Category: McDonald’s

In the contemporary world, firms are using a mix of strategies to achieve greater levels of differentiation. Service delivery is one of the avenues that firms are using to realize this operational goal. In this respect, this paper focuses on service visits and analyses by critically evaluating, comparing, and contrasting two service-based entities; a fast food restaurant (McDonald’s) and an automobile service center (Bosch Car Service). By critically examining the types of services rendered by these two entities, it is evident that they mainly focus on consumer service as their main means of service delivery.

Consumer service at McDonald’s is fast and efficient. Unlike in fine dining restaurants where customers have to wait for their orders to be taken and actually their food to be served, employees at the McDonald’s outlet that I visited were quick to take orders from their customers and serve them quickly. This is an effective means of serving customers hence saving customers as well as the restaurant’s management a lot of time. On the other hand, Bosch Car Service has specialized in service delivery to enhance its overall performance. To achieve this, the service center that I visited, comprised of employees who had the skills and technical knowledge to perform specific duties that have been vested to them. This is critical as it ensures that all cars that are brought in for service are clearly diagnosed and repaired in accordance with the expectation of their clients. This is essential in ensuring that the entity maintains its existing clientele and attracts new customers.

At McDonald’s, the main aspect of service delivery that had a positive influence was the offering, because the services that are offered in the outlet that I visited are designed to meet the needs and expectations of its clientele. The McDonald’s menu, for instance, provides its customers with a wide array of food combinations to choose from, hence meeting the needs and expectations of their varied clientele. A fast-food restaurant needs to offer its services in a fast but efficient manner. McDonald’s has specialized in this. It is perhaps as a result of this fact that this specific outlet did not have long queues, hence ensuring that customers spend a minimal amount of time purchasing food. These aspects of service delivery tend to enhance the overall consumer experience. However, while firms such as Bosch Car Service spend a lot of time and money on recruitment and training, McDonald’s does not. This increases the chances of an employee behaving in an inappropriate manner, such as being rude or arrogant to customers or other employees, hence resulting in the development of a negative attitude and perception towards the restaurant.

As stated previously, the Bosch Car Service lays a lot of emphasis on employee recruitment and training. This ensures that the firm offers high-quality repair service to its customers, and also ensures that its customers develop a positive attitude and perception towards the entity. To further enhance its service delivery, this entity specifically offers service and genuine service parts for specific vehicle brands. This develops a feeling of professionalism and specialization in its clients. However, this aspect of consumer service has a negative influence on clients who own cars that cannot be serviced by this firm. Such clients will not have confidence in the firm if they take their cars to be serviced by Bosch.

At McDonald’s, color, lighting, and smell influenced my overall consumer experience. The ambiance that was brought about as a result of the presence of these factors enhanced my eating mood while at the outlet. At Bosch, color and lighting were the main physical factors that enhanced my overall consumer experience while at the service center. The color and lighting of the service center clearly brought out its spatial layout. For instance, the customer waiting area was well spaced with comfortable couches that enhanced my comfort while waiting for my car to be fixed. Additionally, magazines were present, which had more information on the company as well as cars and car maintenance. This greatly enhanced my experience at the service center.

Other aspects of physical evidence at McDonald’s and at Bosch aimed at achieving corporate branding. These entities used signs, symbols, and artifacts to brand themselves within their outlets. At McDonald’s, for example, there was a huge logo of the company. Inside the restaurant, the logo and catchphrase of the company were present on its walls, employee uniforms, as well as the food packages. Bosch took a relatively similar approach to the brand itself. Outside, the service outlet was a huge Bosch sign. Moreover, there were numerous signs and symbols inside the building attributed to the firm. The use of the physical environment for corporate branding purposes is critical, especially in developing brand awareness and brand loyalty in consumers.

Like any other entity, McDonald’s used its physical evidence as a service differentiator. To achieve this, the spatial layout of McDonald’s restaurant aims at reducing congestion and increasing sitting space for its clients. Congestions and long queues are usually a problem in many fast-food restaurants. Thus, by overcoming this setback, McDonald’s has managed to brand itself as a fast and effective fast food restaurant. To enhance the experience of its customers, McDonald’s outlets are usually kept clean, well-spaced out, and have ambient lighting. This creates a desirable mood and eating atmosphere in consumers. To enhance service delivery, McDonald’s outlets usually have a huge menu placed above the counter. This menu reduces the time, and difficulty customers might have in deciding what to purchase as well as their costs. Bosch, on the other hand, used its physical environment as a service differentiator. The technical team, for instance, had well-designed overalls with the logo of the company at the back. Such a dressing code tends to develop the notion that its employees are more intelligent, skilled, and interactive as compared to other car service firms. At the same time, the presence of symbols, signs, and magazines enhances the process of service delivery by providing more information about the entity, its operations, the ordering process as well as consumer management.

