MBM 207 ENTREPRENEURSHIP DEVELOPMENT

QUIZ-1 CASE STUDY MCDONALDS CORPORATION

SUMMARY OF THE CASE

McDonald's Corporation is the world's largest chain of fast food restaurants, serving nearly 47 million customers daily through more than 31,000 restaurants in 119 countries worldwide. McDonalds sells various fast food items and soft drinks including, burgers, chicken, salads, fries, and ice cream. Many McDonald's restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more 'natural' style, with a particular emphasis on comfort: introducing lounge areas and fireplaces, and eliminating hard plastic chairs and tables. McDonald's brand mission is to be our customers' favorite place and way to eat, and improve our operations to provide the most delicious fast food that meet our customers' expectations. The McDonalds restaurant was a hamburger stand with a twist. Ever since the automobile first appeared, eateries catering to the motoring public began surfacing particularly in California. The McDonald brothers joined the fray in 1940 and within a dozen years their burger and barbecue joint was a booking teenage hangout. In 1948, though the pair decided to make the place stand out by initiating some significant changes. The main attraction, a 15 cent hamburger, was always serving the same way: with mustard, ketchup, onion, and two pickle slices and the unique approach attracted even more business, and six years later the McDonalds were calling on Kroc to supply them with multiple. The head of the class already was a newfangled burger joint called McDonalds. It was spreading rapidly across the United States, and the most ambitious vendors were hot to get their feet in the door. The idea behind McDonalds, then as now, was to quickly serve and feed customers and then get them on their way so the booths could be filled with next in line. While the companys growth has slowed of late, more than 15 years after his death it overseas 25,000 outlets in 119 countries and, with them, controls almost half of the industry it originated. The rise of McDonalds and of Raymond Albert Kroc, is proof that world changing entrepreneurial drive knows no boundaries. Kroc always had aspirations to reach the top of his chosen field, but he didnt realize true success until he reached middle age. McDonalds continues to break new ground, and customers eagerly follow even in places that many would consider unlikely. Today, the overseas network accounts for nearly 60 percent of the companys total sales and profits. Its 12,500 facilities in the US bolstered in recent years by the addition of mini-restaurants within nontraditional venues like Wall mart and Amoco service stations, now account for some 40 percent of this countrys fast food business. McDonalds continues to fight back with highly publicized promotions featuring childrens toys, often tied to the days biggest movies. Highly focused TV ads, promoting such familiar items as the Big Mac along with new products like the McFlurrie dessert, also are deployed. In addition, the McDonalds Charitable Foundation and Kids Charities are among its corporate arms responsible for some $ 20 million in annual donations. Additionally, since 1994, some 8,500 McDonalds have voluntarily become totally smoke free environments. Thus, the answers to various questions related to case are as under. 1.How Mr. Kroc got an idea of running a fast food outlet? How Mr. Kroc went on expanding his business? Explain in details.

