INFORMATION SYSTEM: MCDONALD’S CORPORATION Title Case Study on Business Systems Planning And Implementation: McDonald’s Corporation Introduction The field that involves using information systems comprised of processes, technologies and people for resolving business issues are termed as Management information Systems (MIS). For evaluating information systems employed for various organizational functions MIS is utilized (Kenneth, 2011). The role of information system in accomplishing competitive advantage by proper utilization of core competencies, synergies and network related strategies of McDonald’s is dealt with in this report. It will also describe threats caused by strategic information systems and recommendations to overcome these issues. McDonald’s Company Profile McDonald's is the largest fast food restaurant chain in the world, which has in fact become a part of the daily life of 47 million customers. McDonald’s is spread over 114 countries and their outlets count 32,000. It emerged as an icon and represents the popularity of American culture. In the very tough US fast food market their contribution is 21 percent share (mcdonalds, 2010). The skill to act according to requirements and wishes of customers are the key factor behind McDonald’s success. Customers prefer neat surroundings with friendly and fast service. McDonald’s give priority to cleanliness, quality and value. Management Information Systems (MIS) The system that offers information required for successful organizational management and to accomplish competitive advantage is referred as management information system (Mcleod, 2008). To allow value added services, to facilitate decision making procedure and 1
resolving problem, to manage and synchronize actions, to enhance accuracy in procedures, assessments and resolutions, to estimate and design, to enhance productivity, to facilitate accomplishment of goals of organization and to support people are the major purposes for which business information system is meant (Terence, 2009). Implementation of Strategic Information System in McDonalds Information system employed for attaining competitive advantage in the industry is termed as Strategic Information System (Hackney, 2010). McDonald’s is trying to enhance IT application for successful accomplishment of its business goals (mcdonalds, 2011). To give monthly expense report, employees’ list, their working hours, to propose strategies for future, to enhance productivity, to offer managers and workers information concerning business status etc. MIS system is employed by McDonald’s. In McDonald’s attempt to enhance organizational efficacy, cost savings and in attracting customers towards them big contribution is made by technology. Internet terminal, video games consoles, wireless networks, music videos, television with flat monitors etc. are launched in McDonald’s outlets as part of serving their customers better. McDonald’s is looking into the practicability of developing advertising programs and income sharing partnerships with their equipment providers and internet service providers (mcdonaldsmis.blogspot, 2009). Some among the major segments of the organization where information technology is implemented is money management, recording and processing of transactions. Moreover, by implementing real-‐time payment service in their inventory, financial data and point of scale it is possible for McDonald’s to enhance marketing and sales procedures and customer relationship management (Genn, 2008). For making order taking and payment procedure quick and effective, IT is applied. For understanding the current customer trends and flow of the business the information stored in POS will be helpful. This knowledge will enable McDonald’s to act according to customer requirements and understand the performance of outlets and profitability of the company all over the world. This will help the company to present their current financial position in front of the shareholders. To communicate with their employees, shareholders and suppliers Intranet and Internet facilities are employed by the organization. To link with existing and latent customers and to commence various marketing strategy McDonald’ utilize internet facility. Transaction Processing System (TPS) implemented in McDonald’s 2
If an exchange is made by two persons it is said that transaction has occurred. Transaction processing is gathering data about the transaction that took place. Gathering, amassing, amending and accessing the transactions made in a company is termed as transaction processing and keeping the confidentiality of transaction details are essential for a company since it is related with money exchange (Reynolds, 2011). In order to respond to daily queries transaction system is necessary. In paying the staffs, in maintaining records of workers, payroll and in performing other business operations TPS is really beneficial (Mcleod, 2008). Very large number of food products are sold by McDonald’s daily. Hence they require huge amount of raw materials from supplier. Transaction occurs whenever McDonald’s order for raw materials. Important information like name and other details of supplier, quality of raw material and bill amount etc are noted using TPS. Decision support system (DSS) in McDonalds For sorting the data and taking appropriate decision on the basis of it DSS is employed. The appropriateness of decision depends on the person’s capability to scrutinize the data and value of the data. DSS comprised of computer applications that consist a human element (Burstein, 2008). It is possible to sort huge amount of data and choose from various options with the DSS. It also helps in taking non-‐routine decisions. Modern world is world of technology, considering this fact McDonald’s wanted to offer wireless services in their outlets. As part of it they collected