Despite the fact that McDonald’s and Bosch operate in different industries, the service marketing concepts that these entities are using are fairly similar. Thus, to enhance their overall consumer service delivery, these firms need to conduct more consumer research to understand the needs and requirements of their customers clearly. This will ensure that the service delivery strategies that they will come up with will enhance their brand awareness, differentiate them from their rivals, and meet the needs and requirements of their target market.

McDonald’s Corporation is one of the largest corporations in the United States and the global market. It is also the largest restaurant chain in the world, extending to more than 120 countries. The company was founded more than 77 years ago and quickly grew into a massive corporation. This paper will provide an outlook on the current performance and governance structure of the company.

Current Performance

The annual report from 2016 shows that the corporation performed favorably according to expectations and previously set business goals. The company returned $14.2 billion to shareholders through share repurchases and dividends. This figure marks the successful completion of a targeted return of $30 billion for the three-year period ending in 2016. The corporation reported slightly lower total revenues of $24 billion in comparison to the $25 billion reported in 2015. However, its operating income increased from the $7.1 million reported in 2015 to $7.7 million. McDonald’s Corporation holds the highest market share among its competitors at 17.2% (“Annual reports,” 2017).

The corporation is primarily involved in the restaurant business and has the largest market share and brand association in this field. The mission statement of McDonald’s Corporation is focused on creating a favorite eating and drinking place for their customers while being dedicated to providing a healthy workplace and a positive presence in the community (“Annual reports,” 2017).

The objectives of the company are in line with its mission statement and are based on its “Plan to Win” strategy, adopted in 2003. This strategy is focused on five key drivers of customer experience: people, product, price, place, and promotion. The opportunities of the corporation are based on its mission statement and include operational excellence, leadership marketing, and innovation. These objectives are consistent with each other as well as the company’s external and internal environment (“Ambition & corporate mission,” 2017).

The “Plan to Win” strategy has performed well for the company and reflects its global international operation. The company has been successfully performing since its inception and has continued to expand to new markets over the last decade and a half (Crawford, Humphries, & Geddy, 2015).

Corporate Governance

The company’s board of directors consists of twelve members who are mostly non-executive directors. Enrique Hernandez is the elected non-executive chairman of the board. He owns a high-end security company and serves as director of Chevron Corporation and Wells Fargo & Company. His leadership experience and connections are valued and used by the corporation. Stephen J. Easterbrook, who has extensive experience working in the corporation, is the president of McDonald’s Corporation as well as its chief executive officer and director. Andrew K. McKenna is the chairman-emeritus of the board, offering a wide net of governmental and charity-related connections.

The rest of the board consists of independent non-executive directors. Robert Eckert and Margaret Georgiadis provide expertise from the toy industry. Jeanne Jackson, Richard Lenny, and John Mulligan are focused on marketing issues. Sheila Penrose has real estate knowledge and skills. John Rogers has a long history of money management and focuses his abilities on the financial issues of the corporation. Miles White contributes to the health-care aspects of the corporation and has experience working in the field of health care. Despite the global focus of the company, no one on the board has a prominent history of working internationally. Similarly, not a single member has shown interest in environmental sustainability (“MCD company profile & executives,” 2017).

Conclusion

McDonald’s is a large global corporation with a long history. It has maintained its status as a leader in the restaurant business over the last year. The company’s current strategy of providing quality service and focusing on marketing is consistent with its mission and focus on global operation. The board of directors is diverse in experience and covers most aspects of the corporation.

References

Ambition & corporate mission. (2017). Web.

Annual reports. (2017). Web.

Crawford, A., Humphries, S., & Geddy, M. (2015). McDonald’s: A case study in glocalization. Journal of Global Business Issues, 9(1), 11-18.

MCD company profile & executives – McDonald’s Corp. (2017). Web.

Considered the world’s largest chain of hamburger food cafe, McDonald’s Corporation has been experiencing growth over the last decades. However, it experiences negative aspects related to the labor market.

Selection of diversified workforce

The restaurant favors foreign workers while choosing their employees irrespective of the qualification of the locals in Qatar. In addition, it allows foreign workers to work for long hours contrary to those hours of service allocated to the locals who continue losing their health benefits due to such acts.¹

Shifting in the demands of the workplace

Over the years, several changes have taken place within the corporation that shifts the responsibility of ensuring proper public relations from the administration to the workers. This charges the workers to take up the responsibility of the employers. With the few people committing to full time working hours, hence, making it difficult for the corporation to meet its goals.

Higher level of education accompanied by a higher level of illiteracy

Qatar offers a huge pool of educated workers. On the contrary, to the expectation, these workers do not have any experience required by the management even with their high level of education. It becomes so difficult to even for the corporation’s management to offer them a job, as a result, the management settles on the foreigners with qualifications.

Prevalence of part-time jobs

The workers’ payment depends on the number of hours that a worker avails him/herself. Due to the low payment, most workers are working part-time to allow them to engage in other business activities, hence, increasing their financial stability. Most locals in the Qatar also try to balance the working hours and time for attending classes; therefore, reducing the number of workers available for shifts or overtime.

Entrepreneurship preferences

The majority of people prefer starting their own jobs and practice being bosses of their own. Furthermore, with the rejection at the places of work, many people are resorting to starting their own jobs in order to cope with unfavorable economic situation thus helping them workers to increase their income.² The McDonald’s Qatar agrees that the ownership and operation of the restaurant in Qatar is 100% local. The corporation has a unique organization culture that ensures efficient public relations.

Mission of the corporation

Notably, revenues from all McDonald’s restaurants are ploughed back into the local economy. Their mission involves determination of improving both social and environmental performance; the corporation aims to work closely with the independent franchisees towards a sustainable future.³ Moreover, the corporation ensures customers satisfaction through promotion of well-trained employees and stakeholder involvement.

Core values, beliefs, and assumptions

Their core value seek ensure sustainability of the business are cleanliness higher-customer relations through provision of high-quality products and services in a cleaner environment. Through diversified human personal within the corporation, the business ensures it brings together all the qualified people, embrace honesty, and integrity to ensure the prosperity of the corporation. The assumption that the corporation has an open social system in which most of the activities are conducted through the members.⁴

These practices allow their customers all over the world to interact freely with the customers. Corporation’s organizational culture supports their vision through caring for their customers, creating an innovative environment that is solution oriented, and upholding the quality of the products and services they offer. In order to attract customers from all classes, the corporation’s belief seeks to address this issue through offering customized menu in which their customers are able to choose from depending on their economic status.

Desired positive culture

The corporation desires to reduce the amount of risks and any uncertainties within their activities. Additionally, the largest food chain also seeks to provide their customers in the Qatar with fresher and healthier food contrary to earlier provisions as per the customers. The survival of this food outlet in the Middle East has been grounded on constant Human Resource Development (HRD).¹ Such trainings help employees in having a global view of their workplace, workmates, and objectives. Through their mission statement, the corporation encourages most of its operations to be in line with the laid business ethics.

References

1. McDonald’s Qatar. 2010. Web.
2. Williams C. Management. Mason: Thomson South-Western; 2007.
3. Dibachi F, Thomas RL. Just add management: seven steps to creating a productive workplace and motivating your employees in challenging times. New York: McGraw-Hill; 2003.
4. Moseley JL, Dessinger JC. Handbook of improving performance in the workplace: Vol. 3, measurement and evaluation. San Francisco: Pfeiffer; 2010.

Name and Nature of Organization

McDonald’s corporation is a world leading chain of hamburger fast food restaurant with a presence on 119 countries. The company started as a barbecue restaurant that was operated by two brothers Maurice and Richard McDonald in 1940. Ray Kroc who had joined the company as a franchisee in 1955 later purchased the brand in 1961 and facilitated the opening of many branches across the globe so as to attain a worldwide reach (Lechner, 2009).

He adopted the principles of quality, service, cleanliness, and value. Rosaldo & Inda (2008) studied that Kroc was of the opinion that a customer should have gotten a full refund of his/her money should the customer have not been satisfied with the quality of service and the product itself. In addition, he set the standard of quality of the McDonald’s products be insisting on cleanliness at all times. Kroc was quoted as saying that if a steward could have time to stand, he could also have the time to push a broom and make places clean. This set the standard for cleanliness and quality that is still enjoyed at the McDonald has to date.

The restaurants deal in hamburgers, chicken, French fries and cheese burgers among others depending on the location of the restaurant (Smart, 1999). It also deals in shakes, soft drinks and desserts. Most of the restaurant products have the prefix Mc so that the chicken is called the McChicken thereby making the brands known. The company further states that ‘we are committed to continuously improving our operations and enhancing our customers’ experience’ (McDonald’s, 2011). The values of the company include concern about customer experience, commitment to the customers, ethical practice, giving back to the community, striving to improve, and growing business profitably.

Activity and Time Period

The time period that I have used is January 2010 to December 2010. This time period was chosen because of the nature of the paper that requires the assessment for a prior decision or a future decision. Due to the lack of information about both prior and future operational decisions of McDonald’s corporation pertaining to operations, I have chosen to look at a future decision. This will not only create an ease in the calculations but also allow me to demonstrate by understanding in a more appropriate manner.

Data

It is imperative that the senior management and the board of directors of the McDonald’s corporation should have detailed understanding of the costs structures at every level of the organization. The value chain of the company begins from research and development through to customer service. Research and development involves finding out what business opportunities are feasible in the rice market and how it can be developed in a way that suits the consumers who are the primary concern of a company during production.

The production/manufacturing stage on the other hand ensures that the product that is made is cost effective, appropriate for the target group safe for consumption over a long period of time. Sales and marketing ensures sustainability of a product in the market while also providing information on the leeways that exist of the expansion of business.

Consequently, various overhead costs will be allocated using departmental method. This is owed to the fact that departmental method of overhead allocation allows various departmental service costs to other service and operational departments in a sequence. Through such sequence, systematic allocation would be attained since it flows from the highest ranked department down to other departments that do not offer much service.

The allocation of overhead costs will be guided by the objectives that each cost is to accomplish. As such, costs such as Finance, freight, depreciation, marketing/advertisement and artwork will be allocated in every department using number of units on an item-by-item basis. Since there is overhead cost in both Company-operated restaurants and franchised restaurants, the cost of production will be allocated in these two departments to take care of the freight, depreciation, marketing/advertisement, and artwork in each department.

Results

Ideally, the overhead cost allocation for the Company-operated restaurants and franchised restaurants will be channeled as per the table below.

The process-costing summary for the year Company-operated restaurants and franchised restaurants are shown in the table below:

Implications

The McDonald faces competition from other players in the fast food companies market (McDonald’s corporation, 2011). In order to maximize profits, the company must be sure to cut on costs by taking up on the appropriate costing system and forming a niche in the already competitive market.

References

Lechner, F. (2009). Globalization: The making of world society. Malden, MA: Wiley-Blackwell.

McDonald’s corporation. (2011). 2010-annual-report. Web.

Rosaldo, R. & Inda, X. J. (2008). The anthropology of globalization: A reader. Malden, MA: Blackwell.

Smart, B. (1999). Resisting McDonaldization. London: Sage.

It is estimated that 17% of Americans are obese (Scherer 23). Fast food centers like McDonald have often been criticized for contributing to this phenomenon. In a bid to encourage the public to adopt improved nutrition behavior, McDonald launched a program to collect inputs from clients. The customers were required to offer their feedback with respect to the company’s nutritional programs, sustainability, and general brand advertising. Based on the above illustrations, it is apparent that the Listening Tour conducted by the firm is a qualitative research. Qualitative Researches are undertaken for fact-finding purposes (Masny 340). They are used in establishing underlying reasons, sentiments, and inspirations (Nickoson and Sheridan 145). Through this, the exploratory research offers information about a problem and aids in formulating solutions or hypotheses for possible quantitative inquiry (Scherer 23). Over the years, the company has adjusted its menu. Therefore, the tour will obtain feedbacks from their clients on how they will change their menu in the future to ensure that a healthy nutritional value is attained.

At the end of the tour, the findings will be assembled and analyzed before being sent to the management. Afterward, the executive team should initiate a quantitative research. Quantitative exploration helps in quantifying the research problem (Belk 12). For instance, the company will use this type of investigation to generate numerical data with respect to how to encourage the public to adopt improved nutrition behavior. The study will also offer quantified facts concerning the company’s nutritional programs, sustainability, and general brand advertising. Through the investigation, the firm will generate and utilize mathematical prototypes and concepts about the issue. Measurement will be employed in the study. The procedure is significant to the investigation since it offers the vital link between experimental observations and mathematical findings of quantitative relations. The above research will allow the company to develop a greater understanding of their qualitative results.

McDonald should have carried out a focus group process in their research. The method queries a cluster of people about their insights, sentiments, opinions, and outlooks towards a merchandise, service, idea, commercial, or a program (Robson 45). Marketing firms usually utilize the tactic. Through it, queries are asked in a group-shared environment. Participants can share their contributions with other group associates (Robson 46). The company should have utilized this approach owing to its associated benefits. Indicated below are focus group’s advantages:

• The method enables the researchers to work together with the contributors, pose follow-up inquiries, or request queries that investigate more deeply.
• Its outcomes can be comprehended with ease compared with complex statistical data.
• Through it, researchers can obtain information from non-verbal replies like gestures and body language.
• Data is offered more quickly compared to when participants are interviewed individually.­

Other than group focus, qualitative surveys and interviews should have been used (Gillham 33). Surveys could have been used to examine the clients’ attitudes towards the issue of obesity in the society. The interviews would have required participants to question clients to collect their personal views. During the interview, the contributors would have been asked to detail their perspectives about how the company should enhance improved nutrition behavior (Gillham 33). The questions used during the interviews should be open ended. Equally, questionnaires would have been used to collect private information from the participants.

Works Cited

Belk, Russel W. “Qualitative Versus Quantitative Research In Marketing”. Revista de Negócios 18.1 (2013): 12-14. Print.

Gillham, Bill. Small-Scale Social Survey Methods. London: Continuum International Pub. Group, 2008. Print.

Masny, David. “Rhizoanalytic Pathways In Qualitative Research”. Qualitative Inquiry 19.5 (2013): 339-348. Print.

