The Current Economic Turmoil Business Essay


The second annual report I reviewed was that of McDonalds. I got interested in taking a look at how this famous food chain of restaurants does business. I got their 2011 Annual Report because the Fiscal Year ends on December 31 and the 2012 is not yet available. McDonald's Corporation is one of those food chain of restaurants that derive revenues out of the sales its restaurants make and the fees derived from franchisees. Like Walmart, McDonalds has its goal too and this is Plan to Win. This means that its mission and vision is to win the hearts of all the customers by providing them foods and menus that suit their palates. One of the strategies of this company is going global because it means expansion of its operations. When a company is growing and its growth is translated into patronage of the customers, expansion is the best strategy. There is always McDonalds everywhere in the world, that its name is a household name. The strategies employed by the company consist of customer-focus and elevating the dining experience of the whole family. Its foods and the way these foods are marketed are some strategies that make the company successful. With the right people in place, commitment to the highest level of execution and its ability to keep up with the challenges of times make the business achieve its goal. Its success in 2011 alone makes it the top performing company in the Dow Jones Industrial Average for the said year (McDonalds 2011 Annual Report).

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Given the chance of investing in companies that would give me good returns on my investment, I would invest in either Walmart or McDonalds. As an investor, the deciding factor in any investment is the return that the investment would earn overtime. The earning capacity of a company is measued by the net income generated by it with some considerations of course on some other non-financial information. In 2012, Walmart recorded 18.6% return on investment with 8.8% return on assets (Walmart 2012 Annual Report). These are good indication of a growing company because the return on investment and assets show that a dollar of assets earned 9 cents that year. For that year, cash flow generated amounted to $10.7 billion and though there was a little decline in the cash flow as compared to 2011, it was because of the acquisition of fixed assets that resullted to huge amounts. The company is highly liquid which means it will not default in its current obligations. When a company is liquid, there is an assurance of the company to continue operation. Another reason why I will have to invest in this company is because of its compliance with the rules and regulations of the State. In fact, in its Annual Report I reviewed, there is the opinion of the independent auditor on the sufficiency of the internal control procedures to manage its affairs. When the internal control of a business organization is sufficient, there is an assurance that it is operating as planned and its assets are protected.

Same is true with McDonalds, given the opportunity, I will likewise invest in this company. Its Plan to Win strategy sends the message that it is planning to win the admiration of its customers. An organization that is clear in its plan is one that will not miss success. In its Annual Report, it is evident that it continues to maintain a strong financial spending in order to maximze financial performance. A company which is performing its best financially will give benefits primarily to its shareholders, its employees, its customers and to the community it serves. One of the primary considerations for me as an investor is seeing that the company I selected to invest in is sharing its success to the society and community it serves. Giving back to the community is an indication that the company is living under ethical standards and values. Money and returns on investments are important but social corporate responsibility counts more than money. I would invest in these two companies if resources permit.

Nothing is permanent and everything is changing. The economy of today poses so many challenges and risks to business organizations. The future is very hard to predict. The only recourse, however, is to make plans ahead of time to minimize and control those situations that would be detrimental to the business organization. Both of these companies, Walmart and McDonalds are prone to risks associated with businesses. One of these risk is the risk of competition. Walmart US operates in a very competitive environment due to the presence of many retailers in the United States. The same is true with McDonalds. There are lots of food chain restaurants that sell food and menus and at the same time franchise to franchisees. To have competitive advantage is to serve the customers with outmost care and appreciation and offer goods that are really of quality. Suppliers in the case of Walmart must be chosen with selective processes so that the goods supplied to it and later sold by it would be of quality. It is always to be remembered that in 2007 Mattel, Inc. suffered so much loss because of the hazardous material contained in the toys they manufactured. Health and safety of the customers shoould always be the priority.

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There are other risks faced or maybe faced by both companies. General economic factors both domestically and internationally may adversely affect the financial performance of the companies. There could be some rules and regulations that would be enacted in the future that may deter performance at the maximum. In the case of McDonalds, there could be some legal suits against them caused by food consumption.

Such risks are hard to eliminate because they are inherent in businesses. The bottom line is that they can be mitigated. How to mitigate risks is dependent upon the strategies the companies will employ. In these two companies, it is better that the approach is preventive rather than curative. Risks mitigation is planning for any eventuality. This can be done by formulating policies and procedures that will guide all those in the business organization to exemplify quality in all that they do whether in retailing or selling or serving foods to the customers. In the case of McDonalds, it has to have a good outlook in the years ahead. Striving hard to be the better choiced place for the customers to dine could mitigate the risk brought about by competition. Providing teams with appropriate trainings and technology would enhance the company's ability to attract customers and gain more advantage. Both companies should leverage the scale and supply chain infrastructure. Above all, it has to have a Risk Management Plan. A very good recommendation is for these two companies to follow the 14 points of Deming because these are principles that would give the company top quality management (Rogers, 1996).