information regarding use of wireless services by customers, extent of sales etc and the collected data was examined by the decision support system and it was decided that wireless service will be offered in McDonald’s outlets. “Made for you” system To support business procedures in McDonald’s, latest technology is implemented and they named it as “Made for you” system. McDonald’s consider requirements of customers with great priority. As soon as customer order for a sandwich, an image of sandwich will be displayed in the screen in the kitchen and to signal the employees a sound will be produced by the computer (aboutmcdonalds, 2009). Sandwiches are prepared considering the exact order from customers which helps in keeping efficacy of the organization. Before implementing this system, extra foods were thrown to waste baskets. When special request is made by customers, employee moves the line in order to attend that customer. This make customer to wait for long as it slows the procedure. PC oriented cash registers operating in-‐house software is comprised in this system. For distributing the workload 3
equally among the workers, orders are directed to screens at various food making tables. It helps in selling of more foods at faster speed hence increases the profit of the company. POS "Point Of Sale system" McDonalds give preference to offering best service to their customers. In order to accomplish this purpose by guaranteeing precise and quick order “Point of scale system (POS)" is implemented by McDonald’s. It is possible to follow huge amount of data within seconds with the help of this system. By implementation of this system order placed is immediately broadcasted to various systems under the facility (baselinemag, 2003). So this alert the kitchen staff about what orders are on the way and how long a customer has been waiting and alert employee at the cash counter regarding which payment is due. It saves lot of time and makes operations and access to information easier. As it fastens the delivery customers will be happy and which will result in their coming back to the restaurant. Hyperactive Bob system To make employees aware about when they are going to be busy McDonald’s use this system. To observe incoming vehicles towards the parking lot, this system employs computers and rooftop cameras (msnbc.msn, 2010). McDonald’s cut costs by establishing wireless network in their offices since it save reconfiguration time. For better implementation of McDonald’s office oriented and restaurant wireless networks, XDA smart phones are distributed to some employees to substitute the usage of mobile phones and laptops. It helps worker to save money. Time for stock room operations is also reduced by implementation of symbol handheld wireless computers. Making ordering devices wireless also helped McDonald's to gain profit says Tiley (Computing, 2010). As part of restructuring supply chain, McDonald's intends to make stock ordering centralized. For computerization of stock ordering systems it will consider various data like demographics of customers, previous sales in the store, forecasting of weather, special events etc. In order to prevent errors occur during manual ordering and for minimizing the barebones of ordering procedure this software will be helpful. Handhelds PCs at McDonald's For enhancing efficacy of employees McDonald’s distributed handheld PCs to their workers. Form having 500 questions regarding customer service, hygiene and quality of the product as well as information regarding assessments will be stored in the Pocket PCs offered. It is possible to store all the necessary information onto the handheld device and 4
from it the information is automatically transferred to central system (computing, 2010). This is very helpful for employees as it saves time and there is no need to manually transfer the details. McDonald's business relationship manager, Keith Frimley states that improved assessment results and standardization of methods in every operational segments are the major benefits associated with using mobile PCs. McDonald try to implement new systems to enhance cost savings and to combine their current IT systems. For improving efficiency and to reduce the cost of implementing IT infrastructure McDonald’s use wireless technology. It is possible to combine operations in the business and amalgamate tools with the help of wireless technology. It is simple to access laptops using wireless technique. Smart Card In some target markets to overcome credit card’s costs and its sluggish dealings, McDonald’s implemented smart card technology. Payment through card is made as easy and fast as cash payment. McDonald’s minimized payment time through card by implementation of ADSL broadband connections for permitting transactions (Turban, 2010). At the back end of each card a magnetic slip or computer chip is placed on which the monetary value of each card is stored. By means of machines that take money from ones bank account, value can be added to the smart card. Using this card customers can buy food. Gaining loyalty by offering bonuses and incentives, less shrinkage, money investments in relation to usage of cash etc are some of the purposes behind execution of smart card program. McFamily McFamily was the first website developed by McDonalds and it was in the year 1995 (mcdonalds, 2009). To create an impression that McDonald’s is meant for families services like bringing experts or public figures as guest speakers, sponsors for auditorium for parties, Hey Kids section which contain downloadable games and McArt in which art works of children are included are offered by this website. A segment on “serving others” is also there in the website. Details on Ronald McDonald House and attempt of McDonald’s to conserve the nature and other children’s charities are included in McDonald’s website. Though it is not possible to sell food products on McDonalds’s website, they can earn money by sales of products associated with sponsorship of McDonald’s. To gather 5
