McDonald’s and Fast Food Industry in Australia
Executive Summary
Fast food chain, are considered as one of the most powerful and famous business in the world. Many believed that the concept of fast food chains nowadays is linked with the efficiency of the capitalist and the practices of the American consumers. This feature has become the recipe for McDonald’s success and popularity. For some, fast food chains symbolize good capitalism and as opponents of modernity have proven fast food chain is absolute and a powerful factor that make great influence in both society and the culture (Ritzer, 1993). There is one fast food chain industry that conquers the marketplace in the global arena including McDonald’s.
Introduction
This paper discusses the fast food industry of Australia with special emphasis on the case of McDonald’s – among the most popular fast food brands in the world. McDonald’s now boasts of operating, franchising, and serving a worldwide chain of around 30,000 fast food restaurants that prepare, package and sell a menu of ready to eat foods. Specifically, it has branches in 119 countries, and claims to serve 47 million customers each day (McDonald’s Corporation, 2004). It uses Porter’s Value Chain as tool of analysis. Other facts presented are mainly collected through accessible sources particularly the corporate website. This paper is mainly descriptive in nature. All important information are lifted from a variety of sources and are properly referenced.
Background
There has been this steady increase of fast food consumption; there have been some notions as to why there is this occurrence of consumption increase. It has been noted that the two main causes, according to Greenwood and Leslie (1998) are the changes in commercial practice and the changes in lifestyle. For the changes in the commercial practice, the reasons are the increasing influence of the advertiser and the loss of local shops. It could be noted that advertising has been present for almost over a century, and the influencing power of advertising has been rapidly growing. It should be noted that through advertising, consumers often prefer one brand over the other, and prefer one fast food chain over the other. In addition, the loss of local shops is increasing; this is due to the availability of other options like canned, frozen, and ready-to-eat food, shopping centers, and many others. For the change in lifestyle, there is the change of the typical working week which results to the lack of time for cooking and ingredient buying and the change of the role of the mother (i.e. from domestic to working or from food preparer to food provider).
As much as most people prefer to eat in the fast food, fast foods have been known to cause the following: mad cow disease, food poisoning, obesity, malnutrition or nutrient deficiencies, pollution, and loss of food culture (Geoffrey, 2000). During the recent years, nutrient deficiency particularly among children has been apparent (Ridge, 1997); there has been this huge consumption of junk food and soft drinks which results to the decrease of consuming foods high in nutritional value. Obesity has been observed to be a result of the change in eating habits. The gradual loss of ‘food culture’ has been considered as an effect in fast food consumption and that the skills of food preparation has been gradually diminishing and that people are dependent of the ready-made meals.
It has been considered that to be healthy, an individual should observe a certain standard of food intake, i.e. the amount of calorie intake (2000 calorie), recommended dietary allowance. More over, the individual should observe the food pyramid, and the intake of carbohydrates, fats, proteins, and certain vitamins or minerals (Banff, 1998).
Many studies have pointed out that fast food causes ill-effects to consumers. However, it should be observed that there are also menus in these fast food chains that are healthy. There have been this studies that shows that there are food in the fast food chain that are healthy. For instance, in McDonalds, there is a hamburger, a grilled chicken salad deluxe with fat-free herb vinaigrette dressing and a small Sprite; in Wendy’s, a grilled chicken sandwich, iced tea, and a side salad dish with fat-free French Dressing; and in KFC, an original chicken breast, mashed potato and gravy, garden salad wit Italian dressing (Fox, 1997). Moreover, different individuals tend to monitor their food intake in order to avoid excessive calorie, fat, carbohydrate, and protein intake. The studies that have been conducted tend to point out that there are food that these fast food produce that are healthy or could be assessed as healthy. However, there has been limited study with regards to the altering the menus to become more healthy; it should be noticed that people nowadays are getting more health conscious.
McDonald’s in Australia
McDonald’s is among the most popular fast food brands in the world. McDonald’s restaurants offer a substantially uniform menu, common in the usual fast foods. This includes hamburgers, cheeseburgers, chicken sandwiches, french fries, salads, milk shakes, desserts and ice cream sundaes. The company’s top sellers, and can also be considered as innovative ones, include the Big Mac, Quarter Pounder with Cheese, the Filet-O-Fish and Chicken McNuggets (Datamonitor, 2004). Recently, the company has added a number of new nutritional products. Started out in the fifties, McDonald’s now boasts of operating, franchising, and serving a worldwide chain of around 30,000 fast food restaurants that prepare, package and sell a menu of ready to eat foods. Specifically, it has branches in Australia which is regarded as one of the most popular food chain in the country (Elliott, 2003). McDonald’s success is built on a foundation of personal and professional integrity. Hundreds of millions of people around the world trust McDonald’s. We earn that trust everyday by serving safe food, respecting our customers and employees and delivering outstanding Quality, Service, Cleanliness and Value (QSC&V). We build on this trust by being ethical, truthful and dependable. McDonald’s is a large scale employer. For McDonald’s, people are its most important asset. This is because customer satisfaction begins with the attitudes and abilities of employees and committed, effective workers are the best route to success. For these reasons, McDonald’s strives to attract and hire the best, and to provide the best place to work. In fact, McDonald’s is so active and successful in newly emerging markets that other companies will sometimes use the golden arches as a valuable indicator of future growth markets.
