Operations strategy in a fast food industry – how competitive factors influence strategy decisions.

Candidate Number: 856053
BN3318 Operations Strategy: Systems and Implementation
23-Jan-2012
Word count: 3,000

Table of contents

1. Introduction 2
2. Operations strategy - competitive factors and performance objectives 2
2.1. McDonald’s Corporation 3
2.2. Domino’s Pizza, Inc 4
2.3. Subway 5
3. Structural and infrastructural decisions 6
3.1. McDonald’s Corporation 6
3.2. Domino’s Pizza, Inc 8
3.3. Subway 9
4. Conclusions 10
5. Appendices 11
6. Bibliography 14

1. Introduction
The fast food industry is a highly profitable business, which was worth $201.1 billion in 2009 and was forecasted to grow further (Datamonitor, 2010). The industry can be defined as the sale of food and drink items for immediate consumption. Traditionally, offerings were highly standardized with low variety of choices to cut the costs associated with differentiation and to speed up the production process. Moreover, the competition was very small and there were no incentives to differentiate. Recently however, many factors such as rapid technological changes, speed of globalization and increasing competition pushed fast food chains to change their competitive strategies.
The purpose of this essay is to evaluate how differences in the relative importance of competitive factors should influence the structural and infrastructural decisions of fast food chain companies. There are many different types of outlets that are classified into the industry and wide range of stores within each outlet type. However, this essay will focus on quick service restaurants which provide both meals for immediate consumption and accompanying sitting area – McDonald’s, the very first company established in the industry; Domino’s Pizza and Subway. First, I will identify the competitive factors of each company and how these can be translated into operations performance objectives. Secondly, I will analyse how these objectives should dictate structural and infrastructural decisions and evaluate their importance on companies’ position in the market and their operations capabilities. Finally, I will summarise my discussion and findings.

2. Operations strategy - competitive factors and performance objectives
Operations strategy can be defined as a total pattern of decisions which shape the long-term capabilities of any type of operation and their contribution to overall strategy (Slack & Lewis, 2008). There are many frameworks which can help to analyse operations strategy, two of which are most apparent: market-based approach and resource-based approach (Greasley, 2009). These two approaches have been combined to certain extent in earlier Hill’s (1993) methodology. Hill (1993) developed a framework consisting of 5 steps:
1. Define corporate strategy.
2. Determine marketing strategies to meet these objectives.
3. Asses how different products win orders against competitors.
4. Establish the most appropriate mode to manufacture these sets of products – process choice.
5. Provide the manufacturing infrastructure required to support production.
In this section I will combine both perspectives, first identifying corporate strategy for each fast food chain, followed by their competitive factors – what customers want, and then I will translate them into operations performance objectives to satisfy the market. Steps four and five will be discussed in Section three of this essay.

2.1. McDonald’s Corporation
Mc Donald’s is the largest and the first to be established fast food chain whose total revenues in 2010 reached $24,075mln, showing a year-on-year steady growth (McDonald’s, 2010).
McDonald’s corporate strategy is fairly simple: Plan to Win, a heavily customer focused blueprint which serves the company for the past eight years keeping it in the lead position in the industry. Company’s marketing strategy focuses on five basis business drivers:
Driver: