FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Situation Analysis

McDonald's is one of the most recognizable brands in the world serving millions of customers daily in a multifaceted environment of more than 120 countries. Ray Kroc established large scale operation from the ideas of the McDonald brothers. He founded McDonald's system in 1956 with company land own franchises, treated as partners, implementing a business model founded in real estate operations with franchising was done through buying property and leasing it to franchisees. His strategy was uniformity of operations, while being committed to quality, service and cleanliness. Throughout the years and evolving environments, many CEO have followed Kroc's dream; some making beneficial decision, while some detrimental. This paper will examine ups and downs of this company and the critical issues that caused the falters in such an iconic company and what it can do to alter operation to regain market share lost with increased competition.

Problems Management is Facing

The problems that McDonald's is facing are the declining performance in the areas of customer service, employee turnover and order processing time. McDonald's now has a customer service ranking that was not only the lowest among all national fast-food chains, an undesirable position it has held since 1994, but also lower than any U.S. domestic airline, and even lower than the U.S. Internal Revenue Service. They experienced a first ever quarter loss, revenue growth has declined, and same-store sales fell for 12 straight months. The company's current situation has been attributed to increased competition, poor management and marketing and a failure to respond to the changing needs of customers and franchisees. Cantalupo, CEO during the case time period, is now left with many challenges and problems. The company is also suffering form declining market share and a decrease in domestic sales. The most significant questions remained whether the changes Cantalupo had made were sufficient to provide McDonald's with the core competencies necessary to build a sustainable competitive advantage in the global fast-food industry.

Competitive Analysis

SWOT

Strength

Much strength in the company is still present and exists on many levels. Though competition is tough and McDonald's is loosing some of its sales and market share, it is currently ranked number one is sales and market share that are leaps and bounds above other competitors. It posts more than double the sales of Burger King, its nearest competitor and it hold more then half the market of BK. While it did loose 1.77% of the market, it managed to keep more of the market than BK, whose numbers when down by 2.26%. Competition has lead to aggressive store expansions in the United States, leading to key strategic partnerships with well established firms like Wal-Mart and Walt Disney, providing a key competitive advantage.

The foreign market is expected to grow $200 billion from 2002 to 2006, leaving a huge possibility for McDonald's international operation. Because McDonald's has the most international units, more than 5 times its closes competitor, it has a better chance of capturing that growth. Since 1998 it has added 1,287 international units and it ...