Mcdonalds

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Innovations at McDonald’s
Indoor seating (1950s)
Drive-through window (1970s)
Adding breakfast to the menu (1980s)
Adding play areas (late 1980s)
Redesign of the kitchens (1990s)
Self-service kiosk (2004)
Now three separate dining sections
Innovations at McDonald’s
Indoor seating (1950s)
Drive-through window (1970s)
Adding breakfast to the menu (1980s)
Adding play areas (late 1980s)
Redesign of the kitchens (1990s)
Self-service kiosk (2004)
Now three separate dining sections
Six out of the seven are layout decisions!
McDonald’s New Layout
Seventh major innovation
Redesigning all 30,000 outlets around the world
Three separate dining areas
Linger zone with comfortable chairs and Wi-Fi connections Grab and go zone with tall counters
Flexible zone for kids and families
Facility layout is a source of competitive advantage
Strategic Importance of Layout Decisions The objective of layout strategy is to develop a cost-effective layout that will meet a firm’s competitive needs Layout Design Considerations
Higher utilization of space, equipment, and people
Improved flow of information, materials, or people
Improved employee morale and safer working conditions Improved customer/client interaction
Flexibility

We open Chapter 9 (Layout Strategies) with the story of  the 7 strategic changes at McDonald’s since 1950. All  but one have been major layout redesigns (eg., indoor seating, drive thru, play areas, self-service kiosks, etc.). Adding breakfast foods to the menu (in the 80′s) was the one product change–until now. The front page article in The Wall Street Journal (Dec.27,2010) details two brand new strategies–the 1st a product decision and the 2nd yet another layout change. Under pressure from market-share competitors of all types–from 7-Eleven and Starbucks to smoothie outlets and gas stations– the 14,000 US McDonald’s have broadened their fare. As of now, there are  fruit smoothies, oatmeal, carmel-mocha drinks, flatbread sandwiches, and “garden” snack wraps. This new product development strategy (Ch.5) has created so many choices that the company has been running ads reminding us it still sells Big Macs. Using manufacturing technology, McDonald’s has made many new items from existing items’ ingredients. Chicken wraps use Chicken Selects’ meat and breakfast burrito tortillas. This simplifies preparation and lowers costs. But new layout costs have  blunted franchisee enthusiasm. The food assembly line (see Figure 9.12 in the text) had to be changed to make wraps. And an even bigger modification was the addition of the $100,000 McCafe drink stations– one of the most expensive changes in years. (The corporation picks up $30,000 of that cost). Stores had to be redesigned to make room for space next to the pick-up window to accommodate the 4 pieces of drink equipment. Some franchisees balked at the price tag and low drink sales volumes, claiming “we are not even paying for the electricity to run the machines”. Discussion questions:

1. Why did McDonald’s make these two strategic changes?
2. Ask your students to rank the importance of the  9 changes, referring to the Global Profile in Ch.9. 3. How has the average McDonald’s  changed in the past decades? Are all of the layout strategies still in place?

OM in the News: Product Enhancement and the McDonald’s Happy MealJuly 27, 2011 tags: Ch.5, Happy Meals, McDonald's, product enhancement
by Barry Render
Under pressure from 550 health organizations to stop marketing  “junk food”  to children and to retire Ronald McDonald (the clown mascot), McDonald’s has chosen the path of product enhancement (Ch.5) as a preemptive strike. The New York Times (July 27, 2011) reports today that the firm will start to fill its Happy Meal boxes with apple slices and...
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