Nickoson, Lee, and Mary Sheridan. Writing Studies Research In Practice. Carbondale: Southern Illinois University Press, 2012. Print.

Robson, Colin. Real World Research. Oxford, UK: Blackwell Publishers, 2002. Print.

Scherer, Lauri S. Obesity. Farmington Hills, MI: Greenhaven Press, 2011. Print.

It is beneficial for management of corporate to communicate lightly with their customers and members of staff. This is because the two groups of people are the most important elements of any business enterprise. Customers provide market and revenue while employees provide manpower to manipulate and run the market. The story under discussion is “McDonald’s advice to the hungry” which aired on the Market Place Money program. From the episode, it is evident that MacDonald’s management team took considerations and involved light moments in communicating with customers and staff without affecting their integrity.

The story revolves around an instance when MacDonald’s told customers to break food into small bits whenever they were hungry. In a light hearted manner, the breaking was to make food “more” since they were to eat “less” and still not feel hungry. The story reflects on issues that arise in management of employees and communication to customers. The episode focused on the manner in which management of corporations talk to their employees on social and personal expenditure issues. The story revolves around words used by the management of MacDonald’s on their customers in relation to their food products. The episode follows up on a related story in which MacDonald’s advised their employees to take “food stamps” whenever their paychecks didn’t go far enough.

Employee relations and human resource management topics are the main aspects from the course that relate to the story. According to the host, the story is also a follow up on a related story where employees of Walmart had held a thanks giving food drive to support other employees. This means that McDonald’s and Walmart have interactive resource management models and humanistic employee relations compared to other companies that focus on work-related aspects only.

“Shark Tank”

Shark Tank is one of the most revolutionary and insightful business reality shows in America. The television series is a reality show that features prominent investors called “Sharks” who evaluate business presentations by aspiring entrepreneurs to invest in their businesses. The concept is based on a Japanese money show called “Money Tigers” but Shark Tank perfected the art by presenting some of the brainiest venture capitalists in America. Investors featured in the “sharks” panel include Barbara Corcoran, Kevin Harrington, Mark Cuban, Daymond John, Kevin O’Leary and Robert Herjavec.

Before making a presentation on the intended business venture, an entrepreneur gives an offer for a deal between his company and the investors. During the presentation, the panel asks questions regarding their business plan, their products and services offered by the potential entrepreneur. If contented with the presented business, each investor makes an offer or a counter offer to the entrepreneur.

Investment offers made by investors in the panel usually differ in terms of business value and stake they wish to take in the presented business. For instance, in season four, the sharks made conflicting offers and were competing to outsmart each other. Once one or a team of investors from the panel agree with the entrepreneur, the deal is closed and they become business partners. However, if they don’t discover earning potential or value in the presented business, they get out of the deal one by one and the entrepreneur goes away without a deal. In conclusion, the brainy business conversation between the panel and aspiring entrepreneurs makes “Shark Tank” an insightful program to watch.

Issues

The issues McDonald’s was faced within 2013 were a considerable decrease in sales growth, seriously slowed the growth of operating income, and decreased success overseas due to the weakness of the global economy. Also, McDonald’s was forced to engage in stiff competition with numerous rivals such as Burger King, Wendy’s, Taco Bell, as well as with coffee shops such as Starbucks, and with providers of higher-quality burgers.

Situational Analysis

External Environment

The external environment was rather tough. As for Porter’s five forces (Hill, Schilling & Jones 2017), perhaps the bargaining power of suppliers was increasing due to the customer’s new demands on the quality of foods. There probably was some threat of new entry (from small restaurants providing similar food). Consumers had high bargaining power due to the availability of numerous similar restaurants, so there were fewer consumers than desired. There was a high threat of substitutes from rivals (e.g., ones mentioned above), and there was severe competitive rivalry among the existing firms. As for PEST (Wheelen et al. 2015), while political climate was often favorable, the economic situation was not favorable: the weak economy of the world meant customers bought less overseas, whereas at home they also wanted to eat out less; social problems (e.g., anti-obesity issues) meant clients had additional demands; the technological climate was probably neutral.

Therefore, all the firms were faced with competition and other problems of the external environment. These posed a threat to McDonald’s, which fell behind on several criteria. A probable opportunity was to capitalize on the desire for more healthy foods.

Internal Environment

McDonald’s’ financial situation (a drop in revenues, a decreased market share, a lowered operating income) meant the firm faced several internal challenges, too. One of these was high turnover rates of workers, slow service in restaurants due to the tiredness from monotonous work and low salary, etc. That culture also meant that the customers were unsatisfied, complaining that the service was poor. The foods provided in McDonald’s were often of lower quality than those sold by the rivals, and customers often sought quality over cheapness; however, cheapness remained a competitive advantage, helping retain some of the clients. Overall, the main strengths were probably the low prices of most of the foods, and several new high-quality menu items (primarily the McWrap). The main weaknesses of the value chain included poor service culture and the relatively low quality of most foods compared to that of the competitors; workforce turnover was another issue.

Key Industry Success Factors

There were several key success factors in the industry; one of the external factors was the quality of the food which could be purchased in the restaurant, for there were increasing health concerns in the society; McDonald’s faced issues pertaining to this, whereas those restaurants that sold more expensive, but higher-quality foods started gaining new customers. Around the world, one such factor was the ability to adapt the menu to the local culture (McDonald’s was successful in this respect).

As for internal factors, of great importance was the quality of service in the restaurants, which meant that a positive organizational culture was needed; McDonald’s lacked it.

Strategies

At the business level, McDonald’s worked on improving the quality of food; McWrap (high-quality food item) was rather successful in the U.S. At the functional/operational level, there was a shift from opening new locations (which was costly) to maximizing the profits from the existing ones (apparently a reasonable move, because it allowed for saving costs needed to open new locations). At the cooperative level, no apparent changes were seen; it should be worth noting, however, that McDonald’s traditionally used the franchise system. At the international level, the company expanded primarily through franchises, and tried adapting the menu to the local demands (e.g., kosher foods in Israel) and attempted to make the foods cheaper (and affordable to the locals). Both steps were needed, for, without them, the sales would probably be much lower.

Recommendations

It might be possible to recommend that McDonald’s switches to more healthy foods in the U.S., where the concerns on the healthy diet were growing. Perhaps the enterprise should introduce new food items on the menu, which cost more than the traditional hamburgers and cheeseburgers but are of greater quality. This would probably require working on the restaurant’s image and changing it so that it presents the foods sold in the restaurants as more healthy, attracting some of the customers looking for food of higher quality, but still relatively cheap.

Also, the service in restaurants should be addressed to increase its quality. Probably the workers should not be trained in one area only but should be taught a wider array of skills so that they would be able to help substitute for one another when the need arises.

Update

Nowadays, it is apparent that McDonald’s focuses on the promotion of the image that sells high-quality food to its clients (McDonald’s n.d). However, this company remains to be perceived as a provider of food of lower quality than, e.g., food sold in Subway or Starbucks (Harrington, Ottenbacher & Fauser 2017).

Reference List

Harrington, RJ, Ottenbacher, MC, & Fauser, S 2017, ‘QSR brand value: marketing mix dimensions among McDonald’s, KFC, Burger King, Subway and Starbucks’, International Journal of Contemporary Hospitality Management, vol. 29, no. 1, pp. 551-570.

Hill, CWL, Schilling, MA & Jones, GR 2017, Strategic management theory: an integrated approach, 12th edn, South-Western Cengage Learning, Mason, OH.

McDonald’s n.d., McDonald’s – official corporate website. Web.

Wheelen, TL, Hunger, D, Hoffman, AN & Bamford, CE 2015, Strategic management and business policy: globalization, innovation, and sustainability: global edition, 14th edn, Pearson Education Limited, Harlow, UK.

Fictional hospitality operation and its products

Comfort Hotel Inn

Comfort Hotel Inn is a tourist hotel located on the coast of Zanzibar. The hotel has been in operation for the last two years; however, it has been facing difficulties to penetrate in the hotel industry. Nevertheless, as its marketing manager, I will change the direction and make the hotel more competitive.

Target Customers

The hotel is in a coastal region; this makes it effective for tourists. Zanzibar is a tourist destination, especially in festival seasons and summer. When tourists come to a country, they are interested in having a different experience/feeling. To ensure that this target customer’s needs are addressed, I will upgrade the hotel’s facilities.

Tourism is not an all year round activity; there are months that the flow of tourists is on a slow move. The company targets domestic tourists as its second target customers. Other than individual visitors, the hotel has halls for corporate customers and conferences.

Strategies to Target Customers

The general rule of customer care says, “a dissatisfied customer tells two others, and a happy one tells another one,” so the first thing is to ensure that quality and good services are provided in the inn (Cook 67). After all, measures have been put (for quality), the next step is marketing and advertisement. Marketing is a long trail of processes that ranges from drawing a raw strategy, setting the value of goods and services, creating consumer awareness to spreading out of different available concepts. The hallmark of this process is to enhance the supply of goods and services to meet the demand of consumers as well as achieving both the specific and general goals of a business enterprise (Paley, 1999).

Hospitality Brand Founded Before 1990

McDonald’s

McDonald’s is a fast-food company that was founded in 1955. Other than operating as a restaurant, it has been franchising its name to other companies all over the world. It is located in 117 countries and has over 32,000 local restaurants outlets. Its founder is Ray Croc. The major known brands of the company include Egg McMuffin, world Famous, Quarter Pounder, Chicken McNuggets, and Fries, among others (McDonald’s Official website, 2010).

