product they are receiving. They receive the same consistent quality product every time they make a purchase from McDonald’s and the customers enjoy this quality product and continue to use their services.

  • I agree with Zach that McDonald’s devotes the majority of its resources to the consistency dimension of quality. McDonald’s does not focus resources towards developing the “Top Quality” in its products but can ensure its customer the same satisfaction every time with a product that is streamlined because of its unique supply chain. Given its costs constraint, McDonald’s achieves at making a uniform product that is easily available to its customers because of the low costs. This is different from Whole Foods that strategizes by offering the “Top Quality” to its customer because the customer gains extra satisfaction knowing he/she cannot purchase a superior product despite the extra costs associated with it. While Whole Foods and McDonald’s are targeting completely different segments of the food market, oftentimes they can attract the same person as a customer. Why is it that the same person can have different preferences given the context? This customer may be in different circumstances regarding finances or location that might narrow his choice to either Whole Foods or McDonalds. This shows the importance of meeting the order qualifier in order for a company to at least be considered in the customers purchase decision. Given the time and circumstances, the order winner for a particular customer can change. This would give reason to staying up to date on the customer’s preferences via research and data collection.

• Addressing the Third Bullet Point:
  As leaders within their respective fields, both McDonald’s and Nike Inc. have learned how to succeed within the 10 decision areas of operations management. I would like to pay particular focus to the design of goods and services and compare and contrast this area for each company. McDonald’s emphasizes quick service, consistent recipes, and affordable products at all locations. McDonald’s prepares its goods and services in a way that allows anyone to purchase a meal. There is a large emphasis on pricing, and making it affordable for anybody. In the commercials we see customers of all ages, races, and occupations (https://www.youtube.com/watch?v=skzX1dC24Y4). McDonald’s will even minimize products for affordability, which they do by including a dollar menu. Further, the prices at McDonald’s are unchanging. The dollar menu has been used for since 2002, and continues to evolve today. There is now a “$1, $2, and $3 Dollar Menu”, which was introduced in January of 2018. Clearly, affordability is key to the McDonald’s Corporation’s operations management team.

  Meanwhile, Nike focuses on constantly introducing new, technologically advanced, and athlete-approved products as often as possible. There is little to no flexibility with pricing. Prices are forever changing and increasing throughout time. Nike places more focus on introducing the most innovative, both in fashion and in technology, products available within sports. They recently collaborated with Apple to combine sports with technology by creating the Apple Watch Nike+. Nike works directly with high profile professional athletes, and celebrities to demonstrate that their products are trendy, made for the best and used by the best. Partnering serves particularly well for Nike since they know that amateurs love to emulate professional athletes. Consumers want the shoes, the gloves, or the leggings their favorite athlete has with the hopes that someday they too will be just as good. Their products are not priced or targeted for everyone. Nike targets the athlete, or the sporty consumer. Their advertisements often display a fit individual doing some form of physical activity (http://i.dailymail.co.uk/i/pix/2017/02/12/20/3D21F3D200000578-0-image-m-134_1486931736647.jpg). Although, as the photo exhibits, Nike does try to advertise to individuals of diverse backgrounds as they included their “EQUALITY” platform, but they just must be fit or in shape.

  Similarly, both companies do extensive research to see how consumers are reacting to their products. They want to know what changes can be made, or what can be done to make this product better. McDonald’s specifically looks to see if they are setting the correct prices. Nike is researching for the latest fashion or technology trends, and seeing who is the next uprising athlete or celebrity. Nike constantly has to innovate, and beat its competitors. In depth research and development helps them do this best.

  • Even with entirely different market segments and products, I still found it very surprising to see how different Nike and McDonalds were while still being incredibly successful. Definitely gives some insight that there is not a “one size fits all” operations management strategy. Companies can prioritize entirely different things within their markets and be completely successful in their own ways.

    I agree Nike and McDonalds have huge differences on their flexibility strategies. McDonalds has their rock with the Big Mac (among other products), and Nike continually offers different products year after year because the fashion market is ever changing. Look at their basketball shoes – so many different product lines from LeBron James to Michael Jordan and so forth.

    McDonalds used to do athletes in their commercials but recently turned away from that promotional strategy. Here’s an ad that aired in 2010 with LeBron James and Dwight Howard: https://www.youtube.com/watch?v=PmrTDZy3f2M.

    Why they decided to go away from that strategy is unclear, but McDonalds’ representatives definitely discussed why they wanted to move on from that strategy at length. Such is the life of an operations/marketing manager.

