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Review  the material in the Week 7 Readings and Resources folder. Open the file: HOSP4060 Assignment Situational Analysis Review the PESTEL analysis and Five forces analysis for McDonalds and identify 5 Opportunites and 5 Threats.  List these on the SWOT grid. Review the CPM and Financial analysis for McDonalds and identify 5 Strengths and 5 Weaknesses.  List these on the SWOT grid. Complete the EFE and IFE.   Upload the assignment into Ulearn by Sunday at 11:59 PM EST PESTEL PESTEL Analysis: McDonalds Political Factors Increasing international trade agreements Governmental guidelines for diet and health. Governments have evolving public health policies. Economic Factors Slow but stable growth of developed countries Slowdown of the Chinese economy Rapid growth of developing countries Social / Socio-culture Factors Rising disposable incomes Busy lifestyles in urban environments Increasing cultural diversity Healthy lifestyle trend Technological Factors Moderate R&D activity in the industry Increasing business automation Increasing sales through mobile devices Ecological/Environmental Factors Rising interest for corporate environmental programs Increasing emphasis on sustainable business strategies Changes in climate conditions in some regions Legal Factors Increasing health regulations in workplaces and schools (threat) Increasing animal welfare regulations (threat & opportunity) Rising legal minimum wages (threat) Five Forces Five Forces Analysis: McDonalds Potential Entry of New Competitors Rating: Moderate The low switching costs allow consumers to easily move from McDonald’s toward new fast food restaurant companies. Also, variable capital costs of establishing a new restaurant empowers new businesses to enter the global fast food restaurant industry. For example, small restaurant businesses involve low capital costs compared to major corporations in the market. Many small and medium businesses lack the resources to create a strong brand to match the McDonald’s brand. Potential Development of Substitute Products Rating: Strong There are many substitutes to McDonald’s products, such as products from artisanal food producers and local bakeries. Also, consumers can cook their food at home. It is easy to shift from McDonald’s to substitutes because of the low switching costs. For example, shifting from the company to substitutes typically involves insignificant or minimal disadvantages, such as slightly higher costs per meal in some cases, or additional time consumption for food preparation. Moreover, substitutes are competitive in terms of quality and customer satisfaction (high performance-to-cost ratio). Bargaining Power of Consumers Rating: Strong The ease of changing from one restaurant to another (low switching costs) enables consumers to easily impose their demands on McDonald’s. Because of market saturation, consumers can choose from many fast-food restaurants other than McDonald’s. The availability of substitutes is relevant in this external analysis. For example, substitutes include food kiosks and outlets, and artisanal bakeries, as well as microwave meals and foods that one could cook at home. Bargaining Power of Suppliers Rating: Weak The large population of suppliers weakens the effect of individual suppliers on McDonald’s Corporation. This weakness is partly based on the lack of strong regional and global alliances among suppliers. In relation, most of McDonald’s suppliers are not vertically integrated. This means that they do not control the distribution network that transports their products to firms like McDonald’s The relative abundance of materials like flour and meat reduces individual suppliers’ influence on the company. Rivalry among existing competitors Rating: Strong The fast-food restaurant industry has many firms of various sizes, such as global chains like McDonald’s and local mom-and-pop fast food restaurants. Most medium and large firms aggressively market their products. Low switching costs make it easy for consumers to transfer to other restaurants, such as Wendy’s and Burger King. This external factor adds to the force of competition. CPM Financial Analysis 2019 Financial Statements 2019 Financial Analysis: McDonalds Inc. McDonalds Inc. McDonalds, Inc Use Excel formulas to compute the following 2019 ratios from Section 1: Financial Statements Consolidated Balance Sheets Consolidated Statements of Income 2019 2018 Competitors 2019 Current Ratio 0.98 1.36 0.98 December 31, 2019 