In 1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger stand in San Bernardino, California, and envisioned a massive new industry: fast food. In what should have been his golden years, Raymond Kroc, the founder and builder of McDonald's Corporation, proved himself an industrial pioneer no less capable than Henry Ford. He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, french fries, and milk shakes. The idea behind McDonalds, then as now, was to quickly serve and feed customers and then get them on their way so the booths could be filled with those next in line. In his 20s, after a brief stint as a Red Cross ambulance driver, he was scratching out a living by selling paper cups during the day and playing piano for a radio station at night. One of his biggest cup customers was Earl Prince who invented a five spindled milkshake maker that he called the Multimixer. By putting the humble hamburger on the assembly line, Kroc showed the world how to apply sophisticated process management to the most prosaic endeavors. While the companys growth has slowed of late, more than 15 years after his death it overseas 25,000 outlets in 119 countries and, with them, controls almost half of the industry it originated. McDonalds does this, observe agree, by continually adhering to the underlying philosophy that its founder championed from the outset; build simple, casual and easy to identify restaurants where the service is friendly, the prices are low, and there is no waiting for table while someone finishes a cigarette. The rise of McDonalds and of Raymond Albert Kroc, is proof that world changing entrepreneurial drive knows no boundaries. Kroc invested everything he had to become its exclusive distributor. He dropped the musical gig as well, and over the next 17 years tirelessly traveled around the country to peddle the machine. He saw greener pastures ahead in 1954 when he met two brothers from California named Richard and Maurice. McDonald. The pair owned a restaurant in San Bernardino that was so busy it needed eight Multimixers to keep up. Kroc, then decided to see what kind of establishment could generate such demand. He checked the place out and immediately decided it was time for a career change. The next year, he opened his first restaurant in Des Plaines, Illinois. The actions behind these and similar aphorisms helped McDonalds sell more than 1 billion hamburgers by 1963, and the milestone was trumpeted on neon signs out front. That same year Kroc opened his 500th outlet and introduced the enduring Ronald McDonald clown-initially portrayed by soon to be weathercaster Willard Scott-in a series of TV commercials that ultimately became as well known as the chain itself. In 1965, McDonalds went public, Kroc tried to initiate several other restaurant concepts in the following years, but none caught on. McDonalds continued to flourish, through, and Krocs dream of 1,000 locations was realized in 1968. Three years later, his company made its initial foray outside the US by expanding into Europe and Australia. The first McDonalds Drive-Thru opened in Sierra Vista, Arizona in 1975Happy Meals were added to McDonalds menu in 1979 McDonalds launched the new worldwide Balanced Active Lifestyles public awareness campaign in 2005 McDonalds celebrated its 50th Anniversary on April 15, 2005. When Kroc died in 1984 it had more than 7,500 outlets worldwide. With a planned 1.5 million worldwide intra/extranet users, Day easily outpaced the competition by providing the highest performing globalized content solution running on industry standard technologies. Today, the overseas network accounts for nearly 60 percent of the companys total sales and profits. Its 12,500 facilities in the US bolstered in recent years by the addition of mini-restaurants within nontraditional venues like Wall mart and Amoco service stations, now account for some 40 percent of this

countrys fast food business. At the same time, recent investments in small pizza and Mexican chains provide the company with new growth potential. And officials predict they could still open as many as 10,000 new McDonalds in emerging global markets in the years ahead. and today McDonalds is the worlds largest Food Service organization and one of the most recognized brands on the planet. Communiqu allows us to quickly and reliably deliver content to our entire McFamily, helping us to be flexible and drive new opportunities. Steve Wilson, Senior Director of Web Communications, McDonalds 2.What were the different strategies adopted by Mr. Kroc in order to strengthen the brand of McDonald? Explain in detail. McDonalds has more than 30,000 restaurants serving nearly 46 million people each day in 121 countries. With a planned 1.5 million worldwide intra/extranet users, Day easily outpaced the competition by providing the highest performing globalized content solution running on industry standard technologies. The majority of the McDonalds franchises are owned by individual franchises. Their primary competitors are other fast food chains such as Burger King and Wendys. The competition can get pretty intense to build customer loyalty to their food. The McDonalds Brand is one of the most well known Brands in the world and thus to sustain for a longer period of time Mr. Kroc has to follow certain important strategies, and these analysis is being done on the basis of SWOT Analysis. Strengths: Brand Awareness, Broad geographic locations: McDonalds standard and conformed changes in large areas efficiently. Weaknesses: There is lower operating income in Europe and Canada In Canada the operating income fell 12.6%, likewise the European restaurants operating income also fell at 1.5%. There is a relatively small revenue growth - In the last 5 years McDonalds revenues have grown at a rate of 7.5% compared to industry growth at 13.6% Opportunities: Newer products, more franchises - less risk High Growth in China and Russia Threats: Competition - global, national, regional, and local. Commodity Growing health conscious population Food safety bacteria. MR. KROCS STRATEGIES McDonalds real goal as a corporation is to make money for the stockholders. Their stated goal is Long term sustainable growth for all stakeholders. McDonalds has realized that they are reaching a big maturation stage in the business cycle, based on its profits slowing down more and more every year. It is going to be time to reinvent or re-image this corporation to try to start the business cycle over again. Use local food sources where possible. Using local sources decreases the time to market, and also decreases the use of fuel to transport goods. McDonalds should develop menu choices that are healthy and socially acceptable. It is possible to develop a menu that people will enjoy and that also fits into the original Speedy Service model the company introduced in the 1950s. McDonalds hires thousands of older and disabled workers, and has

implemented programs to help advance their careers along with those of women and minority employees. 3.Entrepreneurs have to be an opportunist. Explain this statement by bringing out the incident from Mr. Krocs life. Can you relate this trait of an entrepreneur with other famous example?