information and personal details regarding customers using online surveys McDonald’s website is helpful. In 1993, in stores of Wal-‐Mart McDonald’s opened their outlets. For selling their food products McDonald’s use Wal-‐Mart’s registers. At the counter in Wal-‐Mart store display of McDonald’s product is provided. When customer purchases McDonald’s products the orders are transmitted to kitchen because of software developed by Wal-‐Mart and McDonald’s. The bill for McDonald’s is appeared on receipts and records of Wal-‐Mart. McDonald’s share from the deal is balanced during end of the day. Supply-‐chain software is employed in McDonald’s for enhancing inventory management. This helps in sharing of supply and demand information among distributors, suppliers and restaurants. Wi-‐Fi Service McDonald’s is always very keen to make their customers happy. Considering the changing requirements of customers, McDonald’s introduced Wi-‐Fi in their outlets with no extra cost. This attracts more customers towards them as they can go through mail, do their work and stay connected with their friends while eating (mcdonalds, 2010). Benefits of IS for McDonald’s Employees performance record, expense and profit report make McDonald’s aware about their strong point and flaws. Understanding this will enable McDonald’s to progress their business operations. Productivity of McDonald’s is enhanced by implementation of information system. Information system helps to minimize the workload and time required for each operation (informationweek, 2009). Hence information system make McDonald’s more efficient and help them to gain competitive advantage. Challenges related with Managing System change in McDonald’s Implementation of strategic information system is very expensive and complex procedure. It will completely change the framework, working environment, products, procedures etc of McDonald’s. Changing to new information system or technology is a cumbersome procedure and will take much time so McDonald’s will be reluctant towards it. Prior to application of SIS thorough plan should be developed, as co-‐ordination should be there among McDonald’s, management and technology Challenges related with maintaining competitive advantage in McDonald’s
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It is a universal rule that “Nothing lasts forever”. Competitive advantage McDonald’s enjoying is also not exempted from this rule. If a company’s information system is successful then rivals will try to replicate that. Technology, market and requirements of customers are also frequently revolutionizing giving McDonald’s chance to accomplish their own benefits. Strategic benefits are bestowed upon McDonald’s by their information system. Usually it is not possible to copy industry relationships and business procedures that lie behind the system, though system of organization can be copied. Conclusion McDonald’s is a leading fast food restaurant giant. The contribution of information system in attaining competitive advantage by McDonald’s is explained above. The report gives idea about information system, their importance, how it is used in McDonald’s etc. The challenges faced by McDonald’s and how they overcome that issues are also dealt with. Some recommendations for McDonald for effective implementation of IS and to accomplish competitive advantage is also described. Recommendations There is no guarantee that competitive advantage once gained will remain forever. Sop McDonald’s should consider this fact and upgrade their information systems and business patterns according to the changing requirements of customers. Implementing strategic systems usually involves modifications in business objectives, procedures within the company, association with suppliers and customers and information pattern. These alterations are referred as strategic transitions as they influence the technical and social aspects of the company (Ralph Stair and George Reynolds, 2011). These type of changes usually cause confusions regarding internal and external limits of the company. So McDonald’s should consider this fact and act according to it. McDonald’s should develop strong bond with customers and suppliers and may split or distribute the responsibilities among themselves. Hence new information systems bring about lot of changes in McDonald’s. Suitable system that hook up altering expenses and economic condition with management information system should be developed by McDonald’s. The costs and earnings should be thoroughly examined as sloppiness will have negative consequences on performance of McDonald’s (M. Gordon Hunter, 2009). New inventions in technological section should be noted and apposite ones should be implemented for upgrading the information system of McDonald’s. Modern world prefer fast services. So McDonald’s should be ready to offer such services to customers to enhance customer’s loyalty towards them which will enable them to increase 7