  • Marshea raises an interesting point by talking about the advertising strategy of McDonalds. It is true that McDonalds caters to the needs of a wide audience and is more personalized in its approach towards its customers. Nike, on the other hand, has a very anglicized advertising strategy. Most of their ads feature Western athletes who might be strangers for the Eastern audience and customer base. It will be interesting to see whether Nike’s sales in the Eastern countries reflects its lack of effort in trying to connect with its customers.

  • Something that could be interesting is how McDonald’s could similarly leverage partnerships to gain customers. McDonald’s could follow Nike’s approach of hiring famous spokespersons but could face skepticism that professional athletes would actually eat fast food. Another option is how the company partners with other companies such as Coca-Cola by advertising that Mcdonald’s is the best place to enjoy a complementary product.

• Addressing the first question:
  I believe the textbook list would be more useful when assessing an e-commerce business such as Amazon or Zappos, whereas the Panmore list would be preferred when evaluating a brick and mortar business such as McDonalds or Costco. An online store is not focused on the physical experience the consumer incurs but more so the quality in which they receive their product. In order to insure such quality the most important criteria they need to meet are centered around logistics, mainly timing and flexibility which is highlighted in the textbook’s list. In a brick and mortar business the experience that customers receive when shopping face to face is a major factor in how the business performs its operations and guarantees success. The maintenance of the store, the layout of the items in terms of accessibility, and customer service are all important aspects to a consumer when they are purchasing a good. Online companies don’t need to worry about such criteria because they offer one nonphysical platform in which all goods can be looked at and bought.
  An argument can be made though for Panmore’s use in evaluating an e-commerce business. By simply altering the foundation of the criteria’s meaning to better match the priority, every single strategy can be applied for online companies as well as physical stores. For example, in terms of the Layout Design strategy of McDonald’s restaurants the focus is to maximize space. While no physical stores exist for Amazon to maximize, space in this criteria is now referred to as the design of warehouses, which in turn contributes to the quality and efficiency of their logistics. This criteria seems more important for McDonald’s seeing as it could potentially influence consumer’s buying decision. Another example is location strategy. McDonald’s goal in this area of operations management is to place stores in the most central areas to maximize market reach. Again Amazon has no physical stores to place strategically so they instead focus on warehouse locations which in turn transport goods more efficiently.
  In summary the textbook’s list in comparison to Panmore’s is a more focused, specified set of criteria which relates to the logistics of a company and therefore should be of greater importance and preferred by e-commerce businesses.

  • Hi Izzy,

    I really liked your response and agree with a lot of what you said. However, I think the online layout of an e-commerce website could be just as important as the physical layout of a brick-and-mortar business. If a user cannot navigate a website to find what he or she is looking for quickly, users will exit the site and take his or her business elsewhere. This article (https://usabilitygeek.com/10-guidelines-for-navigation-usability/) shows some guidelines for online website usability, which I think can be considered parallel to guidelines for the layout of the a physical store. I also prefer the use of the textbook’s list, but not just for e-commerce companies. I believe the textbook’s approach is more simplified with less categories, and since so many of the Panmore Institute’s indicators can overlap or relate to one another, I believe the textbook list is a more streamlined evaluation approach, no matter the kind of company using it.

    Thanks!
    Liza

• (Answer to Question 4)

  The definition of process is any activity that transforms inputs into outputs. A singular process could range in many things such as pricing, marketing, or financial strategies. A process in McDonalds’ operations management plan could be to change the ingredients in their fast food recipes. The input in this situation is the decision to change the recipe and buy different raw materials and the output is an entirely new, better tasting lineup of food.

  Secondly, the definition of an operation is a collection of processes, including nested processes. Expanding on the McDonalds example, they have to make decisions every single day to decide what marketing strategy to input in order to have a strong consumer response/output. Currently, their marketing plan focuses on the $1, $2, $3 menu to gain a price savvy audience. Note this is not just a singular decision; McDonalds needs to make deals with companies in order to air commercials and show billboards, their creative team needs to effective make a promotion, and their executives need to decide on an appropriate price for these low cost products.

  Here is a link to one of their television promotion that shows this marketing strategy at work:
  https://www.ispot.tv/ad/w_No/mcdonalds-1-2-3-dollar-menu-grocery-store

  Operations management designs and control the overall direction of both the processes and operations discussed before. Once one process or operation is completed another one starts, and managers need to have all facets of their operations aligned in order to have a successful company. Specifically, managers can choose what competitive priorities to focus on as well as discuss what core processes will deliver the best value to its external customers.

