Detailed Value Chain Analysis of McDonald’s
To convert a company’s thoughts into products, a dedicated firm of the company has to engage itself in numerous internal activities. Value chain manifests all the internal activities that a business does to convert inputs as outputs. McDonald’s is one the most successful restaurant businesses today. Starting from hot dog stands to today’s 30,000+ restaurants across the world, McDonald’s has thousands of loyal consumers. McDonald’s value chain analysis pinpoints all the primary activities together with support activities, which effectively adds value to the final product of the company and the company precisely analyzes these activities so that, they can either reduce the cost or can add differentiation. In this article, we will do a value chain analysis for McDonald’s. The article will give us knowledge about the background of McDonald’s, McDonald’s value chain analysis, activities attached with it, and others.
2. Background of McDonald
Starting from a hot dog stand, McDonald’s is one of the most successful restaurant franchise in the world. The first McDonald’s restaurant was started by the McDonald brothers- Richard and Maurice in 1948. They converted their barbecue drive-through restaurant into a burger and milkshake joint. The restaurant resided at San Bernardino in California. It was their second venture, while the first food industry venture was the hot dog stand near the Santa Anita track. Starting from hot dogs, the restaurant company broadened its business. And now, the company sells all types of fast foods, while its Chicken McNuggets, Egg McMuffin, etc., are at the top of sales. At present, McDonald’s operates in over 100 countries through its 30,000+ restaurants.
3. Primary Activities in McDonald’s Value Chain Analysis
In McDonald's value chain, the primary activities can be described in five key points, which include all the actions in McDonald’s value chain analysis. They are:
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McDonald’s has its pre-defined, fixed suppliers. The company purchases the raw vegetables and other necessary raw materials only from them. McDonald’s practices backward vertical integration, which ultimately helps the company to reduce additional costs and ensure top-quality products. The milk and beef required in McDonald’s products come from their farms. For fresh vegetables, McDonald’s relies on the local grocery stores. Soft drinks are served by Coca-Cola, an ally of McDonald’s. Some other necessary raw materials like sugar, yeast, flour, etc., are also supplied from the fixed suppliers.
McDonald’s has totally changed the concept of a traditional restaurant kitchen, thanks to the brothers. Instead of a lot of stations and different equipment, McDonald’s kitchens include some basic tools, which helps them in the speedy response. Here are the basic tools that McDonald’s kitchens have.
- A large grill: The grill is so large that a single person can cook several burgers on it at the same time.
- A fryer: French fries are one of the most demandable items in McDonald’s restaurants. The restaurants include a fryer where a person can make French fries.
- A dressing station: Some people keep adding the same condiments to all burgers here.
- Beverage machine: For dessert items and beverages, McDonald’s includes a milkshake machine and a soda fountain.
- Counters: Customers place their orders in these counters and receive them from the same place.
McDonald’s requires mass production due to its large number of restaurants. Hence, McDonald’s warehouses store enormous amounts of every necessary item for each restaurant.
This chain is also claimed to be automated, meaning that computers keep track of what each restaurant has and should have in its store. The distribution center then ships the necessary items on a regular basis.
McDonald’s managed to reach the top due to its highest quality food and top-quality service. They do this while ensuring a welcoming environment, which is clean and has a great value, as well. The whole company, along with its employees, suppliers, and franchises, works to serve food choices with a balanced array, which allows the customers to access the proper nutritional information. As a result, they can easily make a sound decision.
McDonald’s focuses on sustainable packaging, energy conservation, waste management, and so on. The restaurant company continuously works for a better environment, profitable business, and others.
Marketing and Sales:
McDonald’s restaurants are now available in over 100 countries and territories, 119 to be exact. They serve these territories with over 31,000 restaurants, which employ over 1.5 million people. McDonald’s operates other restaurant brands, as well.
McDonald’s always ensures extensive advertising campaigns, along with its usual media coverage that includes television, newspaper, radio, and other social media. McDonald’s uses signage and billboards largely, as well, not to mention the company’s participation in various social events.
Besides its outstanding food quality, McDonald’s offers some additional services, which makes it one of the greatest food company of all time. Here are some of the additional services.
- Free Wi-Fi: McDonald’s meals now come with Wi-Fi, ensuring a better connection with your friends and family. McDonald’s has over 11,500 restaurants with Wi-Fi connections in them.
- Gift Card: McDonald’s offers pre-paid cards, which allow the customers a convenient and quick way to pay. These can also be used as perfect gifts.
- Play Places: McDonald’s is ready to throw parties for your children. You can bring your kids and give them an enjoyable time of their lifetime, while remaining stress-free yourself.
4. Support Activities in McDonald’s Value Chain Analysis
McDonald’s value chain analysis contains its support activities as well. These support activities play vital roles in the analysis. It is organized in four sections:
McDonald’s infrastructure is sophisticated with the advanced IT while ensuring green activities at the same time. The company works to provide eco-friendly restaurants for its customers and workplaces for its employees. The whole process reflects the company’s sustainability goals.
Human Resource Management
McDonald’s has managed to keep its Human resource management extraordinary with some attractive options. One can have flexible hours and get engaged with other activities while working at McDonald’s. People who have fewer chances of jobs somewhere else can easily serve at McDonald’s.
In terms of technology development, McDonald’s is focusing on modernizing its restaurants while evolving its menu at the same time. An example of McDonald’s technology development is its entering five-year IT support deal with Fujitsu.
A primary reason for McDonald’s successful supply chain management is its E-Procurement system. The system is very efficient, providing huge support to the company’s supply chain management. The procurement site makes the process more convenient and faster for franchises. Besides, it allows different business owners to buy materials and supplies at discounted prices, reducing costs for McDonald’s.
5. Key Takeaways
This article describes briefly how McDonald’s started its business to how it is running today. McDonald’s is precise about its value chain and the activities that support the value chain. Here, the McDonald’s Value Chain Analysis diagram was made with the help of EdrawMax Online. You can use this diagramming tool for making similar analysis diagrams with the editable value Chain Analysis examples as well as other 280+ types of diagrams too.
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Hart, M.,2021.‘The Straightforward Guide to Value Chain Analysis [+ Templates]’, HubSpot, [online]. Available at: https://blog.hubspot.com/sales/value-chain-analysis (Accessed 13th August, 2021)
McDonalds Value Chain Analysis. (2016, Feb). Retrieved fromhttps://research-methodology.net/mcdonalds-value-chain-analysis/ (Accessed 13th August, 2021)
Reed, E., 2019.‘History of McDonald’s: Timeline and Facts’, TheStreet,[online]. Available at: https://www.thestreet.com/markets/history-of-mcdonalds-15128096 (Accessed 13th August, 2021)
For McDonald's to fulfill value creation and choose its value, it performs marketing by segmenting its markets and consumers, targeting the attractive segments, and positioning its brand accordingly. McDonald's performs four types of segmentation: Geographic, Demographic, psychographic, and behavioral segmentation.
The value chain framework is made up of five primary activities -- inbound operations, operations, outbound logistics, marketing and sales, service -- and four secondary activities -- procurement and purchasing, human resource management, technological development and company infrastructure.
A value chain is used to describe all the business activities it takes to create a product from start to finish (e.g., design, production, distribution, and so on). A value chain analysis gives businesses a visual model of these activities, allowing them to determine where they can reduce costs.
Three main steps can be distinguished in value chain analysis: (1) Identify the main functions and types of firms in the value chain; (2) Analyze structural connections; and (3) Analyze dynamics.
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