Extra Credit

McDonald’s is the world's largest chain of hamburger and fast food restaurant, serving around 68 million customers daily in 119 countries across 35,000 outlets. McDonald’s may recently have struggled to lure customers, but it still does far more business at each location than other rivals, such as Burger King. According to the article “How the Average McDonald’s Makes Twice as Much as Burger King” from businessweek.com, McDonald’s drew $2.6 million in revenue last year in the U.S, while Burger King’s average sales was $1.2 million. It is surprising to me that there is such a huge gap between McDonald’s and Burger King since they sell similar foods and have the same target market.

What accounts for the difference? I believe there are 3 factors that drive higher sales volumes at McDonald’s:

1. Happy Meal. Happy Meal in McDonald’s is designed for children. This strategy makes McDonald’s different than Burger King. McDonald’s has the largest share of kid’s meal sales in the fast-food industry. Happy meals attract kids very much. It usually gets around 10% of total sales from Happy Meals. This unique children-oriented marketing strategy is helpful to gain revenue and compete with other rivals.

      2. Off-peak Business. The breakfast business in MacDonald’s is really successful. Food like Egg McMuffin, is part of the fast-food vocabulary in a way Burger King can’t match. And also McCafe has now become a well-known brand that is popular among breakfast consumers. The idea to gets more customers during off-peak hours looks like a good way for McDonald’s to follow.

3. Efficiency. Compared to other fast food restaurant, McDonald is more efficient. Its drive-through service can handle more cars at peak times. McDonald’s restaurants are adding a third service window to get customers through even faster. Its waiting line is much shorter than Burger King when they are in peak hours.

Those 3 factors are what I think are critical and essential for McDonald’s success. There might be other factors I have not considered. Anyway, everything from marketing and site selection to product initiatives and franchisee selection have been historical factors. A good operations management will help a lot.

Reference:

http://www.businessweek.com/articles/2014-03-25/how-the-average-mcdonald-s-makes-twice-as-much-as-burger-king

MIS 373 WEEK 4 BLOG

In this week's blog, the article I chose titled " Why Did One of the Best U.S. Design Firms Sell Out to a Chinese Conglomerate?" from businessweek, talks about the reason why one of best U.S. design firm, Fuseproject, sells out to a Chinese marketing group, Bluefocus. This management decision they have made seems very interesting to me.

BlueFocus was established in 1996, has become the biggest communication group around Asia. The headquarters are in Beijing. The group’s major services cover Digital marketing, Public Relations, Advertising, Media, and International Social Network Service. It is one of the fastest growing communication companies in the world, with revenue of $560 million in 2013. As to Fuseproject, the CEO, Yves Béhar, is one of best designers in the world today. Béhar is the archetypal designer as entrepreneur, a talented creative with the business acumen to design products for startups in exchange for an ownership stake. His big clients include Nike, PayPal and Samsung. He also helped create the One Laptop Per Child project for children in the developing world.

It is BlueFocus’s first acquisition in America. So, why a design company sells out to a marketing group? Fuseproject has its own reasons. The CEO, Yves Béhar said he is still CEO and he still chooses their own projects and designs their own way. Fuseproject believes that the capital gained from Bluefocus can enable them to explore the market of Europe and Asia. Their current successful venture model needs to be tested to see if it is a good model in other countries. The acquisition gives Fuseproject the opportunity to expand their business using more resources. Yves Béhar says, “It’s the difference between bootstrapping every agreement and every deal and having more resources to continue what we do and extend it.”

According to the Financial Times, BlueFocus will pay $46.7 million in cash for 75 percent of Fuseproject, which was established in 1999 and now has about 75 employees in San Francisco and New York. BlueFocus believes this acquisition is beneficial. It recognizes that design isn’t only about aesthetics, but can also be the method by which businesses identify new markets. It will bring a big amount of profit when they expand to markets in the world.

Reference:

http://www.businessweek.com/articles/2014-07-25/fuseproject-looks-to-export-its-venture-model-to-europe-and-asia

MIS 373 WEEK 3 BLOG

The week 3 of MIS 373 introduced two main concepts in operations management: Statistical Process Control (SPC) and aggregate planning. The instructor mostly focused on explaining how organizations do aggregate planning and basic techniques companies can use for aggregate planning. Based on what we have learned so far, the goal of aggregate planning is achieving a production plan that will effectively utilize the organization’s resources to satisfy overall demand. The reason why organization should implement aggregate planning is that it impossible to predict with accuracy the timing and volume of demand for individual items; aggregate planning can help synchronize flow throughout the supply chain. Usually, aggregate planners are concerned with two categories: demand quantity and timing of demand.

In the real business world, it is important to utilize aggregate planning throughout operation procedures. The article titled “How Do Inventories Influence Aggregate Planning?” introduces how aggregate planning is involved in inventory management. According to the article, aggregate planning is used in map out future production plans and resource needs for the next couple months. In this case, inventory level becomes the key factor in aggregate planning, because having a proper inventory is necessary to meet production level and customer demand.

For any kind of manufacturing companies, one main purpose of aggregate planning is to find the balance between having enough inventory on hand, but not too much. The ideal balance point is one of the most important issues for the company to consider. Therefore, aggregate planning is important to learn, which helps organizations to know the accurate balance point. Aggregate planning allows leaders of the company to know resource needs across the entire organization to ensure adequate supplies are purchased in the next couple months. It also effectively reduces operation costs, because aggregate planning helps companies avoid buying more inventory than they need, which makes for higher costs of storage.

Also, relationship matters. Relationships with suppliers may influence aggregate planning significantly. For example, if one firm has strong ties with their materials suppliers, it can plan with more flexibility in completing inventory orders as needed. However, it one company has weak relationship with their suppliers, it may take longer time for them to plan their inventory purchases. Therefore, keeping a good relationship with suppliers can help manufacturing companies make better aggregate planning.

References:

(1) Srikar Velichety Eller MIS 373 Summer Session 2, 2014 slides, CH 11

(2) http://yourbusiness.azcentral.com/inventories-influence-aggregate-planning-29221.html

  

MIS 373 WEEK 2 BLOG

The week 2 of MIS 373 introduced some topics of reliability, strategic capacity planning, and quality control in the process of producing a product or service. Those concepts are all important for companies to maintain competitiveness in today’s market. Especially, the topic of strategic capacity planning was covered extensively in this week’s lectures. According to the lectures, strategic capacity planning helps to achieve a match between the long-term supply capabilities and the predicted level of long-term demand for a company to gain profit. Here, the instructor indicates that capacity decisions are strategic because capacity decisions impact many crucial components of a company. It could affect the ability of the organization to meet future customer demands and operating costs, and finally it could impact the competitiveness of the company.

After learning the importance of capacity planning, I have found that this concept can be related to the current event in the world. In the article titled “The iPad Continues to Struggle, and a New iPhone Could Make It Worse” from businessweek.com, the content emphasizes how important and meaningful a good capacity planning is, and how it influences a company’s growing. According to this reading, Apple is facing inventory issues of iPads.  Apple Chief Executive Tim Cook told investors that “IPad sales met our expectations, but we realize they didn't meet many of yours”.

Tim Cook focused on the enterprise market to sell iPads. Although Apple has a big proportion of that market, Apple isn"t satisfied with how many businesses are adopting tablets. This problem is due to the wrong capacity planning. They neglect the impact of smartphones. Many people believe that smartphones have more powerful processors, and bigger screens make them seem less necessary. Also, whenever Apple does release its new iPhones, they will likely be both bigger and more powerful than the iPhone 5S. 

The improper capacity planning gets the company in trouble. The over-capacity planning causes many inventory issues to Apple, which can dramatically increase its operating costs. In today’s world, the business environment is changing all the time. Companies should recognize those changes and make new capacity plans adjust to those changes.

References:

(1) Srikar Velichety Eller MIS 373 Summer Session 2, 2014 slides, CH 5,

(2) http://www.businessweek.com/articles/2014-07-22/the-ipad-continues-to-struggle-and-a-new-iphone-could-make-it-worse

MIS 373 Week 1 blog

The first week of MIS 373 taught by Srikar Velichety introduced some basic concepts of operations management. This course emphasizes how operations management plays an important role in today’s business. The instructor covered topics such as operations strategies, effective planning and decision-making process, and goods/service design, and etc. Operations management helps all operators and managers in the company make better decisions, and it supports the whole company run well.

My knowledge about operations management from MIS 373 so far can be related to the current event in the world. In the article titled “Why MBAs Should Consider Operations Management” from businessweek.com, the author mentions, “Operations may not have the immediately obvious career appeal of finance or strategy. But anyone who makes it their focus will have an enormous advantage when they graduate”. It concentrates on the importance of operations for a company, even like a so successful company like Apple.

This article gives the case of Apple as an example. The new Apple Chief Executive Officer Tim Cook made his name under Steve Jobs by doing excellent operations management. According to the report, Apple employees give the new CEO a 97% approval rating.  Apple follows the model of building international supply chains while keeping top management, marketing, and design in their home market. In this case, operation drives everything. Mr. Cook is concerned about the mission of the company and Apple’s impact on society. As we have learned in class, mission gives the company ideas on how you serve your company and the reason for a company’s existence. Apple has done a great job so far.

On an operational level in the organization, understanding and applying concepts of operations management is necessary. In the process of producing and designing goods and service, operations management becomes the most crucial step to maintain the competitiveness in today’s business environment.

References:

(1) Srikar Velichety Eller MIS 373 Summer Session 2, 2014 slides, CH 1,2,4

(2) http://www.businessweek.com/articles/2012-04-02/why-mbas-should-consider-operations-management

(3) http://www.businessweek.com/videos/2012-03-30/97-percent-employee-approval-rate-for-apple-ceo