Mcdonald's in Germany: Germans, Still Lovin' It?

By Nuque-Joo, Annalee; Kim, Dohee et al. | Academy of Strategic Management Journal, April 2019 | Go to article overview

Mcdonald's in Germany: Germans, Still Lovin' It?


Nuque-Joo, Annalee, Kim, Dohee, Choi, Seungho, Academy of Strategic Management Journal


INTRODUCTION

Arcadia, California-After seeing great success with their drive-in hotdog stand in the late 1930s, brothers Mac and Dick McDonald opened their very first burger-and-fries stand-alone restaurant in San Bernardino in 1948. The restaurant became popular for its consistent and high-quality burgers. This success was made possible by the brothers' Speedy Service System, a standardized process where one employee was taught to perform only one step in a meal's preparation for their entire shift. A few years after opening the stand-alone restaurant, the brothers met Ray Kroc, a sales agent who they had bought six new electronic multi-mixers from to use for the shakes they sold in the store. Realizing he was witnessing the growth of a potential business hit, Kroc offered to expand McDonald's and become the brothers' franchising agent. The McDonald brothers hesitated in fear an expansion meant risking the high-quality products associated with the McDonald's brand. However, in 1954, Kroc finally convinced them and officially became the brothers' business partner. Eventually, Kroc bought the restaurant from the brothers for 2.7 million dollars, with a hand-shake promise of 1.9% royalty to the brothers. In 1955, Kroc founded the McDonald's Corporation and opened his very first Corporation-owned franchise in Illinois. In 1960, he then bought exclusive rights to the McDonald's name and it's Speedy Service System. The Speedy Service System was strictly enforced in all McDonald's franchises to maintain the consistent and quality burgers that McDonald's was known for. The Speedy Service System was eventually renamed into The System and has become the core of McDonald's franchises in the US and all over the world.

BUSINESS MODELS AND STRATEGIES

The System: Suppliers, Employees and Franchises

Previously called the "Three-legged stooF, McDonald's "system" is comprised of a network of suppliers, employees and franchises. As of year-end 2018, McDonald's employed over 210,000 employees and operated a systematized franchise network of over 37,855 stores all over the world (McDonald's Corporation, 2018). To manage and ensure effective application of their System, McDonald's partners with local logistics companies that cover their major market segments' logistics and operations. For instance, McDonald's Europe market has partnered with HAVI Logistics for logistics services in Europe since 1981 (HAVI Marketing Analytics, 2015). Through their logistics providers, McDonald's is able to leverage their huge network and produce standardized products at cheaper prices for their customers.

Suppliers-McDonald's suppliers are composed of farmers and food manufacturers who provide ingredients for its food business and equipment suppliers for its kitchen and restaurant equipment needs. Farmers produce raw materials (meat, vegetable) and send them to food manufacturers who turn these materials into ingredients used for McDonald's meals (frozen fries, patties). Distribution centers receive and store these ingredients, and only deliver to franchises on a per-request basis to minimize storage time and expenses. Coordination of all supplier activities are managed by McDonald's Corporation's ("company") Restaurant Supply Planning departments, through an online McCommunications Network dedicated to the management of their global supply network (Birkinshaw, 2012). To maintain quality standards, McDonald's sends third-party auditors to conduct on-site interviews, quality checkups and reviews of suppliers' operations based on strict internal company standards.

Employees-McDonald's employees are called crew members and are all recruited by individual franchise owners (franchisees). Due to varying sizes of its stores, there is no specific number of how many crew members are employed for each store. McDonald's crew members are divided into three categories: salaried management, hourly paid management and hourly paid servers. …

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Mcdonald's in Germany: Germans, Still Lovin' It?
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