December 31, 2019 Inventory Turnover 59.4 61.7 21.7 2019 2018 2019 2018 Profit Margin 28.6\% 28.2\% 30.4\% Assets Revenues 21,076.5 21,025.2 Return on Assets 12.68\% 18.06\% 11.40\% Currrent Assets Operating Costs and Expenses Return on Stockholders Equity -73.4\% -94.7\% 12.3\% Cash 898.5 866.0 Cost of Goods Sold 2,980.3 3,153.8 Debt to Total Asset Ratio 117.28\% 119.07\% 81.10\% Accounts Receivable 2,224.2 2,441.5 Labor 2,704.4 2,937.9 Inventories 50.2 51.1 Other Operating Expenses 1,892.0 1,937.4 Percent Changes Revenue Result Deferred Taxes 0.0 0.0 General and Administrative Expenses 2,229.4 2,200.2 Enter 2018 Revenue 21,025 Other Current Assets 385.0 694.6 Franchise Occupancy Expenses 2,200.6 1,973.3 Enter 2019 Revenue 21,077 0.2\% Total Current Assets 3,557.9 4,053.2 Asset Impairment Expense 0.0 0.0 Revenue Result Property and Equipment 24,160.0 22,842.7 Preopening Expenses 0.0 0.0 Enter 2018 Net Income 5,924 Goodwill and Trademarks 2,677.4 2,331.5 Total Operating Costs and Expenses 12,006.7 12,202.6 Enter 2019 Net Income 6,025 2\% Other Intangible Assets 1,270.3 1,202.8 Operating Income 9,069.8 8,822.6 Other Assets 15,845.2 2,381.0 Other Expense Total Asets 47,510.8 32,811.2 Interest Expense 1,051.7 1,006.5 Other 0.0 0.0 Liabilities and Stockholder Equity Income Before Income Tax 0.0 0.0 Current Liabilities Income Tax 1,992.7 1,891.8 Accounts Payable 988.2 1,207.9 Net Income 6,025.4 5,924.3 Accrued Liabilities 1,373.5 1,283.6 Income Taxes Payable 579.2 482.0 Current Portion of Long Term Notes 680.1 0.0 Total Current Liabilities 3,621.0 2,973.5 Long Term Notes 49,802.4 33,784.3 Deffered Taxes 1,318.1 1,215.5 Other Liabilities 979.6 1,096.3 Total Liabilities 55,721.1 39,069.6 Stockholders Equity Common Stock ($0.1 Par Value, 60,000,000 shares authorized, 21,593,823 and 25,607,573 issued and outstanding, respectively) -68,794.7 -64,121.4 Additional paid-in Capital 7,653.9 7,376.0 Deffered Stock Compensation 0.0 0.0 Retained Earnings 52,930.5 50,487.0 Total Stockholders Equity -8,210.3 -6,258.4 Total Liabilities and Stockholders Equity 47,510.8 32,811.2 -16,421 SWOT SWOT Analysis: McDonalds, Inc. Strengths Weaknesses Opportunities Threats EFE Company Name: McDonalds Key External Factors Weight Rating Weighted Score Opportunities Threats Total IFE Company Name: McDonalds Key Internal Factors Weight Rating Weighted Score Opportunities Threats Total PESTEL Analysis: McDonalds Political Factors Increasing international trade agreements Governmental guidelines for diet and health. Governments have evolving public health policies. Economic Factors Slow but stable growth of developed countries Slowdown of the Chinese economy Rapid growth of developing countries Social / Socio-culture Factors Rising disposable incomes Busy lifestyles in urban environments Increasing cultural diversity Healthy lifestyle trend Technological Factors Moderate R&D activity in the industry Increasing business automation Increasing sales through mobile devices Ecological/Environmental Factors Rising interest for corporate environmental programs Increasing emphasis on sustainable business strategies Changes in climate conditions in some regions Legal Factors Increasing health regulations in workplaces and schools (threat) Increasing animal welfare regulations (threat & opportunity) Rising legal minimum wages (threat) Five Forces Analysis: McDonalds Potential Entry of New Competitors Rating: Moderate The low switching costs allow consumers to easily move from McDonald’s toward new fast food restaurant companies. Also, variable capital costs of establishing a new restaurant empowers new businesses to enter the global fast food restaurant industry. For example, small restaurant businesses involve low capital costs compared to major corporations in the market. Many small and medium businesses lack the resources to create a strong brand to match the McDonald’s brand. Potential Development of Substitute Products Rating: Strong There are many substitutes to McDonald’s products, such as products from artisanal food producers and local bakeries. Also, consumers can cook their food at home. It is easy to shift from McDonald’s to substitutes because of the low switching costs. For example, shifting from the company to substitutes typically involves insignificant or minimal disadvantages, such as slightly higher costs per meal in some cases, or additional time consumption for food preparation. Moreover, substitutes are competitive in terms of quality and customer satisfaction (high performance-to-cost