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Sustainability and Operational Excellence: Case Study of McDonald’s (Essay Sample)

This research paper explores the concept of operational excellence and its relationship with sustainability, focusing on economic, social, and environmental aspects. Operational excellence is defined as executing a business strategy consistently and reliably, leading to increased revenue, reduced operational costs, and lower operational risks. The study primarily examines how McDonald's, a global fast-food corporation, implements operational excellence across these three dimensions. The paper provides an overview of McDonald's as a company and its unique business model, with a strong emphasis on franchising. Approximately 94% of McDonald's restaurants are franchises, contributing significantly to the company's revenue and operational efficiency. It delves into the operational tools and strategies employed by McDonald's to achieve operational excellence, including designing products to meet customer preferences, quality management, process efficiency, and supply chain and inventory management. The research paper highlights McDonald's commitment to sustainability excellence, with a focus on the United Nations Sustainable Development Goals (SDGs). It discusses how McDonald's addresses issues such as zero hunger, climate action, diversity, equity, and inclusion, and corporate social responsibility. In conclusion, the paper emphasizes that operational excellence and sustainability are interconnected and critical for a company's success. McDonald's has integrated these principles into its operations, contributing to its global competitiveness and growth. The paper recommends that McDonald's should continue to assess its business position, engage its team, and commit to continuous improvement to maintain its operational excellence and sustainability source..
Sustainability and Operational Excellence: Case Study of McDonald’s Student’s name: Professor: Course: Students ID: Date: Table of Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc102417468 \h 2McDonald Overview and its Business Model PAGEREF _Toc102417469 \h 3McDonals Operational Tools and Excellence PAGEREF _Toc102417470 \h 5a. Design of Goods and Services to suit customer tastes and preferenes PAGEREF _Toc102417471 \h 6b. Quality Management, Process, And Capacity Design PAGEREF _Toc102417472 \h 7c. Supply chanin and Inventory management PAGEREF _Toc102417473 \h 7Sustainability Excelelnce PAGEREF _Toc102417475 \h 9a. Zero Hunger, Decenet work and economic growth PAGEREF _Toc102417476 \h 10b. Climate actions and Responsible Production and Consumption PAGEREF _Toc102417477 \h 10c. Diversity, Equity & Inclusion PAGEREF _Toc102417478 \h 11d. Community engagement and corporate social responsibility PAGEREF _Toc102417479 \h 12Discussing Macdonalds Context of Operational excellence and Sustainability PAGEREF _Toc102417480 \h 13Conclusion PAGEREF _Toc102417481 \h 14Recommendation PAGEREF _Toc102417482 \h 15Bibliography PAGEREF _Toc102417483 \h 16 Introduction Operation excellence is defined as the process of executing a business strategy consistently and more reliably than competitors resulting in increased revenue, lower operational costs and lower operational risks. It is widely accepted that the concept of operation excellence and efficiency revolves around three key areas: economic, social, and environmental aspects. From an economic perspective operational excellence in any company whether small or large corporations, is measured based on the overall efficiency in operations costs and operational models such as six-sigma, lean manufacturing, among others. Pollution reduction, efficiency in processing, reduced pollution rate, increased environmental sustainability, and engagement in social sustainability increases opportunities and enhances overall safety in and outside work. Operational excellence sets out three types of sustainability namely: (1) social sustainability; (2) economic sustainability; and (3) environmental sustainability (Henríquez-Machado, et al., 2021). From an organizational perspective, sustainability is considered an operational strategy that simultaneously factors in the environmental, economic, and social impacts of activities and processes executed by the larger organization. Operational strategy remains a vital requirement today largely due to the increasing environmental concerns and call for safe and environmentally friendly products. All companies operating in the global space have integrated operation excellence schemes in their operations with a sole goal of attaining sustainability. With operational excellence, companies are challenged to embrace continuous developments in order to attain a competitive edge. The motivation of this case study is to find out how implementation of operational excellence in McDonald Company is affecting the three aforementioned areas – economic, social, and environmental – simultaneously (Sehnem, et al., 2019). Understanding McDonalds degree of implementation of operational excellence in the three dimensions of sustainability is a critical goal in this case study. McDonald Overview and its Business Model McDonald is a US-based multination fast food corporation founded in 1955 in San Bernardino California, U.S.A. As at January 2022, McDonald ranked as the third leading food service organization globally after Starbucks and compass group at second and first respectively. McDonald which generates over $4 billion sales annually operates over 38,695 restaurants in more than 100 countries and serves over 69 million people on a daily basis. Unlike many other food service organizations, McDonald has proved to have the financial position and the scale to compete in a global scale. With a recognized brand, the company employs over 200,000 employees globally and already has an unapparelled infrastructure and competence