Mcdonalds Case Study

Case McDonald's

McDonald's has worked hard to become more than a restaurant chain. It has become a marketing icon and is part of the routines of millions of people. Its success is so far reaching that it has developed its own culture and identity. McDonald's has become a symbol of the success and desirability of American popular culture.

TECHNOLOGY INVESTMENT AND ANALYSIS

Networks

Networks are particularly important to McDonald's because they provide a mechanism to manage the franchises spread over large geographic areas. Networks reinforce the centralization of power by enabling headquarters to communicate with the franchises. This ensures standardization and quality control through the analysis of inventories and franchises. Networks achieve these functions at a comparatively low cost and without the time constraints of more mainframe-based communications.

Smart Card Technology

Both McDonald's and Burger King are testing smart card technology in selected markets. The cash value of each card is stored on a computer chip or magnetic strip on the back of each card. Value can b e added to the card through machines that accept cash or through ATM-like machines that add value by transferring funds out of a customer's bank account. Customers can use the cards, instead of cash, to make their food purchases. Corporate goals for smart card implementation include cost savings in relation to money handling, reduced shrinkage, and increased loyalty through incentives and premiums. Smart cards eliminate the need for merchants to communicate with banks for authorization of purchases.

McDonald's is testing this technology at 870 restaurants across Germany. A payment system lets customers pay for goods using stored-value smart cards. Customers at McDonald's Deutschland, Inc. restaurants will be able to pay for goods by swiping smart cards through small countertop terminals. They also will be able to add value to their smart cards by downloading money electronically from their bank accounts at touch-screen terminals in the restaurants. The terminals will lead users through the process of downloading new money to the cards.

McDonald's Deutschland continues to use smart card terminals in 55 stores earlier this year. During the first ten weeks of the trial, 30,000 transactions were conducted, using Hewlett-Packard Co.'s (HP's) VeriFone unit, which provides the terminals.

Though smart cards are catching on in Germany, there had not been an easy way to add value to the cards. According to Rolf Kreiner, senior vice president of marketing at McDonald's Deutschland, by letting customers not only buy goods but also add value to their cards, McDonald's is hoping to lead a trend toward the wide-scale acceptance of smart cards in Germany. The German smart-card payment infrastructure, known as GeldKarte-System, has about 40 million cards in circulation. McDonald's has committed to use VeriFone's SC552 smart card reader, which supports GeldKarte-System cards.

The system that will let users add value to their cards will be separate from the smart card readers and will be called VeriFone's Transaction Automation Loading and Information System (TALIS). The system will let users add value to their cards separate from the smart card readers. While customers wait for TALIS terminals to connect to their banks, the screens flash advertising and marketing messages.

VeriFone's TALIS touch-screen terminals are equipped for two cards, permitting consumers to "transfer" monetary value from a debit or credit card to a smart card after first tapping in a personal identification number. Once the smart card has been filled with store value, it can then be inserted into a smart card reader at the point of sale to make payment on goods or services.

Technologically, smart cards were designed to function in place of credit cards in the fast food environment. Historically, credit card transactions were too slow in the fast food service environment. Their associated costs were too high in the face of small margins. Smart cards are an important step in resolving these issues. They enable restaurants to leverage the sales enhancing the impact of the ease of credit card use. Authorization and settlement technology are rapidly improving and the costs of network connectivity are decreasing.

Internet Sites

McDonald's first announced a Web presence in 1994 with McDonald's interactive, an area in NBC online on America Online. In 1995, the company developed and implemented a web site called McFamily (www.mcdonalds.com). It is aimed at families, perceived by McDonald's as its most important target market. The site features "seasonal ideas for fun family activities such as block parties, travel games, and household safety information." The Auditorium sponsors monthly guest speakers, including celebrities and parenting experts, and a Hey Kids area houses a gallery with McArt submitted by children with downloadable games and contests. The goal of all of these web pages is to enhance the brand image that McDonald's presents to families. McFamily includes a section on helping others. This section features information on Ronald McDonald's efforts to preserve the environment.

The McDonald's web site cannot be used to sell food. However, it can capture revenue through the sales of merchandise related to McDonald's sponsorships. The McStuff for You section offers gear from McDonald's racing teams and the Olympic games. The web site is used to collect customer information and profiles through online surveys.

Data

Decision-makers at McDonald's Corporation realize that consumer preference is paramount. The chain is implementing a restaurant-level planning system, dubbed Made For You, which lets each restaurant eliminate its inventory of foods prepared in advance. Instead, workers make sandwiches based on actual demand without sacrificing any of the efficiency.

About 800 McDonald's restaurants use the system, which consists of PC-based cash registers running in-house software. Orders are routed to monitors at different food preparation tables to balance the workload among employees.

In McDonald's restaurants without the new system, workers must anticipate the demand for each type of sandwich in advance and place them in bins. When a customer wants a sandwich that is not pre-made or one with a different