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McDonald's start working in 1955 with leadership of "Ray Kroc" who was an amazing person as manger and have divine skills. But in UK it started working in 1974 and in after some decade in Dec, 2004 there were 1330 McDonald's restaurants operating in all over the UK. The restaurants which are operating in UK 60% are working under supervision of its company and only 40 % worked as franchises.
As McDonald's have a large network of its restaurants so that's why it has to recruitment at large scale. In McDonald's there are different categories of employees and they worked in different mode and different tag, some work full time, some part time and some work on hourly basis. In 2004 the restaurants which were working in UK , in these stores there were 43491 employees working , 40699 on hourly paid staff, 2292 restaurant management and 500 office staff. And in franchises there were 25000 employees.
OBJECTIVE OF THE STUDY:
When we keenly observe the project questions then we find out that the project has different objectives, which enables us to look into the financial matters and also in management core conflicts, and also provide a solution to get rid of all problems which any company facing.
And I choose a company from Retail world that is "McDonald's"
So while studying the McDonald's we will cover various core concepts that are :
The main objective of study is that students could be able to look insight in the organizations management that how it works and when there are changes in the corporate world then how management cope all the changes.
Secondly students should be able to judge the financial statements of the organizations and able to make analyze whether how it is going financially in the market and how management communicate to their employees to accomplish the vision of the company.
Key persons in McDonald's
President / Director
Susan E Arnold
Products of McDonald's
McDonald's offers different types of foods like Hamburger, milkshakes chicken fish & pork, happy meal and French fries these are basic foods items which are offered by McDonald's but now it offers also Breakfast in the morning.
IMPACT OF RESOURCE DECISION UPON INTERNAL AND EXTERNAL MATTERS
After the reading of financial statement of McDonald's, we infers that resource decisions have certain impact upon the internally and externally performance of the McDonald's because when resource decisions (HR decisions and also finance decisions) taken wisely by the Management then certainly the internal performance of the organization will rise as McDonald's management follow the "Ray krock" vision Quality, Service, cleanliness and value to its customers.
So that's why to complete its pioneer vision Management recruited perfect matching employee to its organization for its smooth working and also hire qualified consultants for its legal and financial matters . when working in organization is good, it's obvious that repute (good will) will increase in the market because every manger is the ambassador of the McDonald's so that's why company has 7 stock scouter ranking out of 10 it means that McDonald's restaurants a large cap organization and it has very low risk to invest in it.
Swot analysis helps to find out different threats, which are prevailing in the market and weekne.ss in the organizations and swot analysis help to cope with threats and weakness to maintain its share in the market.
It also helps to find out its strengths and opportunities of McDonald are so that's why its management can more concentrate upon its strengths and get more profit and become a market leader and through swot company can get all positives in the market
McDonald's has the world's best brand names like "Golden Arches"
McDonald's has great revenues from its sales , so that's why it has opened new stores
McDonald's has its specific institutions like "HAMBURGER UNIVERSITY" which provides training to its employees.
Clear vision and strategy that is Quality, service, cleanliness and value to its customers (QSCV).
Many stores have old buildings
Quality of McDonald's is not more inconsistent.
McDonald's has low capacity to arrange the order as compare to its competitors.
It offered different slabs of prices which attract different customers
It offers its new shares to different countries for raising funds.
There is a lot of competitors in the market , regarding price , quality and product innovations.
The consumers, who are health conscious and prefer notorious items.
2. Critically evaluate, appraise and analyze financial data, techniques and tools to aid decision-making in business strategy and planning.
After detail analysis and study of financial report of McDonald's we concluded that organization would remain the key player in food industry and have largest portion of market nationwide and also globally.
Btu the company analysis shows that some negatives trends are prevailing in the company specially when we see its slowing growth rate, it means that either company or retail industry has completed its full circle and now it matures, and now it is going to recession period this could be for only McDonald's or for both .
In this scenario McDonald's corporation can do certain action to improve its returns, like company can reduce its fixed assets which certainly impact upon the ROE (return on equity)
If we see its profit margins as compared to its competitors and also margins which are proving in the industry and used as bench marking for the company then ,we found that McDonald's corporations has almost in every margin profit going up word and can see positive trends its sales and revenues.
PROFIT MARGIN %
Pre tax Margin
Net Profit Margin
Gross Margin(Avg 5iv year)
Pre Tax Margin(5iv Avg)
Net Profit Margin(5 yers)
an other a very important aspect of organization that how much company have to pay its creditors and how much it has debt ratio that tells us that company is better or not so when we analyze McDonald's performance regarding its out sourcing then we conclude that its financial condition is more better than its industry bench marking like its debt ratio 0.74 and industry ratio is 1.12 and also its current asset ratio is 1.14 which is high from the industry ratio which is also a good sign for its shareholders means that McDonald's assets have more capacity to pay to pay its liabilitiesâ€¦
Book value per share
Every organization has a core objective that is to maximize the stockholders equity because it is very essential for McDonald's to generate sufficient funds to maximize share holders wealth.
