Mcdonald's Corporation Essay

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Investment Analysis

McDonald's Corporation

The McDonald's Corporation is the largest fast food chain in the world and it has showed tremendous growth over the last years and has adopted such strategies that have made it to address the political, cultural and economic threats that pertain in the external environment. The financial and risk analysis of the company indicates that the company holds positive growth prospects for its investors and shows its positive financial strength.

Investment Analysis

Cultural Analysis

Political Analysis

Economic Analysis

Risk Analysis and Possible Returns

APPENIX --

McDonald's Corporation is the largest fast food chain in the world and is operating 35,000 outlets in 119 countries by serving the 68 million consumers on daily basis. The company is headquartered in United States and was founded in the year 1940 and started to expand its operations in the year 1948. According to Statista (2014), the annual sales of McDonald's for the year 2013 incorporated $28.11 billion which indicates the market and financial position of the company with the brand value of 84 million. The McDonalds's has employed 440,000 people in the world and is accounted as the second largest employer in the world. The products of McDonald's include hamburgers, fries, cheeseburgers, milkshakes, desserts and fish.

McDonald's serves customers in the form of Cafes where sophisticated area for dinning has been provided, Drive-ins where highway consumers are served, provides play area for children, facilitates free delivery and ensures that the served food is healthy and hygienic. McDonalds is placed at the 6th rank in the world's most valuable brands by the Forbes (2014) and the company intends for continuous improvement in its products and services in order to maintain its position and satisfy the ever-changing demands of its customers.

Investment Analysis

The McDonald's Corporation has been analyzed in order to evaluate the risks that persist in terms of investment and the company has been evaluated on the following grounds:

Cultural Analysis

The cultural forces of the society adapt with the period of time but the rigid perspectives of culture also impacts that environment in which an organization wants to conduct its business activities and generate profits. McDonald's being the number one brand in the fast food industry, is originated from the United States and thus understands that culture of the country and understands the needs of its customers. However, many cultural differences prevail in the United States that are addressed by McDonald's in an adequate manner. The numbers of culture that prevail in the United States are being addressed by the products of McDonald's. The increasing trend of people towards the healthy food by means of the reduction of obesity has made McDonalds to diverse its food products and the introduction of salads and low calorie menu took place (Markatos, 2006).

The traditional hamburgers and cheese burgers offered by McDonalds address the American culture, however, the numbers of cultures that are being persistent from the history of America are also addressed by the menu offered by McDonalds. For example, introduction of Mexican food in McDonalds was due to the number of Mexican people in the U.S. And thus, McDonalds captured a vast population in order to generate profits and growth in business prospects.

Therefore, the cultural analysis of McDonalds indicates that the organization has been successful in order to identify the culture and trend from the society and then develop its products in response to the observed culture.

Political Analysis

The political factors arise due to the changes in government regulations and legislations and they influence the organizations that prevail in such environment. The increasing rate of obesity and health concern that exists in the U.S. caused the political pressure on the health concerns of the public and emphasized the provision of healthy food from the fast food industry. McDonalds addresses this factor by means of making its menu healthy for its consumers by offering salads and low calorie food. The McDonald's corporation has been criticized for the food items it serves, mainly comprising of fries and cheeseburgers, therefore, the company has dynamically changed itself and has become involved in the health policy regulated by the United States (Markatos, 2006). Moreover, the government regulations with respect to the environmental concerns has also emphasized the operations conducted by McDonalds in which the company has adapted the idea of GO GREEN, and has developed environmental friendly restaurants by reducing the waste generated from its production process and has decreased the fabrication of carbon dioxide.

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However, the company was adhered to break the regulation of child labor when the underage employees were found working in McDonalds and since then, the company has strengthen its procedure of employment and has ensured that no underage employees are being hired locally that may negatively affect the organization's image and can cause monetary loss of being sued.

Economic Analysis

The economic factors that affect the organization's tendency to generate profits are considered to impose negative effects on the bottom-line of the company. McDonalds offers its products with respect to the economic factors in which the products offered by the company are produced at reasonable rate in order make these products affordable to the consumers. According to The Economist (2011), the BigMac offered by the company is found to be the cheapest food item offered by the menu with respect to the value it provides to its consumers. The economic downfall of the society and the economic pressure generated in the U.S. economy has impacted the bottom-line of McDonalds and during the economic breakdown with respect to the great recession in the year 2006, the company faced the reduced sales but the growth strategy of the company endured the economic factor (Markatos, 2006). The company came up with "the low fixed cost" strategy in which drive-ins and a number of restaurants were increased in order to increase the sales of the company with respect to the lower fixed cost. The 97% of the McDonald's consumers are below the age of 35 and this age group covers the professionals as well as teenagers and children who do not tend to have adequate source of income to afford the products that are being offered by McDonalds. Therefore, the expansion of McDonald's branches and franchises has provided the company to reach large number of population and the low price offered by the company has increased the sales of the company and has reduced the fixed cost due to its distribution over the number of restaurants and has made its products available with the prices that are affordable to the per capital income of the households. Therefore, the economic analysis of the company incorporates that the company is able to address the economic challenges that prevail in the environment. However, the increasing tax rates can adversely affect the pricing or the revenue of the company but the large number of restaurant chain seem to absorb its negative effects.

Risk Analysis and Possible Returns

The annual revenue of the company predicts the viability of the business model that has been adopted by the company which mainly comprises of its marketing, sales and product development strategies. According to Statista (2014), the revenue of McDonald's for the year 2011 was $27.01 billion and the revenue slightly increased during the year 2012 with the revenue of $27.57 billion. The annual revenue increased during the year 2013 and accounted for $28.11 billion whereas, the decrease in revenue for the year 2014 has been observed which accounted for the total revenue of 27.44 billion dollars. Therefore, the revenue of the company has been slightly fluctuated over the last 4 years and the revenue trends of the company are illustrated in Appendix -- 1.

The earning per share of the company indicates the amount of the company's profit that is being allocated to the common stock's share of the company. According to 4-Traders (2015), the earnings per share of McDonalds for the year 2012 was accounted as $5.36 million and it increased during the year 2013 and accounted as $5.55 million whereas, the earning per share of the company is found to be decreased for the year 2014 with the $4.82 million. The projected earnings per share of the company are forecasted as 5.03 for the year 2015 which makes it an ideal state for the investors to invest in the company. The trend for the earning per share of the company is illustrated in Appendix -- 2.

The dividend per share of the company indicates the dividend that has been paid to the common stock holders during the year. It indicates the efficiency of the company to provide its investors with the profit. According to 4-Traders (2015), the dividend per share of McDonalds accounted for $2.87 million for the year 2012, whereas $3.12 million were accounted for the year 2013 and it has been projected that the company will.....

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