An opportunist is Someone who seeks their own benefit in all cases without regard to the impact on others and an Entrepreneur on other hand is Someone who solves problems at a profit. some people mistake the two. If you look at those two definitions, they couldnt be more opposite! It is right to say that Entrepreneurs have to be an opportunist, i.e. A person with both sophisticated managerial skill and technical knowledge who starts a business.one who has supplemented his or her technical education by studying such nontechnical subjects as economics, law, or English. Opportunistic entrepreneurs avoid paternalism, delegate authority as necessary for growth, employ various marketing strategies and types of sales efforts, obtain original capitalization from more than two sources, and plan for future growth.

An example of an opportunistic entrepreneur is a small building contractor and developer who adopts a relatively sophisticated approach to management, including careful record keeping and budgeting, precise bidding, and systematic marketing research. The Opportunist recognizes that a particular situation presents an opportunity to make money and goes for it. The opportunity could be selling umbrellas on a rainy day, offering ice cold bottles of water in the middle of summer, or jumping on a hot and timely trend and offering some sort of related service. Many entrepreneurs get their start this way, as the best opportunistic opportunities often do not require much startup capital and often have a sense of urgency about them. An experience shared by MR.PRAKASH DUBEY An experience I had as an Opportunist was during college. It was the early 90s, and people were using use net newsgroups as the web was still in the lynx/mosaic phase. I was a big fan of sports cards (baseball cards etc) and recognized an opportunity to take sports card inventory from local card dealers for teams and athletes that were locally not in demand and sell them over the Internet. I was able to pay for a lot of my college expenses with this little hobby business. In the same way the case shows that how Mr. Kroc also availed the opportunity of being a entrepreneur and proved that world changing entrepreneurial drive knows no boundaries. The rise of McDonalds and of Raymond Albert Kroc, is Kroc always had aspirations to reach the top of his chosen field, but he didnt

realize true success until he reached middle age instead he was scratching out a living by selling paper cups during the day and playing piano for a radio station at night. Impressed by this revolutionary device, Multimixer. Kroc invested everything he had to become its exclusive distributor. He dropped the musical gig as well, and over the next 17 years tirelessly traveled around the country to peddle the machine. 4.What is your opinion about the business houses responsibilities towards the society? How far McDonald has carried out this social responsibility? Can you give some relevant Indian corporate examples for the social responsibility? Social Responsibility of business refers to what business does over and above the statutory requirement for the benefit of the society. The word responsibility emphasizes that the business has some moral obligations towards the society. It implies that like individuals, corporate are also the part of the society and their behavior shall be guided by the social norms. Social responsibilities refer to businessmans decision and actions taken to reason at least partially beyond the firms direct economic or technical interest.

CORPORATE SOCIAL RESPONSIBILITY OF MCDONALDS McDonald's include creating a sustainable supply chain strategy and engaging in community-based development projects, with growing public awareness and demand for socially responsible businesses, it is little wonder that companies of today take corporate social responsibility into account when planning future socially responsible business operations. This case study on McDonalds social responsibility examines one such example of corporate social responsibility exemplified by McDonalds. McDonalds is the world's largest chain of hamburger fast food restaurants. McDonalds take on corporate social responsibility or CSR of McDonalds is about: Taking action, achieving results and always maintaining open lines of communication with its customers and other key stakeholders. McDonalds works with its suppliers to promote socially responsible practices in its supply chain as part of its supply chain strategy. It has its own Code of Conduct for Suppliers which describes how McDonalds expects its suppliers to treat their employees. It has also sought to extend social accountability throughout its supply chain as part of its supply chain strategy.

