Public Corporation Stock Report. McDonald’s Corporation

Corporate summary

Company name

McDonald’s Corporation

Mission Statement

McDonald’s brand mission is ‘to be our customers’ favorite place and way to eat’ (AboutMcDonalds.com). McDonald’s statement of purpose states that the company aims to be the best in the world at offering its customers quick service restaurant experience. In order to do so, McDonald’s strives to deliver excellent service, cleanliness, quality and value. The ultimate goal is to make every customer leave the restaurant smiling.

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Industry area

McDonald’s is in the fast food industry. It is the world’s largest chain of hamburger fast food restaurants.

Major products or services

McDonald’s main product is fast food. Their main categories of food are chicken, salads, breakfast, beverages, burgers & sandwiches and snacks, sides & deserts.

Head office and the geographic area served by the company

McDonald’s was founded in 1955 in Des Plaines, Illinois. Its current headquarters address is 2111 McDonald’s Dr., Oak Brook, IL 60523. The company has franchises in over 120 countries across the globe, with over a thousand franchises each in countries like the United States, Canada, Japan, Germany, France and the United Kingdom.

2009 Revenue

In the three months that ended 30th March 2009, the company’s net income was $979.5 million, down from $985 million over the same period in 2008.

Press Release and Article Summary

Press Release

On 19th October, 2011, McDonald’s announced that it had become a member of the Roundtable on Sustainable Palm Oil (RSPO). This was in line with its intention to use only RSPO-certified Palm Oil in all its restaurants and franchises by 2015. McDonald’s is committed to using only sustainable ingredients such as palm oil.

Already, palm oil is used in McDonald’s restaurants as frying oil within the Asia-Pacific, Middle East and Africa, and Latin America. This move is in line with its Sustainable Land Management Commitment (SLMC) announced in early 2011. According to its SLMC, McDonald’s will source its raw materials for its food and packaging materials from sustainably-managed lands (McComb).

Article Summary

An article by Lacey McCraney for NBC Chicago tells of how McDonald’s is making a change to its happy meals, choosing to give a slice of apple and a smaller helping of Fries and either fat-free chocolate milk or 1% white milk in place of the usual soft drink. This change, however, is only optional.

Customers can still choose their full portion of fries instead of fruit, and a soft drink. This move is part of the company’s commitment to offer improved nutrition choices. Fruit has been part of McDonald’s optional foods for more than five years, but only 10% of their customers choose this option (McCraney).

Justification

The choice to study McDonald’s was made for two reasons. First, the company is one of the world’s most recognizable brands in the world and has been in existence for over half a century. Secondly, its prominence all over the globe makes McDonald’s extremely easy to identify with.

Analysis

McDonald’s operates in nearly 120 countries across the globe, and is known to serve nearly 60 million customers every day. The company’s expansion is attributed largely to its business method of franchising and using joint ventures. Most McDonald’s restaurants offer either drive-through or over-the-counter service.

Some franchises also offer outdoor sitting, although this is not common considering they are found in busy and crowded cities with limited space. Most McDonald’s in highways offer only drive-through service, while those in busy and crowded cities use the counter method or, to a limited extent, walk-throughs.

McDonald’s may have started as a fries and hamburgers-selling joint, but it continues to diversify to other foods. It has placed emphasis on the growth of its provision of healthy and diverse foods. Their growth, however, faces certain challenges. According to CNN’s writer Nin-Hai Tseng, McDonald’s faces a number of potential challenges in the coming years. First, the rising cost of food could negatively affect the company’s growth.

The price of food continues to rise, and it could lead to a food inflation of between 2% and 3% in the next couple of years, according to the US Department of Agriculture (Tseng). So far, the leading food chains have not been affected. However, that could change. Secondly, there might be a reduction in McDonald’s growth because of limitation of beverages over burgers. Since most McDonald’s restaurants are a preferred choice for customers looking for fast food, the company has created a number of creative drinks for their customers.

