The Category Strategy Project: McDonald's and Beef

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The Category Strategy Project

McDonalds and Beef

Commodities are necessities for the success of numerous businesses throughout the world. Preparation and research concerning a commodity must be completed in order for a company to source that commodity successfully. The purpose of this study is to provide purchasing management and top management with specific information that can be used to construct an advantageous procurement strategy. If a company does not have reliable useful about a commodity, that commodity’s market, and that commodity’s suppliers it will be very hard for them to be able to source that commodity efficiently and effectively which will greatly diminish their ability to succeed in the market place. We chose McDonald’s because of its tremendous success in the global market place. We wanted to choose a company who everyone is familiar with and has been successful at what they do. Another reason why we choose this company is because we believed that, given its huge popularity, it would not be too hard to find information about it. We chose beef because we believed that beef was the company’s most critical commodity.

Company Description
The McDonald's Corporation is one of the world's largest chains of hamburger fast food restaurants; it serves nearly 47 million customers daily. The first McDonald’s restaurant was opened in San Bernardino, CA in 1940; it now serves customers at over 31,000 locations in over 120 countries. The McDonald’s restaurant serves a wide variety of items on their menu including a large number of beef items. The most popular of these beef items include: the Big Mac, the Quarter Pounder, the Hamburger, the Cheeseburger, and the Big N' Tasty. Our report will focus on the sourcing of the beef for these beef items. “McDonald’s beef procurement is operated through its four global geographic divisions; North America, Latin America, Europe and Asia/Pacific/Middle East/Africa” (Murphy, 2009). “They form what is termed the ‘McDonald’s Global Beef Board’” (Murphy, 2009). “All four procurement functions are involved in any significant changes in procurement in any of the other divisions” (Murphy, 2009). “McDonald’s is currently looking to leverage its global scale in order to improve its long term beef sourcing capabilities” (Murphy, 2009). Their new Worldwide Beef Supply Chain director Jose-Luis Bretones is “planning on working towards creating a more integrated global supply network, more open global beef trading options and a procurement system with greater flexibility overall” (Murphy, 2009). However, since McDonald’s is a global corporation with an extremely complex worldwide supply chain, our report will focus predominantly on the procurement of beef by McDonald’s to their locations in the United States. In the past McDonalds has bought mostly American beef for use in their U.S. restaurants and much of their beef still comes from within the country. However, according to McDonalds, “due to a well-documented shortage of lean beef in the U.S., and to meet the needs of (their) customers, (they have started to)… purchase a relatively small percentage of high quality imported lean beef from New Zealand and Australia. (They) do this to supplement (their) domestic beef purchases” (McDonald's Customer Response Center, personal communication, November 7, 2009).

Description of the Commodity
Beef is the name of meat that comes from cattle and other bovines (Travisl, 2009). It is typically served to consumers in the form of steak, burger patties and other ground beef products, hot dogs, beef jerky, roast beef as well as other dishes (Travisl, 2009). The United States, Japan, Brazil and China are world’s largest consumers of beef products (Travisl, 2009). It is a staple of the diet of a very large number of Americans (Travisl, 2009). The largest exporters of beef are...
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