Assessment - Contents (B.Leeneswari)

8/7/2019 Assessment - Contents (B.Leeneswari)

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BUYER BEHAVIOR

Page 1

OVERVIEW

It all began in 1940 at San Bernardino, California, with the first restaurant being

opened by two brothers - American fast-food pioneers from Manchester-New

Hampshire, Richard “Dick” J. McDonald (February 16, 1909 – July 14, 1998) and

Maurice “Mac” McDonald (November 26, 1902 – December 11, 1971).

In 1937, The McDonald brothers started their first carhop or now known as

“Drive-Thru” business in Pasadena, California. They captured the market by

offering something at time that no one else did, "fast service". They moved on to

a hamburger store with two “Golden Arches” as their logo.

The business gained its fame after 1948 when the brothers introduced the

concept called “self-service” and implemented the “assembly-line” system in their

kitchen for mass production. A little hamburger man called "Speedee" (Exhibit 2)

became the company’s mascot.

EXIHIBIT 1 : Richard “Dick” J. McDonald &Maurice “Mac” McDonald

EXHIBIT 2 : McDonald’s restaurant in SanBernardino, California - 1940

EXHIBIT 3 : McDonald’s “Speedee” Mascot



BUYER BEHAVIOR

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Huge success of the business and its extraordinary capacity, attracted a

milkshake machine (MultiMixer) salesman Ray A. Kroc (Kroc) (October 5, 1902 -

January 14, 1984), from Oak Park, Illinois to finalized a business deal and

became the first franchise agent appointed by the McDonald brothers in 1954.

Kroc formed the new franchising company on March 2, 1955 under the name of

McDonald’s System, Inc. On April 15, 1955 his prototype McDonald’s restaurant

began business in Des Plaines, Illinois.

He replaced the “Speedee” mascot to a red haired clown called “RonaldMcDonald”. By 1961, the McDonald brothers sold the entire business and its

rights to Kroc for $2.7 million. “Look for the Golden Arches” became the

company’s first advertising theme.

In 1965, McDonald’s went public on the stock exchange. It operated a different

business model whereby the income is not only extracted from the franchisee fee

and profit of sales, but also by collecting rents – as part of the franchise

agreement, McDonald’s owns the property on which McDonald’s franchise

operates.

EXHIBIT 6 : MCDONALD’S “RONALD MCDONALD’S MASCOT

EXHIBIT 5 : McDonald’s franchised restaurant inDes Plaines, Illinois - 1955

EXIHIBIT 4 : Raymond Albert Kroc



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Kroc retained the McDonald’s formula of limited menu, quality food, the

assembly-line production system, and fast, friendly, reliable service. Indeed,

Quality, Service, Cleanliness, and Value continue to be McDonald’s operating

principles today.

It aggressively introduced new innovative products guided by their experienced

chefs to cope ever changing customers’ preferences. Their affordable prices

leveraged their customers to continue buying their products. The restaurants are

designed and operated in various operating methods such as standalone

restaurants, “Drive-Thru”, and also “Mc Delivery” services.

McDonald’s, the name that has gained its credibility in the hearts of all walk of

life, is now the world’s leading fast-food restaurant chain operating over 31,000

restaurants in more than 119 countries and 6 continents with almost 1.6 million

employees.

(Source: Funding Universe)



BUYER BEHAVIOR

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CRITICS ON MCDONALD’S

McDonald’s had been constantly battling against its accusations and lawsuits on

various aspects over the years. Famously, the McLibel case where it debated on

the impacts of McDonald’s on its consumer health, animal welfare, environmental

issues and labor.

