McDonald’s Case Study: Cross Functional Collaboration and Organizational Culture.
McDonald’s is a multinational restaurant brand and a leading name in the fast-food industry. It is the second-largest fast-food brand operated mainly by franchisees. The company operates more than 38,000 restaurant stores worldwide. McDonald’s enjoys strong popularity worldwide. The key factors driving its global popularity include menu diversity, competitive pricing, and focus on customer service.
The company generated net revenue of $21 billion in fiscal 2019. It is enjoying strong operating margins but McDonald’s also has high debt obligations. While its operating margin at the end of 2019 stood at 43% compared to 42% at the end of the previous fiscal. Its debt obligations stood at $34.2 billion in 2019 compared to $31.1 billion in 2018. The company has organized its business geographically into three segments. The US market segment of McDonald’s is 95% franchised. The international operated markets segment is 84% franchised and the international developmental licensed and corporate market segment is 98% franchised. (McDonald’s, 2020)
There are two main sources of McDonald’s revenue, which include the sales from the company-operated stores and the fees from franchised stores. The new CEO of McDonald’s is Chris Kempczinski. The focus of the company leadership and top executives remains on maintaining ethical business operations. To ensure better performance and higher efficiency, the company is investing in technology. McDonald’s leadership has focused on growing collaboration across various functions to drive higher accountability and to ensure that the company can achieve superior growth. Digital technology is driving several changes across the company. The company has also grown its focus on digital across sales, marketing, customer service, HRM, and other areas to achieve higher operational efficiency.
McDonald’s Organizational Functions:
McDonald’s follows a divisional organizational structure. From marketing to sales, supply chain, restaurant operations, legal, finance, and HRM, the company’s operations are divided into various functional divisions (Pratap, 2020).
The marketing function at McDonald’s is responsible for activities that help the business churn demand and grow its sales worldwide. Marketing has always been a central focus area for McDonald’s. There is heavy competition in the fast-food industry. There are several major competitors of McDonald’s in the market like Burger King, Subway, and Wendy’s that offer similar products. Marketing is one of the most important functions of the organization. McDonald’s leading position in the industry is also a result of its focus on marketing. McDonald’s is a globally famous brand. The marketing personnel focuses on growing brand awareness and driving customer retention higher. They also work on creating and running campaigns through digital channels, Television, and social media.
Supplier management is also an important function at McDonald’s. It is critical for McDonald’s to focus on managing its supplier relationships so that the company can ensure a continuous supply of good quality raw materials. Apart from food and packaging, McDonald’s restaurants also source equipment and other inputs from thousands of independent suppliers. The focus of the supplier management function at McDonald’s is maintaining quality standards throughout the system. Apart from having quality centers around the world, the company has also established a Food Safety Advisory Council that looks after food safety concerns in the McDonald’s system.
HRM is also a critical function at McDonald’s that ensures the employees are performing at their best. The company employed 205,000 people as of the end of 2019. The HRM function oversees employee recruitment, training, and other critical areas like performance management. Strategically managing its HR has enabled the company to grow its competitive advantage in the market. From store operations to other areas, the company has to ensure that its employees are performing at their best. This ensures superior organizational performance and customer experience.
The company has divided its business on the basis of geographic segments. The US is the main geographic segment of McDonald’s. The international operations of the company are divided into two segments further. Apart from eight domestic McDonald’s subsidiaries, the company also has several international subsidiaries. The company operates its business mainly through franchisees. However, it also owns some company-operated stores that serve as a venue for operations training and innovation.
Store operations are also a critical function at McDonald’s. The employees working at McDonald’s restaurant stores play a critical role in ensuring higher customer satisfaction. These employees are trained to provide customer friendly service at the McDonald’s stores worldwide.
McDonald’s Organizational Structure :
McDonald’s follows a functional organizational structure that allows the company to run organizational operations efficiently. The organizations following a functional organizational structure categorize jobs and positions on the basis of similarity in functions like marketing, operations, HRM, finance, and supply chain management. While the organizational structure of McDonald’s is basically functional, it is a mix of regional and functional. The organization also runs its business on a geographical basis like global and regional operations. For example, Chris Kempczinski, who is the current President & CEO of McDonald’s used to be the President of McDonald’s US operations earlier.