in retailing, restaurant operation, real estate, marketing and franchising. McDonald attributes its global reach and competitiveness to good customer service and extensive community outreach. The companies realizes that consumers will always chose value and have gone an extra mile to integrate value-centered system where employees are trained to be courteous and helpful to customers. Its mission statement and motto are, “Quality, Service, Cleanliness, and Value.” Guided by the mission statement, the company has centered on good customer service and as a result attained operational excellence in many areas (Carvalho, et al., 2019). McDonald is so not only focused on food safety but also committing to environmental protection in all aspects. right635000McDonald has unique business model that has for many years allowed it to make money by leveraging on its products, fast foods, and franchisees. In its 2019, 10-K, the company reported that out of its 38,695 restaurants, 36059 were franchised by the company, thus operating only 2636 restaurants. This means that approximately 94% of McDonalds restaurants are franchises. This model of operation has seen the company increase its revenue stream while reducing its operational costs significantly. McDonald further has extreme control over its leases, and has periodically used its market position to easily negotiate lease deals. From an expert perspective, 82% of the company’s revenue come from franchise with only 16% coming from the company managed businesses (Mani and Delgado, 2018). McDonalds franchises are highly in demand because of its perceived efficiency in ordering supplies, paying rent and salaries. In order to attract franchises, McDonald offers an almost guaranteed money-makers due to its impressive profit margins. Its established brand, extensive markets, and diverse business segments also gives it an extra advantage over competitors. McDonald operates in three major business segments – United states, internationally operated markets, and international development licenced markets and corporates. US market accounts for about 37% revenue, internationally operated markets accounting for 54%, and international licenced markets and corporate accounting for 9% (Moktadir, et al., 2020). At the moment, the US market is the largest and the international developmental licenced markets and corporate the smallest. International operated markets are broken down too many market segments including Germany, Italy, Russia, Spain, Australia, Netherlands, and the United Kingdom. As indicated by its financial reports, McDonald has maintained its profitability over the last decade. While its revenues declined recently due to Covid-19 pandemic the revenue percentage from its franchise department rose, reflecting a transition to a more franchised model in future (Henríquez-Machado, Muñoz-Villamizar, and Santos, 2021). Even though the company is on a profit-making path, the company continues to adopt strategies and models that will further increase its operational efficiency. McDonald Operational Tools and Excellence According to Henríquez-Machado, et al., (2021) operational excellence refers to the overall assembly and distribution of product to achieve a specific task. Excellence on the other hand refers to a goal that must be maintained and sustained to maintain competitive advantage. As such, operation excellence directly refers to the improvement of performance and increased efficiency in all dimension of a business (Venugopal and Saleeshya, 2019). Operating performances looks at areas such as quality, expense, and resilience, whereas sustainable performance looks at areas such as managing individuals and resources in an efficient manner to support business expansion and continuity. In order to increase customer value, McDonald has integrated operational excellence into its company operations. Its global strategy to maintain operational excellence is well structured and maintained (Aguilera and Ruíz, 2019). The company’s operational management strictly supports key areas perceived to major determinants of its success and sustainability. a. Design of Goods and Services to suit customer tastes and preferences McDonald’s key goal in this strategic operation is to offer affordable and customer preferred products. The company designs its products based on the most popular consumer expectations making it easier for them to maintain higher consumer preference rating yearly. in 2017, the company rolled out a model dupped the Velocity Growth Plan, as the company’s ideal customer-centric strategy aimed at identifying and enhances its key drivers of business namely food, value, and customer experience. In the model, the company highlighted three key areas of maintaining its consumer preference rating and included retaining existing customers, regaining new customers, and converting casuals to regular and committed customers. By retaining existing customers, it focused on those areas where the company already had strong foothold such as food-led restaurants and family occasion (Henríquez-Machado, et al., 2021). To regain new customers and convert casuals into regulars the goal was to recommit to areas of strength such as quality, taste, and convenience in addition to enhancing relationship through snack and treat offerings. The company went ahead to address these key areas by identifying growth accelerators (experience of the future, digital, and delivery) which increased value almost ten-folds. In the digital aspect, the company evolved its technology and expanded ways through which customers pay, order, and served. Over the years, it increased number of restaurants offering deliver services and currently the service is available in over three-third of its global system. The company seeks to maintain its operational excellence and sustainability by keeping up fully wit...
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