  The Panmore article touches on McDonalds’ operations management strategy at length. Their focus is on a low cost, high quality strategy to deliver affordable, consistent products. As mentioned in class, McDonalds does not have the very best food but the quality comes with its consistency – you know exactly what you are getting every single time. As for its low cost, the Panmore article talks about McDonalds’ reduction of costs with process efficiency and inventory. They chose to have restaurant managers deal with intermediaries to obtain their fast food and have minimized the costs of the production line.

• McDonald’s is widely known as the largest fast food restaurant chain in the world. Efficiency is key to maintain this status, and with 36,900 restaurants worldwide this is no easy task. McDonalds 10 strategic decisions reflects their focus of effectiveness while also maintaining their cost, quality, and flexibly strategies. McDonalds maintains low costs by serving a product of low enough quality that their prices are low but the consumer still wants to purchase the product. They are able to copy the same product through taste and quality in every store, each time a customer orders their meal. This allows for consumers to have faith in McDonalds to serve them exactly what they ordered, in the quality they expected. Lastly McDonalds shows a global flexibility that competitors such as Wendy’s cannot provide. By abiding by their own location strategy of establishing locations for maximum market reach, they are able to adjust their menu and time of operations to the needs of every region. This includes holidays, food preferences, food laws, and other humanitarian needs that may defer in each company. One of the most impressive policies that McDonalds has put in place is their variety of supply chains. Unlike Wendy’s that has most of their supply chains located in North America, McDonald’s has supply chains all around the world. This diversification of supply chain avoids the risk of a supply shut down, with a regional issue such as weather or drought, and because of the competitive supply, the supply price will be optimal for McDonalds. McDonalds however is not fully effective as they have not globally transformed their restaurants to join the new tech world. With many fast food companies transforming their business plans to include online purchases and pick ups, McDonald’s has begun to fall behind. Chipotle has an app that allows for its consumers to order what they want, and have it ready for consumption when they arrive. In the world of fast food, this tech transformation could allow for an even more efficient style of business for McDonalds. Continuing on this point, in many of the McDonald restaurants, employees are assigned as cashiers to take the consumers orders and payment. This is a cost that McDonalds does not need to have as screen ordering is possibly as shown by companies like Wawa. Yes, McDonalds can be considered one of the most efficient restaurants on the planet, but efficiency can always be improved, and through this new age of technology, McDonalds is falling behind.

  • I agree with Thomas that efficiency can always be improved by McDonalds. However, I believe that McDonalds has successfully adapted to the needs of each country in which it operates. For example, McDonalds has Kiosks similar to Wawa all over the UK. Similarly, online order facility is available to McDonalds customers in Pakistan. Therefore, I think McDonalds operates in each country depending on its needs. I agree that mechanizing the ordering process might reduce costs for McDonalds. However, it should also be brought into consideration that the present model might be more cost-effective for McDonalds in the United States. For example, in most locations in the US, it would not make sense for McDonalds to have food delivery options when customers can find multiple McDonalds’ franchises in a 3-5 miles radius.

  • In considering the opportunities presented through technological innovation McDonald’s may be using a comparison between the cost of labor versus capital. While the minimum wage in the U.S. remains low in comparison to European countries Mcdonald’s may have determined that labor is cheaper than the cost of capital expenditures. This could change dramatically with movements like a $15 minimum wage gaining traction. If this trend towards a higher minimum wage continues it will be interesting to see how McDonald’s changes its current strategies.

  • I find it interesting that Thomas mentions that screen ordering as something that could be made more efficient by McDonald’s. In Australia, the screens have already been implemented as a means of ordering, however for some reason every restaurant I went into while there still had someone waiting behind the counter in order to take my order or ring me up, regardless. I wonder if there is another reason that McDonald’s needs to keep cashiers on that doesn’t necessarily apply to Wawa for some reason.

• — When would one list of criteria for competitive priorities be preferred vs. the other list? Share a situation where the textbook list might be more or less useful than the Panmore list and explain why. It could be one of the other companies from the Panmore site, a company you have worked for or interned for, or a company that you have read about.

  The textbook’s list of competitive priorities is a more general list of delivering value to the customer and satisfying customer needs. This is different than the Panmore list of competitive priorities that is focused on the blueprint for adding value to the product or service itself. In other words, the textbook list is customer-focused whereas the Panmore list is product/service-focused.

