Summary Business Description of McDonalds - Case Study Example

Name: Class: Unit: Summary business description of McDonald’s McDonald’s is one of the most successful multinational companies with operations in over 120 countries. The company is operated through franchises and company outlets in the fast food industry. The firm tracks its fast food operations from May 1940 and has been able to maintain top position in the industry (Vignali, 2001). At the moment, the fast food company has over 31, 000 both franchised and company operated fast food outlets. The franchise agreement is in most cases are based on 20 years period. McDonald’s brand is among the 10 most popular brands worldwide. This is due to the company continuous marketing, brand promotions and public relations which have helped to promote the brand image (Crawford, 2015). The strong brand name acts as a major differentiator of the company from the competitors. According to Crawford (2015), McDonald’s is primarily a franchiser with over 80% of their business operated on franchise model. Through franchising, it becomes possible for an individual to own and operate a McDonald’s’ branded restaurant (Vignali, 2001). A franchiser is able to control the staff, purchases, marketing and pricing decisions while benefiting from a strong brand image. Under the franchises agreement, the company has the ownership of the land or has a long term lease for the building. The franchisee is expected to pay for the equipment, signs and décor (Crawford, 2015). The ownership of the real estate and co-investment from the franchisees makes it possible for McDonald’s to enforce control that ensures high performance which is among the best in the industry. McDonald’s is well known for their homogenous image due to its uniform offerings and taste. The company is easy to spot and has branches almost every country (Talpau & Boscor, 2011). To expand to different countries, the company has been adhering to the local culture and tastes. This is through their specialty menu which is offered in different cultures. As the company expands, it has been innovating and introducing new menu to fit the demographics (Ottenbacher & Harrington, 2009). Summary Company products The fast food restaurant offers a menu that is uniform in all outlets. The main emphasis in developing the menu has always been on low value prices. The main products includes the famous burgers, Big Mac, Quarter Pounder, Chicken Sandwiches, Chicken McNuggets, French Fries, Desserts, Sundaes, Soft drinks, Cheese Burgers, Egg McMuffin, McCafe among other variations of the menu. The fast food restaurant has also been able to come up with a customized breakfast which includes Sandwiches, Muffins, Hotcakes, Bagel and Egg McMuffin. The products are introduced based on the customer needs and industry trends (McDonald’s, 2017). The products are based on uniformity where restaurants in the US and several international markets offer a full or limited breakfast menu. The testing of new products is done on an ongoing basis (Talpau & Boscor, 2011). In addition to the products offered by McDonald’s, the restaurant has several other chains to address the various market sectors. This includes the Chipotle Mexican Grill and Aroma Café in the UK (McDonald’s, 2017). Management Being a global company, the management at McDonald’s is based on strategic HRM. To maintain a strong brand image globally, McDonald’s have been depending on charismatic leadership. This is based on their current management culture which has been able to execute all management roles successfully. The fast food chain has a perfect brand of management functions which are: planning, organising, leading and controlling. Through planning, it has been possible for McDonald’s to identify goals and objectives and come up with strategies to attain these goals. The planning function of management at McDonald’s is based on the external environment. This is through looking at the tastes, cultural values and traditions of the target market. The effectiveness of planning at McDonald’s is shown by their effective management of the supply chain (New, 2015). Through strategic planning, it has been possible for McDonald’s to have 24 hours operations in their outlets. Organizing is based on establishing the organisation structure in an organization (Wright, Snell & Dyer, 2005). This is through focusing on the division, coordination and control of tasks in a company. This involves considering the employees as a vital asset to the organisation. McDonald’s’ uses a collaborative approach in their management through combining all franchisees under the same umbrella. This ensures that there is consistency in all outlets. The management is based on a centralized structure. McDonald’s’ leadership is centred on their CEO who acts as the focal point. The current leader is charismatic and transformational. Controlling at McDonald’s is the main cause of motivated workers and clear policies. The management is able to keep the employees to work based on set standards. Moreover, it has ensured that there is a flexible working schedule, loving culture, balanced work life and training (Vignali, 2001). Culture (mission, values) McDonald’s organisation culture is based on the company history. The organization culture is used in attracting new customers and qualified workers. It is important to note that a firm organisation culture helps in defining traditions, habits and values which acts to influence the workers behaviours. McDonald’s culture is based on continues learning. The continuous evolution of McDonald’s has made it possible for the firm to attain its current level of successes. This shows the significance of organisation culture in doing international business. The brand vision is to have the best quick service and restaurant experience. This is based on the restaurant aim in being the best in cleanliness, service and value (Crawford, 2015). The brand mission is to be the customer first choice in quality, outstanding services and great value. These are all embedded in the company culture. Employee benefits To ensure that the restaurant maintains the best employees, McDonald’s have been working hard to come up with competitive employees’ benefits. The restaurant has been working hard to attract, energise and maintain the best talent. Despite the efforts to ensure they offer a competitive packages, McDonald’s