AN ASSESMENT OF MCDONALD RESTAURANT STAKEHOLDER RELATIONSHIP PDF

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AN ASSESMENT OF MCDONALD RESTAURANT
STAKEHOLDER RELATIONSHIP
Dr Kennedy Amadi, PhD
The Great Lakes University of Kisumu
2019 ...

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AN ASSESMENT OF MCDONALD RESTAURANT STAKEHOLDER RELATIONSHIP Dr Kennedy Amadi, PhD The Great Lakes University of Kisumu 2019

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McDonald’s

Context According to Peterson, H(2017), It was established in 1940 by the brothers Richard and Maurice, McDonald’s has changed as the fast food industry to what is well known by everyone. McDonald’s began as a small hamburger stand in San Bernardino, California, 77 years ago. According to Bhasin,H(2018),McDonald’s is a fast food franchise restaurant having over a 100 outlets globally. It is able to attract customers in more than 36000 of its stores. Size, branches and main markets. According to Forbes (2018), McDonald’s has 235,000 number of employees in the United States, the headquarters being at Oak Brook, Illinois. According to Rosenberg, M(2018), McDonald’s has its branches in 101 countries, more than 36000 restaurants worldwide having 69 million people every day. The place with most McDonald’s restaurants in the United States and specifically California, with 1492 number of McDonald’s. (Theebom, S 2014). According to Jones A (2014), McDonald’s operates in the United States, Europe, Asia, Middle East and Africa and other small countries. Products and services. McDonald’s menu includes a variety of burgers, several chicken sandwiches, chicken nuggets, French fries, salads, oatmeal, shakes, desserts, sundaes, pies soft drinks, coffee and beverages. McDonald’s restaurants in many international markets offer a full or limited breakfast menu, this may include egg or sausage McMuffins, bagel sandwiches and hotcakes, according to Neilson S (2013) Refer to appendix 1: McDonald’s products. Competitors. According to Bhasin, H (2018), McDonald’s has a number of competitors in the market including: 1) 2) 3) 4) 5) 6)

Burger King Subway Starbucks Pizza Hut Domino’s KFC (250 words)

Refer to appendix 2: Competitors. 2

Table of Contents Introduction .......................................................................................................................... 4 Stakeholders ......................................................................................................................... 5 a)

Employees .................................................................................................................. 5

b) Management. ............................................................................................................. 6 1)

Suppliers. .................................................................................................................... 6

2)

Government. ............................................................................................................... 7

2.0. Stakeholder relationship ................................................................................................. 8 Six Market’s Model of Relationship Marketing ................................................................ 8 3.0. Customer loyalty and customer retention ..................................................................... 10 Reichheld’s loyalty based cycle ..................................................................................... 10 The service project profit chain ..................................................................................... 11 4.0. Stakeholder audit ......................................................................................................... 12 Internal stakeholders of McDonald’s ............................................................................. 12 External stakeholders of McDonald’s ............................................................................ 12 SMART objectives of McDonald’s. ....................................................................................... 13 Strategies used by McDonald’s to be successful ............................................................ 13 Conclusion........................................................................................................................... 15 References: ......................................................................................................................... 16 Appendices. ........................................................................................................................ 19

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Introduction. McDonald’s was founded in 1940 as a restaurant operated by Richard and Maurice McDonald, in San Bernardino, California, United States. The products of McDonald’s are the hamburgers, chicken, French fries, soft drinks, milkshakes, salads, desserts, coffee, breakfast and wraps. I have identified and analyzed the main stakeholders of McDonald’s and the various claims they have in the organization. I have used the Mendelow’s Matrix to analyze the McDonald’s stakeholder power and interest in the business. I have talked about the stakeholder relationship in McDonald’s. I have used the Six Market Model to explain the relationship marketing. This consists of the internal, referral, supplier/alliance, recruitment, influence, customer markets. I have explained them further in the task 2 below. I have elaborated on customer loyalty and customer retention. I have used the Reichheld’s loyalty based cycle to talk about customer loyalty and the Service Project Profit Chain to talk about customer retention. I have emphasized on the stakeholder audit, where I have used one internal stakeholder and one external stakeholder to bring out this information. I have also talked about the strategies used by McDonald’s to make it successful which is the marketing mix 4Ps. This assignment talks about the stakeholders of McDonald’s and the influences they have on the organization as well the theories used in the company.

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Stakeholders. Primary stakeholders refer to those who have a direct interest in the organization and its success. They could be those very influential, especially in questions of reputation, but whose stake is more representational than direct (Morphy T 2008). McDonald’s primary stakeholders include: Employees Management Secondary stakeholders refer to those who have an indirect relationship with a company and don’t tend to be employees or directors and don’t have any direct engagement with a company (Morphy T 2008). McDonald’s secondary stakeholders include: Suppliers Government The primary stakeholders are explained as follows: Employees McDonald’s has the employees as its top stakeholder group. These stakeholders’ interests include career development and fair compensation. These interests are addressed through a number of training and development programs. McDonald’s pays them low wages that are almost down to the level of legal minimum wage, but has a global mobility policy that supports leadership development. Employees have a low power and high interest, as they are worried about their pay, promotions, job security, which means they have high job interest as they work hard to achieve their needs. They have low power as they are not able to control anything in the business, they are only kept informed on their tasks. (Smithson N 2017) As emphasized by Whitten, S (2018) most employees of McDonald’s have low power and high interest this led to the employees through the movement of #MeToo demonstrated in Chicago outside the company’s head office. This was due to the alleged sexual harassment at work. Protestors called for more respect in the workplace, better training for managers and more accountability. The gathered at the McDonald’s headquarters repeatedly shouting “We’re here, we’re loud, sexual harassment is not allowed,” and “Respect us, accept us, don’t try to touch us.”

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Management. McDonald’s franchisees employ departmental managers to lead systems such as inventory or training. There are other managers who ensure the stocking, staffing, whereby they make sure the restaurant is properly stocked and staffed during the peak seasons. The managers also aim to achieve high profits and sales goals while ensuring stores with safety, security and food service guidelines and regulations. Managers have high power as they are able to control the day-to-day operations of McDonald’s. (Torrance, M 2019) According to Matyszcyk, C (2018), managers introduce new items as they have high interest to McDonald’s like fresh beef, touchscreen ordering and delivery, where the employees think that it is so much of work. Managers face a problem whereby the give the employees loads of work and much more complicated things without increasing their pay leading to them quitting their jobs. A franchisee had said that the “employee turnover is an all-time high for us” and also “Our restaurants are way too stressful, and people do not want to work in them.” Whitten, S (2018) emphasizes McDonald’s is laying off workers in order to reduce expenses by $500 million by the end of 2019. Managers have high interest as they are focused on increasing profits by getting rid of workers at McDonald’s. McDonald’s is opening a new headquarters in Chicago which means that needs more workers, whereas they are laying off workers to reduce expenses hence leading to poor services.

The external stakeholders are explained as follows: Suppliers. The supply chain strategy has been an integral part of McDonald’s. It included plans for all elements of the supply chain: buy, make, move, store, sell and return. The supply chain management involves planning and management of activities; sourcing and procurement, conversion and all logistics management activities. McDonald’s operates on Just In Time (JIT) strategy that enables them reduce or eliminate waste with a minimum cost. (ukessays 2019) According to Mills, C. (2018), McDonald’s serving salad has always been a wrong idea; 163 people in 10 states have become ill due to the salad, which is said to be poop. The salad was tested by Food and Drug Administration that said the problem was caused by Cyclospora parasite. The illness resulted from a tainted batch of lettuce from a supplier in Steamwood, Illinois. McDonald’s said that they have replaced the lettuce supplier, but the infection takes at least a week or two and may be till six weeks before patients experience symptoms. The suppliers have low power, low interest, as when McDonald’s replaced the lettuce supplier they didn’t have power to resist that nor had interest as they don’t bother change the lettuce.

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1) Government. As emphasized by Price, R (2016), despite public health campaigns focused on obesity and healthy eating, the government has invested more than $262 million into fast-food chains and soft drink companies. There were no bans on investing taxpayer funds in fast-food or soft drinks. The government further invests more than $60 million promoting health lifestyles. The nutrition is recognized as public health issue. McDonald’s actually pays high taxes on U.S profits. Even though the government has high power, nut has low interest as McDonald’s have paid their taxes. They paid a corporate income tax rate of 31.3%, which was one of the highest rates paid in the years 2008-2010. The U.S tax rate was 10% higher than its foreign tax rate. McDonald’s had almost a profit of $8 billion, which had increased and the company’s stock price has risen 122% over prior 5 years. (Foser, J 2011) Refer to appendix 3: Mendelow’s Matrix.

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2.0. Stakeholder relationship. This is a feature of effective organizational management is influenced by a group of interdependent relationships that exist between the key stakeholders. Six Market’s Model of Relationship Marketing. According to UK Essays (2019), Relationship marketing at a macro level recognizes that marketing must broaden its impact across a wider range of market relationships. Organizations must go beyond customer expectations so as to retain them and develop a long lasting bond with them. An organization I has to maintain relations with the internal market and external market. The Six Market’s model has six markets that are as follows: 1) 2) 2) 3) 4) 5)

Internal market. Referral market. Supplier/ Alliance market. Recruitment Market. Influence market. Customer market.

Customer market is the primary focus of marketing that consists of buyers, intermediates, final customers and retailers. Customers are the final consumers of McDonald’s hence are very important for the entity. McDonald’s retains its customers at all possible times, having customer loyalty as their main goal as well as attracting more customers’ every day (Singh, D 2013). Customers at McDonald’s are offered with exceptional services that increases their experiences that help them be maintained at their restaurants with the kind of quality, service, cleanliness and value they deserve. In order to maintain a strong bond with customers, McDonald’s have suppliers that provide quality raw materials to them and have special skilled staff to serve customers in the most appropriate way possible (UK Essays 2019) Referral market in easy terms is known as “Word of Mouth.” It is when we purchase something after being told by friends or relatives. This is very common as it is found in everyone’s daily life, where we get lots of suggestions from different people with different buying preferences. This is one way of promotion that is cheap to establish and effective as well (Singh, D 2013). As said people who have visited McDonald’s through friends telling them, they have never been disappointed with the facilities provided. McDonald’s has the same thing everywhere in the sense of their predictability and consistency is the same everywhere for example whether you visit a McDonald’s restaurant in Melbourne or Paris, your experience will be the same, you will be welcomed and served with all the warmth. It has developed new flavors and menus worldwide, they also have invented new menu items according to the places they are located for example, McAloo Tikkis in India, McMolletes in Mexico, and McTurcos in Turkey (Sahita, K 2016).