McDonalds has succeeded in supporting suppliers who are phasing out sow gestation crates in their supply chain. McDonalds also donates a portion of its pre-tax profits to corporate philanthropy as part of its efforts to be more socially responsible. McDonalds makes charitable contributions through the Ronald McDonald House Charities (RMHC) which aims to create, find and support programs that directly improve the health and well being of children. According to Clara Carrier of Ronald McDonald House Charities, in particular, the Ronald McDonald Care Mobile attempts to ensure that children in vulnerable communities can receive state-of-the-art medical and dental treatment to improve their health and strengthen the whole family. This health care on wheels program attempts to change childrens lives and improve communities along the way.

Corporate Social Responsibility in India A number of studies have been conducted in India to understand what Corporate Social Responsibility (CSR) means in the Indian context, what the expectations of different stakeholders are and the drivers and barriers facing companies. It traces back the history of CSR in India and suggests that there are four models. 1. Ethical Model by Mahatma Gandhi: The ethical model as suggested by Mahatma Gandhi, where companies voluntarily committed to public welfare and participated in nation building. 2. Statist Model by Jawaharlal Nehru: Then followed the statist model post Indias independence propounded by Jawaharlal Nehru. This model calls for state ownership and legal requirements of CSR. 3. Liberal Model by Milton Friedman: The liberal model by Milton Friedman talks about CSR being limited to private owners or shareholders. 4. Stakeholders Model by R. Edward Freeman: And the latest is the stakeholders model championed by R. Edward Freeman, which calls for companies to respond to all stakeholders needs. All these four models co-exist in India today. One of the weaknesses of the current system is that the agenda is set by the industrialized world with little understanding of the diversity of approaches and track record in other parts of the world Many leading foreign MNCs and domestic titans, pre-eminently members of the Tata Group, have been standard setters on core CSR issues such as labor conditions, health and safety, environmental management, corporate governance and integrity. One of the Tata Group of companies, Tata Steel, is the first in the country to produce a corporate sustainability report and administers the only industry town in the world, Jamshedpur, which has received ISO 14001 environmental quality certification. CSR Practices of Tata Group in India: A Tata Company shall be committed to be a good corporate citizen not only in compliance with all relevant laws and regulations but also by actively assisting in the improvement of the quality of life of the people in the communities in which it operates with the objective of making them self reliant. Such social responsibility would comprises, to initiate and support community initiatives in the field of community health and family welfare, water management, vocational training, education and literacy and encourage application of modern scientific and

managerial techniques and expertise. This will be reviewed periodically in consonance with national and regional priorities. The company would also not treat these activities as optional ones but would strive to incorporate them as integral part of its business plan. The company would also encourage volunteering amongst its employees and help them to work in the communities. Tata companies are encouraged to develop social accounting systems and to carry out social audit of their operations. 5.What you as a management student learn from this case of Mr. Kroc? Raymond Kroc, the founder and builder of McDonald's Corporation, proved himself an industrial pioneer no less capable than Henry Ford. He revolutionized the American restaurant industry by imposing discipline on the production of hamburgers, french fries, and milk shakes. Setting the Vision, to be the best and leading fast food provider around the globe and an brand mission to be our customers' favorite place and way to eat, and improve our operations to provide the most delicious fast food that meet our customers' expectations. Aiming at providing good quality, services to customers Mr. Kroc made all possible efforts to globalize the branches of McDonalds at each corner of the globe and ultimately McDonald's revenues grew 27% over the three years ending in 2011 to $22.8 billion, and 9% growth in operating income to $3.9 billion. The case study make us prove that one can become a successful entrepreneur by having two essential ingredients i.e quality of Leadership and being an Initiative. Entrepreneur has internal as well as external locus of control which is the inbuilt quality of Mr. Kroc and thus in 1954, a fifty-two-year-old milk-shake machine salesman saw a hamburger stand in San Bernardino, California, and envisioned a massive new industry of fast food and proved that world changing entrepreneurial drive knows no boundaries.