Satisfying Decision Strategy in McDonalds - Case Study Example

Running Header: Decision Making Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: Table of Contents Table of Contents 2 Abstract 3 1.0 Introduction 4 1.1Purpose and Scope 4 1.2 Method 4 2.0Discussions 5 2.2 Satisfying decision Strategy in McDonalds 7 2.3 Mixed Scanning Decision Strategy 9 2.4 Incrementalism Decision Strategy in McDonalds 10 3.0 Recommendations 12 4.0 Conclusion 12 Abstract Managers and decision makers are interested in understanding decision strategies adopted by various multinational companies. This is due to increased competition and complexity of organizations. This report tries to understand and analyze decision strategies adopted by McDonalds. The report begins by finding out how McDonalds sourcing decisions are made with an aim of optimizing the company returns. Furthermore, the report finds out how the company makes satisfying pricing decisions in order to increase its market share. Additionally, McDonalds utilizes mixed scanning decision making strategy in coming up with its menus. Finally, the report recommends further research so as to achieve better results. 1.0 Introduction 1.1Purpose and Scope Successful businesses are created and maintained by making appropriate and consistent decisions. According to Gregus (2010, p. 7), businesses are faced with challenges of continuously creating new products and at the same time to create more value to their customers and stakeholders. This requires them to come up with efficient decisions in order to succeed. Furthermore, sound decision making enables businesses to invent new strategies, adapt to new environments and to change effectively when need arises. Firms must adopt strong and clear directions and procedures so as to come up with suitable decisions. In addition, they must consider the risks they are exposed to and the social factors surrounding them. Moreover, businesses are required to search for the suitable information in order to assist them in making decisions. Therefore, sound decision making plays an important role in building successful business. The aim of this report is to explore major decision strategies adopted by McDonalds. The ultimate intention of this report is to understand and explain the main decision strategies adopted by McDonalds. 1.2 Method The information used in this report was mainly collected from secondary sources which included books, journal articles and McDonald’s publications. The information was analyzed in order to determine decision strategies adopted by McDonalds. 2.0 Discussions 2.1 Optimizing decision making Strategy in McDonalds Varma(2009, p. 17) states that optimizing decision strategy involves selecting the best solution in relation to a problem. Under this method the decision makers must identify as many alternatives as possible and then choose the very best. This strategy requires managers to collect large information pertaining to the problem in order to enable them to identify suitable solutions and at the same to place limitations on different solutions. According to MacDonald Corporation (2010, p. 7) sourcing decisions of the organization are made with due consideration of the various alternatives available. The company places priority on food quality, safety and cost before it makes its purchase decisions in order to maximize its returns as well as to increase the value offered to its customers. Moreover, the company considers its environmental, ethical and economic environment prior to making its sourcing decisions. Enz (2009, p. 20) affirms that MacDonald’s success can be attributed to its ability to satisfy the needs of its customers and shareholders. The company purchase decisions are made by considering different available alternatives so as to maximize its returns. This enables the company to reduce its expenses hence generate large amounts of profits. In addition, MacDonald’s low operating cost has enabled the company to compete more effectively and this has assisted the company in expanding and developing in both the domestic and foreign markets. According to Gregus (2010, p. 10), MacDonald’s sourcing decision are programmed and this is due to the fact that they are repetitive and routinely made. The company has been able to develop strategies for handling its purchase decisions. McDonald Corporation (2010, p. 7) states that in making sourcing decisions the company must consider several factors in order to ensure that it selects the best alternative which optimizes its returns. Furthermore, the finance department utilizes management accounting techniques in order to maximize the company future financial performance. Lafontine and Leibsohn (2008, p. 13) notes that the senior management has a responsibility of reinvesting the profits made by the company in order to increase the value to its shareholders. The management is required to identify the best option of investing the funds either by building new restaurants, paying debt, reinvesting in existing restaurants and paying dividends. Allen and Coates (2009, p. 13) note that McDonald finance department helps to measure and define several key targets so as to identify the best business strategy hence maximize the company returns. These measures assist the company in identifying and coming up with the best decisions regarding the means to invest its profits. This enables the company to manage its financial resources effectively thereby maximizing its shareholders wealth. Moreover, by coming up with effective decisions in managing its financial resources the company has been able to finance its expansion strategies and this has made it to succeed in its operations. According to Rodney and Starzomski (2010, p. 45), the McDonald Business Strategy and Intelligent department provides key information regarding the market environment and the company competitors during decision making. The department specializes in collecting both the external and internal data relating to its customers and its key target performance indicators. This assists the management in identifying a number of alternatives and selecting the best in order to enable the company to compete effectively and to optimize its returns. The information assists the management of the company in making the best decisions regarding the means of overcoming competition and adapting the organization to its operating environment. Gregus (2010, p. 14) notes that McDonalds has been able to succeed in different parts of the world due to its ability to make decisions that enable the company to compete effectively and maximize its profits. This is because the company is able to collect information, generate alternatives and select the best option that optimizes its stakeholders’ value. 