Product Changes Over the Years

The company initially manufactured hamburgers, but today numerous products are produced by the restaurant. It sold its 100millionth hamburger in 1958. Today the restaurant has a wide variety of foods. Hamburgers today are different from the old day’s hamburger. The recent development on the products is the introduction of McCafe real fruit smoothies and frappes that were launched on July 13, 2010, in the United States of America (McDonald’s Official website, 2010).

The Current Phase of the Product Life Cycle

The products of the company are in the introduction, growth, and maturity ages, depending on the product (Paley, 1999). There are new products introduced to the market like the new McCafe real fruit smoothies and frappes. Egg McMuffin is in the development stage is not an old brand since it was introduced in the 1990s. It has grown in the way it is made, and more people are willing to give it a trial.

There are other products like chicken McNugget, which was introduced in 1980 and is in the maturity stage. It has been in existence for that long, and the customers today are elderly people, who form a small portion of the population.

Reference List

Cook, S. (2008). Customer Care Excellence: How to Create an Effective Customer Focus. New York: Kogan Page Publishers.

McDonald’s. (2010). The Company’s Official Website. Web.

Paley, N. (1999). The manager’s guide to competitive marketing strategies. New York: CRC Press.

Additional Funding for Starbucks

As businesses expand their scale of operations, there is need to obtain additional funds that would facilitate the growth. An expansion program of most businesses aims at increasing the sales level of the an entity. To generate additional sales, a business need to increase the asset and capital base. It is for the reason that businesses use assets to generate sales and these assets are funded by the available capital. Therefore, an increase in income generating assets increases sales (Eugene and Ehrhardt 530). Computation of additional funding needs is of utmost importance for a business which intend to expand. After ascertaining the additional funds needed, an organization needs to look for economical ways of obtaining the funds. It is important to note that the factors that determine the additional funds needs varies. Further, management needs to ascertain whether an organization is operating at full capacity. This would help evaluating whether there is the need to acquire additional machinery and equipment. This may increase the additional funds needed. Calculation of additional funded needed is shown below.

Additional funds needed = Forecasted increase in sales – unstructured upsurge in

liabilities – increase in retained earnings (Eugene and Ehrhardt 532)

Additional funds needed can also be obtained by using the data for the forecasted income statement and balance sheet statement. Calculation of the additional funds needed will be based on a number of assumptions as listed below.

Assumptions

1. Cost of sales including occupancy cost, store operating expenses, general and administrative expenses will increase at the same rate as sales increase that is, 14% in 2013, 11% in 2014, 8% in 2015, 7% in 2016, 6% in 2015, and 5% in 2018.
2. It is assumed that the amount of profit retained is constant at $505.16 during the period of the forecast.
3. Sales will increase according to the rates used for forecasting.
4. Accounts receivable, inventory, accounts payable and fixed assets will increase at the same rate as sales increase that is, 14% in 2013, 11% in 2014, 8% in 2015, 7% in 2016, 6% in 2015, and 5% in 2018.

The assumptions will help ascertain whether the company will require additional funds or whether the expansion program will generate excess cash. When using this approach, it is necessary to obtain the amount of total assets and liabilities & equities which are directly affected by the sales during the period of the forecast. The sum of total liabilities and shareholders’ equity is deducted from the total assets to ascertain whether the organization will require additional funding or the company has excess cash (Eugene and Ehrhardt 536). The table below summarizes workings or additional funds needed.

From the table, it is evident that the amount of total assets exceeds the total amount of liabilities and equities in 2013 and 2014. These differences denote the additional funds needed to increase the sales. However, for 2015 to 2018, total liabilities and equity exceeds the amount of total assets. This implies the organization has adequate capital that is required to acquire the value of total assets which is adequate to generate the projected growth in sales. This implies that the company has excess cash and does not require any additional funding to generate the forecasted sales. In summary, it is evident that the additional funding is required for only two years that is 2013 and 2014 (Eugene and Ehrhardt 539).

Value of equity for McDonalds and Starbucks

The value of equity denotes the value of a company that is attributed to shareholders. The value is obtained by summing up together the value of an entity and all investments less debt and minority interest. Computation of the value of the equity of an entity shows the value of a firm. This value is of great importance to investors since it guides them in knowing which companies to invest in. This further helps them in minimizing risks and increasing risks. The value of equity can either be expressed either as market value or intrinsic value. The value of equity per share is obtained by diving the value of equity by the total number of outstanding shares. To calculate the value of equity it is of essence to obtain the cost of capital. Cost of capital is an aggregate rate of return required by all providers of capital.

