Term Paper: Business Plan: The Corporate Environment

Pages: 10 (2609 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Business  ·  Buy This Paper

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http://www.hoovers.com/quarterlies/4/0,2167,10974,00.html

In addition to slow and steady growth that can be shown by the above financial statement estimated growth charts can also give the shareholders a good idea of the constancy of their purchase. Expected earnings report compares quarterly data from the same quarter in the previous year to the current pattern of growth for the corresponding quarter in the present year.

Last Updated: June 21, 2003

Earnings Snapshot

Period

End

Mean EPS of Estimates

Year Ago

Actual

Q1

Jun 03

Q2

Q3

Dec 03

Q4

P/E Ratio

Consensus Recommendation

Hold

Year Growth Rate

Data Provided by First Call/Thomson Financial. On Hoover's online. (http://quotes.hoovers.com/thomson/analyst.html?c=10974&templ=4&t=MCD&e=NYSE&n=McDonald%26%2339%3Bs+Corporation)

Five Forces Analysis:

Though a Five Forces Analysis is often associated more with individual business entities a corporate multi-location store with private franchise owners could benefit from its use. Individual franchise entities may be better served with this sort of business analysis, and 70% of McDonald's restaurants are privately owned. According to an online interactive Michael Porter's Five Forces Analysis survey, available through Strategic Advantage Incorporated, the industry/market that McDonald's dominates has these summary characteristics:

CUSTOMERS

Buyers/customers are a weak force in the industry. Powerful buyers drive down profitability because they bargain for lower prices, demand better product features for the same price, and play one competitor against another. Weak buyers are not likely to be as price-sensitive or to impose demands on companies in the industry.

COMPETITORS

Rivalry among competitors in the industry is moderate. Competitors can drive down industry profitability by cutting prices or offering more product features for the same price. When rivalry is most intense, competitors often compete head-to-head on price. When competition is disciplined and constrained by industry norms, rivalry is weak.

SUPPLIERS

Suppliers are a moderate force in the industry. Powerful suppliers drive down the profitability of companies in the industry because they can charge higher prices for the products and services they sell. Weak suppliers are not likely to bargain on price or impose demands on companies in the industry.

SUBSTITUTE PRODUCTS substitute product provides the same functionality but is not identical to potentially competitive products. For instance, train travel is a substitute for air travel since both are a means of traveling long distances; movies are a substitute for television since both provide visual entertainment. Substitute products are a moderate force in the industry. Substitute products constrain industry profitability by limiting the selling price companies in the industry can charge. If air fares rise too high, people will start using trains. Moreover, if the quality of the substitute is higher, buyers will switch to the substitute. That's why more people fly than take the bus across country.

NEW ENTRANTS

New entrants are potential competitors. New entrants are a moderate force in the industry. The easier it is for new companies to enter the industry the greater the competition in the industry. New entrants will often attempt to break into the industry with low prices, innovative products, or new features and benefits. When it is difficult to enter an industry, the threats of new entrants is low. (strategic Advantage, 2003)

Recovery Recommendations:

Some recommendations that might serve the McDonald's Corporation in both the short- and long-term can be found in response to the five forces online survey.

Customer force:

Find new ways to differentiate your product/service that have value to the customer. Even if your product is a commodity, there are ways to differentiate it in terms of the services that surround it. Differentiation can occur from the very first time customers becomes aware of your product to the time when they must dispose of it.

Offer additional services or support to customers in exchange for a larger share of their total purchases. Develop services that make it easier for them to work with your company as a single source supplier. Fill in gaps in your portfolio of goods so they don't have to look elsewhere for related products.

Competitor Force:

Find new ways to differentiate your product/service that have value to the customer. Even if your product is a commodity, there are ways to differentiate it in terms of the services that surround it. Differentiation can occur from the very first time customers becomes aware of your product to the time when they must dispose of it. Develop new ways to control and minimize inventory levels. Unless managing inventory is a core competency (i.e., you're better than any of your competitors) outsource it to companies who excel in that area. Find ways to have your supplier or customers carry inventory for you.

Customer Force:

Be on the constant lookout for alternative raw materials to use instead of your current raw materials. What could you use as a substitute that has similar characteristics but is more of a commodity?

Acquire one or more key suppliers if they are adding more value to the end product than you are. Move down the value chain if you want to reap more profits. Turn a cost center into a profit center. If your suppliers are making more than you are, you need to be doing what they do.

New Entrants Force:

Find new ways to differentiate your product/service that have value to the customer. Even if your product is a commodity, there are ways to differentiate it in terms of the services that surround it. Differentiation can occur from the very first time customers becomes aware of your product to the time when they must dispose of it. (Strategic Advantage, 2003)

The best advice that could be offered to an international giant, such as McDonald's Corporation is to continue to formulate and utilize best practices that will continue to provide consistent products for the customer and continued steady profit for the investors. The United States economy is in recovery and will continue to cause the growth of spending for the market. Unemployment rates may decrease, reducing the available pool of employees but will also offer more spend able cash to the industry.

Works Cited

CIA World Fact Book (2002). Retrieved June 23, 2003, at http://www.cia.gov/cia/publications/factbook/geos/us.html

Hoover's online.(2003) McDonald's Corporation Facts Pages. Retrieved June 23, 2003, from www.hoovers.com.

Strategic Advantage. Michael Porter's Five Force Analysis. Retrieved June 23, 2003, at http://www.strategy4u.com/assessment_tools/info.php?s=2 [END OF PREVIEW]

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