  The textbook’s list of competitive priorities is better suited for evaluating technology companies that do not carry an inventory of physical goods. These companies do not have a physical supply chain and do not move product from one location to another, therefore, categories in the Panmore list such as “Inventory Management”, and “Location Strategy” bare little to no significance in evaluating the operations of a technology company. A company like Facebook that provides a social media service to its users collects its user’s data. Facebook’s core processes consist of its inventory of ad space and the collection and selling of user information gathered from its network to customers. A company like Facebook would need to focus resources on its flexibility, quality, and costs of its operations in order to impact its bottom line.

  The inverse is true for companies that sell physical inventory. The Panmore Institute list is more adapt for evaluating the operations of a more traditional brick-and-mortar retail business such as Home Depot. Retailers have suppliers and customer relations as part of its core supply chain processes, which are measures of productivity in the Panmore lists of competitive priorities.

  • Dalton, I agree there seems to be an underlying difference in the way the lists are set up. Customer needs inherently differs from the products or the service itself. Technolgy companies are special because as you pointed out, they carry no physical inventory. Technically nothing is moving, data access is just being transferred. Additionality, different companies may focus on different competitive priorities. As we talked about in class, if a company seeks to maximize all they tend to not do well at any. Depending on the goal or purpose of the company, different competitive priorities may be higher in importance. For example, credit card companies may care a great deal about quality management and security for its customers.

• (in reference to third question)
  McDonalds and Burger King have similar location strategies. Both fast-food chains’ location strategy aims at maximizing “market reach”. In order to do so, McDonalds and Burger King have sold hundreds of franchises, not only in North America, but also internationally. Each new international location presents new challenges for both the businesses. However, McDonalds and Burger King have adapted to the changes by incorporating each country’s culture or norms into its business model. For example, halal meat is served in the chains’ locations in UAE and other predominantly Muslim countries. Similarly, both fast-food chains offer multiple vegetarian options in their menus in India since most people in India are vegetarians. Therefore, in order to reach their strategy of maximum “market reach”, both businesses are assimilating to new cultures and food preferences.
  One major difference between the location strategy of McDonalds and the location strategy of Burger King is the numerous types of venues used by McDonalds to reach its customers. While Burger King mainly relies on brick-and-mortar locations, “McDonald’s marketing mix includes restaurants, kiosks, and the company’s website and mobile app as venues.” In locations like Pakistan, where it is difficult for McDonalds to set up a franchise in each block (as is the case in New York City), it offers home delivery service to customers. Therefore, customers who cannot conveniently reach McDonalds can always call or use mobile apps such as “Food Panda” or “Yelp” to get food delivered to their homes. As a result, McDonalds is able to greatly extend its market reach, as compared to Burger King, by adopting innovative techniques depending on the requirements of each location.
  In order for McDonalds to maintain its title of the “largest fast-food chain in the world”, it is imperative that its location strategy focuses on availability to maximum customers. The McDonalds’ brand name is widely recognized not because of its supreme quality, but mainly because of its ubiquitous presence globally. Therefore, as technological advancement and globalization continue to change the global competitive landscape, McDonalds’ commitment to use technology to simplify the ordering process and to reach remote areas which continue to be untapped by its competitors are impressive but vital techniques for its future success.

  • Great points about the different location strategies of Mcdonalds and Burger King. When I was abroad in Italy last summer I learned that Mcdonalds offers different menu items in different countries. I think it is interesting and extremely valuable that these huge fast food chains are able to adapt to different cultures. This increases their ability to expand outside the United States and reap more profits. The mix of different ordering methods definitely sets Mcdonalds apart from its competitors. My view on technology in the food industry is mixed. In some sense, I like it because it allows for quicker service and greater customization of food orders. Yet, more technology means less labor. This can essentially take away jobs from those who need them. For example, in order to make money with the new delivery system, one now would need a vehicle, something that not everyone can afford. Nonetheless, I think a good mix of labor and technology is present in Mcdonalds.

• McDonalds and Wendy’s are constantly compared as two major competing businesses with similar operation management structures. According to the Panmore Institute, there are ten indicators of operational performance and productivity. These include design of goods and services, quality management, process and capacity design, location strategy, layout design and strategy, job design and human resources, supply chain management, inventory management, scheduling and maintenance. For the majority of the categories, McDonald’s and Wendy’s have similar approaches to be successful and maximize productivity. However, there are a few cases in which the approach of the companies differs.