Promoting Unhealthy Food – McDonald’s has been known as a purveyor of

unhealthy fatty food. Table 1 explains that their food contains high calories, more

fat, salt and sugar but low in fiber and vitamins. The artificial additives,

preservatives and its diet itself contributes to serious health risk such as heart

disease, diabetes, cancer and other chronic diseases. In 1991, an outbreak of

food poisoning caused many McDonald’s consumers to suffer from serious

kidney failures. (Source: McSpotlight)

McDonald’s constantly criticised to the rising of obesity rates. They have become

a subject of Morgan Spurlock’s documentary called “Super Size Me” where it

chronicled the nutritional dangers of eating McDonald’s fast-food and gained 25

pounds, an increase in the cholesterol by 60 points and has been suffering with

headaches and mental depression. (Source: McMans Depression and Bipolar

Weekly, 2004)

Allegations were thrown against McDonald’s for exploiting children with their

“misleading advert” as part of their marketing strategy to drum up their business.

Collectible toys such as movie characters and gifts are used in the “Happy Meal”

to promote their “innutritious” (McLibel 1995). In 2002, a lawsuit was made

against McDonald’s by a mother of a 15 year old boy weighs 180 kilograms (400pounds) as a result of consuming the unhealthy food diet from Mc Donald’s.

EXHIBIT 7 : Morgan Spurlock’s “Super Size Me” documentary



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TABLE 1 : Calories & Nutrient contained in some of McDonald’s famous foods

(Source : www.fitforsummer.com)



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The usage of trans fatty acids (TFAs) / hydrogenated oil in McDonald’s cooking

process has been part of the contributing factor to obesity and other health

disorders. Both the hydrogenated oil is found to be pure cholesterol which leads

to coronary artery or cardiovascular diseases. In 2003, BanTransFats.com, Inc.

filed a suit against McDonald’s to minimize the usage of hydrogenated oil in their

cooking. (Source : BanTransFat.com)

Environmental Concern – McDonald’s has been found to be one the cause for

pollution due to the usage of polystyrene foams - “clamshells” (Exhibit 8) for their

burgers. These materials cannot be recycled or composted which causes

overfilled landfills. The polystyrene production contains chlorofluorocarbon (CFC)

which can be harmful to the ozone. McLibel 1995 accusations on McDonald’s

were for them being a support to the production of such materials and for not

using recycling and reusing the food containers. (Source : McLibel 1995)

Animal Welfare - Being the world’s largest user of beef and chicken, McDonald’s

have been accused on the inhumane way of animal treatment before they are

being turned to fast food. The animals are being farmed with no access to air or

sunshine and with no freedom of movement. PETA (People of Ethical Treatment

of Animals) launched a “McCruelty” campaign (Exhibit 9), accusing on the

‘barbaric slaughter’ of this animals - In 1995, the McLibel Trial came to verdict

and claimed that McDonald’s was “culpably responsible for cruel practices in the

rearing and slaughter of some of the animals which are used to produce their

food”. (Source : PETA)

EXHIBIT 8 : “Clamshells” Polystyrene Burger Packaging

(Source : EDF)



BUYER BEHAVIOR

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Human Rights - There were also several controversies on McDonald’s neglecting

labor rights. This includes underpaying the workers and over-working child labor.

On November 2007, China Radio International broadcasted McDonald’s China’s

part-time workers were paid below the legal requirement, denied their bonuses,

required to work extremely long hours and were not given proper insurance and

medical funding. The company has also been fined for hiring children who are

below 15 to work especially in the making of the collectible toys. And most of the

children are caught with no work permit. Similar case was reported in The

Telegraph, UK on June 2001 which occurred in Shenzhen, Hong Kong where 14children were found working in a sweatshop, making toys to supply to the fast-

food chain.

EXHIBIT 9 : PETA'S Original McCruelty Campaign Logo(Source : PETA)



BUYER BEHAVIOR

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COUNTERING CRITISCM It has been a common knowledge that Mc Donald’s has been a focal point to the

number of controversies and lawsuits on its food products over the years. In

pursuance to bringing back its “tarnished image”, they embarked on a mission to

fight back against their detractors and to re-establish their credibility. A Social

Responsibility Committee was formed to determine the areas that require

improvement and subsequently to introduce new policies for the company to

operate in a more ethical way for the betterment of its customers and the growth

of the business.

