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Factors to Sustainable Growth, Essay Example

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Which of two companies (that your group has selected) has the most responsible environmental policies? Compare and contrast the companies.

Corporate marketing strategies dedicated to sustainable platforms perform a benchmark in competitive analyses of company performance, and serve as marketing tool for matching brand innovation with consumer consciousness. From ‘green’ projects to charitable contribution programs, corporations are stepping up their commitment to social responsibility as a measure of ensuring competitive edge and sustained customer loyalty. In the late-capitalist marketplace, experiential consumerism is interfaced with macro interests reflected in public choice policies focused on ‘feel good’ topics such as environmental health.

Popularization of scientific knowledge as an informatics of authority, corporations stand to benefit from the incorporation of issues based strategies. Standard core competencies within current organizational change models and instruments of measurement such SWOT/PESTLE analyses employed in Six Sigma systems approaches, sustainable growth benchmarks are largely interpreted through an array of ‘green’ business concepts that have flooded the marketplace in the last decade (RapidBi, 2010). Corporate decision is pressured to keep up with this phenomenon of convergence – where consumer ideologies meet regulatory mandates – and the future of social responsibility looks vast in that spiritual commitment of the brand, to the customer, and to the planet.

McDonalds Corporation, now in its 62^nd year of operations, the franchise restaurant chain is part of this corporate-consumer movement, and expands this vision through certain product niches toward “global progress on beef and coffee sustainability [in an] approach to life by addressing different components of sustainability through both global and local efforts” (McDonald’s, 2010). Linking ethical, environmental and economic platforms of sustainability, the McDonald’s has done a fairly rigorous job of convincing stakeholder’s of its discretionary competency at each level of operations. It’s “3 E’s: supply chain” motto guides company policy and procedure, and allows the company to create conduits for informational flows between its actual retail channels and its communications model. The Company’s marketing mix belies its commitment to the “3 E’s” and includes social responsibility new media, internet, print, television and video distribution of the brand experience on its ‘Road to Sustainability.’ McDonald’s “takes its responsibility to the environment seriously” (McDonald’s, 2010). With the establishment of the Company’s Global Environmental Commitment in 1990, McDonald’s aligns itself with the international Kyoto Protocol, and claims constant sourcing for methods of incrementally improving its restaurant and supply chain environmental performance through: 1) energy efficiency; 2) sustainable packaging and waste management; and 3) green restaurant design.

Counterpoint to McDonald Corporation’s fast food legacy, and new market social responsibility, is global competitor Subway Corporation’s brand decision in this area, where environmental health is translated directly through its food product. The sheer absence of a publically stated social responsibility platform on the Company’s website is rather conspicuous once put into comparative perspective with its larger conglomerate competitors. Despite the status of the SUBWAY® brand as “the world’s largest submarine sandwich chain” with more than 34,000 locations around the world since 1965, the corporation relies on tradition, with its vision and “passion for delighting customers by serving fresh, delicious, made-to-order sandwiches” (Subway, 2010).

Choose two U.S. companies and describe their stock price performance over the past 10 years. Explain what factors have led to this performance.

Performance comparison between McDonald’s and Subway Corporations is uneven in terms of a total revenue picture, as access to Subway Corporation 10 year portfolio was found to be unavailable in traditional sources (i.e. Hoovers). Analysis of ten year stock performance by McDonald’s Corporation is illustrated in Tables 1.

Table 1

Stock History
Year	Stock Price ($)			P/E		Per Share ($)
Year	FY High	FY Low	FY Close	High	Low	Earns.	Div.	Book Value
Dec 2009	64.75	50.44	62.44	16	12	4.11	2.05	13.19
Dec 2008	67.00	45.79	62.19	18	12	3.76	1.63	12.57
Dec 2007	63.69	42.31	58.91	32	21	1.98	1.50	14.36
Dec 2006	44.68	31.73	44.33	16	11	2.83	1.00	14.52
Dec 2005	35.69	27.36	33.72	17	13	2.04	0.67	14.23
Dec 2004	32.96	24.54	32.06	18	14	1.79	0.55	13.34
Dec 2003	27.00	12.12	24.83	23	11	1.15	0.40	11.26
Dec 2002	30.72	15.17	16.08	44	22	0.70	0.23	9.66
Dec 2001	35.06	24.75	26.47	28	20	1.25	0.22	8.91
Dec 2000	43.63	26.38	34.00	30	18	1.46	0.22	8.65

Table 1: McDonald’s Corporation Stock History (Hoovers, 2010).

Stock performance for Subway Subs of Connecticut, is unavailable through standard business resources, but comparative analysis of company sales is captured in competitive reporting, illustrated in Table 2.

Table 2

Competitive Landscape

KEY: Best of Group. Companies listed are Top Competitors.