2.2 Satisfying decision Strategy in McDonalds According to Sexena (2011, p. 92), in satisfying decision making strategy the first satisfactory alternative is chosen even if it may not represent the best alternative. The satisfying strategy is appropriate because it is impossible to identify all the possible alternatives required in order to come up with the best decision. This strategy involves identifying the problem and selecting a satisfactory alternative. Schmidt and Wilhelm (2009, p. 4) note that McDonalds marketing strategy decisions are mostly made in order to assist the company to overcome the competition that it may face. However, these decisions do not always represent the best available option. In some foreign markets the company establishes Franchisees in order to gain market share. This decision forces the company to share profits generated with its franchises. Franchise decisions are aimed at assisting the company to build and protect its long term brand reputation due to increased competition. Allen and Coates (2009, p. 15) notes that the McDonalds has been able to develop complicated supplier networks by establishing franchises. The franchises have assisted the company in building efficient distribution and operation systems. Therefore, through its satisfying franchising decisions the company has achieved constant product quality and taste across both its foreign and domestic markets. The company makes decisions that are aimed at making sure that it delivers sales in order to overcome its immediate and present competitors. This has assisted the company to gain a large market share across the world. Vignali (2009, p. 97) notes that McDonald was forced to make satisfying marketing decisions in order to enable it to become a global organization. Global markets require international organizations to make decisions that take into consideration t culture, national and regional differences as well as cultural and economic disparity between different regions of the world. Schmidt and Wilhelm (2009, p. 14) state that it is difficult for McDonalds to make decisions that consider all the needs of the different global markets in which it operates in. The company is thus strained to make decisions that standardize and satisfy different regions. This enables the company to treat its entire foreign operations as a single market. According to McDonald Corporation (2010, p. 12), the company aims at creating standardized set of products that taste the same in different markets. To do this the company is required to make satisfying decisions that meet the needs of different markets which have distinctive characteristics. Allen and Coates (2009, p. 15) note that McDonalds has been able to save considerable costs by making standardized decisions. In addition, the decisions have enabled the company to adjust to different environments hence ensuring its success. These decisions are unprogramed because they are made based on the situation faced by the company. McDonald Corporation (2010, p. 15) notes that the company makes its pricing decisions by considering the general needs of its operating localities. The company management makes different pricing decisions in relation to its different operating locations. For each location the company considers the best pricing alternative. The process involves selecting the price objective, determining demand, analyzing competitors’ prices and offers, selecting pricing alternatives and finally choosing the price that is satisfactory. According to Vignali (2009, p. 102), McDonald general pricing objective is to increase its market share. Therefore, the company is forced to make satisfactory pricing decisions in order to increase demand for its products. This strategy has enabled the company to penetrate new markets like New Delhi in India. The company perceived that the only way it could enter into the Indian market was by setting satisfactory prices similar to the ones that ware used by the local food chains. Enz (2009, p. 20) states that the current growth and success of McDonald in the Japanese market can be greatly attributed to its satisfactory pricing decisions. The company has been able to attract a large number of customers hence it has achieved great success in relation to profitability. 2.3 Mixed Scanning Decision Strategy According to Erlandson, Stark and Ward (2006, p. 39), decision makers do not have perfect information about the available alternatives therefore, they focus on a specific problem and provide temporary solution. If the solution fails they implement a new alternative. Mixed scanning decision making strategy is focused on trial and error in order to enable an organization to adapt its productivity with the partial information available. In addition, the method is committed towards revising original decisions when it is deemed necessary. Furthermore, mixed scanning decision model holds the opinion that strategic decisions makers should postpone their decision making activities in order to gather more knowledge or await improved conditions. Bartlett and Ghoshal (2007, p. 51) note that McDonalds uses mixed scanning model in order to make global strategic decisions. This is due to the fact that the company cannot generate all the information relating to a specific country or region hence it is forced to occasionally concentrate on a specific problem and provide temporary solution. Rapid changes in social and political environment in different countries require the company to come up with short term solutions so as to overcome the challenges created by these adjustments. Vignali (2009, p. 108) notes that the operating procedures adopted by various outlets owned by the company are different. The company decision makers are required to adapt the company operations to local conditions hence the need to try different operating strategies. Furthermore, the company restaurants have slightly different menus and new food preparation techniques. This is because the decision makers were forced to try different menus in order to fit the company’s products to its local operating environments. MacDonald Corporation (2010, p. 10) affirms that the company made decisions to try different new menus in India in order to meet and suit local tastes. This was done through trial and error with an aim of identifying the most suitable menu offering. The company has been able to gain competitive advantage by localizing its products hence making it to succeed in the global markets. Schmidt and Wilhelm (2009, p. 9) note that the lack of adequate information requires McDonalds to make its supply chain decisions using the mixed scanning strategy. This is with an aim of identifying a supply chain strategy that can enable the company to achieve its goals. According to McDonald corporation (2010, p. 4), the company tries various supply chain strategies with an aim of identifying the most efficient and sustainable plan. McDonalds has been able to develop well-organized supply chains with its franchisees, suppliers and partners by trying various strategies. This has enabled the company to improve its communication with its stakeholders and at the same time it has been able to achieve increased understanding with its suppliers. The company supply chain decisions have enabled it to efficiently coordinate and drive its business operations thereby making the company to succeed globally. 