According the financial data above (Hoovers,2018), McDonald's and Yum are the two companies that have adopted an utterly de-risking strategy; this has enabled them to drop their ownership of the restaurants through what is commonly known as franchising (Hoovers,2018). This strategy reduces the capital needed by the companies and boosts earnings per share growth making them less vulnerable to the food inflation. Although the two companies have similar procedures in running its operations, there are some critical aspects that differentiate the two in financially (Hoovers,2018).
Analysis and Evaluation
The revenues of McDonald's as it has been reducing over time from 27,567,000 in 2012 to 24,621,000 in 2016, this is estimated to be about -11 % decrease (Hoovers,2018) The reduction in the revenues in McDonald's is associated with the increase in food inflation, despite the reduction, it is still better as compared with that of Yum (Hoovers,2018). The reduction of revenues for McDonald's by about 11% in 2016 from that of 2012, the cost of change in the cost of goods which are sold by 17% and the given change of goods sold (COGS) as the percent revenues from 2016 at about 52% (Hoovers,2018).
The McDonald's highest net income during the period was given to be 5,585.90; this value was attained in 2013 by a change of 20% from the
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This does not show that McDonald's isn't profitable as the business could have been cost expanding the business to other new locations that they expect to grow (Hoovers,2018). The stock price of Yum steadily decreased from 64.72 to about 63.33 in the year 2016 while that of McDonald's had increased from 88.12 to an estimated value of 121.72 (Hoovers,2018). This doesn't depict the goodness or badness of investing in the
The corporation I chose to discuss is McDonald’s. McDonald’s is a publicly traded corporation that includes the following domestic companies, McDonald’s, Chipotle Mexican Grill, and Boston Market. This paper will discuss the following:
Each competitor 's current ratio, quick ratio, and cash ratio are able to be found in this exhibit for the year ended in 2015. McDonald’s currently has a cash ratio of 0.76, a quick ratio of 1.20, and a 1.52. Starbucks has a cash ratio of 0.44, a quick ratio of 0.64, and a current ratio of 1.19. Finally, the Dunkin Brand Group Inc. has a cash ratio of 0.59, a quick ratio of 0.74, and a current ratio of 1.25. When looking at these ratios one is able to find that compared to its competitors, Starbucks is less liquid than McDonald 's and Dunkin Brand Group
As a company, McDonald’s was first introduced in Des Plaines, Illinois in 1955. This was the very first McDonald’s restaurant, which all started in San Bernardino, California in 1954 when Ray Kroc approached the McDonald brothers with a business proposition to start a new company. In 1965 McDonald’s went public and was later, in 1985 added to the Dow Jones Industrial Average. (www.mcdonalds.com) The company has gone through quite a few changes with its changing CEO’s over the years, but the company seems to be on track with CEO Jim Skinner, named in 2004. Skinner was named the new CEO just in time to clean up after McDonald’s first ever quarterly loss. He succeeded by showing that McDonald’s revenue had climbed 11% during 2006 and net profits had climbed 36%. (Dess, Case 40 Pg. 1)
With strength ultimately comes weakness and McDonald's has its fair share, especially in the last few years. Many weaknesses are due to the external environment which includes market saturation, increased price competition, and food and labor costs. These weaknesses affect many firms in the fast food industry so McDonald's is trying to effectively combat these forces using a differentiation strategy. Developing new products such
In 1940, McDonalds was not the multi-million dollar industry that people recognize today. In fact, it started out as a small drive-in style BBQ restaurant, owned by Dick and Mac McDonald, in San Bernadino, California. However in 1948, the entire workings of the restaurant were altered, making it the dawn of the McDonald’s empire. This new drive-in, like other drive-in restaurants of its time, struggled to make a large amount of profit, due to selling low-priced food using traditional methods, which were often labor intensive and expensive. But the McDonald brothers fixed this problem by reducing their menu 25 items to nine items: hamburgers, cheeseburgers, soft drinks, milk, coffee, potato chips, and a slice of pie. Their staple item, the 30 cent hamburger, accounted for 80 percent of their total sales. Later, the brothers altered the production to that of the Fordist assembly line in order to make the whole operation fast and efficient, halving the price of their items, including their prized hamburger. (http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds_history_timeline.html?DCSext.destination=http://www.aboutmcdonalds.com/mcd/our_company/mcd_history.html).