The greatest factor that affected the reputation of McDonald’s was the release of

Morgan Spurlock’s “Super Size Me’ documentary in 2002. Jim Cantalupo, the

Chairman and CEO of McDonald’s developed the 1“turnaround strategy” as to fix

the bad view of the public on McDonald’s. Being the prime target of the “obesity”

debate, the plan’s motive was to fully focus on offering a broader selection of

meals to meet the diverse needs and preferences of its customers. A fulltime

nutritionist was employed to revive its menu by adding more fruits and vegetables

related items, such as salads and yogurt desserts with fruits.

The children’s menu – ‘Happy Meal” contained options that were high in protein,

calcium, iron and B vitamins and other nutrients. A mix and match option was

made available to enable the kids to make their preferred choice. Apple slices

were offered as a substitute to the fries and milk, fresh orange and water was

offered instead of soda in the kids ‘Happy Meal. This clearly demonstrates

McDonald’s seriousness in ensuring nutritious and quality food for its customers.

(Source: McDonald’s Corporate Responsibility Report (CRR), 2004)

1 * Turnaround strategy is to return an underperforming or distressed company to normal in terms of

acceptable levels of profitability, solvency, liquidity and cash flow. Source : (McDonald’s Corporate

Responsibility Report (CSR) , 2004)



BUYER BEHAVIOR

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In early 2006, McDonald’s implemented a system of printing the nutrition

information which consists of info graphic display, the amount of calories, fat,

sodium, carbohydrates and protein labels directly on its food packaging. They

ensured that the printing is highly visible to get the attention of their customers

This is to enable the customers’ to make a more informed decision on how the

food can fit into a balanced diet.

EXHIIBIT 10 : Calories and Nutrients Classification(Source : Corporate Responsibility Report 2004)

EXHIBIT 11 : Nutrition Information on McDonald’s Food Packaging

(Source : McDonald’s US)



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McDonald’s initiated several campaigns to create awareness among the public on

ways to lead an active lifestyle. With the help of several worlds’ famous icons like

the “William Sisters – Serena and Venus”, McDonald’s emphasised on the

importance to incorporate physical fitness / exercise into our everyday lives. They

highlighted that a steady food diet is not the only factor for healthy life but it has to

be followed by exercise as well. (Spinwatch, UK – June9, 2005)

McDonald’s has agreed with PETA (People for the Ethical treatment of Animals)

in 2005 to use the “Controlled Atmosphere Killing (CAK)” system in their

slaughterhouses where it kills animals slowly. A regular audit is conducted on the

supplier's processing facilities to ensure that the animals are well treated. (Table

2 illustrates a yearly increase as a result of effectiveness in the audit program).

This includes the implementation of a policy to curb the usage of antibiotics to

promote chicken growth. In 2006, the implementation of the policy was a success

and a 90% reduction in the poultry production was recorded. (Source: EDF)

TABLE 2 : The above chart shows the number of facility audit carried from the year 2003 to2005. The results show 91% success in 2003, followed by 93% in 2004 and 99% in2005. This is a continuous upward trend in the audit results.

(Source :Corporate Responsibility Report 2006)

EXHIBIT 12 : Example of health campaigns launched by McDonald’s

(Source : Corporate Responsibility Report, 2004)



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The company also took a challenge to work towards the ecological sustainability

for the benefit of its future generation in areas such as packaging and waste

management, energy efficiency, wildlife protection and others.

Packaging and Waste reduction – They joint task force with Environmental

Defense Fund (EDF), McDonald’s identified two areas of improvement in the

aspects of their packaging, i.e. its weight and its recycled content which can be

recycled or composted. They switch from polystyrene foam packaging to paper-

based wraps using biodegradable materials made from pulp and grass paper,

which contain natural grease-resistant properties. The usage of these material

was being enforced in all its restaurants and it has become a prime eco-solution

to these wasteful and pollution problems. As a result, McDonald’s managed toachieve a 3.2% reduction in its packaging in the year 2003. (Source: McDonald’s

Corporate Responsibility Report, 2004)

Wildlife Protection – Educational projects and campaigns were geared towards

educating the public on the importance of protecting the endangered animals and

how they are being threatened by climate change and human activities.

