McDonalds In Colombia

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McDonalds In Colombia



A brief history of the organization:

Two brothers originally started McDonald’s, they ran a single restaurant for 17 years in a single city in California. In 1954, Ray Kroc visited them to sell them a milkshake machine and saw a bigger vision. In 1955, Mr. Kroc began the new “McDonald’s System Inc.” and in the first year opened 18 new restaurants across the United States, and he maintained the quality, the production line and the limited menu that the McDonald brothers had started.

McDonald’s tried to come to Colombia in 1983, but the economy was closed to such businesses. They tried for 12 years before having success in getting the appropriate paperwork and permission to start a McDonald’s in Colombia. At first, McDonald’s didn’t open doors to the public for consumption, like they have done before. They started working in Colombia to obtain the correct temperature at which to cook the fries to get the correct taste, and to obtain the correct menu and the same tastes as the company is accustomed to. At first they set the prices, while they are importing the supplies, at a higher level. Then later discounted the prices of the food to the customer.

Today, Colombia is the fourth most important country in Latin America to McDonald’s. In it’s first year it surpassed all of the expectations that anyone had for the restaurant with the opening of 12 restaurants. Thanks to the high demand, they will continue opening McDonald’s in the rest of the country. McDonald’s is continually looking for businesses in Colombia to supply them with things they need. They continue to invest in the economy and the country. McDonald’s is working for a bigger part of the pie in the Colombian market, even though this pie continues to shrink.

Organizational structure:

The organizational structure is based on franchises, where the owner is an involved operator and not some unconcerned corporate entity. McDonald’s believes that by keeping owners, or franchisers that are involved in day-to-day operations of their store, their drive for success is much higher. The McDonald’s corporation does operate some stores, but this is only to open new markets or to continue establishing good market procedures and basic store operation. It is the desire of the corporation that each McDonald’s location be individually owned and operated.

When an owner is found for a restaurant, McDonald’s shows them the restaurant and explains why they feel it is a good location. The potential owner has the choice of purchasing the said restaurant or waiting for a new restaurant in a future location that he/she feels more comfortable with. After the owner has purchased the restaurant, he goes through a year of training so that the restaurant will continue in the way that McDonald’s desires and the owner knows the system that McDonald’s has used over their 40+ years of service.

In 2000, there were twenty restaurants in three of the major cities in Colombia, with three of them being privately owned.

The McDonald’s corporation in Colombia has eight departments, human resources, purchasing, operations, finance, franchising, development, information systems, and marketing. Each department has a department head and a small staff. The corporate purpose is to provide the necessary support for the operation of the individual McDonald’s stores throughout Colombia. They also provide the communication with the international headquarters in Illinois and work with the McDonald’s corporation for making decisions and operating McDonald’s in Colombia.

Organization’s mission / vision or purpose:

“McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value, so that we make every customer in every restaurant smile.”

Description of international strategies to achieve the organization’s mission or purpose:

To achieve their vision, McDonald’s is focused on three worldwide strategies:

Be The Best Employer

Be the best employer for our people in each community around the world.

Deliver Operational Excellence

Deliver operational excellence to our customers in each of our restaurants.

Achieve Enduring Profitable Growth

Achieve enduring profitable growth by expanding the brand and leveraging the strengths of the McDonald's system through innovation and technology.

For McDonald's to achieve its goal of being the world's best quick service restaurant experience, they must have the best experience for all McDonald's employees. So they formalized their beliefs into a People Vision and People Promise.

“Our People Vision defines what we strive to be as an employer. Simply put, we aspire to be the Best Employer in Each Community Around the World.”

“Our People Promise is how we remind our people what they can expect and how high our goal is: To be the best employer in each community around the world. To the 1.5 million people who work at McDonald's in 119 countries around the world, and to all future employees, we want you to know that: We Value You, Your Growth and Your Contributions.”

Organization’s planning process and cycle:

McDonald’s Colombia uses a 31Q planning cycle. This is a three-year strategic plan, and a one-year tactical plan with quarterly revisions. A leadership council, consisting of the eight department heads of the corporation, makes the decisions. Decisions are made by consensus when possible. When not possible decisions are made based on the majority with due diligence to the opinion of dissenters. Email, voicemail, meetings, hallways, newsletter and letters communicate decisions.

Description of information and management control system:

McDonald’s has a large corporate structure to support the worldwide operations and the franchisers. This corporate structure is designed around advancing the McDonald’s opportunity around the world and helping each McDonald’s unit be successful and profitable.

McDonald’s Colombia has an Information Systems department responsible for the data collection and reporting. I failed to inquire further about McDonald’s information system in my interview with Pedro Medina, and I have not received a reply to my email inquiry after the fact. I know that McDonald’s uses extensive data collection and reporting for each store and region. This data is used not only to help the individual store in planning and improving service but for corporate planning and the addition of future franchises.

McDonald’s Colombia works in cooperation with McDonald’s International, having some degree of freedom to make decisions and handle the operation of the stores in Colombia. One example was the recent addition of a breakfast menu to four stores. This is a test market. McDonalds International Headquarters recommended against it, based on their data and information they felt that Colombians eat breakfast at home and would not be open to the idea of eating at a restaurant in the morning. McDonald’s Colombia made the decision to try it in the four restaurants with the highest potential for success, those with the most pedestrian traffic in the morning hours. Based on a six-month review of sales and expense McDonald’s will evaluate the possibility of expanding breakfast for other restaurants within the country. This shows that the McDonald’s corporate structure in Colombia while working towards achieving the goals of McDonald’s is largely independent to work within the culture it understands.