  The Panmore Institute seemed to rate the productivity of both McDonald’s and Wendy’s operations management similarly, but without using the verbatim descriptions for each success indicator. The process and capacity designs for each company would appear similar, but Panmore seems to say the same thing two different ways. McDonald’s is said to minimize cost through process efficiency, while Wendy’s is said to maximize efficiency through production lines. To me, these two evaluations say the same thing, or arrive at the same conclusion that the two companies approach process and capacity design in similar ways. I feel like this conclusion is reached logically without the use of the Panmore Institute’s indicators, since the two companies have very similar business plans and target audiences. I found the same logical conclusions in categories including location strategy, inventory management and design of goods and services. In these categories I felt the Panmore Institute’s evaluations looked different, but had the same core meaning.

  Alternatively, I found the Panmore Institute’s evaluation especially helpful in the quality management category. Although someone who has not read the McDonald’s and Wendy’s mission statements would assume them to be identical, the Panmore Institute points out differences in each. Wendy’s mission statement can be found here: https://www.wendys.com/en-us/about-wendys/the-wendys-company while McDonald’s can be found here: http://corporate.mcdonalds.com/mcd/our_company/our-ambition.html. McDonald’s statement is simple; it emphasizes good people, good food, and good neighbors. Wendy’s, on the other hand, says they stand for honest, higher quality, fresh food, prepared on time by “Wendy’s kind of people,” and states they do not cut corners. Panmore Institute’s evaluation of McDonald’s mission statement says they maximize product quality within cost and price constraints consistent with customer expectation, while Wendy’s mission statement maintains quality to match consumer expectation, in addition to emphasizing high quality. I found it interesting that Panmore Institution could identify a monetary constraint in McDonald’s strategy, while this was left out of Wendy’s. It makes me wonder if Wendy’s is looking to McDonald’s in terms of matching, and then exceeding, the quality management expectation set by the competition rather than solely by the consumer. This criteria is important to the overall success of McDonald’s business, because it’s the basis upon which the company stands to express its core values to its consumers. With a faulty mission statement, McDonald’s does not take full advantage of the mission statement’s platform in convincing its target audience of a loyalty to customer satisfaction and maximum product quality.

• McDonald’s and Burger King both want to meet the quality expectations of their customers. Additionally, they both want to offer affordable products to their target customers. McDonalds works within their cost and price constraints, whereas Burger King uses product tests. Consistency is the main concern of McDonalds when it comes to quality of management, meaning given certain limits they must produce the best product possible. On the other hand, to assess quality, Burger King uses direct feedback from customers. They want to know what products are doing well so they can put more resources into it, and what products are not progressing as expected so they can alter or stop making it. Quality management is important to the success of fast food chains like McDonalds because there are a plethora of other fast food chains that can also reach their target customers. Fast food is fast food, they are cheap and quick alternatives to cooking or dining at a restaurant. The main quality management difference between Burger King and McDonalds is that one focuses on consistency and the other on product tests. Yet, when it all boils down, the customer is focused on taste and advertising. McDonalds offers hot, fresh food at low prices. This is the main reason for their business success. People from all classes can afford and enjoy something on their menu. The product quality, price, availability, and customer service are generally extremely consistent and are important variables in McDonald’s success.

• McDonald’s and Costco have established themselves as leaders in their respective industries. These companies have found operations management strategies that give them competitive advantages. In terms of quality management McDonald’s and Costco apply similar strategies. Both companies use consistency of quality in order to attract customers. McDonald’s does this through standardization in that no matter where you are in the country if you go to a McDonald’s you will know there is a certain level of quality you can expect. Costco similarly accomplishes this assured quality through the Kirkland signature brand. This effect benefits large brand names, as individuals are more likely to choose an option if they have more information about it in comparison to others. In this specific case both companies have tied their brands to an assurance of a certain level of quality. In contrast however is the total level of quality that both are able to achieve due to their different restraints. While both companies attempt to achieve a lower price than the competition they do this in different ways. Costco uses a wholesale system where they sell their products close to at cost by charging membership fees. McDonald’s is able to achieve its lower costs by limiting its portion sizes and quality while also standardizing practices.

• I agree with Blake that the consumer is drawn to McDonald’s consistency and low prices. This is achievable because of their limited product selection. In restaurants and stores that sell their goods at a higher price like Whole Foods tend to sell a wide array of products. Companies like McDonald’s sell a small amount of goods which makes the inventory less diversified, but this leads to low costs. In turn, the costumer knows what to expect and can buy it at a low price.

