Week 2 Exercise 4,5 A&B - Perform a Financial Ratio Analysis for McDonald’s 

Week 2

Exercise 4A: Perform a Financial Ratio Analysis for McDonald’s 

Financial ratio analysis is one of the best techniques for identifying and evaluating internal strengths and weaknesses. Potential investors and current shareholders look closely at firms’ financial ratios, making detailed comparisons to industry averages and to previous periods of time. Financial ratio analyses provide vital input information for developing an IFE Matrix.

Note along the bottom row of the strategic planning template at  www.strategyclub.com  there is an icon Financial Ratios and also an icon Projected Financial Ratios. The template will thus calculate these ratios and give you the percentage change from 1 year to the next. However, as you know, ratios are calculated based on financial statements, so it is important in preparing a comprehensive strategic plan using the template to convert your company’s existing financial statements into the template format. This is well worth the effort and is explained near the end of this chapter.

Instructions

. Step 1:  Using the resources listed in Table 4-8, find as many of McDonald’s financial ratios as possible. Record your sources. Report your research to your classmates and your professor.

. Step 2: Given the Template Considerations for Financial Ratios provided near the end of this chapter, try to convert McDonald’s actual (most recent) financial statements into the template format, and get the template to then calculate associated financial ratios and changes year-over-year.

Exercise 4B: Develop an IFE Matrix for McDonald’s

Purpose

This exercise will give you experience in developing an IFE Matrix. Identifying and prioritizing factors to include in an IFE Matrix fosters communication among functional and divisional managers. Preparing an IFE Matrix allows managers to articulate their concerns and thoughts regarding the business condition of the firm. This results in an improved collective understanding of the business.

Instructions

. Step 1:  Get familiar with the template at the  www.strategyclub.com website. You can click on IFE Matrix and use the template to save immense time in completing this exercise. Be mindful, however, that the template does not itself access the internet to find key strengths and weaknesses. You need to do that and then enter that information into the template. The template is widely used by companies (and students) in preparing an IFE Matrix.

. Step 2: Join with two other individuals to form a three-person team. Develop a team IFE Matrix for McDonald’s. Use information from Exercise 1B from Chapter 1.

. Step 3:  Compare your team’s IFE Matrix to other teams’ IFE matrices. Discuss any major differences.

. Step 4:  What strategies do you think would allow McDonald's to capitalize on its major strengths?  What strategies would allow McDonald's to improve on its major weaknesses?

 

Exercise 5A: Develop Hypothetical McDonald’s Corporation Strategies

Purpose

This chapter identifies, defines, and exemplifies 11 key types of strategies available to firms. This exercise will give you practice formulating possible strategies within each broad category.

Instructions

·. Step 1Review the Cohesion Case and your answers to the prior end-of-chapter assurance-of-learning exercises.

. Step 2For the 11 strategies given in Table 5-3, identify a feasible alternative strategy that could reasonably benefit the McDonald’s Corporation.

Exercise 5B: Should McDonald’s Build, Borrow, or Buy in 2023–2026?

Purpose

Comparing what is planned versus what you recommend is an important part of case analysis. Do not recommend what the firm actually plans, unless in-depth analysis of the situation reveals those strategies to be best among all feasible alternatives. This exercise gives you experience conducting research to determine what a firm is doing in 2022–2023 and should do in 2023–2026.

Instructions

. Step 1Go to the McDonald’s corporate website and click on “Press Center.” Read through the most recent 10 press releases.

. Step 2Determine two strategies that McDonald’s is actually pursuing. Give some pros and cons of those two strategies in light of the guidelines presented in this chapter.

. Step 3Determine two strategies that McDonald’s is not pursuing. Give some pros and cons of those two strategies in light of the guidelines presented in this chapter.