• Internal Code :
  • Subject Code : TBS808
  • University : Sydney business school
  • Subject Name : Supply Chain Management

Established and emerging value proportion in fast food industry 

The term value preposition is to know what is different that your company is offering to the customers compare to your competitors (Yrjölä, Rintamäki, Saarijärvi, Joensuu and Kulkarni 2019). What are the different benefits and products you are providing to your customers? The products or services offered by your company are consumer specific or not? In other words, value preposition is the package of overall perceived values that includes (all the key benefits minus costs) that is offered by the product or service of the company (Chiu, Won and Bae 2019). The value preposition is tangible element that is perceived by the customer in the form of value for the explicit needs they have. These needs are objective in “B2B” Businesses and less objective for “B2C” (Castro 2019).

From the given options, McDonalds’s is the example that is selected for describing value proposition. To understand the value proposition of McDonald’s first analyzed how McDonald’s is different from its competitors (Yrjölä, Rintamäki, Saarijärvi, Joensuu and Kulkarni 2019). What are the unique offerings and package of benefits that are offered by McDonald’s that charm to their customers?

Some of the McDonald’s value prepositions are- 

Efficient and quick delivery

Distinct product range

Convenient locations of the layouts

Consistent product quality 

Comfortable seating facilities in the store

Great value for reasonable prices

These value propositions would appeal many target markets and customers.  A broad range of food products will appeal to many families, also the comfortable seating arrangement and facilities inside the stores will appeal to many people who are looking to spend time with their close ones or want to socialize (Castro 2019). 

Benefits of McDonald’s over its competitors-

Location- Convenient and easy to reach location

Facilities- Good seating arrangement, ventilation, soothing music, nice ambience

Speed of service- Quick service with trained employees 

Distinctive products

Variety of products are offered by McDonald’s they also provide distinctive products that are modified according to the demand and likings of their customers (Chiu, Won and Bae 2019). 

McDonald’s has given all the reasons to their customers to become a customer of their brand. The products and services offered by the company have all the aspects that attract to the customers and also appeal them to choose the brand over and over again.  

Emerging Value Preposition for McDonald’s- 

In order to achieve competitive advantage first understand how they can gain competitive advantage by providing more attractive products (Yrjölä, Rintamäki, Saarijärvi, Joensuu and Kulkarni 2019). This will definitely help them to stand out of the traditional competition arena. In the traditional arena any company can win by offering the same products or services with better quality or low price (Chiu, Won and Bae 2019).

The companies today are very competitive and there is no other method to survive in the market except just by delivering product or service with more value. That is why there is a shift and need for innovative value preposition (Yrjölä, Rintamäki, Saarijärvi, Joensuu and Kulkarni 2019). This means offering something to the market that is not offered by any other company. 

Some emerging value prepositions are-

Creating customized product

Product as an experience

Use software applications

Creating emotions

Personalized/ relationship with the customers

Developing innovative new products

Managing relationship with the consumers

Explore new niche 

Developing innovative technologies

Application of Manufacturing Excellence

McDonald’s operate over 13000 restaurants in 59 countries and considered as one of the largest food service organization across the globe. The main aim of the company is to deliver quality, service, cleanliness and value. 

The important factors of for manufacturing excellence in McDonald’s-

Simplicity- With the implementation of Just in time has improved the importance of simplicity in manufacturing. Many large companies have simplified themselves into small autonomous units (Ragan and Dreher 2019).. 

McDonald’s is also known for the implementation of simplicity. The McDonald tries to keep all the procedures in the food production simple and standardized. They just follow the written instructions on the screen to prepare the meal.  Because of this simplicity it becomes very easy for the company to save money from providing training to their employees. This will also reduce the holding inventory. 

Demand pull strategy- In the present scenario where the life cycle of the product is less, and the demand for differentiating products is more, the traditional strategy of mass production is no longer works, especially for this industry.  The production system must be flexible to serve customer within the time duration. 

At McDonald’s the customers enjoy the service that much that they will not switch to any other competitive brand (Ragan and Dreher 2019). They also use production caller to let their customers stay with them.  This will immediately provide order to the kitchen when a particular order goes below the particular stock level. The kitchen starts producing the order immediately. 

Improvement in the process is continuous- McDonald’s continuous work on analysis so that they can reduce their errors. Also the manager of the company organizes a monthly customer group meeting and then shares the reviews of the customers to their crew members to make more improvement. 

TQM (Total Quality Control)- All the stages in the manufacturing process from the starting to the delivering will go through quality control, that is strictly followed. No food can be taken out of the cooler for certain time duration. They also use holding time card to know for how much time duration is to hold the food (Sartal, Carou, Dorado-Vicente, and Mandayo 2019).  

Zero defect and implementation of statistical techniques- In McDonald’s all the food products undergoes 100% quality inspection.  The statistical process control is a technique that is still not implemented in many manufacturing industries. If any defect found in the food product then it will cause health problems to the consumers and also create a bad image of the company (Sartal, Carou, Dorado-Vicente and Mandayo 2019). 

Respect for human resource- McDonald’s show respect for their people. The companies provide facilities for their crew members inside the company. They facilitate them by providing special room to rest. There are many similar facilities and benefits.

Relation between service quality and profitability 

Service quality is considered to be one of the essential marketing strategies. It is a vital strategy to maintain the service quality for the growth and success of any fast food restaurants. It helps in providing customer oriented strategies rather than restaurants oriented strategies (Mayliza 2019). There are many measurements for service quality such as SERVQUAL, DINESERV, SERVPERF, DINESCAPE, and TANGSERV (Wu and Mohi 2015.

It is important for any fast food industry to evaluate and understand the integrated process of services. Also it is important to measure the sub dimensions of the service area so as to maintain the service quality in the restaurants industry. It is important for the restaurants service providers to maintain and measure the quality of services regularly (Taha and Ng 2019). 

McDonald’s is one of the biggest fast food service providers. The best part of the company is that they measure the quality based on the comparative study between what was expected and what is delivered. The service quality in McDonald’s is highly relativistic phenomenon and also a matter of subjective study when it comes to customer’s experience (Mayliza 2019). The service quality measure is designed to measure the gap between what was expected by the customers and what is delivered by the companies. There are number of studies conducted and it has been found that many companies are compromising with the quality of its products and services just to earn better profit margin. Especially in the fast food industry the restaurants are delivering the bad quality food to their customers. That is the reason why the government has made some policies so that the fast food industry will take safety measures and will remain under control (Spotts, Weinberger and Weinberger 2019).  

A number of studies related to hospitality disciplines that include the fast food restaurants, have specially paid attention to know and identify the dimensions on which service quality can be measured and found that the measurements for service quality have not been sufficiently to capture the quality of the service in the fast food restaurant industry The most popular instruments to measure the service quality is SERVQUAL (Wu and Mohi 2015).

McDonald’s seems to be resilient in the present tough economy. From the McDonald’s recent report, it has been found that the company is sacrificing its profit margin by focusing more on serving value menu to their customers by increasing the customer loyalty. It’s really difficult for the fast food restaurants like McDonald’s that are pricing out to their businesses (Taha and Ng 2019). These successful businesses employ many tricks so that the patrons coming back to them. Serving food products at rock-bottom prices is one of the many tricks that will let the fast food places to keep their doors open (Spotts, Weinberger and Weinberger 2019). 

Some of the food products of low prices in the menu of the fast food restaurants look very low in prices that they rarely generate benefit to the restaurant, the reason behind this is that they actually (Taha and Ng 2019). The strategies used by McDonald’s like cheap promotions like value meals and value menus actually not generate many profit to the company. The main reason of such menus is to attract the customer to buy products (Mayliza 2019). And once the customer entered into the restaurants they implemented other tactics to make profit.

Operational Challenges 

Fast food industry and other foodservice managers and operators are frequently approaching institutions and researchers to find out the solutions for their problems in the fast food industry.