McDonald’s is an example of brand franchising. McDonald’s, the franchisor grants the right to sell McDonald’s branded goods to someone wishing to set up their own business, the franchisee. The license agreement allows McDonald’s to insist on manufacturing or operating methods and the quality of the product. This is an arrangement that can suit both parties very well. However, despite of the established brand of McDonald’s Corporation and contrary to its previous achievements; it seems that there is a need for the management to redefine its image. The current growing and bustling population is obviously different from the population of the previous decades in terms of health and nutritional attitudes and behaviors (McDonald’s 2005).
With the unique and efficient strategy of McDonald, both the rationalization of production and consumption of its products have been incomparable in the modern society, and functions as a model for the emergence of the term McDonaldization.
The first person who had coined the popular phrase “McDonaldization” is George Ritzer in his “McDonaldization of Society” which describes the development of modernization i.e. connected with the fast food industry. According to Ritzer (1996), the fast food restaurant is the modern paradigm of the rationalization system (Alfino, Caputo, Wynyard, 1998). McDonaldization is defined as the process of adapting the standards of the fast food chain which functions in a gradually broad range of the social settings including the higher education, health care, work places and other organizations (Zayani, 1997). The point of McDonaldization is to remove unpredictable circumstances from both the production and consumption of food. By eliminating ‘surprises’ from the consumption of food, McDonaldization also removes risk (Turner, 1994).
McDonaldization is a new process although it has deeply rooted in the historical process of rationalization. McDonaldization has a profound effect on the way individuals experience their world. The term describes the rationalization of society—the places and spaces where people live, work, and consume—using the fast-food restaurant as a paradigm. The process is a direct consequence of the ascendance of four related processes: a push for greater efficiency, predictability, calculability, and replacement of human with non-human technology (Ritzer, 2000).
Porter’s Value Chain Analysis
Value Chain is a term used by Michael Porter (1985) to describe the various activities that the organization performs and relates these to the competitive position of the organization. An analysis of the value chain of an organization shows the activities inside and surrounding the organization and connects these to the analysis of the strength of the organization in relation to its competitors. This model enables the organization to evaluate the value that every single organizational activity contributes to its products and services.
Figure 1: Basic Model of Porter’s Value Chain
The value chain concept was established based on the recognition that an organization is not just made up of building, machinery, money and people but these factors should be taken together, arranged and organized into systematic components in order to produce goods and services that customers are willing to purchase. An organization achieves competitive advantage through the ability to perform essential activities and effectively link these activities.
In the value chain model, activities are distinguished as primary or support. Primary activities cover the creation and delivery of products and services, grouped into inbound logistics, operations, outbound logistics, marketing and sales, and service. Every primary activity is related to support activities that seek to help achieve efficiency that are differentiated into procurement, technology development covering research and development, human resource management, and infrastructure such as planning, finance, quality and information management systems. Margin refers to the level of returns that the organization achieves depending upon its ability to integrate and direct the dynamics of primary and support activities towards its goals.
Marketing and sales is a primary activity and a process that commences from the development of a product to customer utilization of the product. McDonalds engages in marketing and sales strategies that creates value linked to the satisfaction of customer demands. Marketing for McDonalds covers the entire process of deciding on food, methods of cooking and serving food, actual delivery of ordered products and services, and ending with post company experience of customers. Its marketing strategies involve the facilitation of the exchange of value-for-value between the restaurant and its customers. McDonalds facilitates the exchange of value by matching the money paid by customers with quality and variety of products and services resulting to the customer feeling of having received their moneys worth and even more than what they paid for. McDonalds targets customer satisfaction by offering food and services, catering to customer preferences to make the customer feel satisfied about the value exchange or transaction affecting the propensity of the customer to return to McDonalds or recommend the restaurant to family, friends and colleagues.