McDonald’s and Conservation International (CI) teamed up to create awareness

among the public on ways to protect the wildlife and as a pledge to support CI on

its efforts. Some of the projects undertaken were “Bee Good to the Planet” –

emphasising on preservation of the bee habitats, Panda Guardians – providing

support to the CI’s nature reserves/staff who are sheltering the pandas and also

made a significant contribution to support three projects led by CI to protect

tropical forests such as Cambodia, Sumatra and Congo, habitat of the Asian

elephants, tigers and gorillas. (Source: Conservation International)

EXHIBIT 13 : Andrew Millar’s McDonald’s Packaging Design



BUYER BEHAVIOR

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Energy Saying - McDonald’s has evolved in using Echelon Corporation’s power

line network equipment to provide communication and data exchange in its

various kitchen equipments, directly reducing energy consumption and

maintenance cost, and increase operational efficiency. (Source: Echelon

Corporation)

McDonald’s goes McOrganic – On June, 2007, McDonald’s announced on its

intention to sell organic beverages by obtaining the milk from the British organic

cows and to be sold in all their restaurants worldwide. It is the company’s effort

towards protecting the environment and to help the organic farmers as well.

(Source: Telegraph, UK – 28 Jun, 2007)

Hydroflurocarbon (HFC) Restaurant - On January 2003, IEMA (Institute of

Environmental Management and Assessment) announced that McDonald’s

Denmark operates the world’s first HFC-free restaurant to help reduce the effects

of climate change on the environment. The environmentally innovated

refrigerants do not have Freon, or HFCs (hydroflurocarbons). (Source: Jason Judge,

IEMA -23 January, 2003)

McDonald’s defended their hiring policies in their outlets through aggressive

Public Relations (PR) campaign. The low wages are supplemented with various

perks such as travel allowance, free vacations and also flexible working hours.

(Source : Sourcewatch)

EXHIBIT 15 : Echelon’s networking system used in the McDonald’s kitchens(Source : Echelon Corporation)

EXHIBIT 16 : HFC-Free Restaurant in Denmark



BUYER BEHAVIOR

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REFERENCES

1. http://findarticles.com/p/articles/mi_m3190/is_n32_v22/ai_6583230/

2. http://www.andrew-millar.com/biodegrademe.html

3. http://www.bantransfat.com/mcdonalds.html

4. http://www.consumeraffairs.com/news04/2006/05/mcdonalds_responds.html

5. http://www.crocodyl.org/wiki/mcdonalds

6. http://www.echeat.com/essay.php?t=28470

7. http://www.echelon.com/company/press/mcdonalds.htm

8. http://www.fitforsummer.com/mcdonaldsmeal1.htm

9. http://www.fundinguniverse.com/company-histories/McDonalds-Corporation-

Company-History.html10. http://www.iema.net/news/envnews?aid=3765

11. http://www.mcspotlight.org/case/index.html

12. http://www.sourcewatch.org/index.php?title=McDonald's

13. http://www.telegraph.co.uk/news/uknews/1555894/McDonalds-goes-

McOrganic.html

14. http://www.telegraph.co.uk/news/worldnews/asia/hongkong/1368114/McDonalds-

in-child-labour-claim.html

15. McDonald’s Corporate Responsibility Report (CSR) , 2002



18. www.mcdonalds.com

19. http://www.safeagemployer.org/news3.htm

20. www.eCheat.com

21. http://www.sourcewatch.org/index.php?title=McDonald's

22. http://www.spinwatch.org.uk/-news-by-category-mainmenu-9/154-food-industry/1348-fatboy-ronald-mcdonald-downsizes-to-head-off-critics

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Assessment - Contents (B.Leeneswari)