Key Numbers	McDonald’s	Burger King	Subway¹	YUM!
Annual Sales ($ mil.)	22,744.7	2,537.4	926.6	10,836.0	—	—
Employees	385,000	41,320	700	350,000	—	—
Market Cap ($ mil.)	77,526.4	2,337.9	—	19,796.2	—	—
Profitability	McDonald’s	Burger King	Subway¹	YUM!	Industry²	Market³
Gross Profit Margin	39.52%	35.60%	—	26.54%	31.76%	28.77%
Pre-Tax Profit Margin	28.91%	11.50%	—	13.10%	12.74%	8.48%
Net Profit Margin	20.33%	7.84%	—	9.74%	3.05%	5.53%
Return on Equity	36.3%	19.3%	—	132.6%	9.4%	10.1%
Return on Assets	16.6%	7.4%	—	15.3%	3.4%	1.5%
Return on Invested Capital	20.0%	10.3%	—	25.1%	4.5%	4.4%
Valuation	McDonald’s	Burger King	Subway¹	YUM!	Industry²	Market³
Price/Sales Ratio	3.38	0.94	—	1.86	1.64	3.43
Price/Earnings Ratio	16.61	12.02	—	19.08	18.35	25.13
Price/Book Ratio	5.90	2.10	—	17.24	4.77	6.65
Price/Cash Flow Ratio	13.55	7.92	—	11.81	10.92	21.28
Operations	McDonald’s	Burger King	Subway¹	YUM!	Industry²	Market³
Days of Sales Outstanding	7.20	19.01	—	8.88	8.84	34.66
Inventory Turnover	144.7	—	—	59.8	53.4	8.1
Days Cost of Goods Sold in Inventory	3	—	—	6	7	45
Asset Turnover	0.8	0.9	—	1.6	1.1	0.3
Net Receivables Turnover Flow	50.7	19.2	—	41.1	41.3	10.5
Effective Tax Rate	29.7%	31.8%	—	24.6%	—	37.9%
Financial	McDonald’s	Burger King	Subway¹	YUM!	Industry²	Market³
Current Ratio	1.14	0.77	—	0.73	0.92	1.33
Quick Ratio	1.0	0.5	—	0.4	0.6	1.2
Leverage Ratio	2.15	2.78	—	6.97	2.78	7.13
Total Debt/Equity	0.75	0.84	—	3.28	1.03	1.37
Interest Coverage	16.07	6.71	—	9.01	8.15	17.33
Per Share Data ($)	McDonald’s	Burger King	Subway¹	YUM!	Industry²	Market³
Revenue Per Share	21.58	18.28	—	22.81	22.47	7.60
Fully Diluted Earnings Per Share from Total Operations	4.45	1.45	—	2.27	0.69	1.08
Dividends Per Share	2.15	0.25	—	0.82	0.23	0.25
Cash Flow Per Share	5.38	2.18	—	3.59	3.38	1.22
Working Capital Per Share	0.40	(0.82)	—	(0.95)	(0.26)	0.64
Long-Term Debt Per Share	9.92	6.05	—	6.87	7.72	4.06
Book Value Per Share	12.34	8.19	—	2.46	7.74	3.91
Total Assets Per Share	28.40	19.95	—	15.31	20.83	27.90
Growth	McDonald’s	Burger King	Subway¹	YUM!	Industry²	Market³
12-Month Revenue Growth	(3.3%)	3.4%	—	(3.9%)	(0.1%)	31.9%
12-Month Net Income Growth	5.5%	5.3%	—	11.1%	22.5%	(27.7%)
12-Month EPS Growth	9.3%	5.8%	—	13.3%	74.4%	(50.0%)
12-Month Dividend Growth	26.2%	0.0%	—	14.7%	42.0%	—
36-Month Revenue Growth	1.8%	7.4%	—	4.3%	4.1%	14.3%
36-Month Net Income Growth	8.7%	95.0%	—	9.1%	5.1%	(5.6%)
36-Month EPS Growth	21.3%	82.5%	—	15.0%	8.5%	(14.7%)
36-Month Dividend Growth	27.0%	—	—	43.3%	31.5%	—

Table 2: The Fast Food Industry’s competitive landscape (Hoovers, 2010).

Description of Historical audit at McDonald’s Corporation is available at the Company’s website. According to McDonald’s agile and lean management strategies are responsible for the success of its business, and the efficiency of its global supply chain offers scope in assessment of its capacity to deliver ‘sustainable growth’ through responsive oversight. Priorities such as food safety, quality, and costs, as well as its brand identification as the Company committed to a ‘3 E’ platform of decision making, contributes to its overall performance. Integrated systems approaches to collective purchasing and supplier evaluation are the behind the scenes activities supporting the sustainable model. Lead by the Sustainable Supply Steering Committee (SSSC), formed in 2007, McDonald’s works toward its vision as a truly ‘global’ corporation, with a supply chain that consistently “yields high-quality, safe products without supply interruption while leveraging our leadership position to create a net benefit by improving ethical, environmental and economic outcomes,” and ultimately profitability (McDonald’s, 2010).