McDonald's business strategy to enhance its profit (Two Pronged strategy)
There are 25,975 restaurants owned by company and 6303 are working as franchises. In late 2009, McDonald's operate with the ratio of 80% in original restaurant and 20% operated through franchises. When company give the right to operate any person the franchise of McDonald's , franchise provide its initial investment and this investment provided sufficient funds to run the restaurant and management can concentrate upon the operation of restaurants , where as direct restaurants operation has more expensive because company has to give investment to run the store.
So that's why McDonald's management has been shifting its restaurants portfolio towards because it is more profitable. But McDonald's management has a great check upon the franchises restaurants to develop its marketing and pricing strategy which is aligned to its core objective. Management also do consider upon training programs in franchises particularly.
McDonald's has pursued two strategies since 2003.
McDonald's management need to cope with rapidly changing in consumer's purchasing power and their taste preferences because consumer wants more nourishments so that's why management now introducing new products like premium chicken and sandwich etc.
McDonald's management also considers that working hours of its existing stores should be enhanced so that's why now stores are offering breakfast facility also.
WHAT DOES MCDONALD'S DO WITH ITS PROFITS? Its investment strategy
It is the prime responsibility of the management of McDonald's that the profit of the company should reinvest again in the business in order to achieve positive cash flows for company which helps to create and maximize the stockholders worth in the market, and it can be possible to do through build new restaurants or investing in existing restaurants.
In the era of 90s McDonald's management work on that strategy and build a large a number of restaurants in the market and want to get more market share . Through this company also show its presence in the retail world.
Now in recent years , management have to take a sharp turn in its investment strategy now management emphasis upon the reimaging the existing restaurants and opened fewer new stores , through this strategy McDonald's will able to get positive perception about company and also customer retention in an increasing competition
3. Evaluate, appraise and analyze international aspects of financial strategy
As we already discuss that McDonald's is US based company but it also work in so many countries like India, China, Pakistan and also in Europe and a large portion of its revenues comes from Europe side, so when company management formulates financial strategy then it have to consider this important reasons in their mind. McDonald's generates most of its revenue in Europe in 2009 and 2008 McDonald's earn 9922.9 million and 9273.8 million respectively.
There are different aspects which can affect the financial strategy of McDonald's earning. And McDonald's management has to keep in view while formulating the business strategy like
Strong international Growth
Consumer preference(Health conscious )
Changing in exchange rate of dollar
Prices of inputs
Strong International Growth
McDonald's has presence in every part of world its majority of sales comes from US and a large portion comes from outside the native country. McDonald's increasingly work in china, India, South Korea and also Australia. McDonald's launched its breakfast to increase its sale.
Consumer preferences (Health conscious)
Consumer preferences is also a very important aspect which effect the sale of McDonald's because there is trend to eat more nutritional food which is not practicing in McDonald's which is adversely effected the sale of restaurants.
So company have to move that gray area and now McDonald's are expending a lot of money on salad and nutrition campaign..
Prices of inputs
Earnings of organization are heavily affected by prices of inputs like increase price in beef, corn, cheese and poultry , but McDonald's couldn't pass this price to customers because of competition so company have to suffer
There is another factor which adversely affect the sale of McDonalds and have impact upon the strategy of organization which is competition, although company is market leader but it faces competition with different other restaurants like burger king, Wendy etc
4. Identify and critically assess the management and performance of tangible and intangible resources in business strategy and planning.
Importance of tangible and intangible resources in McDonald's
There are many resources in an organization which help to company management to achieve its objectives, means that anything which is used to get profit or to capture the market share called its resource.
Main purpose of the company management to enhance the performance of its operations which is only take place when there is right match between tangible and intangible assets.
Every business resource has included any tangible resources that help to attain company objective and in McDonald's like these are property, rent, and production machinery. Tangible resource can vary with different industry and business. Tangible assets in McDonald's are increased as compared to FY 2007 to FY 2008 in 2007 property and equipment was $1532.7 million and in 2008 it was $1,587.5 million and machinery was in 2009 was $4422900 and now in 2010 it is $4722900.Building was in 2009 $ 23466900 and in 2010 it is 25478900.
Many businesses have a competitive advantage and survive by just excelling in brand image, such as McDonald's golden arches, or by protecting important intellectual property, such as a patent for new technology. As we know that McDonalds is the largest share of the market and have good repute in the market so McDonald's have more concern on its quality service cleanliness and value. So that's why McDonalds can have those positions with the help of in tangible resources. Amortizations of intangible assets in, 2006 was, 103.6 m, in 2007 was, 69.1 m , in 2008 was 46.20 m, in 2009 was 53.4 million us dollars.
