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How has McDonald’s exploited its factors of production and what effects did it bring upon the global society?


How has McDonald’s exploited its factors of production and what effects did it bring upon the global society?

As Diana previously stated, McDonald is an expanding multinational corporation that runs in 123 countries throughout the world. This means that McDonald’s runs non-stop for 24 hours per day, 7 days per week, and 52 weeks per year. According to one of McDonald’s official websites, there are over 33,000 stores world-wide. Multiply those numbers above by 33,000 and you’ll get an incredibly high number that you can’t even read.

Now, what is it that I’m trying to say here? If McDonald’s operates for over 792,000 hours per day in the world (24*33,000), how much factors of production would it use up per day? Per year? How much factors of production has  it used up over the many decades, and how much will it use up in the upcoming years? One may think that all kinds of corporations use tons of resources every day so the amount that McDonald’s uses is insignificant. However, one must not neglect the fact that McDonald’s mistreats its factors of productions and that it has brought a variety of negative effects to the global health.

There are three components to factors of productions: land, labor, and capital (human & physical). McDonald’s has exploited all three of these components. First off, it destroyed land. In order to produce thousands of burgers each day large quantities of beef are required, which means lots and lots of cows. In order to grow millions of cattle McDonald’s has cleared off vast amounts of land where rain forests have previously thrived in and destroyed the habitat of millions of organisms. With newly acquired land, it has grown pastures of grass for the cattle to feed on and has greatly increased the number of cows on earth. This act of deforestation took away trees, which are major sources of carbon dioxide reduction, and increased the population of cows, which are known to release methane gas. In this time of severe global warming, McDonald’s has solely worsened the crisis instead of the other way around. Second off, it exploited labor. McDonald’s is known to have 60 percent of its workers turnover annually- that is, 60 percent quit their job at McDonald’s after a month or so each year. One of the major reasons is that McDonald’s workers are prohibited from unionizing. Majority of workers in the burger industry claimed that they get help from their unions over pay and conditions of the working environment. Without unions to back them up and without the ability to find better quality jobs, workers are virtually left powerless over the low-paying, unsatisfactory working conditions. Because its basic, immediate goal is to use the cheapest labor possible and the most easily manipulated group of workers, McDonald’s usually targets the socially disadvantaged groups to hire. Lastly, McDonald’s exploited its capital, both human and physical. McDonald’s has used its human capital about cheap foreign labor to create physical capital of factories and farms internationally to manufacture food, toys, and cattle feed. In many of the third world countries, people grow crops to feed McDonald’s cattle and earn money, but suffer from chronic malnourishment and starvation. If McDonald’s did not exploit cheap labor extensively, poor workers of the third world countries would not have to sacrifice so much to earn what they can barely call a living.

With all kinds of exploitations going on behind the scenes of the multinational corporation so called McDonald’s, how has it managed to succeed? The key to that is “behind the scenes.” These kind of actions McDonald’s takes to produce maximum profit is not very well known to the public. I, myself, was not aware of these until I took the initiative to conduct research. If all of its exploitations were to be publicized globally, how would consumers react and how would McDonald’s be affected? What would happen to its reputation towards families & children as well as its profit that has been climbing up? Would poor consumers of this major inferior good even care enough to have an effect on the corporation?

How has McDonald’s addressed the consumers wants and needs to maintain their status as the leading fast food company?

McDonald’s is a revolutionary company that has provided millions of jobs as well as fed millions and paved the way for the method that other companies use to make their food. 

More than 50% of their owner operators have started off working behind the counter. McDonald’s has provided jobs opportunities not only nationwide but world wide and is the leading employer for immigrants. The fact that someone can get a meal for about under eight dollars shows that Mcdonald’s is one of the cheapest sources of production and labor, while still bringing in one of the biggest profits in the world. They have also influenced other companies to provide steady jobs with low wages. McDonald’s will continue to be the leading innovator in this industry.

Not only have they provided jobs, but given opportunities to people with low income or no other option to purchase their food. They have mastered the skill of making unhealthily delicious food, while still charging low prices. People have been working at McDonald’s for generations. Similar to Starbucks, there are multiple locations in one area, providing convenience and jobs for those in the community, which helps the economy.

