Introduction
McDonalds Corporation is a multinational company founded in 1940 in Oak Brook, Illinois that operates McDonald’s restaurants. The company operates in 117 countries, in the United States, Europe, the Asia Pacific, the Middle East, and Africa with over 27,000 franchised restaurants and over 6,000 company-owned restaurants. Its products are known worldwide, from hamburgers and cheeseburgers, Big Mac, Quarter Pounder with cheese, Filet-O-Fish, chicken sandwiches, chicken McNuggets, french fries, salads, shakes, desserts, sundaes, even pies, cookies, coffee and other beverages. McDonald’s offers meals for breakfast, lunch, dinner and snacks. McDonald’s mission statement as found in their company website states that the company shall “compete on the basis of price, convenience, service, menu variety and product quality in a highly fragmented global restaurant industry.” The company has a brand mission statement that reads "be our customers' favorite place and way to eat." Worldwide the operations are centered on “People, Products, Place, Price and Promotion” all of which are thoughtfully constructed to enhance the experience of customers. The company also strives to become the best employer in the locations where they situate in and to focus on growth and long term viability through innovation and technology . In a nutshell, the company wants to be the best restaurant in the world and offer the best and fastest service to its customers while maintaining its high level of quality, cleanliness and overall value.
McDonald’s operates in a fast moving, high risk, consumer environment. Because of its many operations abroad, it faces business risks such as varying FOREX rates, fluctuating interest rates, inflation rates, government regulations, employment risks, volatile financial markets, even security risks. However despite these risks, McDonald’s Corporation remains to be one of the most competitive fast-food organizations in the market today. Proof of the company’s success is the reported net income from $2.4 billion in 2007 to 5.5 billion in 2011.
Current Performance Results
The illustration below shows McDonald’s financial returns in comparison with its Yum Brands ( a competitor) and the S&P 500 index. Over the last five years, McDonald’s returns are on the average range, with respect to the returns of Yum! Brands but is above the S&P 500 index.
Figure 1 Comparison between Closest Competitor and the S&P500 Index
Overall, the company is in the pink of health. Profit margins for the last five years are about 20% while asset utilization is about 80% (80 cents of revenue for every dollar invested). Revenues are almost around US$ 30 billion for this year and net income is around US$5.5 billion. Price per share and earnings per share are both moving steadily upwards, meaning the market is pricing the company’s ability to generate profits efficiently. Earnings yield is around 5% while dividend yield is around 3% which means that the company is giving its shareholders about 60% of the net cash available while keeping the rest for company growth.
Figure 2 Competitor Analysis
Corporate Governance
McDonald’s corporate governance is as top notch as the entire organization. The company is a franchising powerhouse, operating in about 120 countries wherein about 75% of the entire operations is set up by franchisees. McDonald’s produces managers that are qualified and have very good skills managing not just the company’s resources but most importantly, its people. The top executives of the company work equally hard and are known to be very effective as seen in the company’s five year performance graph shown above.
Strategy
The company uses a strategy it has come up with in 2003 called “Plan to Win”. Essentially, this strategy means that the company plans to win on five fronts which in fact are the five Ps - People, Place, Product, Price, and Promotion. This plan, which was set ten years ago and is still being implemented because of its high effectiveness. Some examples coming out of the Plan to Win strategy are:
Internal Strengths and Opportunities
According to NCBI (2013), the organization’s competencies come from its resources, its behaviors, its weaknesses and its overall mission and visions. Companies that know how to identify, resolve, utilize and appreciate these factors succeed in the market place. McDonalds is one of those companies, growing into one of the largest sit-down restaurants in the world. The company’s strengths are:
- Strong franchise due to its size and global reach
- Strong and dominant position in the local and foreign markets
- Efficient operations due to its size
- Diversified position due to its global operations
- Long-term advantages due to its global competitive position
- A real-estate portfolio that is increasingly becoming a significant asset
- Aggressive planning and marketing strategies, focusing on the youth
These strengths are very obvious. McDonald’s has one of the most recognizable brands worldwide and its view of customer satisfaction in any country is uniform. Anywhere you go, the experience of going to a McDonalds store is the same thus customers can enjoy the same quality regardless of location.
Weaknesses and Threats
The company faces weaknesses and threats as well. These include:
- A saturation of the restaurant market worldwide
- A very competitive restaurant market in the US and abroad
- Income problems from some product lines that are more difficult to remove from the current product portfolio
- A healthy living direction observed in the population reduces the popularity of the company’s products, due to having a “non-healthy” connotation
All companies have weaknesses and faces a threat, McDonald’s is not an exception to this rule. However, the company has steered very clearly away from obscurity and is one of the most recognized brands in the world today. It will continue to thrive due to tis thoughtful strategies and the effective use of its resources.
Bibliography
Finance, Y. (2013). McDonalds Corporation. Retrieved July 13, 2013, from Yahoo!Finance: http://finance.yahoo.com/q/co?s=MCD+Competitors
Ivanova, E. (2011, November 8). McDonald's Corporation Company Analysis. Retrieved July 13, 2013, from DocShare.Com: http://dc445.4shared.com/doc/nAYYRGF9/preview.html
McDonald's Corporation. (2013). McDonald's Corporation: About Us. Retrieved July 13, 2013, from McDonald's Corporation: http://www.aboutmcdonalds.com/mcd/our_company.html
NCBI. (2013). Strenght of the Organization. Retrieved July 13, 2013, from NCBI: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1649055/
WikiSwot. (2013). SWOT Analysis: McDonalds Corporation. Retrieved July 13, 2013, from WikiSwot: http://www.wikiswot.com/SWOT/6_Restaurants/McDonald_s.html
