McDonald’s Strategy
The strategy of McDonald’s is to expand the areas of its operations in International market through capital expenditures in opening of new restaurants. The success of the overall strategy of the company depends heavily upon the fluctuation in the foreign exchange rates and efficiency of the company in utilizing the capital expenditures in the strategic manner. The biggest uncertainty that the company could face is the abnormal fluctuation in the foreign exchange rate and the variations in the sale in the seasons of Olympics and worldwide operator’s convention.
Ratios to Consider by the Company
The company should closely observe the net income margin to reach the conclusion whether their strategy is adding value to the business. The company should also watch the asset turnover to observe whether the capital expenditures made efficiently working towards the growth of overall income of the company. Furthermore, gross margin may help the company in realizing how much production cost is increased as compared to the previous year and whether the increase is in accordance with the company’s assumptions or not.
Comments on McDonald’s Strategy
The overall strategy of the McDonald’s is likely to bring the positive growth in the business of the company. The goals and objectives of the company for future growth are realistic and in line with the historical performance of the company. The key assumptions made by the company while establishing strategy includes the fluctuations in the currency exchange rates and the expectations regarding seasonal fluctuations in the sales. If the assumptions proved to be realistic in 2012, the company’s profit will show a stable growth as predicted in the projected financial statements (Agtarap and Juan).
Alternate Scenario
Management should consider the alternate scenario in case if the assumptions prove to be wrong. There is a risk that the company’s sales may decline due to the economic recession. In this case, the company management should be ready to respond in a proactive manner to reduce the impact of financial losses or to convert them into profits (Smith). Hence, the alternative scenario will help the company in devising such alternative strategy.
Works Cited
Agtarap, Donatila and San Juan. Fundamentals of Accounting: Basic Accounting Principles Simplified for Accounting Students. New York: AuthorHouse, 2007. Print.
Smith, Gaylord. Excel Applications for Accounting Principles. Boston: Cengage Learning, 2011. Print.
