Current Short-Term Objectives and Plans of McDonalds - Case Study Example

McDonald's uses 5 key strategies in implementing this plan, i.e. product, price, people, place, and promotion (Mcdonald's 2009 annual report).
• In increasing sales in every geographic segment of the business thru franchising. Focused on brand availability, menu variety, beverage choice, convenience, and day-part expansion. Mcdonald's introduced McCafe and premium Angus third pounder focused on classic favorites like Big Mac and Quarter Pounder, and emphasized affordability in the US market; in the mid-2010s introduced frappes and smoothies.

• In all areas of operations, reinvestment was done in the facilities and equipment, opened stores in convenient areas, extended store hours, build up drive-through systems, and offered locally relevant selections. The strategy included advertising and promotions. In the U.S., drive-through systems, and café-ambiance were developed; in Europe, portable snacks were popularized; in Germany, breakfast time was introduced, and designed the same strategies in other areas where McDonald's is present.

2. Functional tactics of Mcdonald's that made them successful are globalization, diversity, and ethics.

• Mcdonald's joined the bandwagon of globalization and has developed franchised business in 119 countries. In 2010, Mcdonald's has 32,737 franchise units all over the world, an increase of 28% from 21,078 units in 2009 (McDonald’s Annual Report). This means the company has to work with franchise owners with diverse cultures, religions, and ethnicity. The tactics of McDonald's's to adapt its menu to the culture and taste of the region, to hire and train locals to work in the company, and to source its supplies from local suppliers that have similar diverse cultures. This strategy allowed the company to understand the customs and traditions of the community and allowed Mcdonald's to stay in business in the area.

• Mcdonald's provided a standard framework for global operations, yet allows diversity that is needed in local adaption. The system of franchising which has been the business model of Mcdonald's allows the company to become an integral part of the community and be able to “deliver locally relevant customer experience”. For example, McDonald designed its menu to the cultures in the region. In India, beef or pork is not on its menu, but offers chicken and fish burgers and other vegetarian options (Noreen, 2009).
3. Policies the firm uses to aid strategy execution

• Mcdonald's considers people as its most valuable asset. Success is a direct result of the people involved with Mcdonald's – the owner/operators; suppliers and company employees (McDonald’s Management).
• It strives to be the best employer in each community where they do business. McDonald’s has set People Principles that are committed to treating everyone with fairness and respect; recognizing good work with rewards; becoming open to listening to diverse opinions; providing competitive pay and benefits; supporting personal growth and development and providing the resources to get the job done well (McDonald's Management Career Paths. N.d.)

4. The executive bonus compensation plans the firm is currently using are based on Mcdonald's policy that follows a “pay for performance policy: the better your results, the greater your pay opportunities” (Mcdonald's Management Career Paths). McDonald's provides incentive pay, long-term incentives, recognition programs, and company car programs. Aside from this, McDonald’s has a profit-sharing plan wherein employees save 1% to 50% of their pay on a deferred basis in the 401K plan. Under this plan, the company matches the employee’s contribution with $3 for every $1 of the first 1% of pay they contribute and $1 for every 1 dollar contributed on the next 4%.

Eligible employees also receive discretionary profit sharing based on their 0% to 4% contribution. Employees participating in the 401 K plans are limited to 20% investment in McDonald’s common stock. Excess of his 401 K contribution can be deposited in a supplemental benefit plan wherein an executive can make tax-deferred contributions; receive company-provided allocations which is not possible under the Profit Sharing and Savings Plan because of Internal Revenue Service limitations. Under the supplemental benefit plan, investment alternatives and returns are based on certain market alternatives under the Profit Sharing and Savings Plan of the company. As of 2009, the liabilities of the company were $373.9 million (2009 Annual Report)

The above strategies resulted in 3.8% comparable sales growth, 9% earnings per share growth, and total cash returned to shareholders 2007-2008 of $16.6 billion. Read More