2.4 Incrementalism Decision Strategy in McDonalds According to Wit and Meyer (2010, p. 110) incrementalism decision making strategy seeks to adjust decision making strategies to the narrow cognitive capabilities of the decision makers. In addition, the strategy aims at reducing the cost and scope of information computation and collection. This method requires the decision makers to focus on those alternatives that differ incrementally from the existing plans. Thus, the decision making problem is continuously redefined making it easier to manage the problem faced by the organization. Incrementalism involves taking organizational decisions in small steps. The steps arise in response to the limited information that may be available or affordable at a specific time (Nutt & Wilson 2010, p. 110). These decisions are unprogramed due to fact that they are made rarely. Vignali (2009, p. 108) notes that McDonald utilizes a step by step decision making process in order to improve quality of its food products. This involves making programmed set of decisions regarding the company production and distribution activities. Moreover, the decisions are extended to its suppliers in order to come up with tight specifications regarding the quality of its raw materials and final products. According to McDonald corporation (2010, p. 4) customers expect the company to provide them with quality food products hence this requires a detailed step by step decision making in order to achieve the required quality. This ensures that the food provided by the company restaurants is safe, clean and of high value. Hill and Jones (2009, p. 74) note that McDonalds ability to offer quality food products through its step by step decision making has enabled it to respond more effectively to its customers demands. This in turn has played an important role in assisting the company to build competitive advantage over its competitors. Furthermore, McDonalds quality products boost employees’ productivity and increase its economies of scale in sales hence this has made the company to excel in its operations. According to Allen and Coates (2009, p. 20) McDonalds expansion decisions are made on a step by step strategy. This is in order to ensure careful planning and designing, cautious resource allocation and detailed rational analysis. Lafontine and Leibsohn (2008, p. 10) notes that incremental decision making strategy assists McDonalds in ranking markets and evaluating their expected net present values. In addition, the method provides an opportunity for the company to undertake a detailed analysis of the expected demand and profits from its target markets. This has enabled the company to avoid entering into markets with low demand. Moreover, the company is able to delay entering some markets until their conditions improve sufficiently. McDonald corporation (2010, p. 16) asserts that step by step expansion decisions enable the company to maximize its resource allocation. Therefore, the step by step expansion decisions assist the company in maximizing the use of its resources by locating itself in the most suitable locations. This has in turn made the company to succeed in its operations. 3.0 Recommendations Rapid changes in the environment may require companies to change their decision strategies. Therefore, there is need to continue research in order to understand changes in decision strategies in McDonalds. In addition, future researchers should personally visit McDonalds in order to gain a deeper understanding of the company decision strategies. 4.0 Conclusion McDonalds makes its sourcing decisions by considering all the available opportunities in order to optimize the value that it offers to its shareholders and customers. Moreover, the company is forced to make satisfying decisions in order to match the different markets in which it operates in. The company makes decisions that ensure its prices are satisfactory in order to increase its market share. Furthermore, McDonalds utilizes mixed scanning decision strategy so as to make its supply chain decisions. This is due to the fact that it cannot be able to collect full information regarding each particular market. Therefore, McDonald effective decisions have enabled the company to excel globally. References Allen, C & Coates, B 2009, ‘Decision Making Paradigms’, Journal of Organization Management, vol. 5, no. 2, pp. 1-21. Bartlett, C & Ghoshal, S 2007, Organizations Strategic Decision Making, Cengage Learning, Mason. Enz, C 2009, Strategic Management Concepts, John wiley & Sons, Hoboken. Erlandson, D, Stark, P & Ward, D 2006, Organization Decision Making. Eye on Education Publishers, New York. Gregus, M 2010, ‘Business Decisions: Making the Right Call’, Chemquest Group, vol. 3, no. 1, pp. 1-5. Hill, C & Jones, G 2009, Strategic Management Theory, Cengage Learning, Mason. Lafontaine, F & Leibsohn 2008, ‘Beyond Entry: Examining McDonalds Expansion in International Market’, In Global Expansion, pp. 1-35. McDonalds Corporation 2010, ‘Worldwide Responsibility’, In McDonalds, pp. 1-70. Rodney, P & Starzomski, Rosalie 2010, ‘A Framework for Decision Making’, In Decision Making, pp. 1-4. Schmidt, G & Wilhelm, W 2009, ‘Strategic, Tactical and Operational Decisions in Multi-National Logistics Networks’, International Journal of Production Research, vol. 8, no. 1, pp. 1-30. Sexena, P 2011, Principles of Management, London, Global Publications. Varma, D 2009, Decision Making, VK Publications, New Delhi Vignali, C 2009, ‘McDonalds: Think Global, Act Local’, British Food Journal, vol. 103, no. 2, pp. 97-111. Wit, B & Meyer, R 2010, Strategy: Process, Content , Context, Cengage Learning, Mason. Read More