5. Critically evaluate and appraise contemporary management accounting methodology to support the effective management and control of resources.
Key Accounting Policies
Being the largest company in the restaurants and food industry, McDonald's corporation has chosen to find out its basic competitive edges in its financial operation of the company because if corporation performs its operation efficiently then it gets the market advantage over its competitors.
Being market leader and to hold that position it is very important for McDonald's management that its operation specially in Accounting matters must be cost efficient .so that's why management formulates key accounting policies to gain that position.
Following are the key Accounting policies which discovered by the management team of McDonald's..
McDonald's corporation when issued its Annual reports it includes the consolidated financial details of the company and also about its subsidiaries.
According to principles based opinion 25, company deals and accounts for all stock based compensation. McDonald's corporation discloses its net income and share price of its shares which is prevailing in the market under regulation 14 provided by Statement Financial Accounting Standard (SFAS) no 123 and it is amended by SFAS no 148 accounting for stock based compensation.
Property and Equipment
In financial statement, property and equipment stated with its cost price, depreciated and amortized under using the straight line method, and useful life considered for building is 40 years and for the equipment is 3 years to 12 years.
According to Statement of Financial Accounting Standard(SFAS) No 144,deals long lived assets and reviewed that carrying amount of an asset recoverable or not.
Income tax uncertainties
In 2006 , FASB(Financial Accounting Standards) issued guidelines and regulations for uncertainties of Tax as FASB ASC upon new guidelines which was revised in January 2007 helps to collect $ 339 million liabilities.
Financial Accounting standards has introduced different policies for different entities like
Variable interest entities and consolidation
Fair value measurements
Share purchases and dividends
Environmental Changing Risks and consequence:
When we talk about risk there are lots of risks which can affect companies' performance like
First risk is Financial and market risk means when any company borrows money from market it means it is based on long term or Short term and its impact is interest rate a foreign exchange rate changing.
New market entrants and diminish of sales also a very huge risk for McDonald eventually when new companies enter in the market with innovative ideas then they capture some contribute of market. And the share value in the stock market also decreased.
Rules and regulations changing also a risk for company like McDonald whose operate in multiple countries?
Tax rate changing is also a very big risk.
Cross cultural risk also affect the company like when McDonald opens its branch in India they introduced beef or chicken but the peoples don't eat beef and chicken so cultures also very important.
After the study of environmental risks there is also some consequences which I am going to study like No more reputation of the company, Market Share/sales can be decreased, costumer trust which is very important for any company can be lose. Stock markets rating also decreased so; these are the points which are not good for any company.
So to solve these environmental risk or some other risks McDonald introduced Environmental Strategy to protect the environment for future generation. According to this policy lifecycle policy is following in which material wastage is reducing and McDonald also educating his customers regarding environmental issues, risks and their remedies.
Importance of Communication:
Communication is very important part of the organization or in our life's here I want to mention that communication is not only enough but the effective communication is important in which everybody understands what the other person wants to convey to the other person so here I can say without effective communication company are nothing.
'It is a method of transmitting information, thoughts, feelings, opinions and plans between various parts an organization."
Communications are of two types:
Internal communication -is within the organization between the executive and workers
External communication -is the communication between the company's staff and clients, suppliers, vendors etc.
To get the desired results manager employee relation should be good and communication between them is effective like what manger wants to his employee should be clear to the employee that how it done?
We all know that increase production is always a goal of any company and our company also have the same goal and to attain the goal effective communications must. Like if manger said to the employees I need that much sale in some days like 2 or 3 days it means manager clears the entire thing to the employees so in this ways we can increased our production.
For employees' morale and motivation communication is also matters like when employees successfully achicheved the target and manager personally go the employee's cabin and said to him/her well done u done a good job in this way employee morale is high and he/she works with more interest.
When we studied the importance of communication then how we can forget the written communication and verbal communication means when we communicate to some written it should be clear and concise that anybody can understand what the other person wants to say and also in the case of oral communication.
After the complete study and analysis of McDonalds financial data, risks and international aspect of financial strategy I conclude that during the business McDonald seen many changes either it is good or bad. Despite the challenges their are e lots of opportunities to improve its performance. The suggested strategy will make stronger this plan because it is doing what McDonalds do greatest and more so. Regardless of the downturn the company has seen, the general feeling we receive from McDonald's financial situation is that the company is slowly climbing out of a low period and making a spin. We must never forget the key success factors of the business which really makes the business for what it is today, including franchises that present quick, well-organized service in a spotless friendly environment.