have been faced with a lot criticisms due to low wages and poor labour standards. Most of the jobs at McDonald’s are low paying and requires little skills where employees are trained at work. The low wage pays are also associated with few benefits. Moreover, low wages are evident in all McDonald’s outlets (Gould, 2010). Employee attributes Working at McDonald’s requires having right attitude and commitment to serve the customers. According to Gould (2010), the company is an equal opportunity employer. Moreover, there is no minimum qualifications to join McDonald’s hence anyone interested can join. To work at McDonald’s one has to work for low to medium paying jobs in most cases based on qualification (Gould, 2010). This leads to most of the low position workers being students while others uses it as an entry job. McDonald’s prefers hiring people who believes in businesses. For the staff, one must have the passion to serve the customers. As long as one is happy to do what it takes to make the customer happy, they can work at McDonald’s. It requires having passion in the fast food industry and a high commitment (Keiningham et al., 2014). Yearly income statement, the yearly balance sheet and the financial ratios Yearly income statement McDonald’s Income statement (Marketwatch, 2017) McDonald’s has been able to maintain a strong financial performance despite the challenges in the fast food industry. In 2017, the company share was at $1.44 though the expected price was at $1.41(Marketwatch, 2017). The company has been working hard to improve on their revenue through enhanced customer experience and enhanced menu. The fall in revenue can be associated with the current trends towards healthy alternatives. In 2017, the revenue fell by 5% to $6.03 billion from $6.34 billion in the previous year (Morning Star, 2017). This decline was narrow than what was expected in the market. From the report, the international same store sales rose by 2.7% (NASDAQ, 2017). This has been driven by the rise in sales in UK, China, and Japan and in some countries in Latin America. Balance Sheet In millions of USD (except for per share items) McDonald’s Balance Sheet (NASDAQ, 2017) In US market which had been dominant for a long period, the company have not been performing well. According to NASDAQ (2017), the company sales have fallen by 1.3% while the operating income fell by 11%. The company have been working hard to reconfigure their menu with introduction of All Day breakfast among other innovative menu additions. These changes have not been able to deliver changes in the financial earnings as expected. The costs have been rising partly due to the complex menu and reducing customer traffic. Outside US, the company have been doing well. This is seen in the international lead markets which saw a rise in 2.8% of sales in the fourth quota (Marketwatch, 2017). A strong performance in China and positive results in several markets in high growth market segment has led to a 4.7% rise in comparable sales. In the foundational markets, there was a surge in comparable sales with 11.1% (Marketwatch, 2017). The results are encouraging for taking into account the existing pressure on healthy eating and the changing customer lifestyles. From the analysis, McDonald’s is performing well in the fast food industry despite the current market challenges. In fact, the investors at McDonald’s have been paying less for the earning that they receive. The company have shown a positive trend in their earnings despite the slight fluctuations. In future, McDonald’s remains an important venture to invest in. the company offers a long term investment for those seeking for long term benefits in revenue. Historically, McDonald’s earnings have been on slow decline. Despite this, the operating income declined in 2014-15 and increased from 2015-16. The net income increased from 2015-16 above the 2014levels. The performance levels of the firm have been within the industry average (Marketwatch, 2017). McDonald’s Ratios (NASDAQ, 2017) McDonald’s had a debt to total capital ratio of 107.59% which is lower than in 2016 when it was 4,064.06%. The company current ratio shows that it can meet its short term liabilities when they are due (NASDAQ, 2017). The quick ratio shows that the company is in a better position. McDonald’s financial situation shows that they can continue operating without additional cash flows. The company shows a strong performance in its finances which indicates an overall better business performance. References Crawford, A. (2015). McDonald's: A case study in glocalization. Journal of Global Business Issues, 9(1), 11. Gould, A. M. (2010). Working at McDonald’s: some redeeming features of McJobs. Work, employment and society, 24(4), 780-802. Keiningham, T., Gupta, S., Aksoy, L., & Buoye, A. (2014). The high price of customer satisfaction. MIT Sloan Management Review, 55(3), 37. Marketwatch.com (2017). McDonald's Corp. Marketwatch.com. Retrieved 21 August 2017, from http://www.marketwatch.com/investing/stock/mcd/financials/balance-sheet McDonald’s (2017). McDonald's Menu: Our Full McDonald's Food Menu | McDonald's. McDonald’s.com. Retrieved 21 August 2017, from https://www.McDonald’s.com/us/en- us/full-menu.html Morning Star (2017). Growth, Profitability, and Financial Ratios for McDonald's Corp (MCD) from Morningstar.com. Financials.morningstar.com. Retrieved 21 August 2017, from http://financials.morningstar.com/ratios/r.html?t=MCD NASDAQ (2017). MCD Balance Sheet. NASDAQ.com. Retrieved 21 August 2017, from http://www.nasdaq.com/symbol/mcd/financials?query=balance-sheet New, S. (2015). McDonald’s and the challenges of a modern supply chain. Harvard Business Review. Pub, 4. Ottenbacher, M. C., & Harrington, R. J. (2009). The product innovation process of quick- service restaurant chains. International Journal of Contemporary Hospitality Management, 21(5), 523-541. Talpau, A. & Boscor, D. (2011). Customer-oriented marketing-A strategy that guarantees success: Starbucks and McDonald's. Bulletin of the Transilvania University of Brasov. Economic Sciences. Series V, 4(1), 51. Vignali, C. (2001). McDonald’s:“think global, act local”–the marketing mix. British Food Journal, 103(2), 97-111. Wright, P. M., Snell, S. A., & Dyer, L. (2005). New models of strategic HRM in a global context. The International Journal of Human Resource Management, 16(6), 875-881. Read More