McDonald's Food Chain

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Case Details:

Case Code : OPER001
Case Length : 10 Pages
Period : 1996 - 2002
Organization : McDonalds
Pub Date : 2002
Teaching Note : Available
Countries : Sweden
Industry : Food, Beverage and Tobacco

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

Few companies appreciate the value of supply chain management and logistics as much as McDonald's does.

From its experience in other countries (Refer Exhibit II & III), McDonald's was aware that supply chain management was undoubtedly the most important factor for running its restaurants successfully. Amit Jatia, Managing Director, Hardcastle Restaurants Private Limited said, "A McDonald's restaurant is just the window of a much larger system comprising an extensive food-chain, running right up to the farms".

McDonald's worked on the supply chain management well ahead of its formal entry to India. "We spent seven years to develop the supply chain. The first McDonald's team came to India way back in 1989," said S. D. Saravanan (Saravanan), Product Manager, National Supply Chain, McDonald's India.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Background Note

McDonald's was started as a drive-in restaurant by two brothers, Richard and Maurice McDonald in California, US in the year 1937. The business, which was generating $200,000 per annum in the 1940s, got a further boost with the emergence of a revolutionary concept called 'self-service.'

The brothers used assembly line procedures in their kitchen for mass production. Prices were kept low. Speed, service and cleanliness became the critical success factors of the business. By mid-1950s, the restaurant's revenues had reached $350,000.

As word of their success spread, franchisees started showing interest. However, the franchising system failed because the McDonald brothers observed very transparent business practices. As a consequence, imitators copied their business practices and emerged as competitors. The franchisees also did not maintain the same standards of cleanliness, customer service and product uniformity.

At this point, Ray Kroc (Kroc), distributor for milkshake machines expressed interest in the business, and he finalized a deal with the McDonald brothers in 1954. He established a franchising company, the McDonald System Inc. and appointed franchisees. In 1961, he bought out the McDonald brothers' share for $2.7 million and changed the name of the company to McDonald's Corporation. In 1965, McDonald's went public...

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