What are the best small-business opportunities available today? Select at least two to report on and then compare and contrast which would be the best overall.

The ready-made aspect of the fast food franchise was chosen for this study in response to Industry reporting on investment, corporate support, supply chain and market channel management, and start-up costs, with in depth consideration to long-term overhead in employee compensation, insurance, and local real estate and tax factors. The Fast Food & Quick-Service Restaurant Industry is analyzed in reporting on industry performance from McDonald’s Corporation, the Industry Leader, in Table 3.

Table 3

Industry Comparison

Profitability	Company	Industry¹	Market²
Gross Profit Margin	39.52%	31.76%	28.77%
Pre-Tax Profit Margin	28.91%	12.74%	8.48%
Net Profit Margin	20.33%	3.05%	5.53%
Return on Equity	36.3%	9.4%	10.1%
Return on Assets	16.6%	3.4%	1.5%
Return on Invested Capital	20.0%	4.5%	4.4%

Table 3: Fast Food & Quick-Service Restaurant industry comparison (Hoovers, 2010).

Selection of a fast food franchise as a small business is recommended, with industry profitability exceeding the market mean by 2.99%.

What market factors led to the development of a product that you use frequently, and how are those factors different today?

According to McDonald’s Corporation, “the ingredients and materials that go into our products to be produced in ways that contribute positively to the development of sustainable agricultural and food manufacturing practices” (McDonalds, 2010). Interfacing the product lifecycle with the ecological cycle in an effort to maintain minimal impact on the environment, McDonald’s decision to go ‘green’ is based on an economic perspective, social responsibility belies the transfer of company’ values to capitalization on internal equity, product equity and the customer equity feedback loop. Consumer consciousness is now a commodity to be bought and sold, and how well companies are able to harness that intangible asset as a component of the product-cycle as it moves from supply to market is anyone’s game.

At McDonald’s the instantiation of equitable trading in commerce is cleverly worked into the fast food chain’s channel operations, and the company espouses authority in “delivering affordable food, engaging in equitable trade practices, limiting the spread of agricultural diseases, and positively impacting the communities that our suppliers operate in” (McDonald’s, 2010). Linking product quality with product delivery, McDonald’s ensures that “every step of the [Company’s] supply chain contributes positively to the safety, quality, and availability of [its] final products.” To this end, the Company’s vision articulates a ‘total’ chain approach to its concept, with “purchasing from suppliers that follow practices that ensure the health and safety of their employees and the welfare and humane treatment of animals” (McDonalds, 2010). Conversely, Subway Corporation does not describe depth in a sustainable product model beyond product quality, with the wholesomeness of its sandwich speaking for itself.

What does the Federal Reserve Board do to combat inflation when the economy is bad?

During times of inflation, the U.S. Federal Reserve System relies upon decision making by its presidentially appointed Board of Governors (or Federal Reserve Board), the Federal Open Market Committee (FOMC), and the twelve regional banking institutions that serve as the monetary authorities (Board of Governors of the U.S. Federal Reserve, 2010). The central banks control the size of the money supply, set interest rates, and look to FOMC decision on banking reserve requirements and market operations. In times of inflation, a rise in the general level of prices of goods and services in an economy over a period of time resulting in currency devaluation, so that there is a general erosion in the purchasing power of money, and a loss of real value in the internal medium of exchange and unit of account in national economies. The annualized percentage change in a general price index (i.e. Consumer Price Index) offers a macro picture on trends within the market.

Contemporary economists recommend low inflation as a steady medium for market practice, and control of the velocity of the money supply is in direct correlation to price controls which have influence over both the short and long term prospectus of national financial policies. Most central banks follow this recommendation, maintaining federal funds lending rates at a low level, of about 2% to 3% per annum, with up to 6% per annum in the targeted inflation range. Setting interest rates and other operations by the Fed and central banks is traditionally backed by setting high interest rates, and slow growth of the money supply (Board of Governors of the U.S. Federal Reserve, 2010).

Works Cited

Board of Governors of the U.S. Federal Reserve (2010). Retrieved from: http://www.federalreserve.gov/

McDonald’s Corporation (2010). Retrieved from: http://www.mcdonalds.com

McDonald’s Corportation (2010). Hoovers. Retrieved from: http://www.hoovers.com

Subway Corporation (2010). Retrieved from: http://www.subway.com

SWOT/PESTLE (2010). RapidBi. Retrieved from: http://www.rapidbi.com