Recommendation Paper

McDonald’s Overview

Name

Institution

McDonald’s Overview

To: Jack Harris

From: McDonald’s

Date: October 1, 2017

Re: McDonalds (Overview)

I am writing this memo to provide important information on the company. In this way, you will be able to tell whether you can come to the aid of the organization. In this memo, I will touch on a number issues with respect to the organization including the company’s business profile, the governmental action with which it is grappling, the organization of the business, the company’s internal and external stakeholders, as well as the current business environment. It is my hope that a comprehensive overview of the aforementioned facets of the company will provide you with the necessary information to arrive at a well-informed decision.

A. Business Profile

McDonald’s Company is a fast-food restaurant that was founded in the year 1940. The company has its headquarters in Oak Brook, Illinois, United States and it has continued to serve the globe making sure that it offers fast foods and drinks (Facella & Genn, 2009). The firm operates in the restaurant's industry considering that it continues to offer drinks and fast foods to the society. It is a public organization suggesting that it seeks to protect the society and the environment. The firm has different stores in various locations around the globe. The number of the company’s employees has been estimated to be over 375000 workers suggesting that the company has to adapt to effective management skills that will allow it to control and supervise all the workers. In other words, with a large number of employees, there is the need to implement tactics that can ensure the employees perform their assignments accordingly.

McDonald’s Company provides different products to the market including chicken products, hamburgers, soft drinks, cheeseburgers, French fries, wraps, breakfast items and desserts. Based on its market share, the company has done an estimation of the number of clients that it serves to be 69 million customers. The firm has managed to enter an estimation of more than 100 nations, and it has opened more than 36900 outlets. Some of its competitors include Starbucks Company which competes for a larger market share. Therefore, competition from other organizations is a threat to the organization which should be handled effectively.

The other threat is the saturation of some the markets that it has already entered requiring it to incur more costs as it seeks to locate other locations that it can enter and be in a position to attract a large market share. Some of its opportunities include the global market that allows it to choose the nations with stable economies where the company can easily invest and be in a position to progress effectively. There is also the existence of an opportunity regarding advanced technology that has enabled the organization to improve its products’ quality and introduce more advanced commodities to the market. There is also a wide variety of professionals that can be recruited in the organization to help it grow over time.

B. Government Action

The increase in the minimum wage has an impact on the McDonald’s Company and the fast-food industry generally. In other words, the fact that the government decided to increase the minimum wage impact the firm’s operation. For instance, the increase in the wage suggests that the organization will have to incur higher costs. It is because the fir will have to pay its workers higher amounts that it used to pay them in the past leading to a high overall cost (Card & Krueger, 2015). Therefore, it is probable that the company’s level of profit will reduce considering that a higher portion of its revenue will be paid to the employees. Therefore, it is the mandate of McDonald’s Company to come up with better ways to improve its finances.

However, it is possible that the increase in the minimum wage will result in the increase of motivation among the workers (Davidson & Forsythe, 2017). In other words, it is probable that the employees will offer better services to the organization and the industry resulting in a higher production level. Therefore, the result will be high sales that will contribute to high profits and realization of the firm’s goals and the improvement of the industry. It is for these reasons that increase in wage can be identified to impact McDonald’s both positively and negatively.

C. Organization and Teams

The company has a divisional organizational structure. More precisely, each and every division is tasked with the responsibility of handling a specific sphere of operation. The company has opted for this organizational structure with the intention of supporting autonomy as well as organizational flexibility. The company’s organizational structure is made of three noteworthy features, that is, global hierarchy, performance-based divisions, and function-based groups, in order of significance (Jones & Jones, 2010). To begin with, the company has a global hierarchy that is aimed at covering all of the organization’s undertakings throughout the globe. This particular facet of the organizational structure places a great deal of emphasis on corporate control. Just to cite an instance, the company’s CEO is tasked with directing the undertakings of every business area. As such, mandates come from the CEO after which they reach the middle managers. From there, the mandates are disseminated to the restaurant managers as well as workers. Further, the performance-based divisions relate to the most divergent aspect of the company’s organizational structure. The corporation elected to reorganize its structure back in June 2015.

Prior to the reorganization, the company’s geographic divisions included the United States, Europe, Asia-Pacific, Middle East and Africa, as well as OCC (Other Countries and Corporate). The OCC included Latin America, Canada, in addition to Corporate. Following the company’s decision to reorganize its structure, the corporate made use of performance as a basis for novel segments in its organizational structure. The new segments included the United States, Internal Lead Markets, High-Growth Markets, as well as Foundational Markets and Corporate. Indeed, the United States makes up over forty percent of the company’s revenues while the lead markets make up another forty percent of the corporations revenue (Jones & Jones, 2010). On the other hand, the high-growth markets make up ten percent of the company’s revenue. Additionally, the company keeps up function-based groups in the corporation’s organizational structure. Just to mention an instance, under corporate operations, McDonald’s has put in place a franchising and supply chain group, a HRM (human resource management) group, as well as a legal group. Concisely, this particular feature of the organizational structure allows the company to handle the fundamental functions in its business.

The company’s organizational structure has been of great benefit to the organization in more ways than one, in particular, with respect to the hierarchical nature of the organization. More precisely, the hierarchy has effectively supported the company’s efforts aimed at monitoring and controlling its global undertakings (Jones & Jones, 2010). On top of this, the performance-based divisions have proved essential in the sense that they have enabled the company to put into practice strategies that are anchored in market performance similarities.