They have been the leading innovators in creating meals that fill the consumers but have them coming back for more. To do this, they use products such as pink slime, a beef based meat filler that cannot be legally sold by itself but must be added to meat based processed meats. To keep customers satisfied, they add chicken flavor to their chicken nuggets and add sweeteners to their breads and drinks. Such innovations in the industry have kept them ahead of all the other fast food companies.

How does McDonald’s use technology development to lower cost of production?

McDonald’s has teamed up with Echelon corporation in order to improve their kitchen equipment to lower energy consumption and increase efficiency. With Echelon’s i.Lon Internet Server, McDonald’s can receive data on their equipment which lowers labor costs used to gather data. This also allows them to create reports while receiving less data errors. With their “smart kitchen,” McDonald’s equipment can mix with building sub-systems to extend energy management in the entire restaurant.

By lowering the cost of production, McDonald’s is able to lower their prices as well. Though McDonald’s has tested different technologies, Echelon proved to be more reliable and cost-effective. With Echelon’s power line networking technology, McDonald’s can communicate and exchange data through kitchen equipment. This helps manage use of energy, develop improvement applications, and lower maintenance costs McDonald’s smart equipment provides data that meets HACCP requirements of health departments, which save labor costs from reading thermometers and creating reports.

By lowering their own prices thanks to their “smart kitchen,” McDonald’s supply increases as a result.  This encourages McDonald’s to open up more restaurants in other places. As a result, more people will be attracted to go to McDonald’s than other fast food restaurant competitors. McDonald’s can be found in 119 different countries worldwide and serve at least 68 million customers per day. McDonald’s currently operates 33,000 restaurants and employing about 1.7 million people.

How has McDonald’s improved their operations for the environment?

How does the McDonalds in Korea play non-price competition?

There are 243 McDonald’s restaurants in South Korea today. Compared to the United States which has over 12,000 McDonald’s restaurants, it might be nothing but it is a fact that South Korea has ranked 12th for the most number of McDonald’s restaurants a country has. In Korea McDonald’s is not a cheap fast food restaurant unlike in the United States, but how come Koreans still go and eat there? That is because McDonald’s franchise in Korea plays a well-planned non-price competition with other fast food restaurants.

             First McDonald’s in Korea sells food that fits to Korean’s taste without increasing the outcome. They do not sell the same products as they sell here in US. In Korea pork is cheaper ingredient than beef so they use pork in making patty instead of beef. Also they use different ingredients for patties and buns. They use shrimp, crab, bul go gi, chicken, and also beef for patties and have rice buns as well as normal buns, taking ideas from Korean culture.

             Next, they provide a higher service to their customers than other restaurants. Customers can order McDonald’s via mobile phone and ask them to deliver it to their own houses. This delivery service brings the restaurants more customers who do not have a car, who are lazy, and who are unable to go out and get their meals.

How much subsidies McDonald’s received from the government and how was it used on?

Is it possible for McDonald’s food to be a substitute for itself?

While McDonald’s characteristics of efficiency and low cost secure its popularity, it fails to attract a significant number of customers due to health concerns. Regarding its suspicious meat and greasy fries, it is clear that McDonald’s sacrifices quality in order to deliver fast, cheap food. And the high amounts of sugar and fat used to make such a product have had an increasingly visible effect on Americans’ health over the years. In 1980, the year of McDonald’s 25th anniversary, the rate of obesity in America was 15%, the same percentage it had been for approximately two decades. Another twenty years later, an official survey in 2000 found that that rate had doubled to 30% of the population; by 2010, 35.7% of the population of the United States was to be found obese. A person is considered obese when his or her Body Mass Index measures at or above 30.

Numbers like these have led to harsh criticism of McDonald’s contribution to the astonishingly rapid weight gain that has seized the country in the last few decades. Although McDonald’s cannot be the only factor in this nationwide epidemic, as the biggest and one of the oldest fast food chains in the United States it now largely represents the unexpectedly ugly side of the American dream. In contemporary pop culture, books like Fast Food Nation prove that the problem has become too great to ignore. A documentary film, Supersize Me, was made in 2004 as an exhibited study of the negative physical (and even psychological) effects of McDonald’s fast food on the average American. There have also been numerous lawsuits since the early 2000s, claiming McDonald’s false advertisements of a healthy lifestyle in fact led customers to obesity and other symptoms of poor health. So when the world knows all of a company’s dirty secrets, what is it to do? McDonald’s decided to recognize the gravity of the situation and reform.