the profitability and hence attain competitive advantage in the very tough fast food industry. The transactions can be made faster by Electronic data interchange (EDI) and will help McDonald’s to offer better service by transmitting information to customers or suppliers (Gary P. Schneider, 2010). McDonald’s will be able to enjoy the advantage of minimal cost through automated reordering procedures and information provided will also be accurate. This will allow McDonald’s to attain competitive advantage. Application of an effective Strategic Information System will help all management levels to easily access details of every factor that have an influence on functioning of McDonald’s. McDonald’s should make use of an information system that will enable centralized control of all the operations in the restaurant and that offer real-‐time transactional data. They also can use software system that will help in Cash Control, Integrating Inventory, Scheduling workers and maintain record on attendance. Employee Training Service of employees is one among the major thing that will make customers come back to the restaurant. So keeping this in mind the most efficient and pleasing worker should be appointed to serve the customers. As part of this McDonald’s should properly train the employees regarding the use of all the information system equipments in the outlet as customers always look for fast service. Any slight confusion will result in sluggish delivery which organization can’t afford. Staff should be managed well and system should be implemented that schedules time for workers and record their in-‐time and out-‐time (R. Kelly Rainer and Casey G. Cegielski, 2009). For observing the attitude of employees towards work and how efficient they are in their work, account should be kept on deliveries made by each employee. This will make staff more attentive towards serving customers which will surely increase the productivity of organization and hence will help McDonald’s to gain competitive advantage. Backup System: For averting system breakdown and interruptions backup system should be developed as vital information will be lost if the system break down and will also result in confusions. This will affect the efficiency of McDonalds which will take customers away from them (Turban, 2010). So using a backup system will increase productivity of McDonald’s. Dissemination of information For effective functioning, flow of information is necessary in every organization. All the operations and even minute details should be carefully scrutinized to understand whether expenses are utilized properly and for suitable operations. Stakeholders should be supplied 8
with the information regarding the organization at correct time (M. Jacobson and I. Fiksdahl-‐King, 2009). Lessening of expense and maximizing the profit Increasing the profit is the major aim of any organizations and even McDonald’s have same objective. For that more and more customers should be lured and convinced to purchase the food products of McDonald’s. Attaining this objective is all the more difficult in modern world as customers have got various alternatives to choose from and competition is very tough in fast food industry. Low cost is another factor that leads to competitive advantage. Effective implementation of appropriate information system will help in lowering the expenses (Ralph Stair and George Reynolds, 2011). Wastage of food can be avoided by keeping track of customer trends and other aspects. This will enhance lowering of expenses. The staffs who manage information system procedure in McDonald’s should be properly guided and trained for effectual implementation of operations. If incompetent employees perform such jobs then there is possibility of error (Gamma and Vlissides, J, 2009). Minimizing cost and maximization of profit should be opted as tracker of operational efficiency by McDonald’s and new tools should be used to determine them. Adapt to changes in the information system methods: New technologies are developing every day. So it is necessary to update your system according to it (Frada Burstein and C. W. Holsapple, 2008). The Strategic IS should be implemented in such a way that employees and other stakeholders can access information from anywhere at any time. For trailing and observing the status of McDonald’s system should be properly implemented in domestic offices along with Head office. McDonald’s should develop data warehouse or business management database that will be helpful to sales managers and management. In order to manage business, create application for data mining in addition to real time online systems. References Ø M. Jacobson and I. Fiksdahl-‐King (2009): "A Pattern Language". Oxford University Press, New York Ø Frada Burstein, C. W. Holsapple (2008), “Handbook on Decision Support Systems 1: Basic Themes”, Springer Publications Ø Gamma, Helm and Vlissides, J. (2009) "Design Patterns: Elements of reusable object-‐ oriented software", Addison Wesley. 9
Ø Gary P. Schneider ( 2010), “Electronic Commerce”, Cengage Learning Publications Ø Kenneth C. Laudon, Jane P. Laudon (2011), “Management Information Systems: Managing the Digital Firm”, Pearson Education, Edition12 Ø Kevin Grant, Ray Hackney, David Edgar (2010), “Strategic Information Systems Management”, Cengage Learning Ø Laudon Kenneth C. (2010), “Management Information Systems : Managing the Digital Firm”, Pearson Publications Ø Lucey Terence(2009). Management information systems. Ø M. Gordon Hunter (2009), “Strategic Information Systems: Concepts, Methodologies, Tools, and Applications”, IGI Global Ø Mcleod (2008), “Management Information Systems”, (10th ed.), Pearson Education India Ø Paul Facella, Adina Genn (2008), “Everything I know about business I learned at McDonald's:”, McGraw-‐Hill Professional Ø R. Kelly Rainer, Casey G. Cegielski (2009), “Introduction to Information Systems: Enabling and Transforming Business”, John Wiley & Sons Publications Ø Ralph Stair, George Reynolds (2011), “Fundamentals of Information Systems”, Cengage Learning Publications Ø Robert Galliers, Dorothy E. Leidner (2009), “Strategic Information Management: Challenges and Strategies in Managing Information Systems”, Routledge Publications Ø Robert Galliers, M. Lynne Markus, Susan Newell (2007), “Exploring information systems research approaches: readings and reflections”, Routledge Publications Ø Turban (2010), “Decision Support And Business Intelligence Systems”, (8th ed.), Pearson Education India Web references 10
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