Processes comprise the formula for achieving organizational goals. Every process requires inputs, methods and outputs. Inputs refer to the requisites placed strategically prior to the application of the determined methods. The presence of requisites and the application of methods results to outputs. Processes also pertain to the dynamics of connected structural activities producing things of value to the organization, to stakeholders and customers. A process may be the mechanism through which the organization realizes product and service delivery to customers. A process may form part of an encompassing process so that processes may be viewed through varying degrees of specificity. The connection of processes with value generation implies that processes are also workflows to realize relationship results, such as the close relationship between an organization and its customers. (Keung 2005)
Processes are important to the organization because the organization can manipulate these mechanisms to achieve desired results. In the value chain, processes are mechanisms based on the economic value required by customers. Organizations engage in the primary activities as the main processes in value delivery and optimize available and accessible support activities or processes to achieve efficient value creation and delivery. On the aggregate, the primary and supporting processes should be managed by the organization to direct the dynamics of these factors towards the organization’s objective of value delivery. Process determination, manipulation and management are important factors to be performed simultaneously and continuously by organizations to achieve their targeted goals amidst changing environment (Smith and Fingar 2002).
McDonalds Corporation has evolved in different ways and in different areas due to inappropriate or outdated processes and the changing internal and external global environment. It is during these changes that process determination, manipulation and management reach their height of importance. The first process change that McDonalds went through in order to enhance its value delivery is automation. This required the company to change the application of its entire value chain in order to reorganize its food processing, cooking and food delivery to provide added value to its customers. Raw food is processed through an assembly line utilizing a strict process with each worker assigned to a single specific task. Cooking was done by strictly following a process and food delivery removed dine-in space to speed up the process of fulfilling orders.
The second process change that McDonalds had to manage was its expansion into other countries and different business environments. The company realized that it had to adapt to the unique customer demands in different countries if it were to succeed in taking hold of the global market. McDonalds had to adjust its food preparation, cooking and delivery service to meet new demands. Originally, hamburger patties are made of processed ground beef. However, in India, cows are deemed sacred and the people do not eat beef. The company had to change their food ingredients from beef to mutton for the burger patties and change the process of preparing french-fries from seasoning it with beef–based flavoring to the use of substitute flavoring to respect the reverence for cows and its consideration as a non-food source.
The third process change that McDonalds Corporation had to address is the intensity of the negative publicity that the company faced from animal rights and human rights advocate criticizing the manner that the company treats animals in growing and preparing these as food raw materials as well as the treatment of their workers and employees. In terms of animal rights, advocate groups claim that the company supports the practices of commercial farmers of keeping cows and chickens in closed spaces to obtain optimized weight gain through lack of movement and physical action implying the lack of consideration for animal welfare. In relation to human rights, labor groups claim that McDonalds runs a restrictive and anti-labor organization by not allowing its workers and employees to create unions as well as providing only minimal wages and benefits, particularly in developing countries, that do not meet international labor standards. McDonalds took years to shift its processes to accommodate these issues, which is still a continuing endeavor. Instead of applying a uniform standard for all its franchises, McDonalds is shifting to customized food and service based on the demands of a given market. McDonalds opted to pull out unprofitable chains due to strong negative publicity and concentrate in areas with positive reception.
These process changes are important to organizations in channeling their resources towards activities that work for the company. McDonalds directs different facets of organizational processes in creating and delivering value by evaluating the appropriateness of inputs and the corresponding methods and then linking the inputs and methods to achieve desired results. Without processes, McDonalds does not have the mechanism by which to assess changes in market conditions and rising issues, redirect its inputs and methods to meet these changes and issues, and integrate inputs and methods towards desired outputs.
Conclusion
The McDonald restaurants undoubtedly present a useful and effective example of a common sociological artefact that can be scrutinized to create a more universal conceptualization. Several artefacts and traditions of the modern world are as well recognized and omnipresent as McDonald’s popular brands, promotional strategies with the famous toys and films, its charities and the McDonald’s saturation advertising. McDonald’s views the relationship between franchisor, franchisee and supplier to be of paramount importance to the success of the business (Datamonitor, 2004). Ray Kroc, the founder, recognized the need very early on for franchisees that would dedicate themselves to their restaurants. He wanted people who had to give up another job to take on the franchise venture, relying on their franchise as their sole source of income and would therefore be highly motivated and dedicated. Consequently, McDonald’s will not offer franchises to partnerships, consortia or absentee investors. The initial capital has to come from the franchisee as a guarantee of their commitment. The selection process is rigorous to ensure that McDonald’s only recruits the right people.
References
Alfino, M., Caputo, J.S., Wynyard, R. (1998). McDonaldization Revisited: Critical Essays on Consumer Culture. Westport, CT: Praeger Publishers.
Datamonitor (2004). McDonald’s Corporation Company Profile (online). Available at: www.datamonitor.
Ritzer, G. (1993). The McDonaldization of Society. Thousand Oaks, CA: Pine Forge Press.
Ritzer, G. (2000). The McDonaldization of Society. Revised Edition. Thousand Oaks, CA: Pine Forge Press.
Turner, B.S. (1994). Orientalism, Postmodernism and Globalism. London: Routledge.
Zayani, M. (1997). The McDonaldization of Society: An Investigation into the Changing Character of Contemporary Social Life. Unknown.
http://www.mcdonalds.com/corp/about.html
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