The main aim of management is a actual development of relationship marketing with customer focus strategies applying in business‐to‐business (B2B) markets. It offers many opportunities at the same time many critical benefits to enhance profit for both sellers as well as buyers (Chandra 2019). 

The management scope is widening frequently and with time becoming more complex. The managers need to have strategic as well as operational skills that are required to be updated regularly. There are many challenges faced by the fast food industry like McDonald’s (Ruteri and Xu 2009). 

Some major challenges faced by the company are:

If the loyal customers turned to the competitors because of variety of products or services, it becomes very difficult for the company to get them back. This is a major challenge in front of the manager once a loyal customer gone, than he/she will not return back, or to convince them to trust back to your product is very difficult. That is why it is important to maintain the existing customers (Verma 2000). 

Also it is important for the manager to make such strategies that will attract the customers of all income level. McDonald’s is serving products at a very low prices that easily be offered by the customers come under low income level.

McDonald’s have a poor image as they are paying very poorly to their staff. In the past, many time the workers protest against the salary provided by the company despite of being working for years in the company (Ruteri and Xu 2009). 

Make efforts to create a clean image of McDonald’s that was earlier spoiled by the company itself because of some scandals particularly in China. There were many complaints found against McDonald’s restaurants especially in China for serving expired and rotten meat.

Investors play a major role in any business industry. Because of the company poor performance in the past few years the investors are not willing to invest in the company. 

McDonald’s also facing challenge as the food served by the stores is considered to be unhealthy and not fit to eat. McDonald’s want to serve things for all men and also tries to serve something better than burger and fries and looking for some healthier alternatives (Chandra 2019). But because of that the menu will definitely become more complex as more things will be added to the menu. This is also a challenge for the manager to deal with the product variety and also plan strategies to deal with complex kitchen operations (Verma 2000). 

Recommendation 

Service quality is an important measure for the success of any fast food company. The manager of any fast food store needs to improve and maintain the quality of the service in their restaurant on regular basis (Fauzi and Suryani 2019). For this a proper knowledge on the service quality is required. Service quality is a important concept. It is important to know how the customers perceive the service quality (Kanyan, Ngana and Voon 2016). It depends upon the service type and from where the service is provided and in which context. Many searches have proven that the better the service quality the more customer satisfaction will become. Better service quality will lead to increase customer loyalty, and customer value. If not taking proper care of the service quality, it will lead to bad reputation for the company. 

There are some recommendations for the fast food industry to improve service quality and maintain customer satisfaction-

By implementing qualitative research and conducting in depth interviews from the regular or prospect customers. Also perform interview from the focus group and verifies all the indicators obtained from the customer’s interview. The company should also focus on testing the content validity (Kanyan, Ngana and Voon 2016).. This helps to find out whether or not the key indicators that are used during the research are helpful in improving the quality of the service. Service quality experts are also appointed to get their review on the selected indicators and what further actions are to be taken (Yusuf, Hamzah and Wekke 2019).

The indicator that is not in accordance with the concept by the experts must be eliminated (Fauzi and Suryani 2019). Also make selection for a better instrument to measure the quality depending about the selected fast food service quality model. 

Also the company should work on collecting the data. The data can be collected from any means such as conducting survey using questionnaire method. The respondents must be selected based on the statistical information required based on the improvement of the service quality. Also check the goodness of the model implemented to maintain the service quality (Kanyan, Ngana and Voon 2016). 

References

Kim, W.G., Li, J.J. and Brymer, R.A., 2016. The impact of social media reviews on restaurant performance: The moderating role of excellence certificate. International Journal of Hospitality Management, 55, pp.41-51. Available at: 

https://www.sciencedirect.com/science/article/pii/S0278431916300184

Ragan, J.A. and Dreher, S.D., 2019. Excellence in Industrial Organic Synthesis 2019: The Past, Present, and Future. Available at: 

https://pubs.acs.org/doi/abs/10.1021/acs.joc.9b00847

Sartal, A., Carou, D., Dorado-Vicente, R. and Mandayo, L., 2019. Facing the challenges of the food industry: Might additive manufacturing be the answer?. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 233(8), pp.1902-1906. Available at: 

https://journals.sagepub.com/doi/abs/10.1177/0954405418805611

Castro, J.H.B.F.D., 2019. Crowdsourcing in the food industry: the impact of creator’s body type and gender on healthy food consumption (Doctoral dissertation). Available at: https://run.unl.pt/handle/10362/62920