Estimation of cost of capital for Starbuck Corporation

Cost of debt after tax = 6.5% (1 – 0.32) = 4.5%

Cost of equity (using CAPM method) = 3.2% + 1.2 (5%) = 9.2%

Total debt = 549.5million

Total equity = 4,384.9milion

Debt + equity = 4,934.4

The weight of debt = 549.5/4934.4= 0.1113

Weight of equity = 4,384.9/4,934.4 = 0.8886

Cost of capital = 0.1113*4.5% + 0.8886*9.2%

0.5011+ 8.1755 = 8.68%

Cost of capital for Starbucks corporation is approximately 9%.

Estimation of cost of capital for McDonalds Corporation

Cost of debt after tax = 6.7% (1 – 0.294) = 4.7%

Cost of equity (using CAPM method) = 6.2% + 0.41 (5%) = 8.25%

Total debt = 12,500.40million

Total equity = 14,390.20million

Debt + equity = 26,890.60

The weight of debt = 0.4649

Weight of equity = 0.5351

Cost of capital = 0.4649*4.7% + 0.5351*8.25% = 6.57%

Cost of capital for McDonalds corporation is approximately 7%.

To compute the value of equity, present value of future cash flow is first computed using the cost of capital estimates above. The tables below show the computation of equity value per share for Starbuck Corporation.

The equity value per share = Equity value/number of shares outstanding

The tables below show the computation of equity value per share for McDonald Corporation.

Since the unlevered cash flow is computed from earnings after interest the net debt is excluded from the computation of equity value, thus the present value of unlevered cash flow is the same as the equity.

The equity value per share = Equity value/number of shares outstanding

Projected and historic economic profitability

Economic analysis deals with the allocation of scare resource and analysis of opportunity cost. Economic profitability denotes the difference between income received from the sale of a commodity and the opportunity cost of the factors of production. It is different from the accounting profitability which is the difference between income from the sale of a commodity and the cost of production of the commodity. Economic profit is attained by deducting the cost of capital from the net operating profits after tax obtained in a given financial year (Bruner, Kenneth and Schill 76). Calculation of historic and projected economic profits for Starbucks corporation is shown in the tables below.

Continuation.

Calculation of historic and projected economic profits for McDonald corporation is shown in the tables below.

Continuation.

Works Cited

Bruner, Robert, Kenneth Eades, and M. Schill. Case Studies in Finance: Managing for Corporate Value Creation, USA: McGraw Hill, 2003. Print.

Eugene, Brigham, and M. Ehrhardt. Financial Management: Theory and Practice, Mason: Thomson South-Western, 2008. Print.

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McDonald’s was successful throughout the first two decades after it was first introduced to customers. Nonetheless, in the mid-1980s, the company started dragging behind as the business became a bit more dynamic. This situation required McDonald’s to implement a novel approach. This is how the “Made for You” kitchen system appeared. This system was aimed at improving food quality, introducing the menu items in an easier way, and providing exceptional customer service. The key idea of that approach was that each meal was prepared exclusively and the whole order was made on the spot. All of the operational and customer requirements were followed in the new system. McDonald’s administration explored a number of new technologies with the intention of implementing critical changes into the current system. The main objective of the company was to find a way to cook food faster and provide the customer withe high-quality food at the same time. McDonald’s management and staff had to engage into the learning process and find the ways to improve the company’s processes.

There were five major key criteria that defined the goals of the “Made for You” kitchen system. Those criteria included service (60-second delivery after the order has been made), food quality, and food preparation (easier cooking patterns allowing the employees to prepare the food much quicker than before). It is also important to take into consideration the staff (increasing job satisfaction among the employees) and profitability (minimizing the costs and increasing customer satisfaction at the same time). Combined, these five criteria turned out to be the custom recipe for McDonald’s success. The company was able to do whatever it took in order to comply with all the essential requirements. The way in which these five criteria of success were followed defined the success of the McDonald’s brand and proved the fact that a JIT technique may be useful in the food industry as well.

The new “Made for You” kitchen utilized a computerized approach that allowed the company to identify the customers’ purchasing patterns and helped the new system to predict the upcoming purchases and generate the orders for the best-selling products. This was intended to help the employees to be ahead of schedule during the busy hours. Another important aspect of this forecasting system was the ability to monitor the employees’ output. In other words, the “Made for You” forecasting system was designed to accomplish two key goals: employee efficiency and accurate order prediction. This system boosted all the vital characteristics of the company.

McDonald’s administration believes that the forecasting system used by the company is one of the best in the market. Since the first implementation of the McDonald’s forecasting system, the company has been able to seriously improve the quality of their service and enrich McDonald’s customer base. This can be explained by the perfect balance between the particularities of the supply chain planning and the growing popularity of new products. The actions that were taken by McDonald’s impacted the resulting complexity of the system, but the forecasting system proved to be profitable and efficient at all of the production stages. Lately, the demand for McDonald’s has increased dramatically, and one of the explanations is the correct use of the forecasting system that turned out to be the game-changing asset for the franchise.