According to Royle (1999) McDonald’s is a very large multinational enterprise (MNE) and the largest food service operation in the world. Currently the company has 1.5 million workers with 23,500 stores in over 110 countries with the United Kingdom and Germany amongst the corporation’s six biggest markets, and over 12,000 restaurants in the United States. In 1974 the United Kingdom corporation was established and in 1971 the Germany corporation was established, currently the combined corporation has over 900 restaurants and close to 50,000 employees in each of these countries (Royle, 1999).
Kraft Food Group has some areas in which it can grow. The company needs to fix its debt-to-assets and debt-to-equity ratios. The profit margin has been sporadic for the last five years. This is not a good trend for the company. This industry has some very external factors that can devastate the profit margin such as drought and other Asian market trends that can hurt the bottom line for this industry and company. Weather cannot be controlled. This company has a lot of different products which can be good by not putting all of your eggs in one basket approach. This can also lead the company to be stretched and pulled into many directions. The food industry can be a very up and down market because of external forces. Kraft Food Group has some problems with putting chemicals in some of their products that are now prohibited by the government. Kraft Food Group has food scientists, engineers and chemists to combat these chemicals and to develop new products and provide consistent quality of products so they can grow through sales and profits. Kraft Food Group has a high standard of quality and respect from its customers. Kraft Food Group could lose financially by food contamination. This company will continue to grow in the future if they continue to make improvements, make investments, and produce quality
McDonald's also focuses on the perception of value within it line of products and therefore takes care to price its menu items accordingly. Different products are priced differently depending on which target audience those items appeal to most. An extensive value menu is an essential part of any fast-food menu in recent years. The prices and products within the value menu can prove to be areas that will make or break a fast-food companies' year depending on the competitions value menus.
A franchisee, an affiliate, or the corporation operates a McDonald’s restaurant. Thus, McDonald's Corporation revenues come from the rent, royalties, and fees paid by the franchisees or sales in company-operated restaurants. According to Yahoo Finance report, McDonald's Corporation had annual revenues of $27.5 billion, and profits of $5.5 billion (McDonald’s 2014). McDonald’s primarily sells hamburgers, cheeseburgers, chicken snacks, french fries, breakfast items, soft drinks, milkshakes, and desserts. In response to changing consumer tastes, the company has expanded its menu to include salads, fish, wraps, smoothies, and fruit. Their food caters to all age groups, and they have a special menu known as “happy meal” that is targeting children.
During the current recession, most businesses have gone under. While McDonalds did not fall, it was not spared from the economic downturn. Investors were scared and not used to the company turning in weak financial figures. Previously, the company has been known to overturn a profit even in a bad economy (Domanska 2). In this article it states how southern Europe was where the profits started to decrease. “U.S. sales dropped 0.1 percent compared to a 4.4 increase growth last year. In addition, Europ...
McDonald’s has proven over time that the business practices they utilize work well and have led them to obtaining the title of the largest food retailer in the world. The founder of the company made a tactical decision in franchising the idea of providing fast food at a cheap price. Today, fast food has become a staple of not only American life but a viable food option all over the world. For McDonald’s a critical factor in them reaching the level of growth they currently experience has been franchising. It can be assured that McDonald’s will continue to grow through the usage of the franchising techniques as new food markets continue to develop all over the world.
McDonald’s has been one of the biggest fast food chain corporations that has worldwide share in the food market. The company’s appeals were fast service, menu varieties, and affordability, which capture majority of customers’ psychological needs. Furthermore, McDonald successfully builds a relationship with consumer by promoting donation campaigns and vitally involving in societal activities. In recent years, McDonald’s sales decline is affected by food scandals causing public mistrust of its food ingredients, which deviates consumers from fast, cheap and convenient food.
McDonalds provide high quality products, such as burgers, fries, drinks, muffins, etc, which are safe and reliable that it does what it is supposed to do, but not only does the quality of the products matter, the good value for money affects the business. E.g. buy one extra value meal and get one free with a food voucher that represents the offer only. They ensure that a high standard of the product is carried out at all times and they try to compete very competitively with other fast food businesses with their good value for money. Also a customer would know if the product is good value for money by checking in another food outlet like KFC for their services and products.
In today’s market, McDonalds faces numerous challenges such as fierce competition, a more health conscious customer, and the continual need for improved customer satisfaction and menu. McDonalds needs to go through some changes in order to remain ahead in the fast-food industry.
Fierce and growing competition – big fast food companies like Burger King and Kentucky Fried Chicken are constantly competing with McDonalds for customers and trying to take the spot as the top fast food chain.