Chiu, W., Won, D. and Bae, J.S., 2019. Customer value co-creation behaviour in fitness centres: how does it influence customers’ value, satisfaction, and repatronage intention?. Managing Sport and Leisure, 24(1-3), pp.32-44. Available at: 

https://www.tandfonline.com/doi/abs/10.1080/23750472.2019.1579666

Yrjölä, M., Rintamäki, T., Saarijärvi, H., Joensuu, J. and Kulkarni, G., 2019. A customer value perspective to service experiences in restaurants. Journal of Retailing and Consumer Services, 51, pp.91-101. Available at: 

https://www.sciencedirect.com/science/article/pii/S0969698919302309

Mayliza, R. 2019. Analisis customer satisfaction dan behavioral intention dilihat dari service quality, food quality dan price/value di restoran Mcdonald's depok. Available at: https://osf.io/preprints/e2jrt/

Spotts, H.E., Weinberger, M.G. and Weinberger, M.F. 2019. Advertising and Promotional Effects On Consumer Service Firm Sales: Media Ad Spend and Quality Matter For Driving Restaurant Sales. Journal of Advertising Research, pp.JAR-2019. Available at: http://www.journalofadvertisingresearch.com/content/early/2019/05/22/JAR-2019-017.abstract

Taha, A.Z. and Ng, C.Y.N., 2019. Service quality and gastronomy. The Routledge Handbook of Gastronomic Tourism. London: Routledge.

Wu, H.C. and Mohi, Z., 2015. Assessment of service quality in the fast-food restaurant. Journal of Foodservice Business Research, 18(4), pp.358-388. Available at: https://www.tandfonline.com/doi/abs/10.1080/15378020.2015.1068673

Chandra, M., 2019. Dynamics & marketing trends in fast food industry-a special case study of Mcdonald’s in Delhi (NCR). Nolegein-Journal of Consumer Behavior & Market Research, pp.18-29. Available at: 

http://www.mbajournals.in/index.php/JoCBMR/article/view/252

Ruteri, J.M. and Xu, Q., 2009. Supply chain management and challenges facing the food industry sector in Tanzania. International Journal of Business and Management, 4(12), pp.70-80. Available at: 

https://www.researchgate.net/profile/Juma_Ruteri/publication/41891682_Supply_Chain_Management_and_Challenges_Facing_the_Food_Industry_Sector_in_Tanzania/links/5728c5a008ae2efbfdb7e57b/Supply-Chain-Management-and-Challenges-Facing-the-Food-Industry-Sector-in-Tanzania.pdf

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Fauzi, A.A. and Suryani, T., 2019. Measuring the effects of service quality by using CARTER model towards customer satisfaction, trust and loyalty in Indonesian Islamic banking. Journal of Islamic Marketing, 10(1), pp.269-289. Available at: https://www.emeraldinsight.com/doi/abs/10.1108/JIMA-04-2017-0048

Kanyan, A., Ngana, L. and Voon, B.H., 2016. Improving the Service Operations of Fast-food Restaurants. Procedia-Social and Behavioral Sciences, 224, pp.190-198. Available at: https://www.sciencedirect.com/science/article/pii/S1877042816305237

Yusuf, R.M., Hamzah, M.G. and Wekke, I.S., 2019. The mediating effect of employee commitment and hospital's ethics on service quality in indonesian state hospital. Journal of Legal, Ethical and Regulatory Issues, 22(1), pp.1-9. Available at: http://search.proquest.com/openview/b770ea8e8e471cd2a408c21b6586453c/1?pq-origsite=gscholar&cbl=38868

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