However, the time taken to serve customers with these beverages has lunch hour sales to slow down over the years. According to the Wall Street Journal, McDonald’s business at lunch-hour has flattened over the last five years (Tseng). Finally, there is a growing concern that McDonalds may no longer provide a satisfactory return-on-investment. This is particularly applicable with the McCafe machines, which cost over $100,000 to install. This is a cause for concern for small investors.

Investing in McDonald’s stock presents a measure of risk, as most stocks do, but it is considered one of the safest stocks to buy. Even during the economic downturn that America has been experiencing since late 2008, the company’s stock remains stable. This can be attributed to two aspects.

First, as the recession hit, America turned to McDonald’s restaurants as a source of affordable food. This kept the business afloat as other companies felt the pinch of the credit crisis. Secondly, McDonald’s continues to appeal to a more upscale market, particularly with its specialty coffee. All these aspects pushed the stock of the company from $55 a share in 2008 to $87.09 in July 2011, a 58% rise (Krantz).

McDonald’s has been involved in a number of lawsuits over the years, most of which involve defamation, workers’ rights and trademark disputes. A hugely famous case was a defamation case they filed against Helen Steel and Dave Morris, a gardener and a former postman. This case was famously known as the McLibel case.

The two were sued after they distributed booklets with damning information regarding McDonald’s record on health, the environment and the exploitation of workers. The trial went on for two-and-a-half years, becoming the longest running English trial ever. Mr. Justice Bell finally delivered his verdict in 1997, condemning McDonald’s for advertisements that ‘exploit children’ and ‘misleading’.

The judge also said the company was cruel to animals and apathetic to workers’ rights (McSpotlight). Nevertheless, McDonald’s was awarded a settlement amount by the courts in the United Kingdom. The company stated later that it had no intention of collecting the 40,000 pounds it was awarded. This case was considered a major embarrassment to McDonald’s.

Conclusion

From the three sections above, three things about McDonald’s are clear. First, the company is one of the best managed organizations in the world and has been for the last several years. It is highly profitable, has a remarkably healthy stock and operates in many countries.

Its business model is easy to follow, and it is easy to see why competitors, who provide highly similar products, have been unable to muscle the company off the top spot. There is a constant pursuit of excellence in the company, b
o matter where a franchise is located. A company does not gain the reputation McDonald’s has by being mediocre and running its business poorly.

Secondly, despite the challenges it faces in the market and the odd lawsuit here and there, McDonald’s future appears to be bright. It seems as though this company, which has been at the heart of the fast-food business for over half a century, could last forever. Whether this remains to be true or not, McDonald’s is an excellent example of a company well run, well managed and worthy of emulation.

Finally, McDonald’s will always face a hard time from competitors, environmentalists and people concerned with the ethics of the business. McDonald’s has been criticized in the past for its business methods, its aggressive style and its distasteful marketing techniques. Using the McLibel case as a good example, the company got into trouble first because of its reportedly poor business practices.

The defendants in the case distributed leaflets that the company considered defamatory, so it sued successfully and actually got a settlement. However, the judge still took a swipe at the company, condemning it as a company that practices bad business and operates dishonestly, to the great embarrassment of McDonald’s.

Bibliography

AboutMcDonalds.com. Student Research. 2011. 28 October 2011 .

Krantz, Matt. Is McDonald’s a Good Stock to Buy? 28 July 2011. 28 October 2011 .

McComb, Lisa. McDONALD’S JOINS ROUNDTABLE ON SUSTAINABLE PALM OIL. 19 October 2011. 28 October 2011 .

McCraney, Lacey. “McDonald’s Pushes Apples Over Fries.” NBC Chicago 28 October 2011: online.

McSpotlight. The McLibel Trial. 2011. 28 October 2011 .

Samples-Help.org. McDonalds Mission Statement. 2006. 28 October 2011 .

Tseng, Nin-Hai. Three challenges to McDonald’s growth. 21 January 2011. 28 October 2011 .

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