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Influence markets are important to a company with reference to relationship marketing as the members involved in this make an impact on the organization. They include government regulators, financial analysts, stockholders, venture capitalists, consumer, environmental and labor associations (UK Essays 2019). One of the factors influencing McDonald’s is the government conflict overseas, whereby they pressurize the company due to high amounts of sodium and sugar used in their foods that causes health complications. McDonald’s overcame this issue with offering extra protein facilities to fruit smoothies, cutting off sugar levels. The government issues between United States that has been a wreck with the United Kingdom and communication with Russia is questionable. Even though McDonald’s has its restaurants globally, there are yet complications between government parties (Frue, K 2018) Internal market is the process of bringing support for a company and its activities within its employees, encouraging them to promote the company goals. Internal market in relational marketing is helpful as it helps treat the employee as an enabler to enhance goals. (Singh, D 2013). McDonald’s internal market is a reason to its growth externally as they launched a “Dollar menu” whereby they charged $1, $2, and $3 on meals aimed towards its valueconscious customers. McDonald’s is confident enough that marketing this and the lower costs due to high number of customers coming will maintain high margins. This method has been successful and McDonald’s had grown greatly in the year 2018 (Team, T 2018) Supplier market. Suppliers are like partners to an organization, improving quality and managing costs. Developing good relationships with suppliers is one main element of relationship marketing. Manufacturers prefer to build less immoral relationships with suppliers creating relatively stable supply chains allowing quality and flexibility in the system with low costs (UK Essays 2019). McDonald’s spends £1 billion every year through its supply chain. About twentysix grams of iceburg lettuce is used for the bestselling McDonald’s product which is the “Big Mac.” McDonald’s has been working with the lettuce suppliers for the prior 26 years, which shows a long-term relationship that is well working to grow McDonald’s. The company has been having fixed suppliers since “day one” in the UK for around 20-30 years. Long-term relationships with suppliers boosts confidence in suppliers to grow and invest in their own business (Katie, J 2018) Recruitment market helps an organization keep the best people who can add value to an organization, who should be experienced, skilled and talented. Getting and retaining best people to work in the profession to build sustainability with the customers. Organizations need to conduct strategic and effective partnerships so as to make the company known and attract best trained workers (Singh, D 2013). McDonald’s employees need to be loyal and trustworthy for them to market the brand. McDonald’s had a lounge where guests could create their own burgers and enjoy live music, where they got trained employees to engage with customers to offer better services (Borges, B 2016) Refer to appendix 4: Six Market’s Model of Relationship Marketing.

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3.0. Customer loyalty and customer retention. Customer loyalty is defined as a positive customer satisfaction where customers are devoted to a company’s products or services as they consistently favor the brand that meet their needs. Loyal customers purchase a firm’s products and services and are not willing to change their preferences over a competitive firm (myaccountingcourse, 2019) Customer retention refers to actions and activities taken to reduce number of customer defections. Customer retention goal is to help retain customers through customer loyalty (Galetto, M 2015) Reichheld’s loyalty based cycle. When customer loyalty increases, it increases the profits and business growth as well. Loyalty leaders are successful due to the customer loyalty in their businesses. Customer loyalty is attained by delivering a higher value to the customers to visit the business regularly. Customers can be retained by reinvesting on cash flows minimizing costs and maximizing revenue. Loyalty from customers is achieved through inventing new ideas, managing and designing the system in the company (Reichheld, F 1993). The additional profit into the company allow invention of new activities to retain and attract more customers. More profit can also lead to increase in employee wage rate that encourages them to work harder and be more committed to the company. Customer loyalty also helps to reduce costs as they bring in more profits that leads to increase in pay, which makes customers work at the same place getting used to the work they do, reducing training costs. Employees would also get job satisfaction leading to better customer service that makes customers stay loyal to the company (Reichheld, F 1993). According to Team, T (2016), Strong customer relationship can improve sale. McDonald’s is working on a loyalty program that would attract more customers and retain the old customers. McDonald’s is looking forward to increase customers, with the loyalty program acting as the way to achieve this. The company is hoping that this will help increase sales, as it three main benefits through the loyalty program: 1) building a relationship with its customers based on the behavior and preferences. 2) Competing better with the competitors who already have loyalty programs going on, E.g. Starbucks and Dunkin Donuts. 3) Increasing sales and encouraging revisits. Friedman, L (2016) emphasizes that, McDonald’s has offers to attract customers, where they are trying something similar as “Buy five Egg McMuffins, get the sixth free.” McDonald’s offers a reward system for its McCafe beverages, launching a smartphone app which will encourage customers to buy more products regularly. McDonald’s is using an “All-Day Breakfast” strategy which instigate customers to buy breakfast items that would be offered all day. Ther...