• Processes are the activities that transform inputs into outputs, whereas operations are simply just a collection of processes. Operations management is the design, direction, and control of processes and operations. In the case of both McDonald’s and Wendy’s processes primarily focus on the creation of their products, which of course is the food that they sell to customers. The effectiveness of these companies can largely be attributed to the ten decision areas that McDonald’s and Wendy’s both chose to focus on. Even though they chose to handle their management strategies differently, both are highly successful regardless, which is a testament to the idea’s applications.
  In particular, McDonald’s focuses on making its products more affordable, specifically by cutting costs, setting consistent expectations, and knowing its customer base well enough to know its target price point. They do so by focusing on serving size, consumer expectations, and input costs, going as far as to decrease serving sizes in order to keep prices more affordable. Additionally, regarding inputs, they try to maintain a standard of quality, while working within certain price constraints, in order to maximize the quality of the outputs, while maintaining the consistency across the board that the consumers expect. But with these inputs, they make sure not put themselves in any sort of risky situation by having a good supply chain diversification. The company itself does not supply the ingredients necessary for each restaurant, instead choosing to work with regional and local intermediaries and distributors in order to cut costs and make sure each individual restaurant can maintain their own inventory. From there, there are many additional cost-cutting strategies that are put into place. McDonald’s maximizes efficiency by using a production line method across the board. This also helps control the consistency from location to location.
  Location and the arrangement of the physical restaurants themselves are also other significant considerations in the management strategy. McDonald’s knows its target market very well, and tries its best to place itself where it can reach the maximum amount of its target group in that specific region. Whether that involves just having a large number of restaurants, or implementing the use of kiosks, websites and apps, McDonalds attempts to maximizes its reach as best as it can in order to draw in more revenue. At the same time though, its restaurants are built not for comfort and aesthetic, but for efficiency and utility.
  Basically, McDonald’s management strategy is built around a concept of consistent quality, consumer affordability, and [cost cutting within the restaurants basics]. This strong strategic planning is what allows and has allowed McDonald’s to be so successful for many years. Its actions and decisions truly reflect its competitive priorities and align very well with the overall strategy.

• McDonalds is an industry example of mastering speed, quality (consistency), price, and efficiency. Usually in operations management a company can only focus on two of these factors while focusing on more leads to failure. However, McDonalds has found a way to capture all for without going under. Also, capturing these factors isn’t something that just recently happened McDonalds has been like this for years. I would argue however that this isn’t surprising because this is the way fast food restaurants were designed to be. If you look at the two biggest fast food chains (McDonalds and Burger King), they are both almost identical in terms of operations. This to me proves that the fast food industry has cracked the code when it comes to operations management.

• (In response to question three)

  Pick one criteria area from the lists above and compare/contrast how McDonalds applies this criteria vs. the other company you read about. Give examples of similarities and differences. Explain why you think this criteria area is important to McDonalds’ overall business success.

  While McDonald’s and Whole Foods are both very popular food suppliers, they embrace very different quality management strategies. For instance, McDonald’s emphasizes consistency; the corporation uses a production line method in order to guarantee that all products will be the same from store to store around the globe. On the other hand, Whole Foods uses various different programs to ensure top quality of their products. Whole Foods has a variety of different products within their stores and these goods can change constantly, but the company attracts consumers by maximizing the quality and health of the goods that are sold. This operating decision is much different than that of McDonald’s; the fast food chain does not supply the most healthy food. They certainly do not attract customers with the high quality of their food like Whole Foods. Instead, McDonald’s secures an extremely large consumer base and is the largest fast food chain in the world, because it constantly provides the same products from franchise to franchise. In other words, hungry individuals flock to McDonald’s restaurants around the world, because they know exactly the kind of food that they are getting before they order and they enjoy the taste of the unhealthy food. McDonald’s has mastered this quality management, and others have adapted the consistency and production line methods. During a Sociology class that I took last year at the University of Richmond, I was introduced to the idea of McDonaldization. This term was established by George Ritzer in his book The McDonaldization of Society (1993). The term was coined to describe how society, specifically America, has adopted characteristics of fast food restaurant chains in the sense that society wants ensured consistency of what they are receiving. In general, society likes the certainty that comes with going to an organization that has consistent quality management. While Whole Foods has successfully attracted consumers with healthy, high quality options, they do not attract costumers with consistency always. Therefore, it is interesting to note that Whole Foods was recently acquired by Amazon; the online retail giant will help expand Whole Food’s reach. McDonald’s still stands alone and is continuing to grow.

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