Case Report Analysis

Case Report Analysis

III. Capabilities Analysis
McDonalds is a firm that has demonstrated potential over many decades on how it has the potential to succeed in the market.
A. Financial Trends
1.Sales
McDonald has continued to demonstrated fluctuations in the sales revenues. However, the overall sales growth has been declining over the past five years which is attributed to various factors in the market.
Year 2011 2012 2013 2014 2015
Sales in Billion 27.01B 27.57B 28.11B 27.44B 25.41B
Sales growth – 2.08% 1.95% -2.36% -7.39%

Some of the factors that have contributed the decline in sales at McDonalds is the increase in competition from other food outlets. Other factors that might have contributed to the decline in the sales revenues is the changing culture in people who do not want to concentrate in the uptake of fast foods. Geopolitical issues also appear to have contributed to a decline in the sales revenues in other regions (Grant, 2016).
2.Operating margin
The operating margin of the McDonald’s has also been fluctuating over the years. Operating margin is calculated by dividing operating income by revenues. Based on the data presented, operating margin of the McDonald’s has been deteriorating. The deterioration is observable from 2013 to 2014. Additionally, the operating margin has also deteriorated from 2014 to 2015.
Years 2011 2012 2013 2014 2015
Operating margin 31.6% 31.2% 31.2% 29.0% 28.1%
3.ROI
Return on Investment is profitability ratio calculated by dividing net income by the total assets invested.

Similarly, the McDonald’s has continued to experience deterioration from the year 2013 to 2015.
Years 2011 2012 2013 2014 2015
Return on Investment 16.68% 15.44% 15.25% 13.88% 11.94%
4.ROE
Returns on Equity is also a profitability ratio that is calculated by dividing the net income with shareholder’s equity. The Returns on Equity of the McDonalds Corporation have shown improvement from 2013 to 2015.
Year 2011 2012 2013 2014 2015
Returns on Equity 37.92% 36.8% 35.69% 32.97% 45.43%
5.Leverage
Year 2011 2012 2013 2014 2015
Leverage 2.29% 2.31% 2.29% 2.67% 5.35%
B.CSF “report card” (your firm vs. competitors
ROE
2011 2012 2013 2014 2015
Priceline Group Inc. 41.04%
36.43% 27.39% 28.27% 29.01%
Starbucks Corp. 28.41% 27.09% 0.19% 39.23% 47.39%
YUM! Brands Inc 72.35% 74.14% 50.37% 67.94% 141.93%
Based on the comparison between the competitors and McDonalds, it is true that they ae showing improved ROE compared to McDonalds.
C.Major strengths and weaknesses in the following categories
1.Functions and skills
The functions and skills at the firm are currently being carried out in an organized manner. The strengths that are available is the fact that the company has well-trained personnel. The major weakness in the function and skills is the cost of compensation for employees (New, 2015).
2.Resources (financial, physical, human, technological)
McDonald’s has enough resources that are capable of making it the most successful corporations in the world. However, the management of these resources have created great difference in the performance of the firm.
3.Organization structure
The organizational structure that has been accepted and currently being used is the decentralized structure. Regional managers are capable of dealing with issues at lower levels. The strength of this structure is that it is effective in addressing various issues. However, the structure has weaknesses because it is expensive to maintain.
4. Physical locations’ proximity to markets & essential resources
McDonalds has its presence in many regions and making it have access to the market and essential resources to be used in production making it one of the strengths of the company. The weaknesses available is that it is slow to cope with technology thus making it lag behind.
IV. Goals & Strategic Objectives
Position on the goals hierarchy
The hierarchy of goals applied by the Mc Donalds includes the mission, strategic goals, tactical goals, and operational goals. The first-line management and the workers are responsible for the operational goals. Middle management handle tactical goals while the top management deal with n the strategic goals. Mission of the company is decided upon by the owners and other stakeholders (Sachdeva, 2015).
B. Financial Goals Table
1.Sales
1 Long-term goal
Sales Expected sales growth of 3%-5%.
Operating Margin The operating income growth is expected to grow by 6% to 7%
ROI Expected growth of $ 4.5 to 5 billion
ROE Go up to almost 50% will demonstrate efficiency.
Leverage Maintain it at 2 % and below.
C.Competitive Position
1.Market share
The current market share of the McDonald is at 17.2% which is significantly huge. It is followed by Starbucks at 11.96%. Yum Brands Inc. is the third with 7.53%, Chipotle Mexican Grill with 3.13, Wendy’s Co with 1.2%, and Darden Restaurants at 4.34%.
D. Strategic Objectives
1.Least cost
Least cost is one of the strategic objectives that the McDonalds have undertaken. The least costs are considered the best strategic objective because it will contribute to an increase in profitability and the sales revenues.
2.Differentiation
McDonalds has taken a step to change to other healthy alternatives. Additionally, the firm has ensured that they have come up with program to create awareness to the public on these new products.
References
Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
New, S. (. (2015). McDonald’s and the challenges of a modern supply chain. Harvard Business Review. Pub, 4.
Sachdeva, A. (2015). Evaluation and selection of differentiation as a strategy for McDonald’s.