Financial Management

Financial Management

Business Strategy Analysis

McDonald uses the generic business strategy of low cost production and differentiation. As McDonald is successfully using the technique of being a low cost producer, this has made McDonald as a market leader in what it produces (Han, 2008). McDonald has its own system in which it uses basic ingredients and by the use of economies of scale reduces costs in different areas of the business.

Different countries involve different groups of consumers, which makes the process of differentiation important for McDonald. McDonald has made a regional structure for its products, by the help of this regional structure McDonald's is able to not only satisfy the requirements of each customer but McDonald is also aiming towards maximizing local development. McDonald produces slightly different products in different markets in accordance to the taste of that particular market. Although, in all McDonald outlets one can evidently find the same level of cleanliness, service and values. McDonald uses the technique of affordable prices, fast service and a good level of hygiene to maintain its large clientele. The main ingredient is the same, but they differentiate their taste a little bit according to the requirement of each of their regional structure. For example, people In India demand more spices being used while the American eat low levels of spices in their daily life. McDonald makes recipes accordingly for these regions which have different tastes (Han, 2008).

Accounting Analysis

McDonald's being the largest organization in the industry of food and restaurant services, McDonald have a competitive advantage in the field of marketing and operations. The growth is attributed to the success McDonald has faced in the areas of product development, advertising and marketing. With these fundamental factors keeping in mind McDonald has outlined key accounting policies.

In the consolidated financial statements of McDonald, the total accounts of itself and its subsidiaries are mentioned. McDonald's has a strict and vigilant system of financial governance, and the margin of fraud is very less in this dynamite of a firm. Over the years, McDonald's has been able to truly value its company according to it's true worth. The accounting principles that McDonald's uses are acceptable in the United States. With the help of effective management, McDonald's financial statements truly reflect their value as a firm.

The advertising fee is divided by the number of restaurants run by the company, this way each restaurant gives a contribution towards the total advertising expenditure. The advertisement expenditure covers the expenditure on television commercials, internet commercials, radio commercials and print media commercials. The costs with the marketing related costs come under the heading of selling, administrative and general expenses.

In the balance sheet of the firm, the firm states it's total tangible fixed assets on the principle of historic cost and uses the method of straight line depreciation in depreciating it's assets. Building is given a total useful life of 40 years, whereas equipment are giving that of 3 to 12 years. Company also keeps separate accounts for goodwill; ...