Reformation first began in 1987 with the addition of fresh salads to the mainly-hamburger menu. Although the health concerns back then were not voiced as strongly as they are today, it is noted that by this time, the country was starting to climb in obesity rates. In 2000, when the obesity rate was 30%, McDonald’s introduced a fruit and yogurt parfait as a healthier alternative to its own soft-serve ice cream and McFlurries. Later, McDonald’s would begin to serve apples and milk with its Happy Meals, in response to attacks that the company “unfairly entice[s]” children with free toys and rewards them with health problems. McDonald’s latest addition is the “Real Fruit” smoothie, which first appeared in 2010.

It is understandable that many potential and even regular customers would be turned away by the criticisms, but McDonald’s seems to support itself by making changes in order to draw them back again. Normally, people genuinely worried about their well-being would ignore the extra cost and opt for healthier alternatives such as Subway, Chipotle, and (in New England and several European countries) Pret A Manger. However, there is no need to as McDonald’s provides its own alternatives, and for much cheaper. So interestingly enough, McDonald’s inferior goods act as substitutes for real, home-cooked food, while its healthy options act as substitutes for its original menu.

Could McDonald’s finally be beaten if a new restaurant chain emerged advertising equally fast, equally cheap, but only healthy food?

How has McDonald’s stock grown since going public in 1965?

In 1965 McDonalds sold 100 hundred shares worth $2,250 while today their are well over 75,000 shares that are worth more than $5 million. McDonalds stock has split twelve times. As McDonald’s expanded world wide in 1967 the stock market also began to flourish.  McDonald’s is the worlds largest restaurant company and even through the recession the stock has risen. The stock market benefits from the success of the restaurant franchise so as McDonald’s introduced the iconic Big Mac Hamburger and other items such as salads to please all different costumers the stock also gained success.  In 2008 during the stock crash, McDonald’s stock was weakened a bit and fell 32% to $1.98 per share. This slight decrease in the stock value quickly rose.

In 2011 the stock rose to  $2.37 per share which is a 2.7% increase. The McDonald’s stock rose 31% while the Dow Jones industrial average only rose 1.2%. in the past ten years the stock has grown more than 240%. The expansion of McDonald’s throughout the world, and renovation of the restaurants and menus have contributed to the financial growth of the McDonald’s stock market.

McDonald’s stock has proven to be stable even through the great crash and the recession. A slight decrease in 2008 has since come back even stronger. In 2011 McDonald’s was the leading company on the Dow. McDonald’s stock has a constant appreciation rather than depreciation because there is always a demand for cheap food with fast service. The growing chain continues to perform and accelerate past other fast-food restaurants as well as in the stock market. The steady success of the McDonalds has increased the value of stock because it is not risky.

How has the McDonald’s stock market affected the business of McDonald’s restaurants?

How has McDonalds used innovation to gain customers?

Being a fast-food chain, many do not consider McDonald’s to be ‘real food’ and may think that they do not put time and effort into their menu. That is quite the opposite of the truth. Teams of chefs work on new menu items daily, and try to improve the items that are already on the menu. They even take it to an international level, careful to balance standard recipes with respect towards local traditions.

In India, Abhijit Upadhye, menu management and supply chain head, was put in charge of creating a new item and two years later, the ‘McSpicy Paneer’ was created. This has become popular in other countries as well. McDonald’s consumers can get McArabia’s in the Middle East (grilled chicken in Arabic bread); Shogun Burgers in Hong Kong (Teriyaki pork); and McShawarmas in Israel (Kosher meat).

In mid- 2007, they launched a specialty coffee line, and with high quality ingredients and low prices, they created competition with Starbucks. They also sought to increase sales at times when not many people where buying fast food, so they created a breakfast menu with wholesome and low priced food.

Innovation has not stopped here.When ordering at a drive-thru window, one might think that they are talking to an employee inside the building, but a McDonald’s franchisee in Missouri has outsourced order taking to Colorado. According to the owner, outsourced order taking allows him to take on 30 additional cars per hour as well as significantly decrease the error rate in order taking as the process has become more efficient and accurate. Overall, the innovation at McDonald’s does not stop at just food, and they will continue to create new and more efficient ways to make money.

Next questions: In what way can McDonald’s use the customers needs and wants to increase profits? Has McDonald’s change America’s work ethics?