Its operations are mainly divided into domestic and international segments. Joe Erlinger is the president of McDonald’s US operations and Ian Borden is the president of McDonald’s international operations (McDonald’s, 2020).
|Chris Kempczinski (President &CEO)|
|Ian Borden(President McDonald’s International)||Joe Erlinger(President McDonald’s USA)|
|Francesca Debiase (Executive VP and Chief Supply chain officer)|
|Brian Mullens (Senior Vice President, Global Finance)|
|Kevin Ozan (Executive Vice President and CFO)|
|Daniel Henry (Executive Vice President, Global CIO)|
|Lucy Brady (Chief Digital Customer Engagement Officer)|
|Alistair Macrow (Senior VP & Global Chief Marketing Officer)|
Image source: Pinterest.
Cross Functional Interaction and collaboration at McDonald’s:
Cross-functional collaboration has become necessary to maintain organizational growth momentum across all industry sectors. At McDonald’s, the leadership maintains a heavy focus on cross-functional collaboration. It helps the company achieve performance targets and organizational objectives. The company is focusing on digitalization to grow the level of collaboration across various functions. Technology has become a key driver of growth for fast food businesses, which have faced several difficulties maintaining their sales during the pandemic. Amidst a nationwide lockdown, fast food brands like McDonald’s made changes to their operating model to serve their customers in the United States. During the pandemic, the need for cross-functional collaboration grew even more highlighted.
In the past, the company has achieved success in several areas including customer engagement, sales growth, operational efficiency, and marketing through cross-functional collaboration. Seamless communication between the various functions at McDonald’s drives superior performance. It also drives super Return on Investment (ROI) in marketing for McDonald’s. The company has run several successful marketing campaigns in the past.
Marketing does not involve only the marketing or customer service functions. To achieve higher ROI, other functions like supply chain and HRM also have to get involved. Now, marketing is not the sole responsibility of the marketing function. It is now more of a cross-functional responsibility involving more departments like communications, operations, supply chain, sales, and customer service. Digital technology enables superior communication between various functions and allows project teams to communicate and collaborate on projects as well as receive feedback in real-time.
McDonald’s frequently launches special products in various local markets. To ensure that a product is a success, the company runs marketing campaigns. However, its success does not depend solely on marketing but product quality, customer service, and many more factors come into play that can make the product a success. For example, McDonald’s launched All day Breakfast in 2015. All Day Breakfast was crafted carefully to suit the needs of modern jobbers that worked in various shifts. McDonald’s believed the product was not going to be an instant success and there were significant risks involved as this product competed with existing offerings from McDonald’s. Making the new offering a success was not possible without a synergistic collaboration between marketing, sales, supply chain, and restaurant operations functions.
Launching a new product required McDonald’s to ready all these functions to beat the challenge. While the marketing, sales, and operation functions had a major challenge before them, the biggest challenge was before the supply chain function (McCorkle, 2017). The company wanted a flawless launch but there were several challenges like uncertain demand, the supply of critical raw materials, cooperation of franchisees, and so on. The marketing, sales and operations functions were ready to deal with the challenge. The marketing function was tasked with preparing ads, selecting the most influential channels, and cooperating with other functions like sales and operations to gather and analyze data for forecasting demand.
However, the most critical role was played by the supply chain function that had to ensure the cooperation of suppliers. If the company could not secure the supply of critical raw materials, it could have been forced to abort the ADB. There was not much time either since the company wanted to execute the plan early and the supply chain function had just a few months to inform the suppliers and secure their commitment to making ADB a success. Predicting demand required the supply chain function to collate data and present an integrated picture.
Digital technology played a critical role in making the plan a success. The supply chain function successfully collaborated with the other functions including operations, marketing, and sales allowing all these functions to work in tandem and ensure the success of the ADB launch. The marketing function selected the most suitable channels for promotion including television, social media, and digital promotions. The sales and operations functions also played a major role in the success of ADB. The launch of ADB was welcomed around the US by customers.
The collaboration between sales, operations, marketing, and supply chain functions ensured that the company gathered the necessary data and information to understand customer reactions. McDonald’s had also formed contingency plans if anything went wrong. However, data played a critical role in making its plan successful. The data being generated from all the channels including sales, marketing, supply chain, and others allowed the company to track the success of its plan and act in the event of a contingency. The digital marketing team at McDonald’s decided to make use of social media as the central promotional tool.
“Over the course of September 2015, the pre-launch of All Day Breakfast kicked off with 12,000 Tweets to McDonald’s customers. The announcement of the launch began with a Tweet to the first person who ever requested 24/7 breakfast on social media”
While each function played a significant role in the success of ADB, the collaboration between them and their use of data and analytics were instrumental in making ADB a success.
Apart from the other things, communication played a role in determining the success of the campaign. Whether it was the communication between the supply chain function and the suppliers, cross functional communication among marketing, sales, supply chain and other functions or the marketing communication targeted at customers, all of them helped make the launch a success. Five years later, McDonald’s is still celebrating the success of ADB. It continues to reduce operational complexity in its system by adopting innovative communication channels that facilitate higher cross-functional collaboration and superior performance.
McDonald’s Organizational Culture:
For organizations of all sizes, culture is a fundamental driver of organizational performance and productivity. McDonald’s is a global fast-food brand. However, its global operations are driven by a central culture that focuses on customer service and customer satisfaction. Customer service is a basic tenet of McDonald’s organizational culture. Other major cultural values that dictate everyday performance at all levels of the organization include integrity and collaboration (McDonald’s, 2020). McDonald’s has differentiated its brand from other fast food businesses through a culture driven by positivity. Its culture promotes flexibility, opportunity, and development. These are some essential tenets of a modern culture that strives to deliver the highest customer satisfaction. They guide workplace behavior and key decisions throughout the organization (Pratap, 2020).
At McDonald’s, organizational culture is at the core of several things including the everyday performance of the employees at the frontline. McDonald’s stores around the world see heavy footfall most of the days during the year. Customer satisfaction depends on the performance of the McDonald’s employees working at the frontline inside the stores. It also depends on the teamwork between employees. The higher the level of teamwork, the better the level of service, and the higher is the resulting customer satisfaction. McDonald’s trains its employees to provide the best quality customer service and to work as a team. In reality, it translates into superior employee performance and lower work stress. The company also trains its employees to maintain a jolly environment inside stores so that customers can have a superior dining experience. In this way, organizational culture has a significant impact on customer experience at McDonald’s stores.
Another important area where the culture of an organization is a leading influence is marketing. Culture also plays an important role in shaping the image of McDonald’s as a fast-food brand around the world. Customer service is a central tenet of McDonald’s culture (McDonald’s Corporate, 2020). The customers’ perception of McDonald’s does not depend only on the quality of food it serves but also on the store environment and the level of service. Apart from a customer-friendly dining environment, McDonald’s also leverages its culture to create the perception of an innovative food brand. The company releases new twists now and then to engage its customers and tingle their taste buds. A customer-centric culture cares for the customers’ happiness. These factors grow demand as they help to attract, engage, and retain customers. The focus is on creating more happiness for both McDonald’s employees and customers. It offers a significant competitive advantage for the brand. Its customer-centric culture has resulted in stronger brand equity and superior returns on marketing investment.
McCorkle, K. C. (2017). McDonald’s All Day Breakfast Launch: The Strategic Value of McDonald’s Supply Chain. Purdue University. Retrieved October, 2020, from https://agribusiness.purdue.edu/wp-content/uploads/2019/08/1-mcdonald-s-case-study-cs6-2.pdf
McDonald’s. (2020). McDonald’s Leadership. https://corporate.mcdonalds.com/corpmcd/about-us/leadership.html
McDonald’s. (2020, January 29). McDonald’s Reports Fourth Quarter And Full Year 2019 Results And Quarterly Cash Dividend. McDonald’s Company News. https://mcdonaldscorporation.gcs-web.com/news-releases/news-release-details/mcdonalds-reports-fourth-quarter-and-full-year-2019-results-and
McDonald’s. (2020). What is McDonald’s culture like? McDonald’s. Retrieved 2020, from https://www.mcdonalds.com/gb/en-gb/help/faq/18357-what-is-mcdonalds-culture-like.html
McDonald’s Corporate. (2020). Our Values. McDonald’s Corporate. Retrieved 2020, from https://corporate.mcdonalds.com/corpmcd/about-us/our-values.html
Pratap, A. (2020). McDonald’s Business Model. Notesmatic. https://notesmatic.com/2019/01/mcdonalds-business-model/
Pratap, A. (2020, April). Organizational culture and why it matters. Notesmatic. Retrieved 2020, from https://notesmatic.com/2020/04/organizational-culture-and-why-it-matters/
Sprinklr. (2016). Why you’re still lovin it. Sprinklr. Retrieved 2020, from https://blog.sprinklr.com/wp-content/uploads/2016/08/20160824_CS_EN_McDonalds_Customer-First-Case-Study_V01.pdf