ratio). Bargaining Power of Consumers Rating: Strong The ease of changing from one restaurant to another (low switching costs) enables consumers to easily impose their demands on McDonald’s. Because of market saturation, consumers can choose from many fast-food restaurants other than McDonald’s. The availability of substitutes is relevant in this external analysis. For example, substitutes include food kiosks and outlets, and artisanal bakeries, as well as microwave meals and foods that one could cook at home. Bargaining Power of Suppliers Rating: Weak The large population of suppliers weakens the effect of individual suppliers on McDonald’s Corporation. This weakness is partly based on the lack of strong regional and global alliances among suppliers. In relation, most of McDonald’s suppliers are not vertically integrated. This means that they do not control the distribution network that transports their products to firms like McDonald’s The relative abundance of materials like flour and meat reduces individual suppliers’ influence on the company. Rivalry among existing competitors Rating: Strong The fast-food restaurant industry has many firms of various sizes, such as global chains like McDonald’s and local mom-and-pop fast food restaurants. Most medium and large firms aggressively market their products. Low switching costs make it easy for consumers to transfer to other restaurants, such as Wendy’s and Burger King. This external factor adds to the force of competition. Competitive Profile Matrix: McDonalds Critical Success FactorsWeightRatingScoreRatingScoreRatingScore 1Brand Name0.124.000.483.000.363.000.36 2Product Quality0.112.000.223.000.333.000.33 3Market Share0.122.000.244.000.483.000.36 4Customer Service0.102.000.203.000.302.000.20 5Geographic Coverage0.094.000.364.000.362.000.18 6Corporate Social Responsibility0.093.000.273.000.273.000.27 7Innovation0.104.000.402.000.203.000.30 8Price Competitiveness0.102.000.202.000.203.000.30 9Financial Position0.093.000.274.000.363.000.27 10Number of Locations0.084.000.323.000.243.000.24 Total1.002.963.102.81 McDonaldsBurger KingYum Brands Sheet1 2019 Financial Statements 2019 Financial Analysis: McDonalds Inc. McDonalds Inc. McDonalds, Inc Use Excel formulas to compute the following 2019 ratios from Section 1: Financial Statements Consolidated Balance Sheets Consolidated Statements of Income 2019 2018 Competitors 2019 Current Ratio 0.98 1.36 0.98 December 31, 2019 December 31, 2019 Inventory Turnover 59.4 61.7 21.7 2019 2018 2019 2018 Profit Margin 28.6\% 28.2\% 30.4\% Assets Revenues 21,076.5 21,025.2 Return on Assets 12.68\% 18.06\% 11.40\% Currrent Assets Operating Costs and Expenses Return on Stockholders Equity -73.4\% -94.7\% 12.3\% Cash 898.5 866.0 Cost of Goods Sold 2,980.3 3,153.8 Debt to Total Asset Ratio 117.28\% 119.07\% 81.10\% Accounts Receivable 2,224.2 2,441.5 Labor 2,704.4 2,937.9 Inventories 50.2 51.1 Other Operating Expenses 1,892.0 1,937.4 Percent Changes Revenue Result Deferred Taxes 0.0 0.0 General and Administrative Expenses 2,229.4 2,200.2 Enter 2018 Revenue 21,025 Other Current Assets 385.0 694.6 Franchise Occupancy Expenses 2,200.6 1,973.3 Enter 2019 Revenue 21,077 0.2\% Total Current Assets 3,557.9 4,053.2 Asset Impairment Expense 0.0 0.0 Revenue Result Property and Equipment 24,160.0 22,842.7 Preopening Expenses 0.0 0.0 Enter 2018 Net Income 5,924 Goodwill and Trademarks 2,677.4 2,331.5 Total Operating Costs and Expenses 12,006.7 12,202.6 Enter 2019 Net Income 6,025 2\% Other Intangible Assets 1,270.3 1,202.8 Operating Income 9,069.8 8,822.6 Other Assets 15,845.2 2,381.0 Other Expense Total Asets 47,510.8 32,811.2 Interest Expense 1,051.7 1,006.5 Other 0.0 0.0 Liabilities and Stockholder Equity Income Before Income Tax 0.0 0.0 Current Liabilities Income Tax 1,992.7 1,891.8 Accounts Payable 988.2 1,207.9 Net Income 6,025.4 5,924.3 Accrued Liabilities 1,373.5 1,283.6 Income Taxes Payable 579.2 482.0 Current Portion of Long Term Notes 680.1 0.0 Total Current Liabilities 3,621.0 2,973.5 Long Term Notes 49,802.4 33,784.3 Deffered Taxes 1,318.1 1,215.5 Other Liabilities 979.6 1,096.3 Total Liabilities 55,721.1 39,069.6 Stockholders Equity Common Stock ($0.1 Par Value, 60,000,000 shares authorized, 21,593,823 and 25,607,573 issued and outstanding, respectively) -68,794.7 -64,121.4 Additional paid-in Capital 7,653.9 7,376.0 Deffered Stock Compensation 0.0 0.0 Retained Earnings 52,930.5 50,487.0 Total Stockholders Equity -8,210.3 -6,258.4 Total Liabilities and Stockholders Equity 47,510.8 32,811.2 -16,421