Management Assignment: Q&A based on Management Concepts and Scenarios

Question

Task

Question: Management Assignment Part A:

Q1: What is corporate governance? How does the unitary board differ from the dual board structure? Which one is better in your opinion?

Q2: What does the PESTEL framework do? Please briefly explain each factor of the PESTEL framework.

Q3: What is high-performance work practices (HPWP)? Please briefly describe its four principles and explain how they can work together to achieve high employee engagement in organizations.

Q4: Chesbrough (2003) talked about two models of innovation: open innovation and closed innovation. Briefly define these two types. What are their advantages and disadvantages (at least three advantages and disadvantages for each type of innovation)?

Q5: What is culture? What are values and norms? What is cultural intelligence (CQ)? Briefly define its four factors.

Part B
Please read the below-mentioned case and answer the questions in an essay format (with introduction and conclusion). Prepare an essay that will help McDonalds' CEO develop a strategy for retaining and preferably improving its performance by incorporating the following analyses in your essay.

Q1. Conduct a SWOT analysis to help McDonald's CEO gain a deeper understanding of the company. Your answer must include a brief explanation of the SWOT factors and its practical application to the given organization (McDonald).

Q2. Evaluate the fast-food industry's attractiveness based on Porter's Five Forces Model considering the Covid-19 factor. Your answer must include a definition of this theoretical model (Porter’s Five Forces Model) and its practical application to the given organization (McDonald).

McDonald's sales hit hard by coronavirus.

McDonald's global comparable sales tumbled 22.2 per cent in March and the burger chain pulled its full-year forecast as coronavirus-related lockdowns forced it to shutter stores and stick to delivery or takeaway.

The company, one of the first major fast-food chains to provide a glimpse into the economic impact of the health crisis, said it had raised $US6.5 billion ($10.4 billion) in the quarter and suspended share buybacks to bolster its cash reserves.

It provided the update, including quarterly sales results, ahead of its planned earnings announcement on April 30.

In March in the United States, when COVID-19 cases began to skyrocket, McDonald's sales fell 13.4 per cent as authorities asked people to stay home and required dining rooms to shutter to curtail the spread of the virus.

It has now infected more than 1.3 million and killed over 81,000 globally.

About 75 per cent of McDonald's 38,000 restaurants around the world were operational during the quarter, the majority of which adapted to focus on drive-thru, delivery or take-away, chief executive Officer Chris Kempczinski said.

"This unprecedented situation is changing the world we live in, and we will need to adapt to a new reality in its aftermath," Kempczinski said in a statement.

The steep drop in March led to a 3.4 per cent fall in comparable sales for the three months ended March 31 globally, compared with the 0.91 per cent drop analysts on average had expected, according to IBES data from Refinitiv.

However, a few of the brokers surveyed by Refinitiv had not updated their estimates to include the impact of the coronavirus in the consensus.

Still, Wall Street analysts said strong sales at the start of the quarter, when global same-store sales rose 7.2 per cent, could mean the company may soon recover.

"The business update implies McDonald's is well-positioned for an eventual recovery following Jan/Feb momentum," said BMO Capital Markets analyst Andrew Strelzik.

McDonald's said it would defer rent and royalties for its franchisees, who are already facing difficulties due to the outbreak and are burdened with other expenses like restaurant renovations as a part of the company's push to modernize stores.

The company said it expects to reduce capital expenditures by about $US1 billion for 2020 due to fewer store renovations in the United States and fewer restaurant openings around the world.

McDonald's said the cancellation of its Worldwide Owner/Operator Convention due to the health crisis could cost about $US40 million due to refunds.

The Chicago-based company's shares closed nearly 2 per cent higher amid a bounce in the broader market.

Answer

Tags: management | critical analysis | McDonalds | marketing | MGMT20144

Management Assignment Part A

Q1: What is corporate governance? How do the unitary board differ from the dual board structure? Which one is better in your opinion?

Corporate Governance can be understood as the set of rules, procedures and practices which are used to govern the companies. Every company/ business has some specific set of corporate governance model which helps it in the distribution of the responsibilities and in the maintenance of the law and order within the company. For example: the routine internal audits in the company which assist in identifying the issues of the company. This also suggest few solutions for the employees, business actions and more which ultimately improves the company’s work. Corporate Governance is becoming more significant day by day with the rise in the issue sin the business world.

There are different modes of corporate governance.

In my opinion, the dual board structure is better because like this the loopholes in the system can be clearly pointed out by the supervisory board and there is a dual check of the system.

Q2: What does the PESTEL framework do? Please briefly explain each factor of the PESTEL framework.

PESTEL framework is basically an acronym for a strategic framework which includes 6 different environmental factors:

Source: By Author

PESTEL framework is used by the marketers in order to monitor and scan the external environment of the organization and what influence they put on the activities of the business. This analysis is also known as Macro environmental analysis.

• Political factors: Political factors includes the governmental policies, rules and regulations by law which shows to what degree the government can involve in the economy and business.
• Economic factors: These factors include the position of the economy, business cycles and income ;levels which shows how the economy changes influence the businesses.
• Social factors: the social factors include societal demographics, changes in taste, fashion, impact of culture which makes an impact on the business.
• