January 18/Initial Blog/MGMT 340

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

• One of the most recognized logos in the world is the McDonalds golden arches. The brand has taught customers to trust the consistency of the product beneath that logo in their stores all around the world. This consistency keeps customers returning, building a loyal base. While the food may not be of the best quality, customers can be reassured that the “Big Mac” they order in New York City will be just like the one they order in California. McDonalds is able to maximize their quality of production within the bounds of their price objectives making their target sales at a very low price point.
  Having a reliable product is certainly a goal amongst fast food organizations, but a company like Burger King takes a slightly different approach than McDonalds. Burger King puts a great emphasis on differentiating their product from their competitors and they do this through their generic strategy and intensive growth strategies. The primary generic competitive strategy is cost leadership, which involves driving down costs and prices. Their use of economies of scale is a significant driver in this strategy. The secondary generic strategy is their use of broad differentiation in order to gain a competitive advantage against others, like McDonalds. They pride themselves on their flame-cooked burgers and their slogan, “Have it your way.” This is how Burger King tries to empower the customer to create their own experience, different from the strategy of McDonalds. The flexibility they have within their business model is much greater, changing their commitment to the same type of consistency that McDonalds has. The overall strategic objective for Burger King with this differentiation of their product is to attract new customers especially in areas where other big players, such as McDonalds, are already well established.
  The intensive growth strategy is comprised of three different elements: market penetration, market development, and product development. As the primary goal of the intensive growth strategy, market penetration, pushes Burger King to grow their revenue with existing customers or markets where they are already well established. Gaining a larger market share furthers this objective while also growing the franchise network. With such a significant market share already, McDonalds takes a different approach of maximization, attempting to optimize efficiency in ever possible market and location without the differentiation approach. Market Development is Burger King’s secondary intensive growth strategy and it involves entering new markets and new market segments. However, because Burger King is such a global brand, they are focused on using their cost leadership strategy to attract new customers in these markets based on their incredibly low prices, which is similar to what we find at McDonalds. Finally, product development helps the company grow through innovation and the introduction of new and differentiated products from those of their competitors. It is however the least significant of the growth strategies as new products they release are infrequent and often done at a slow rate in order to get a sense of the markets reaction. McDonalds changes their menu slightly more frequently than Burger King, especially depending on the time of year. The limited time products such as the “Shamrock Shake” near St. Patricks Day is a great way to keep customers returning.

• Panmore Institute’s assessment of McDonald’s Quality Management makes more sense to use in this situation, as opposed to the textbook. The textbook splits quality into Top Quality and Consistent Quality. For McDonalds, they are not concerned with having top quality, but rather having consistent quality. Panmore’s approach makes more sense given McDonalds unique strategy. McDonalds uses a production line method to uphold its consistency, but this probably sacrifices some of the product quality. Their overall strategy makes more sense when it is assessed holistically as opposed to these two separate groups.
  It would make more sense to use the text books approach if the company prioritized both tope quality and consistency. A company like Rolex strives to produce the best watches in the world. In order to uphold this reputation, they must also place a heavy focus on consistency. The textbooks approach makes sense in this case because the two separate criteria go hand in hand with each other.
  I think the strategy that McDonalds adopted fulfilled a large void within the market place, and is why the company has been so successful and grown to be the largest fast food restaurant in the world. However, when one is judging the operations management and strategy of the company, i think it is important to look at the company from a large scope, as opposed to using specific categoires that may not be as relevant.

• An important factor in any business is design of goods and services. McDonald’s design of goods and services varies depending on the customers. They have an outline of what they wish to accomplish with their product and then do their best to implement the product in a way that a consumer will be attracted to it. Their main design point is to have affordable prices so that more customers may come in, no matter their economical standing. They are appealing to the largest group of people they can by making their prices low enough to be widely available to all economic ranges, with a decent quality that people can enjoy. It may not be the highest quality food out there, but it is still popular due to its accessibility. They even minimize some of the food portions to allow for even lower prices. This product design is what attracts consumers to McDonalds, and is what will continue to fuel this company for years to come. There has been some pushback in recent years, coming from the surge in public opinion for healthy living. I believe they will adapt their design of goods if the need ever arises and will continue to be the juggernaut company it is today.
  In comparison, Whole Foods is an entirely different story. Their design of goods and services is to focus on high standards and deliver goods that are of very high quality. The healthy living wave has been upon us for some time now, and Whole Foods has taken advantage of this opportunity. This segments their market to a degree. Middle to upper class customers are attracted to this product design due to their want of a healthier lifestyle. These customers can handle the price premium at Whole Foods for the high quality of goods they receive. Whole Foods also puts emphasis on their whole trade guarantee, which is there to certify supplier sustainability and fair labor prices. This design in product presentation attracts more customers by showing exactly what the consumers are paying a premium for, on top of the high quality.
  In conclusion, McDonalds focuses upon affordable products while Whole Foods has higher prices but guarantees a higher quality product. They both present their products in ways that will appeal to the type of customer they are looking for. However they are looking for different groups of people. McDonalds has not done any extensive work in redesigning products for the health wave, while Whole Foods has based their entire business off of it. It will be interesting to see where both companies go, as McDonalds has the resources to make a vast change to the way they do business and design goods, and Whole Foods has been bought by Amazon, which could lead to changes, big or small, or absolutely nothing at all.

• Looking at the “Design of Goods and Services” of McDonald’s and Wendy’s turned out to be very interesting. Since both are fast food chains, I assumed that this area would be similar for each company. This didn’t exactly turn out to be the case. McDonald’s is extremely focused on providing affordable products in this strategic decision area. To keep some products more affordable, Panmore points out that the sizes of some products are shrunk in order to reach the affordability that they and their consumers desire. Strict affordability is an interesting model to follow, but McDonald’s consistency in this area is what allows them to remain so successful.

  Although making sure its products are still affordable is still important, Wendy’s is much more concerned with high output quality in this strategic decision area. Wendy’s turns more towards innovation of new products and finding out exactly what consumers want instead of focusing more on just the affordability of the products. With a good understanding of the price range that consumers are willing to pay for higher quality fast food, this is a good strategy and has proved to be effective for Wendy’s.

  • As you have pointed out, McDonald’s and Wendy’s are fairly different even though they seem like similar companies on the outside. McDonald’s first opened in 1955, ushering in a new era of food service to customers. Wendy’s then followed later in 1969. Wendy’s had to find a way to differentiate themselves from the already established, widely popular McDonald’s. So the competitive advantage they chose to combat McDonald’s was to put a higher quality product on the table while still being relatively affordable. McDonald’s came first, giving them the advantage of doing business how they wanted, not having to react to competitors and adapt their business plan accordingly. Not to say McDonald’s doesn’t have to react and adapt to competitors, just that they shaped how their competitors did business initially. I wonder if Wendy’s came first, would it still be the company it is today, focusing on innovation of new products, or would it have been more like McDonald’s focusing on affordability.

• Panmore discusses Process and Capacity Design as one of the ten decisions of operations management. In the textbook these are known as cost- low cost of operations. McDonald’s is focused entirely on efficiency and an effort to minimize costs. They have mastered the balance between adequately matching supply and demand while still minimizing unnecessary costs. McDonald’s also uses a production line style to maximize efficiency and quality control. Both of these help McDonalds keep their costs low, production high, and quality consistent throughout.

  Whole Foods, on the other hand, is on the opposite end of the spectrum in terms of low cost of operations. Efficiency and cost effectiveness are among the largest concerns for Whole Foods. Their quality standards and business ideology has almost left them shackled and unable to shed high costs associated with their operation. Their locally sourced, organic, and healthy foods forces Whole Foods use a decentralized approach to sourcing their inventory. This creates headaches for them because each individual store needs to set up complex supply networks in order to adequately ensure sufficient supply to meet the anticipated demand.

  In one regard, Whole Foods and McDonalds are entirely different in terms of how they treat low cost of operations. One area where they are similar is that they both expect their goods to be quality. Whole Foods holds their organic and locally sourced produce as an integral part of who they are in their mission statement. Similarly, McDonalds prides itself on its consistent product no matter where or when it is consumed.

  • Adam, you are right about McDonald’s but I don’t know if the strategy of Whole Foods to care only for high quality and not low costs is still standing. Since the $13.7 billion dollar purchase of Whole Foods by Amazon prices of many products have dropped. This is most likely due to the fact that the supermarket now has cut production costs of many of its products. But lower prices come at a cost since customers have started complaining that the quality of the products is not what it used to be. This might come as an issue for Whole Foods since high quality standards is one of their core values. We, as customers, need to wait and see if the trend of bad products continue or if the company solves the issue.
    https://www.cnbc.com/2017/08/28/amazon-officially-owns-whole-foods-here-are-the-products-that-are-getting-marked-down.html
    http://money.cnn.com/2017/11/15/news/companies/amazon-whole-foods-price-cuts/index.html

• I feel as if it is important to outline some of the main concepts that we began to discuss in class on Tuesday, since they will no doubt be a benchmark for our future involvement in the course. I find that these concepts are interesting and apply directly to the business analysis that we are dealing with. Process is simply an activity that takes an input and transforms it into an output. For example, McDonald’s utilizes a strong sense of process to efficiently and effectively move inputs along their supply chain and transform them outputs that will be consumed by their customers. This process is exemplified through McDonald’s commitment to both quality and cost-minimization, which become more and more appealing to their consumer base.

  The Panmore post discusses different processes that include process and capacity design, supply chain management, and inventory management. All of these elements are extremely important to a successful corporation such as McDonald’s. Following process is operation, which is a collection of processes. All of McDonald’s processes must work together in order to produce consistent and quality product. Lastly, operations management (OM) becomes important. OM is the design, direction, and control of processes and operations within an organization. One can see how this becomes crucial to an organizations success! Working in tandem, elements within an organization like McDonald’s can create a consistently appealing product that appeals to a very large consumer base.

  Another company that can be related to McDonald’s is Tesla. Not unlike McDonald’s, Tesla strives for quality driven products that will satisfy their consumer base where “satisfying customers’ quality expectations is the main objective” in Tesla’s operations management decision area. Tesla is another fantastic firm that utilizes the varying elements of process and operations to create, deliver, and sustain a vehicle that is seen by many as one of the best in the market. Both McDonald’s and Tesla measure productivity by way of production numbers. McDonald’s looks at “order fulfillment rate” and Tesla assesses “automobiles per day” as measures of success.

  • It is interesting to look at how these two companies which are in vastly different industries can be similar in how they operate. These are two vastly different products, in terms of quality in their respective industries. Tesla is a high end vehicle that is almost in its own class, as not many other car companies can boast a luxury electric vehicle. McDonald’s on the other hand, has quality but not in the sense of a high end product. It has incredible consistency, even in other countries. The menu might change depending on regional tastes but overall the quality of consistency is there. They both have a type of quality that allows them to be big names in their respective industries. The company structures themselves are vastly different as well. McDonald’s does what it can to create as much profit as possible by minimizing production costs, so that even though their products are sold at low prices they still turn a large profit. Looking at Tesla however, the company has explicitly stated that they will not be profitable until 2020 (Source: https://seekingalpha.com/article/4078369-tesla-can-profitable-2018). Tesla was founded in 2003. I am sure it took McDonald’s some time to figure out how to run their business and turn profits, but I don’t think they had something like this. Tesla is creating a high end product, but is not making enough to cover their production costs. They share some similarities with McDonald’s, but are not the same type of juggernaut company as McDonald’s. Not yet at least.

• The design of goods and services for McDonald’s is essentially low (but consistent) quality of large serving sizes for low prices. In contrast, Whole Foods Market focuses on high quality, premium priced products. At first glance, they design of their goods and services are completely different.

  McDonald’s main goal is to sell affordable food products, while Whole Foods’ is to ensure high quality, specifically organic and non-GMO, food products. Whole Foods prides itself on being “America’s Healthiest Grocery Store” which does come at a cost for the customers, paying premium for healthy and/or organic products. McDonald’s does have healthy options to appeal to the more health-conscious, but their main stays of burgers, fries, and a coke are what bring in business.

  Although the outcome of their design of goods and services are different, they similarly have a system of processes in place they go through to achieve the output the customers expect. McDonald’s has certain processes in place, such as a production line for food preparation, to ensure the consistent quality across various locations. Whole Foods Market uses processes that certify suppliers’ sustainability and fair labor practices to ensure the consumer is getting the organic, non-GMO products they are in search of.

  This criteria is important for McDonald’s business success because that is their whole business model and has been for years. When people go to McDonald’s, they do not expect healthy, high quality, expensive food; they are all about quick, cheap, and value, and that is why customers go there.

• Process is defined as an activity or a set of activities that transforms inputs into outputs for customers. Operations are a group of resources executing all or a part of the processes. Operations management refers to the implementation of business practices to maximize efficiency within a company. Additionally, operations management is focused on transforming inputs into goods and services for customers while maximizing the profit of the company.

  In class on Tuesday, we discussed the four core supply chain processes. These processes were supplier relationship, new product development, order fulfillment, and customer relationship. The post places emphasize on the order fulfillment core supply chain process that is defined by its production line method. McDonald’s production line method is vital to its success as a company since it is considered the original “fast food” restaurant. McDonald’s production line method allows McDonalds to have quality management, consistent products for which McDonalds is known for. Additionally, McDonald’s production line method allows it to maximize efficiency while supporting McDonald’s strategy of providing its customers with food of a high standard, quick service and value for their money. In addition, the Panmore post mentions the design of McDonald’s goods and services as an operations management decision area. The design of McDonald’s goods and services is to provide affordable food and drinks to its customers. This operations management decision area could be classified as the new product development supply chain process.

  Besides the core supply chain processes, the Panmore post mentions the scheduling of employees, individual and organizational learning, hiring maintenance service providers, managing inventory, market research, and capacity design which can be classified as support processes.

  The main competitive strategy McDonald’s utilizes is the quality strategy. McDonald’s production line is key to this competitive strategy. Managing the production line effectively and efficiently allows McDonald’s to produce the fast food that Americans and individuals around the world have come to enjoy. The production line produces consistent products at an efficient pace that provides customers with the same product independent of which McDonald’s they are at. Additionally, the production line contributes to minimizing the production time and production cost allowing McDonald’s to be successful and true to their objective of providing customers with food and drinks at a high standard, quickly, and affordable.

  • Erin,

    I appreciated your mentioning of the production line method, as that was something that stood out to me as I read Panmore’s analysis of McDonald’s operational strategies. I would agree with you that this is their key to success – or competitive strategy. I think this really stood out to me when I was abroad last semester. I had just landed in Germany and I was intimidated by the authentic German food and decided to go to McDonald’s instead. Although the menu was in German, the food was prepared and delivered to me the exact same way as in the States. Thinking back on this moment, that was exactly why I gave McDonald’s my business that day – I needed something that I knew I could trust.

    I would say this competitive strategy fosters loyalty within McDonald’s customers and is truly what keeps the “non-regular” customers from giving their business to the company (as well as the regulars). This method not only maximizes quality consistency, process efficiency, and capacity utilization, but it also is what builds and holds the relationship between McDonald’s and its customer base. It is interesting to consider why other fast food chains have not tried to embrace this strategy more.

• Even though McDonald’s and Burger King provide the same type of product, fast food, they have different approaches to their quality strategy. On one hand, McDonald’s focuses on maximizing their product quality taking into account costs and price limits. Even though their products might not be of the highest quality, McDonald’s is able to provide consistent meals, with the special remark that every item ordered in any of their stores around the globe is going to look and taste very similar or even the same. The company’s menu may vary a bit country to country to adapt to cultural preferences. For example, in Spain they serve Gazpacho and in Korea the sell a shrimp burger. Even though they have slightly altered menus depending on the country, McDonald’s is definitely “consistent quality” given that you can find all of their staple meals all around the world and their taste should be the same no matter where. On the other, Burger King focuses on their target clients and tries to please their customers expectations. Having constant quality is not Burger King’s most important concern, instead they provide “high quality” products for their industry’s standards. This is due to their constant product tests to meet customers demands and expectations. Consumers can also provide feedback through Burger King’s app My BK Experience, this also allows the company to make changes accordingly. It is through these two instances that Burger King is able to provide high quality products.

  This criteria, quality strategy, is of vital importance to McDonald’s because constant quality is their order winner. To put it in other words, it’s what differentiates them from their competition. The company achieved a strategy that grants them success anywhere. Knowing that any McDonald’s in the world is providing same quality services with the lowest prices possible has allowed them to gain an extremely large customer base.

  • Maria,

    I enjoyed your comparison between Burger King and McDonalds. It makes me wonder if it is the difference in the two restaurant’s strategies that has enabled McDonald’s to become a stronger and bigger company. Maybe there is more demand in the market for low quality, low cost fast food than there is for medium quality, low cost, and good customer service? it is interesting to consider what has driven the success of the two companies.

• A process is any activity that transforms inputs into outputs. For example, a process of brushing your teeth in the morning would have an input of a toothbrush and dirty teeth creating an output of cleaner teeth. An operation is a collection of processes and operations management is the design, direction, and control of processes and operations.

  McDonalds has developed many different competitive strategies to become one of the largest fast food chains in the world. Firstly, they’re an extremely accessible restaurant chain. According to Forbes, they have the most locations of any fast food restaurant chain in the world. Also, they deliver quality. I just recently studied abroad in Europe and I was excited to see the difference in the McDonalds there versus the McDonalds locations we have here in the United States. I was astonished to find out that it is virtually the same food, which is incredible to experience. Their consistency throughout all their stores in all the different countries in the world is exceptional. Furthermore, McDonalds is still improving. As mentioned in the Paramore article, they have regularly scheduled meetings throughout the year to discuss the fluctuations in the market to make sure they are meeting demand appropriately. That reflects well on their upper management that they are never settling, constantly looking to adapt to any new obstacles the market puts in their way. It takes dedication to sit atop the mountain of market share and they are clearly showing that they have what it takes.

  • Connor,

    I like your point and completely agree about how McDonald’s all over the world offer the same consistency within each location. I visited Europe over the summer and was surprised to see all of the similarities between the locations their and in the United States. I also asked my friend from Japan about the McDonald’s locations there and he said that the locations there are all very similar to here in the United States and they still offer very similar menu items. For such a big company, it is cool to see such great consistency throughout the world.

    I also agree that the regularly scheduled meetings reflect well on upper management, but I am interested if this will continue in the long-run. I’m sure the meetings will continue, but I’m interested in seeing if upper management can find consistent ways to integrate new healthier options thats are still extremely affordable. The reason I find this interesting is because of some of the current food movements including healthier or organic options.

• A process is any activity or group of activities that takes one or more inputs, transforms them, and provides one or more outputs for its consumers. A group of resources performing all or part of one or more processes is considered an operation. Further, 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.

  The quality and consistency across McDonald’s product and their employee training program are two processes discussed in Panmore Institute’s post on McDonald’s Generic Strategy and Intensive Growth Strategies. McDonald’s strives to maximize product quality while simultaneously maintaining product consistency, both of which are made possible through the use of a production line. According to the Harvard Business Review’s article Production-Line Approach to Service, McDonald’s production line and its “systematic substitution of equipment for people, combined with the carefully planned use and positioning of technology, enables McDonald’s to attract and hold patronage in proportions no predecessor or imitator has managed to duplicate.” The consistency and uniformity of McDonald’s products is extremely appealing to customers worldwide who receive the same Big Mac or Chicken McNuggets in Hong Kong that they would receive in Houston.

  McDonald’s Human Resources department and its employee training program is a process in and of itself. McDonald’s trains approximately 55,000 employees annually worldwide and has developed an extremely extensive and comprehensive employee training program. The training process takes an input, recently hired individuals, and transforms them, through their program, into knowledgeable, productive, and service-driven McDonald’s employees.

  McDonald’s primary generic strategy is cost leadership, which involves minimizing costs to offer products at a lower price. Processes such as McDonald’s production-line approach to service as well as their employee training program contribute to their cost leadership strategy.

• McDonalds is known all around world as a fast food restaurant chain that delivers low-quality, affordable meals. According to Panmore, their ‘design of goods and services strategy’ states that the serving sizes and prices of its products are based on the most popular consumer expectations. Although not of a very high quality, it is an affordable meal that meets the consumer’s expectations and is available to anyone. In the fast food industry, affordability is a key factor in where consumer choose their fast food restaurant. Intertwined with this strategy is ‘quality management’. Consumers expect an affordable meal while simultaneously expect a consistent one. In any McDonald’s, one expects to receive a low-quality meal that’s consistent with your expectations and is affordable. This coordination of operations management strategies result in McDonald’s position as the largest fast food restaurant chain in the world.

  On the other hand, Home Depot’s ‘design of goods and services’ strategy revolves around delivering goods with a low price that are high in quality while also providing quality service. Home Depot is a leader in the home improvement retail market and is now the largest firm in the industry according to Panmore. The Home Depot and McDonald’s are in very different industries but it is interesting to identify the operations management differences between the two that distinguish them as leaders in their industries. Both rely on affordability and although the quality of service may not be high at McDonald’s, it is what is expected. Customers expect high quality service at Home Depot but not at Mcdonald’s which consumers are fine with because it met their expectations. Home Depot stresses the importance of expert advice and quality service which attract customers to its stores. Like McDonald’s, Home Depot’s ‘design of goods and services’ strategy is intertwined with the ‘quality management’ strategy. In order for the Home Depot to achieve its emphasis on affordability and high quality, the Home Depot imposes quality requirements on suppliers and provides training programs for their employees.

  • Mark,

    I appreciate the comparison between Home Depot and McDonalds. I feel that they both have done a great job of clearly communicating their brand promises, and delivering on them. Home Depot’s slogan, “You can do it, we can help” really stresses the idea that the workers and products at the store are intended to help people find all the materials they may need. This places high expectations on customer service, as well as having an extensive inventory which can be used for nearly every situation.
    McDonalds brand promises consistently low prices and lower quality food. Although the quality management may be different between these two company’s, they have both delivered on their promises.

• Even in rural areas it seems like you cannot go more than a couple miles without seeing a McDonalds. Panamore states that their location strategy is to maximize their market reach in every one of their locations. This means that they chose each store’s location due to their high traffic which equates to lots of potential customers. Because these high traffic areas are not always on highways or where there is a lot of space, McDonald’s business model also includes kiosks. From small kiosks in food courts to a huge restaurant in Disney World (http://www.businessinsider.com/americas-largest-mcdonalds-serves-pizza-pasta-sandwiches-2017-5) McDonalds are truly everywhere.

  Whole Foods Market’s approach to location tends to be concentrated to urban areas. The densely populated areas allow for them to also have high potential traffic in their stores. The choice of being in cities is also consistent with their target market—people who are environmentally conscious and have a high income (https://storify.com/abastian/whole-foods-target-market).

  Both companies are adapting to the digital world and are understanding that their customers want to go to brick-and-mortar stores less and less. They also want to connect with their favorite brands online. Because of this, they are focusing more of their digital footprint. Both Whole Foods reaches their target audience through their website and app. Both companies have also partnered with the app Postmates to bring their products right to their customer’s front door in certain cities around the United States.

  • Caroline,

    I think it is interesting that you decided to compare McDonald’s and Whole Foods Market’s approach to location. I usually compare the products or services they provide not their location. I agree that both companies are adapting to the digital world especially after Amazon’s acquisition of Whole Foods. Whole Foods under Amazon allows for customers to have Whole Foods groceries to be delivered via Amazon by ordering from their phone or computer. Customers do not have to leave the comfort of their home or interrupt their busy schedule in order to get their groceries. Furthermore, when I was in Florida over winter break, I noticed that McDonald’s was on Uber Eats. I did not expect to see a fast food restaurant on a meal delivery service. Logically, it makes sense that McDonald’s on Uber Eats in order to compete with other fast food restaurants such as Panera Bread and Jimmy Johns that both have their own delivery service.

  • Caroline,

    I think you make a great point where you brought up that people are moving away from going to B&M stores. Postmates is an incredible app to do this. Having a delivery system of basically any food you want is truly revolutionary. I think that McDonald’s decision to do partner with that app was an ingenious idea. I brought up in my post that McDonald’s is exceptional at adapting to the market around them and this is just one of the many demonstrations of their ability to do so. It makes me excited to see where the world goes from here because it is constantly changing and improving. However, McDonald’s cannot settle there. Eventually, something like even Postmates will change and be outdated, and they will have to be prepared for that as well if they want to continue to hold their share of the market.

    • Connor,

      I agree with you here regarding Caroline’s post. I feel as if we are definitely moving away from brick and mortar style stores. If I had to defend this business style, I could definitely do so for goods that are not ideal to ship to a consumer’s residence, but I would be hard-pressed to argue in favor of B&M stores in today’s market. The overarching trend is definitely that of ordering products at the consumers convenience. Thus, I can see where firms would seek to utilize this style of delivery to meet consumer needs. I can actually relate to this, as being a college student I do not always have time to go to a location to get my product. Textbooks, for example, are almost always ordered from a digital market source.

• McDonald’s ‘design of goods and services’ strategy aims to provide consumers with affordable products while meeting their price-to-serving size expectations. This ties in with their ‘quality management’ strategy of maintaining the highest quality products at the most affordable and demanded costs.

  We can see this strategy in action in McDonald’s product mix; the company offers $1, $2, and $3 menus. An example of a $1 menu item is a regular cheeseburger, on the $2 menu you can find a Bacon McDouble, and from the $3 menu you can order a Triple Cheeseburger. As the price of the menu item increases, the portion size increases proportionally (each option has an extra patty). These dollar menus offer flexibility to the consumer in portion size while remaining within an affordable budget range. These extensive menu options (dollar menu, kids menu, meal menu) are a large part of McDonald’s success as it allows them to reach diverse consumer demand while increasing the production effort on their end very minimally. These “upgrades” in burger typically require little to no extra work to a production line employee, as they are simply adding an extra patty. However, a consumer’s utility is increased substantially with a larger selection of menu items available to them.

  Whole Foods is a health food store chain, in contrast to a fast food restaurant chain. Their ‘design of goods and services’ strategy focuses on meeting a high standard for a niche consumer.

  All Whole Foods products meet the Whole Trade Guarantee – a commitment to ethical trade, working conditions and the environment. Similar to McDonald’s, we can see how their ‘design of goods and services’ strategy parallels with their ‘quality management’ strategy of high quality goods that meet this benchmark.

  Although this strategy is very different from McDonald’s, it is similar in the way that they are adequately meeting the demand of their consumer. McDonalds serves a variety of the population among different ages and incomes. This is reflected in the flexibility and time efficiency of their menu. Whole Foods is serving a niche consumer – typically a higher income couple with dependents no longer living in the house. This allows them to upgrade their food choices to more healthy and sustainable options, which comes at a higher price. Both of these companies reap success by understanding their customers and tailoring their operations to their needs.

  • Jessica,

    You made some great points about McDonald’s pricing strategy, and I greatly appreciate the tie-in of utility as it relates to pricing. Spot-on with your analysis of the $1, $2, $3 dollar menu options, the question of marginal cost versus marginal benefit is called into play. You mention that it takes very little extra work for a production line employee to add a hamburger patty to a cheeseburger, and given that the sandwich now costs the consumer an extra dollar, does the incremental change in benefit that the consumer receives from the larger sandwich outweigh the incremental cost that the company bears? Were the answer yes, it would prove an ingenious marketing strategy that the company uses to increase its profit margin per unit.

    This type of thought shows just how closely related operations management and other key areas of the firm are related. Fantastic.

    Thanks!!

  • Jess,

    I really enjoyed your analysis of McDonald’s $1, $2, $3 menu. They market it to be a huge selection for the customer when in reality, it is almost no extra work. Additionally, McDonald’s uses their always competitive prices to market their food, rather than the quality, which I do think makes sense! However, it is always fascinating how their pricing is always the main selling point. This is so drastically different than Whole Foods because of their target customer. Both companies truly understand who they are selling to and are able to adjust their strategies accordingly. This pricing model will be effective as long as there is a market demand for the relative price. Whole Foods has struggled with this recently as many people value their Whole Trade Guarantee, but only to a certain level. There will always be a market for a high priced food store, however rising prices could lead to a loss of business for Whole Foods. Even though these two companies are drastically different, your comparison of the two and how it leads to their relative success was very intriguing! Thanks for sharing.

  • Jessica, it is interesting that you pointed out the variety of price and quality options to its customers, and I agree that it has helped McDonalds be so successful. This quality management allows McDonalds to reach multiple different groups of individuals depending on their price range and preferences. I think it is important to emphasize that even though the price of these options vary, the quality remains somewhat similiar. McDonalds will merely add another patty, bun, or just more food and increase the price. The actual quality of the food remains about the same. This strategy allows for people of different appetites and price ranges to eat according to their preference.

• McDonald’s prides itself on being one of the largest fast food restaurant chains in the world. This can attributed to their commitment to maintaining effective policies and strategies related to the company’s operations management. Similarly, Nike holds the title of the leading global manufacturer and seller of sports shoes, apparel, and equipment. This is a result of their commitment to continual improvement of the company’s operations. Process and capacity design is an essential decision area for companies like McDonalds and Nike to ensure their productivity and an overall enhanced performance.

  Being a fast food restaurant, McDonald’s process and capacity design is focused on creating a system that supports efficiency and cost-minimization while also supporting the company’s strategies. Quickness, consistency, and quality are important to McDonald’s customers so the company needs to have an efficient way to satisfy these demands. For McDonald’s, the production line methods was implemented to both maximize the utility of the resources (such as employees and equipment) and the efficiency of producing the finished goods. Since the demand for the products that McDonald’s offers is dependant on the needs/wants of the public, it is especially important that a company such as McDonald’s creates a process and capacity design that is built to seamlessly handle the unpredictable nature of the restaurant industry.

  For Nike, this strategic decision area of process and capacity design means prioritizing streamlining and efficiency of production. Quality and consistency are important for the brand, so implementing a process that ensures a degree of uniformity is important. Because of the nature of the product and industry, the company is able to look at data and create forecasts of estimated sales. Thus, the process and capacity design can be created with this in mind and made to effectively handle the expectations of the company.

  McDonald’s and Nike both place a high importance on the decision area of process and capacity design. These two companies are both known for their quality products with a certain level of consistency among them. Unlike Nike, McDonald’s design should be customized to their various locations and be capable of handling unprecedented spikes in demand while also producing that consistent and quality product that they are known for. In order to maintain their position as the leading fast food restaurant chain, having a design that allows for efficiency and also cost minimization will be important. This will continue to reinforce the brand image and the overall customer experience.

  • Jessica, I agree with your comparison of Nike and McDonald’s. A particular part of the operations management of Nike that I find interesting is their supply chain management. The Panmore article addresses this and states that Nike has excellent supply chain management and efficient global production. Nike utilizes automation and optimization of transport distances among suppliers, production facilities, distributors and retailers. In the past, however, Nike faced criticism for the use of child labor in their supply chain. Although Nike did not intentionally choose factories utilizing child labor, their lack of supervision of their supply chain allowed children to be producing their products. During this period Nike was using a cost management strategy. Nike now audits their supply chain and publishes their findings as part of their corporate social responsibility report. While Nike is still focused on cost and efficiency, they have shifted their strategy to appeal to the public. Now Nike is able to produce consistent quality goods with ethical working conditions.

    http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5

  • Jess,

    This is a great comparison of the two companies. The only thing I feel could be reviewed is where you say “Unlike Nike, McDonald’s design should be customized to their various locations and be capable of handling unprecedented spikes in demand while also producing that consistent and quality product that they are known for.” It cannot be argued that McDonald’s design should be customized to their various locations. However, I think Nike needs to do this too. Demand can often change by region. Europeans, for example, have a much different style than Americans. Customization can be helpful for many companies and I think it would be a prudent idea of Nike to do this along with McDonald’s.

• My comment will address the question located in the third bullet point. More specifically, my analysis will focus on The Panmore Institute’s second criteria, Quality Management.
  It has been acknowledged on numerous occasions (Panmore’s site; our most recent class discussion) that McDonald’s chief operational feat is their unfailing consistency. The Panmore analysis mentions a number of processes that help MCD achieve this consistency. For instance, MCD employs a production line process during food preparation. This process is designed to be efficient, as well as easily replicable and scalable to deliver a consistent product. Furthermore, Panmore highlighted McDonald’s training program for employees working in food preparation. A well-designed training program that is consistently followed helps deliver consistent quality.
  Tesla’s Quality Management is focused on delivering both high and consistent quality. Panmore noted that regular quality reviews of parts, cars, and processes help ensure a high-quality product. Further, Tesla is laser-focused on electric vehicles—an operational focus that could offer strategic advantages over competitors that manufacture EV’s and gas-powered vehicles. In regards to consistency of quality, one of Tesla’s operational strategies stood out from McDonald’s, the widespread use of automation. Automation helps Tesla recognize higher productivity but also reduces human errors that could result in a less consistent product. Even though TSLA and MCD operate in vastly different industries and markets, the use of automation, or lack thereof in MCD’s case, struck me as one of the biggest differences between their respective operations. In many ways, MCD’s goal of delivering consistency could be enhanced by leveraging automation; their food preparation process—already in a production line format—could be easily integrated with automation technologies.
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  • It would be interesting to think about how Tesla’s use of automation could be applicable to McDonald’s, or fast food restaurants in general. Some McDonald’s have implemented self serve kiosks and table service, essentially eliminating the need for some employees. McDonald’s prides itself on consistent product and has implemented production line methods to ensure this. Theoretically, McDonald’s could follow Tesla’s lead and create a system that completely eliminates any possibility of human error. Additionally, it would eliminate the need for human resource department, employee training, and most labor costs. I’m not how this would impact the customer experience, but if they know that they could get a satisfactory meal at a cheap price they will surely continue to go back.

    http://fortune.com/2016/11/18/mcdonalds-kiosks-table-service/

    • Although it seems only logical for McDonald’s kitchen to become fully automated, and with the addition of their self serve kiosk it seems that they are doing so, the company’s CEO has said that these kiosks are not a replacement of labor. Instead, it seems that McDonald’s is changing strategies by adding other services, such as concierge and table services. Now the workers that were in the kitchen can help enhance your dining experience. It will be very interesting to see the company move from consistent quality to a higher quality experience.

      http://www.businessinsider.com/what-self-serve-kiosks-at-mcdonalds-mean-for-cashiers-2017-6

  • Andrew,

    Your comparison between the products of Tesla and McDonalds is very interesting. The quality and consistency of both products is remarkable, despite their vastly different industries and production methods. When it comes to automation, I believe consumers will begin to see far more automation in fast food restaurants in the coming years, as is already so common in the automotive industry. However, one of the main arguments in support of automation, in addition to cost cutting, is greater efficiency and shorter production times. When we use this rational to compare those elements of both businesses, McDonalds has had great success without automating the production of their product while Tesla, some might argue, has struggled. While it is not entirely realistic to compare the difficulty of preparing a Big Mac to a Tesla Model S, Tesla has stated its great difficulty meeting deadlines in the production of their new Model 3. Their production times have extended far longer than anticipated and the management of their supply chain had to be reevaluated. So while we can find similarities in the consistency of both final products, but accurate production time estimates have varied.

• A process within the scope of a business is any activity(s) that take inputs and converts them into outputs. An operation is a collection of people or things that work together to complete a process. Thus, operations management is the design, coordination, and improvement of how processes are performed.

  Examples of processes used by McDonald’s and described by Panmore include prescribed production line methods of ‘assembling’ menu items, selection of property types for different locations, menu selection, inventory ordering, and employee scheduling to fill demand. It is no surprise that two of the three notable productivity measures listed by Panmore for McDonald’s are order fulfillment rate and timely delivery rate. After all, McDonald’s is the original “fast” food and speed is one of their top competitive strategies. Additionally, McDonald’s maintains strong competitive strategies in quality consistency and relatively consistent low prices. McDonald’s process and operation management allows these strategies to come to fruition in several key ways.

  One example is McDonald’s assembly line method for preparing sandwiches (Here is a video for reference: https://youtu.be/gdon6vuOC80). As shown in the video, during a busy period, different employees are responsible for making specific parts of the meal before passing it onto the next person and then eventually on to the customer. This is the process which employees are trained to perform and is incredibly efficient in providing McDonald’s with the advantage of speed and consistency. Another example is their employee scheduling process. Somewhere in their offices, there is a group of people who go through and analyze the local market environment along with other variables and determine the demand for regular and seasonal employees at specific times, thus cutting out the issue of understaffing which could cause order fulfillment delays and solving the problem of overstaffing which could indirectly lead to higher prices in the future.

  The design and management of the countless processes such as these are what has been key to McDonald’s success over competition, and reflect the importance of matching processes and operations to competitive strategies.

  • Joe,

    Thanks for sharing this insightful post. Businesses such as McDonald’s have very little wiggle room when dealing with their high-cost inputs like labor. Even more so now that political pressure in several key locales is pushing up the minimum wage (which affects many of the company’s employees), it is critical that management effectively staff restaurants. Traffic ebbs and flows, and McDonald’s strong focus on accurate scheduling is key in keeping profits strong and keeping shareholders happy.

    Your post has led me to wonder exactly how different the processes by which McDonald’s has perfected its craft differ from its competitors (e.g., Wendy’s, Subway, even Starbucks and 7/11). Further research into this area may not be the focus of this article, though I would be interested to learn.

    Thanks!!

  • Joe,

    I enjoyed your post! McDonald’s use of the line method that has been copied by many fast food chains is fascinating because of how they adopted it to the food industry from what had traditionally been manufacturing. It also is interesting about how this line method relates to their scheduling and the ability to maximize their efficiency. Your comment about examining the local market was also intriguing because in order to keep their impressive efficiency, the schedulers must know the activity in their local environment. I’m sure each restaurant, even in the same city, has different peak service times and a company that is so committed to speed and efficiency must be aware of their restaurant specific markets to truly get the most out of their staff.

    Thanks for sharing!

• No analysis is necessary to recognize the efficiency with which McDonald’s Corporation handles its operations management. McDonald’s has been the leading fast-food restaurant chain in the world for decades, and it led the shift towards its kind of restaurant beginning with its inception nearly eight decades ago. However, the company offers valuable insight for companies of any kind or size that want to learn about operations management. McDonald’s focuses on quality and consistency, parts of the Quality Management decision area. Its acute ability to deliver nearly-perfect consistency across its stores with similar products (restaurants in different countries serve different products) is a product of not only Quality Management, but also Process and Capacity Design as it relates to efficiency and the capacity to fulfill market demand.

  Tesla Motors is a highly automated electric car manufacturer that is well known for its ability to offer luxury-quality electric vehicles for relatively affordable prices across its product lines. One of the most important inputs to this quality is the adequacy of its workforce. The uber-competitive compensation attracts the crème-de-la-crème in electrical and automotive engineering employees. Inventory Management is another area where Elon Musk and Tesla excel. Just-in-time inventory is utilized for some of the materials with which the cars are built to keep inventory costs low and deliver a lower-cost product to consumers.

  Unlike McDonald’s Quality Management, Tesla delivers a product that is of a higher quality relative to its peers (while McDonald’s serves a lower quality product when compared to restaurants across the board). Consistency is a key for both companies. Cars, Tesla as no exception, must be made exactly the same to uphold federal and state safety and quality regulations, and McDonald’s must deliver a high-consistency product to satisfy customers who expect the same burger each visit.

  • Christian,

    I chose to respond to your comment because I compared the same two companies in my own response to the blog post. It was particularly interesting how you touched on the regulatory constraints that most, if not all, firms are subject too—that was an insight that I did not consider in my own response. After reading your post, I started using that regulatory lens to quickly compare and contrast MCD and TSLA. Given how global MCD is, they must navigate a myriad of various foreign food safety standards, standards that may be more or less stringent than those in the U.S. depending on the case. I’d be curious to learn how MCD navigates these waters. Their focus on delivering a consistent product, regardless of location, likely makes this a little easier for them.
    Tesla also seeks to deliver a consistent product, but unlike MCD, Tesla’s consistently high safety and performance ratings indicate that they take it upon themselves to go above and beyond the bare minimum. This strategic priority makes sense knowing how Tesla positions itself in the automotive market, but I’d argue that it makes processes and systems on the operations management side of the business much more difficult.

  • Christian, in your post you mention that Teslas must be made exactly the same to uphold federal and state safety and quality regulations. While this is true, Tesla offers consumers with an extremely customizable experience in designing their product that McDonald’s lacks. In 2014, there were over 23 million possible combinations of how the Tesla Model S can be ordered. Customers design their vehicle from scratch in Tesla’s online Design Studio and following this process, each Tesla is custom built per the customer’s preferences. While McDonald’s must deliver a high-consistency product to satisfy customers who expect the same burger each visit, they provide customers with very little customizability. As the demand from consumers for customized products continues to grow, this could pose a challenge for McDonald’s.

  • Christian,

    I enjoyed your analysis of McDonald’s and Tesla as two companies who similarly deliver consistency, while doing so in vastly different industries and while serving very often different customers. When you think about it, people really do want to know what they are getting when they buy something, particularly if it’s something they are going to eat (McDonald’s) or something that is a large investment (Tesla). One thing that I see more often nowadays is businesses not meeting the expectations of their customers such as with many airlines and with vehicle emissions scandals. With such consistent businesses as these, those issues are much less of a problem (so long as Tesla can get their profits above sea level at some point).

    One other interesting point I would like to add on for consideration is the customization options that come with both McDonald’s and Tesla. Customers know what they can expect with base products like the standard Big Mac or Tesla Model S, but both companies also give customers the ability to customize further while still maintaining the certainty that customers will get what they asked for (barring the occasional McDonald’s order mix-up). A hungry customer can ask for an extra patty and bun on his big mac because he’s hungry, while a hotshot Tesla buyer can purchase some of the dozens of car upgrades worth thousands of dollars. Now obviously customization is not their competitive advantage, but I find it an interesting thing to ponder. Especially in an age where customization is all the rage, do you think that companies such as McDonald’s and Tesla will ever develop and advertise more customization options to fit this trend? Or do you think they will stick to what they are best known for?

  • Christian, I enjoyed the points you raised about McDonalds and Tesla sharing a similar operations management point but focus on different aspects of it. While it is true that McDonalds is unrivaled in its efficiency and ability to deliver consistent products worldwide, I wonder how this comparison would hold up with a lesser car manufacturer. Does a company like Chrysler, who is not known for its initial quality standards, have the same sort of operations management goals as McDonalds?

    The issue of safety concerns might be the difference in this regard. Since McDonalds is a food provider, their quality control standards are honestly a little bit more relaxed than car safety standards. This may make a lower quality car manufacturer have to focus on different aspects of their management (like just-in-time delivery like you said) to keep their costs down rather than consistent but low quality.

  • Christian,

    I found it interesting how you compared and contrasted an established fast-food company with an emerging and innovative automotive company. In a way, McDonald’s and their advent of the concept of “fast-food” interrupted the restaurant industry just like Tesla is currently influencing and interrupting the automotive industry with their electric cars. It’s important to highlight the importance of consistent quality across already established and emerging companies in completely different industries. McDonald’s doesn’t center its focus on high-quality products in the same way that Tesla does, but consistency is undoubtedly something that both firms hold in high importance.

• The design of goods and services is one of McDonald’s most important operations management design areas because it is what differentiates it from it’s biggest competitor, Wendy’s. McDonald’s key goal is to provide goods that are affordable and accessible to the majority of people. Because affordability is McDonald’s main goal, products and portions are even made smaller to reduce prices and appeal to more people.
  On the other hand, Wendy’s main goal in the design of goods and services is to exceed consumer expectations in product innovation. Wendy’s must continually innovate its products because it lags behind McDonald’s within this industry. McDonald’s and Wendy’s offer similar products at a similar level of convenience. However, Wendy’s must be creative in its product design to attract more customers who might have otherwise chosen McDonald’s for its lower prices.
  When considering the prices of the most popular meals sold by McDonald’s and Wendy’s, there is a stark difference in both price and product design. For example, McDonald’s most popular meal is the “Big Mac” sold for $3.99 while Wendy’s is the “Baconator” sold for $6.29. McDonald’s price is lower and the product is a simple burger, while Wendy’s price is higher and its product is more innovative and provides a different flare to traditional fast food (“McDonald’s vs. Wendy’s Prices”).
  In conclusion, McDonald’s design of goods and services focusing on affordability proves to be a key area in the overall success of this business. Consumers continually choose McDonald’s primarily because of its low prices. When considering design of goods and services and the success of McDonald’s, consumers would rather spend less money for a simpler product than spend more money on a product that aims to be innovative within the fast food industry. Although McDonald’s offers simple fast food, this low cost and low innovation approach to product design proves successful in comparison to that of Wendy’s.

  http://panmore.com/wendys-operations-management-10-decisions-areas-productivity
  https://www.fastfoodmenuprices.com/mcdonalds-vs-wendys-prices/

  • Fran, I agree with you that McDonald’s focus on high quality, consistent, yet affordable products is a key area in McDonald’s business model and a major contributor, if not the biggest contributor, to their overall success as an organization. McDonald’s new $1, $2, and $3 menu which includes a variety of items including the Bacon McDouble, Sausage McGriddle, and the Happy Meal has made McDonald’s products even more affordable and accessible to the majority of the population in the United States. Additionally, you discuss how McDonald’s most popular meal is the Big Mac which sells for $3.99 while Wendy’s is the Baconator which is sold for $6.29 and that Wendy’s “product is more innovative and provides a different flare to traditional fast food.” However, I wonder how different McDonald’s and Wendy’s target market and customers are. How can these consumers be differentiated? What drives them to go to Wendy’s instead of McDonald’s?

  • Fran, I thought it was interesting how you brought up how two seemingly similar fast food companies can have very different approaches to their business model. It sounds to me like McDonalds cornered the market on cheap, affordable food and forced its competitors to adapt their operations management to compensate for that. I hadn’t considered Wendy’s being forced to innovate to keep up with McDonalds due to their price difference. One additional point of differentiation between the two is that Wendy’s emphasizes their “Fresh never frozen beef” from locally sourced farms. This could also contribute to the price disparity between the two fast food chains.

• The second company I chose to write about was Costco. McDonald’s and Costco are clearly very different companies, however they are both successful in their respective fields. For both companies, “process and capacity design” is vital to their continuing success.
  McDonald’s and Costco are committed to increasing efficiency in order to better their process and capacity design. For McDonald’s this means utilizing cost-minimizing tactics that increases their efficiency. The production line method is how McDonald’s is able to maximize not only efficiency, but also their space within the store. This provides McDonald’s with the necessary speed needed to stay at the top of the fast food market. Similarly, Costco uses pallets to store all the merchandise in the store. Not only are the pallets used to store the items, the items available for sale are kept on the pallets when they are sold. This makes Costco very efficient compared to other retail stores because the only stocking they have to do is moving pallets from storage shelves to the floor for sale.
  However, this does reveal one key difference between McDonald’s and Costco. It is worth mentioning that Costco is one of the very few retailers that operates their business like this, and it would be nearly impossible for a fast food chain to model this approach, but it is one of the few differences between these successful companies. Walking into Costco is not only walking into their retail store, it is walking into their warehouse. This creates an incredibly unique experience for the customer, as well as saving Costco money by not storing their bulk items in a typical back of the store warehouse. Costco was able to capture the feel and look of a warehouse and marketed their store to fit it. Therefore, they are able to have a huge edge in process and capacity design compared to other retailers and countless other companies in general.

  • Your comparison of McDonald’s and Costco is really interesting. It almost seems like Costco is the McDonald’s of wholesale shops with regard to cost. The one thing I’m curious about is Costco’s competitive priority. For McDonald’s , it seems obvious that they focus on time and cost exclusively as their primary and secondary competitive priorities. Thinking of Costco’s slogan, Costco keeps the cost low, their primary competitive advantage is certainly their cost. Buying in bulk makes things much cheaper for them as a corporation and for the individual as a customer as well. Keeping this in mind, I’m finding it hard to identify their secondary priority. Is it their quality? Do they offer consistent and high-quality goods for their customers week in and week out? Or is it their flexibility and the variety they offer? I have never shopped at Costco or been a member, so I’d be curious to hear from some Costco customers regarding their opinion on the company’s secondary competitive advantage.

  • As a member of Costco, I can confirm that their strategy of process and capacity design is important to their success. As you mentioned, a Costco is always in some sort of warehouse and because of its large size, it is overwhelming. A consumer can find anything they need in one store. The pallets are especially useful in the rapid movement of products around the store. In the store, a lot of the products are stacked on top of each other or gigantic shelves that reach the warehouse ceiling. This almost gives the feeling of what you see is what you get. There is no product that can be found “in the back”. As a wholesale club, Costco sells most of its items in bulk which necessitates an efficient way to transport items.

  • Another similarity that I found interesting between McDonald’s and Costco is in their approach to layout design and strategy. McDonald’s does not focus on comfort and spaciousness. Instead, McDonald’s is practical and focuses on maximizing space utilization through the use of kiosks and strategic space organization. Similarly, Costco uses space efficiently and aims to reduce the use of extra space. Costco uses a warehouse design that logically reduces the need for extra storage space in addition to retail space. In addition to McDonald’s and Costco both valuing cost minimization and efficiency, both companies use unique design elements to maximize space utilization.

• McDonald’s is one of, if not the most, famous and recognizable world-wide fast food brands. This huge corporation has achieved this success and earned its current status as the world’s fast food company in part because of its strict adherence to a policy of consistent, unwavering quality. McDonald’s ingredients, equipment, training programs, and overall processes are remarkably consistent all around the world. This consistency is what brings loyal McDonald’s customers back time and time again. In terms of Quality Management, McDonald’s excels at consistency, but it also strives to provide the highest-quality food within certain “costs and price limits.” That being said, at McDonald’s, consistency of quality trumps degree of quality.

  In contrast, Whole Foods, a prominent leader in the health food store chain industry, focuses on the providing and supplying only the highest-quality products in its locations. Whole Foods is not nearly as concerned as McDonald’s about the consistency of quality, because consistency is not what attracts their customers. Rather, the higher quality, and subsequently, higher priced goods are what attract the middle to upper class customers that routinely shop at Whole Foods.

  McDonald’s and Whole Foods undoubtedly have different approaches to Quality Management, and these different approaches to quality are directly tied to their differing approaches to the “Design of Goods and Services” and their overall pricing strategy. McDonald’s focus is on providing affordable food, whereas Whole Foods’ focus is on providing higher priced products. Because of these contrasting strategies, these two companies attract groups of consumers from differing income levels. To further differentiate itself from other grocery chains as a brand that is committed to higher standards and sustainability, Whole Foods has a Whole Trade Guarantee that is “used for certifying suppliers’ sustainability and fair labor practices.” A closer look at their premium pricing strategy reflects this. McDonald’s standards and degree of sustainability pales in comparison to Whole Foods, but this is not a problem for McDonald’s because it is not central to their strategy like it is to Whole Foods.

  In conclusion, McDonald’s and Whole Foods take very different approaches to Quality Management, the Design of their Goods and Services, and their overall pricing strategy. Both companies have found great success in pursuing these strategies because they are both selling to different groups and sections of the market.

  • I agree that McDonalds and Whole Foods have very different approaches to Quality Management and their business tactics have been effective in creating loyal customers. You mention that Whole Foods is not nearly as concerned as McDonald’s about the consistency of their quality, but I would have to disagree. Yes, the brand carries unique and exclusive products in each of their stores across the nation but if you look at one of their markets individually, you can see a high level of consistency. Considering the higher prices of the products, I believe that Whole Foods customers would not be frequent shoppers if they didn’t trust that the groceries they were buying each week were going to be consistently healthy, fresh, and trustworthy. Whole Foods prides itself on delivering healthy food options and providing the best products you can buy and they deliver on that promise by continuously offering fresh food options. I think it is important to keep in mind that consistency might be understood and interpreted in unique ways by different companies and how they emulate that in the real world might be different.

  • Jake, I really like the comparison of McDonald’s to a food-purchasing alternative outside the fast food market. As you mentioned, both McDonald’s and Whole Foods focus on different elements of quality and, as a result, attract different target segments to each respective chain. It’s become clear that healthy food options are becoming more important in the United States, especially for middle to upper class families and individuals (http://www.foodbusinessnews.net/articles/news_home/Consumer_Trends/2017/05/US_organic_food_sales_jump_mor.aspx?ID=%7BDD125ECE-3866-4D8B-8842-827E3C93B8AB%7D&cck=1). This increase in demand has called for stores like Whole Foods to grow and even fast food chains like McDonald’s to decline. With this trend in place, do you think Whole Foods should follow the example set by Wegmans and consider opening an in-house restaurant that serves organic, on-the-spot meals? It wouldn’t be as “fast” as McDonald’s, of course, but with the cheap, lower-quality fast food market shrinking, Whole Foods has an opportunity to gain more ground.

    • When I was reading this post I also thought about the growing trend of US consumers wanting high quality, healthy food options. I think it is also interesting to think of it from McDonald’s perspective and consider if it would it be a smart business move to introduce a couple higher quality items. Obviously this won’t appeal to everyone, but it could attract customers (current and new) who are willing to pay a premium for better quality ingredients with the McDonalds guarantee of quick and consistent food.

      • Caroline, I was also thinking about that trend of US consumers wanting high quality, healthy food options while reading this post and writing my own. Panmore briefly mentions, I assume in reference to their salads and other healthier foods, that the healthy foods McDonald’s currently serves is reduced in serving size to make it more affordable than it would be at another entity. I think they do this as their way of addressing the healthy trend, although, I am not sure of how healthy and high quality it really is, considering many news and health organizations have spoken out about it, like the below CNBC article.
        https://www.cnbc.com/2016/02/04/mcdonalds-salad-has-more-calories-than-big-mac.html

    • It’s interesting that you mentioned this idea of Whole Foods expanding their business model and opening up “an in-house restaurant.” While they don’t currently offer what would be considered a “typical” restaurant experience within their locations, they do offer a deli that is relatively fast and still delivers on their promise to provide only the highest quality ingredients. The Whole Foods location that I frequent in Houston, Texas has this deli in its store, along with a full-sized salad bar and seating area for customers to enjoy their food at the location. You mentioned that Whole Foods could potentially “gain ground” on McDonald’s because of larger market trends shifting away from fast food. I don’t completely agree, given that the two companies attract different types of customers, but I have witnessed first hand the advantage of having a place for customers to sit and eat a meal within a grocery store, and I do agree that it is advantageous for Whole Foods to implement these types of features in all of their locations.

  • Jake,

    I agree with you about the two different approaches of quality management used by McDonald’s and Whole Foods. Historically, McDonald’s has been able to provide cheaper food to their customers because of lower production and raw material costs, while Whole Foods is more expensive due to their desire to provide healthy, high quality food. Currently, as the culture is starting to put more emphasis on healthier, high-quality foods, what will happen to a store like McDonald’s? Without adapting to new customer needs, they may lose the business of those who desire to buy higher quality foods. If you take a look at their revenues from 2013 to 2016, this assumption seems to be accurate as you can see a steady decrease in revenue. Therefore, I wonder if McDonald’s will attempt to provide more high quality food or decide to target those who wish to spend less money for food.

  • Jake,

    Both of us compare companies in different industries. I agree that quality management and design of goods and services are intertwined. You brought up a great point in that both companies are selling to different groups on different sections of the market. I compared McDonald’s and Home Depot. After reading your post I realized that both McDonalds and Home Depot appeal to every consumer at every level which I did not think of when I was comparing the two. A home improvement retail store is necessary for all homeowners (of any income level) and contractors. A fast food restaurant chain will appeal to anyone in need of a quick affordable meal.

  • Jake,

    Since the Panmore post on the Whole Foods market was updated before Amazon bought the company, I think it would be interesting to compare McDonald’s to the “new” Whole Foods that is now under Amazon. I still agree with you that McDonald’s and Whole Foods have different approaches for quality management. McDonald’s is known for its consistency while Whole Foods has the reputation for having the highest quality of products.

    I think it would be interesting to look at whether Amazon’s acquisition of Whole Foods changed Whole Foods’ approach to quality management. I believe that it may have change slightly since we are in an environment where perception is important. One of the main things Amazon changed when it bought Whole Foods was that prices were lowered. If the prices of the products that Whole Foods sells are lower, what was the impact to the products’ quality? Where does Whole Foods intend to make a profit? Lastly, if Amazon just lowered the prices of products that have been sold at Whole Foods for years, does the price drop have any influence on customers’ interpretation and perception of the quality standard?

  • Jake,

    I enjoyed reading your reply because we both conducted a comparison of Whole Foods and McDonald’s, although focusing on different operations strategies. I found it interesting that although you spoke on Quality Management strategy and I spoke on Design of Goods and Services strategies, we both noted the interconnection between these strategies. I liked how you pointed out that McDonald’s strives to provide the highest quality products within “cost and price limits” because this strictly contrasts Whole Foods that strives to provide the highest quality products with the only limits being rationality of the consumer (i.e. they price above market price but within reason).
    When you discuss the target customer for the two companies you mentioned that they target two different income levels. I agree and disagree with you here. I agree that Whole Foods targets a niche market of middle to upper income consumers, however, I wouldn’t agree that McDonald’s doesn’t target those people as well. I believe McDonald’s targets the consumer population as a whole, shown in their flexibility of services and products, but trademarks being “affordable” and “easy”. I would say their consistency of quality would appeal to all income levels and is a place that one goes for the consistency of the menu, not strictly because it’s a ‘cheap meal’ so to say.

    Thanks for sharing!

• A process is a an activity that transforms inputs into outputs. An operation is a collection of processes. Operations management is the design, direction, and control of processes and operations. Processes described wiithin the Panmore post on McDonald’s include design of goods, capacity design, scheduling of workers and hours, inventory purchases, hiring of employees, job design, supplier relations, and the production line.

  McDonald’s competitive strategy of consistent and top quality is reflected in their operations management through their production line which allows for each item produced to be consistent and of top quality within the price constraint. To fulfill the needs of the production line, McDonald’s human resources department focuses on training employees to work in restaurant kitchens and production areas. McDonald’s focus on quality is also visible with both local and corporate maintenance providers working on the restaurant equipment.

  Another competitive strategy McDonald’s employs is low cost. This is reflected in their process of designing goods with affordable serving sizes in mind. Similarly the production line approach used in their process in capacity design allows for low costs.

• When it comes to quality management, the two most important aspects for companies to consider are the overall level of quality and the consistency of the product or service delivered. As the Panmore analysis details, McDonald’s aims to deliver the highest quality product they can. However, they can only do so much. Customers expect low prices, and in order to keep costs low, the overall level of quality must remain low as well. While McDonald’s overall quality might be lacking, the consistency of their product cannot be beat. I studied abroad this previous semester, and I ate McDonald’s in Copenhagen, Oslo, Madrid, Barcelona, Prague, and many other cities. No matter where I went, the menu and quality of the items remained the exact same. Even compared to McDonald’s in the United States, the food is impressively similar. This convenient familiarity is one of the main reasons for the chain’s overall success. Even though the overall level of quality is sacrificed for price and consumer expectation, there is a comfort in knowing that wherever you are in the world, you can expect McDonald’s to deliver a consistent product.

  Burger King, on the other hand, is focused more on overall level of quality and delivering a higher quality product than their competitors. In order to do this, Burger King administers product quality tests as well as gathers online customer feedback. Focusing on the quality of ingredients and taste of the product, Burger King’s prices are a bit higher than those at McDonald’s. During my time abroad, I personally chose to eat at McDonald’s over Burger King to save money. Each customer is different, however, so some people certainly prefer to sacrifice price or consistency for overall quality of the product. Despite this, McDonald’s has maintained superior success both at home and abroad due to the consistency of their product and their comparatively low prices.

  • Nicholas,

    You are correct in your analysis of McDonald’s emphasis on consistency. I also reached this conclusion after thinking about my own international experiences. When I was in High School, I had the opportunity to travel to India, which has a completely different culture from the culture here in America. Aside from the fact that the Indian menu did not have a burger (since it is illegal to slaughter cows in most Indian states), the rest of the food options looked and tasted very similar to the way it does here in America. Here is the link to the Indian McDonald’s menu for your own reference: http://www.mcdonaldsindia.net/burgers.aspx

    I find this consistency to be remarkable and one of the most important aspects to their operations. In addition to consistency, McDonald’s has a reputation for being a cheaper option for food. Now, as you have said in your response, both of these aspects (cheap and consistent food), are big reasons for McDonald’s success. Therefore, I find it very interesting to see their desire to produce higher quality food within last couple months. This desire raises questions as to how they will sustain the cost of producing higher quality food. Will they have to raise the prices, which would eliminate the loyalty of lower income families? Will they decide to automate certain areas of production, which will lead to less employees and decreased labor costs? Will they decide to take a loss on profit margins, which will hurt the bottom line? Each of these alternatives present a dilemma for McDonald’s executives, who should seriously consider the consequences of certain actions. I just find it interesting that they have a desire to change from an aspect that has been so important to their success over the years.

    • I actually haven’t noticed McDonald’s desire to increase the quality of their food. Are they advertising for new items? Improving menu constants? I haven’t been to a restaurant or seen any of their ads lately, so I am out of the loop. That being said, I totally agree that McDonald’s has found the formula to success by utilizing cheap prices and delivering consistent food. However, it’s interesting to note a drop in revenue over the past few years (https://www.statista.com/statistics/219453/revenue-of-the-mcdonalds-corporation-by-geographic-region/). One explanation for this and for their change in menu quality could involve consumers becoming more health conscious and wanting to eat at healthier fast food chains like Panera or Chipotle. If McDonald’s really is trying to improve the quality of their food, then all of the alternatives you mentioned become quite important for them to consider. Do they risk increasing prices and cutting off a consistent, low-income consumer segment? Or do they keep the prices the same and risk losing even more revenue. Whichever option McDonald’s decides to pursue, they should strongly consider increasing promotion for their new, healthier product in hopes of attracting and retaining new customers. It will be interesting to see how this plays out in the future.

  • Nicholas,

    I found your comment insightful, and the personal anecdotes from your time helped enhance your insights. I did not personally read the Burger King analysis on Panmore’s site, primarily because I expected it to be quite similar to McDonald’s—it was interesting to read your comment and find that this was not the case. I noticed in the McDonald’s analysis that Panmore did not highlight McDonald’s use of quality checks the same way that they did in their Burger King analysis. This certainly helps MCD keep costs low, but I’m curious how this impacts the overall quality of McDonald’s product. As I thought about this, I couldn’t help but reflect on the initial comment and how it might relate to the issue of quality reviews/checks. In my comment, I questioned why McDonald’s does not integrate more automated processes into their food prep “production line.” One reason that I expect MCD hasn’t integrated more automated processes is that automation makes more economic sense if it is replacing a worker with a high salary—a MCD employee does not receive a competitive salary. However, if MCD were to automate their food preparation process, they could devote leverage a system where humans and machines work in tandem. For instance, employee training and attention could pivot away from food prep to issues such as quality control, in essence, increasing MCD’s ability to deliver a higher quality product.
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  • Nicholas,
    Your discussion of the importance of the consistency of the quality of McDonald’s products reminded me of the Panmore analysis of Ford Motor Company. Like McDonald’s, Ford aims to supply consistent quality throughout the world, meaning that a Ford in America is of equal quality to a Ford in a foreign country. In doing so, Ford, like McDonald’s successfully maintains customer expectations. Ford customers are also more likely to be satisfied with their purchase because they know that regardless of their specific location, the quality of a Ford car will remain equal. McDonald’s success in providing consistent products to its customers within the fast food industry can be equated to Ford’s continual global success within the automobile industry.

• One of the most important criteria for McDonald’s competitive priority is “Quality.” This criteria is broken up into two parts: “high quality” and “consistent quality”. Although McDonald’s desires to maximize their quality given certain constraints, the restaurant’s most important claim to fame is its remarkable consistency throughout the world. Food quality, equipment, and the layout of the restaurant are generally very, very similar no matter what country the restaurant is in. This consistency adds to customer satisfaction, forever making McDonald’s a well-known and reliable place to eat.

  Wendy’s also focuses on the “Quality” criteria within the restaurant’s competitive priority. However, instead of focussing more on “consistent quality,” Wendy’s focuses more on “high quality.” Because of this stance, consumers have come to expect high quality products, making it imperative that the restaurant emphasizes high quality during the production of their food. Therefore, both McDonald’s and Wendy’s emphasize the importance of providing quality to the consumer but go about doing so in different ways.

  • Daniel, I agree with this assessment of the competitive priorities of McDonald’s versus Wendy’s. While both focus on quality, McDonald’s focuses more on consistent quality while Wendy’s focuses more on high quality. Specifically this difference is clear through how McDonald’s and Wendy’s address the topic of quality management. McDonald’s uses a production line to focus on consistent quality within price constraints while Wendy’s relies on its mission and visions statements as framework for operations managers to apply the high quality standards during expansion. The production line focuses on creating a standardized product across locations while the mission of Wendy’s is to provide high quality food and is carried out through locations.

    • After reading the analysis between McDonalds and Wendys, I thought it would be interesting to look a Panmore’s assessment of Burger King and their competitive priorities because it is such a close competitor. I found that instead of focusing on their quality they focus on differentiation. This is exemplified with their former slogan “have it your way”. It means that they are creating value for the consumer by offering them exactly what they want. Burger King also differentiates their offerings by offering more unique menu options that are not regularly found at fast food places. Lastly, they allow for more customer input than their other competitors offer by having a ‘My BK Experience’ website.

      Because Burger King focuses more on differentiation, they have to have more complex ways of production that allows for a customer to customize their order to exactly how they like it. For example, McDonalds has an automated machine that dispenses standardized amounts of condiments. In comparison, all condiments at Burger King are dispensed by hand. This makes me wonder how much longer production is for a single item at Burger King compared to McDonalds or Wendy’s?

      http://panmore.com/burger-king-generic-intensive-growth-strategies
      https://www.bartleby.com/essay/Operational-Difference-Between-Mcdonalds-and-Burger-King-P3ATJYNMC

  • Daniel,

    I agree with your statement that “one of the most important criteria for McDonald’s competitive priority is “Quality”,” where growing up and occasionally eating at McDonald’s, I can personally attest to this criteria of quality. Throughout the years, and at every new McDonald’s location, the product has consistently remained high in quality and consistent in nature. I enjoyed viewing the article on Tesla as a means of comparison to McDonald’s. Though the industry is naturally different for both corporations, some of the same processes are occurring, where both entities are committed to delivering high quality products that meet the expectations of the consumer. Whether it be a car or a cheeseburger, the processes involved to make the two highlight the operations within the firms. I like that you outline the importance across companies of providing quality to the consumer, even if in different ways.

  • Daniel,

    I agree that Wendy’s competitive priority within the fast food business is definitely “high quality.” At its core, all fast food is going to be of rather consistent low quality with rather consistent unhealthiness. However, on the rare occasion in which I want fast food, I usually choose Wendy’s because I perceive it as higher quality. This made me think about why I would think that, as someone who seldom eats at fast food restaurants. Sure, all of the things Panmore mentioned do create quality at some point in the value chain, but I realized it was actually because of something that Panmore did not mention, which is their trademark “Never Frozen Beef” motto. More than just a motto, this is how Wendy’s first set themselves apart in 1969 (https://www.wendys.com/en-us/fresh-beef). They have prided themselves on this and based much of their marketing and supply chain management on it. Look at any competitors’ website and you will find “100% real beef,” which may as well say “100% frozen beef.” All that aside, I think it is important to look beyond simply what their competitive priority is within the fast food industry and further at how they bring that priority to the public eye.

  • Daniel, I agree with your analysis on McDonald’s focus on consistent quality versus Wendy’s focus on higher quality. Other responses to your post compare McDonald’s to Wendy’s or another fast food chain, so I will compare the consistent quality of McDonald’s you discussed to the quality of Whole Foods Markets.

    Although this comparison is not as direct because one is fast food and one is more in the grocery sector, they both still uses processes to produce a certain quality of food products. As Panmore describes, Whole Foods’ quality is high and they strive for healthy, certified organic and non-GMO food in their stores. Whole Foods, like you discussed with Wendy’s, focuses on high quality, but Whole Foods also implements consistent quality with their process of certifying foods to ensure customers they are organic. McDonald’s, as you mentioned, focuses on processes that produce low, but consistent quality food. Both places have their respective target markets and certain types of consumer which expect the quality that is delivered to them. The processes that produce the quality of their food products are a part of what make their brands so successful.

  • Daniel,

    You make a good point in mentioning the customer satisfaction that comes from the consistency of each location. As a customer, I can personally say that it is nice being able to walk into each location knowing exactly what I’m walking into.

    You do a good job in pointing out how McDonald’s and Wendy’s both focus on the quality but how they focus on different types of quality. It is interesting to see how two fast food companies can take such different stances on quality. This is common in other industries too. This past summer I interned at a high end health and fitness facility. This company focused on high quality services and well-kept facilities compared to some competitors.

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