There is a broad range of governments that have handed out regulations on the company, hence compelling it into selling healthier food to its vast pool of customers. Such regulations have forced the company to come up with healthier menus that do not have a detrimental health impact, in particular, on children. The US government, for instance, came up with a law in which each and every fast food market is required to disclose the nutrition information in their menus in order that individuals can get to know what they are consuming (Jones & Jones, 2010). Another example of government regulations can be seen in Ecuador in which the nation’s president came up with a law that required alcohol, cigarettes, and junk food to be tasked. This move was made with the intention of preventing individuals from developing certain diseases that are linked to such products. In response, the company not only raised the prices of a number of its products but also made some important transformations in its menus, for instance, the children’s Happy meal. In this particular meal, the company reduced the quantity of French Fries and added in some fruits in the menu (such as apples). The positive responses to such regulations have resulted in the attraction of more customers since they believe in the company’s healthy food choices. Indeed, the company’s divisions greatly contributed to the success of its responses to such regulations.

D. Stakeholders

The company’s stakeholders undoubtedly affect it, in particular, through consumer perception. The company’s top stakeholders can be said to be its workers and customers. Nevertheless, there are other stakeholder groups in the organization including investors and communities. To begin with, the company places a great deal of emphasis on its team of workers as its principal stakeholder group. The company’s workers have always demanded career development opportunities and fair compensation. First, fair compensation is something that is mandated by the law (Spitzeck & Hansen, 2010). On the other land, career development opportunities are of the essence because they enable employees to become highly capable in every role that they serve. In this way, organizational productivity can be enhanced owing to the presence of skilled workers. In a bid to fulfill the demands of employees with respect to career development, the company has set up a range of development and training programs, for instance, Hamburger University (a facility where workers are trained) as well as a global mobility policy, which is aimed at supporting leadership development. With regard to fair compensation, McDonald’s pays wages that are nearly on the same level with the legally mandated minimum wage. Further, customers have always demanded healthy food choices from the company (Spitzeck & Hansen, 2010). The government has responded to the demands of customers by introducing laws that force that organization to develop healthy food choices. By developing healthy food choices, the corporation has managed to draw more customers, hence leading to greater profitability and solidifying its status as the dominant force in its realm of operation.

In addition, the company’s stakeholders have always demanded greater profitability and increasing revenues. To that end, the organization has responded to these demands by coming up with new products (for instance McCafe). In this way, the organization has also ensured that it remains profitable through product diversification. Finally, communities have always demanded developmental support and concern for the environment (through certain programs) from the company. Indeed, care for the environment is also mandated by the government. In response, the company has come up with an array of sustainability and support initiatives to live up to the demands of this stakeholder group. Just to cite an instance, the company has developed the McDonald House Charities, which offers monetary aid to families that are in need (Spitzeck & Hansen, 2010). On top of this, the organization’s sourcing policy places a great deal of emphasis on sustainable production, for instance, as in farms. Moreover, the company’s Global Best of Green initiative acknowledges and gives rewards for innovative contributions and ideas with respect to the environment. All in all, the company’s responses to the needs of the community has resulted in the development of a strong reputation.

E. Current Environment

At the moment (that is, as of October 20, 2017), the company is trading at 156.68 US dollars per share on the NYSE (New York Stock Exchange). Further, there are current political developments that can be deemed an opportunity by the company, for instance, pending tax reform, increasing international trade agreements, as well as evolving public health policies. Further, a current development that can be deemed an opportunity by the company relates to a slow but stable growth of the United States economy (Card & Krueger, 2015). On the other hand, the slowdown of the Chinese economy in addition to the stable but risky European economies represents current economic developments to the company that can be perceived as threats to the organization. What is more, the increasing cultural diversity and widening wealth gaps represent current sociocultural developments that can be exploited by the organization to attain greater profitability. However, healthy lifestyle trends can be deemed either a threat or opportunity due to the criticisms that the company always deals with as a result of the perception of its products as having negative health outcomes. Nevertheless, the organization has the opportunity to make an effort to see to it that its products are healthy by improving their nutritional value.

Additionally, the introduction of new minimum wage rates in the United States represents a major threat to the organization. More precisely, the legal requirement that minimum wage be raised significantly has the potential to result in higher costs and prices for the company. As a result, the company’s initial reaction to the aforementioned development was automation. In essence, the company affirmed that all of its stores spread throughout the US would replace cashiers with automated touch-screen kiosks. The plan will be first implemented in stores in which minimum wage legislation mandate the highest rates, for instance, Seattle and Washington, DC. The company’s decision to resort to automation is owing to the fact that it is a cheaper alternative in comparison with paying workers the legally mandated highest minimum wage rates. Further, various political actors have cited the raise of the minimum wage as a move that will enable workers to be fairly compensated for their input, thus reducing poverty, reducing inequality, and boosting the economy and worker morale (Card & Krueger, 2015). The same can also be said of employees and certain communities. On the other hand, investors and certain professionals studying economics have asserted that raising the minimum wage will increase operational costs in business, which is particularly damaging to small business. In turn, opponents affirm, many will be released from their jobs, hence increasing unemployment and poverty.

Thank you,

Sincerely

Name

[Signature]

References

Card, D., & Krueger, A. B. (2015). Myth and measurement: The new economics of the minimum wage. Princeton University Press.

Davidson, D. & Forsythe, L. (2017). Business in the contemporary legal environment. New York: Wolters Kluwer.

Facella, P. & Genn, A. (2009). Everything I know about business I learned at McDonald's : the 7 leadership principles that drive break out success. New York: McGraw-Hill.

Jones, G. R., & Jones, G. R. (2010). Organizational theory, design, and change.

Spitzeck, H., & Hansen, E. G. (2010). Stakeholder governance: how stakeholders influence corporate decision making. Corporate Governance: The international journal of business in society, 10(4), 378-391.