Description of the organization’s notable achievements:

McDonald’s Colombia has proven to be one of the most notable achievements for the McDonald’s corporation. McDonald’s arrived in Colombia in the midst of one of the worst economic recessions in Colombian history and yet has become one of McDonald’s greatest successes. McDonald’s Colombia set a world record by opening twelve new stores in the first year after entering the country. McDonald’s continues to grow and expand opening in new cities and hoping to establish new franchises throughout Colombia.

McDonald’s Colombia is growing more rapidly and having success that is helping the countries around Colombia. McDonald’s Colombia now produces the uniforms for four neighboring countries. McDonald’s Colombia was able to work with Colombian farmers to produce the proper potatoes for French fries within 5 years; Argentina took 9 years. McDonald’s Colombia is now responsible for the exportation of 10 million pounds of coffee to McDonald’s USA each year.

McDonald's Colombia is the only fast service restaurant in Colombia raising money for the welfare of children. The total fundraising through McHappy Days has provided more than 250 whole year scholarships.

In 1999 McDonald's Colombia won the PORTAFOLIO award given to the company who trains the best in the country.

Issues and problems faced in international operations:

McDonald’s is highly concerned with the quality of their food. Therefore at the opening of a new restaurant, most of the supplies are imported until they can find a provider for these products in the local economy. They take the time to seek out and teach farmers to grow the potatoes just right so that the McDonald’s French Fries taste the same at any restaurant you go to in any part of the world. Currently over 50% of the products used in a McDonald’s in Colombia are supplied by Colombian businesses.

One difficulty in Colombia has been to find adequate locations on principal high traffic corners with sufficient square footage to meet the company needs, and to find adequate franchisers to take the ownership of individual outlets.

The economic situation is considered a substantial risk, but McDonald’s has proven, throughout Latin America, their ability to overcome financial difficulties. McDonald’s also recognizes the additional risks in Colombia with the guerilla threatening and extorting from the rich and successful businesses here in Colombia. McDonald’s does not pay extortion; they have added scenarios to their business planning and operations including potential contingencies and costs. McDonald’s believes that by contributing to the community where they operate they will create a neighborhood watch mentality, where a community of trust built around the individual units protects them. They refer to this in their corporate plans as a trust bank.

Conclusion:

McDonald’s has proven once again in having an ability to be successful in another developing country with different risks and challenges. McDonald’s Colombia is one of the most successful endeavors for the McDonald’s corporation even in the midst of a country with serious economic difficulties.

McDonald’s has proven repeatedly that the franchise model creating independent restaurants that follow the McDonald’s model can be successful and profitable. McDonald’s may have serious advantages over other corporate models because they have created smaller units, leaving decision-making and control at the lowest level possible. They have created a corporate structure designed to help the individual units be successful. The corporate role is to serve the restaurants; the restaurants do not serve the corporate. This is an important distinction and one that will continue to help McDonald’s be a leader in the global marketplace.

McDonald’s is committed to people, to their customers and to their employees. This commitment to people will continue to help McDonald’s breed success from every individual. McDonald’s is the largest employer of youth in Colombia and has consistently been one of the largest employers of youth in the United States. McDonald’s recognizes its role in the development of young people, providing scholarships and working to provide a solid foundation for young people to be successful in the business world.

McDonald’s is committed to the communities in which they operate, working to provide social programs and to meet the needs of the community. McDonald’s raises funds in support of Children’s Hospitals and programs that provide for those with needs in the community. Some see this level of social concern as manipulative advertising and promotion, but McDonald’s is truly committed to the community. They have shown repeatedly in many countries a desire to be involved in the community and helping the communities not just making a profit from the community.

McDonald’s is an organization of the future. They have shown an ability to adapt and grow in the global marketplace. They may in some ways be responsible for expanding the global market through reaching into countries as early as possible. McDonald’s has created an organization that seeks not only continuous improvement, but is looking for ways to improve itself, its employees and its community. McDonald’s commitment to seeking out local suppliers and working to develop local brands in each market helps to advance McDonald’s as a global company and not just an American company coming to take over a market. McDonald’s creates jobs and even companies to supply their needs and this can only improve the economies of developing countries.

This report has renewed my confidence in a company like McDonald’s and I am happy that it is my daughter’s favorite place to eat outside of our home. I learned a lot about Colombia but even more about McDonald’s commitment to people and to the community. I hope that I can learn to develop an organization with the same commitment to people and the community as McDonald’s has but with Christ as the focus instead of profit.





Bibliography:



www.mcdonalds.com

http://www.mcdonalds.com/corporate/index.html

http://www.mcdonalds.com/countries/colombia/index.html

Gaitan, Jorge, Algo de Creer en Colombia, report prepared for International Business Course at the Andes University, Bogotá, Colombia, 2000

Reyes, Angelica, personal interview April 17, 2001 Case Study, McDonald’s in Colombia, notes and research written for International Business Course, Andes University, Bogotá, Colombia

Medina, Pedro, Personal Interview, April 21, 2001

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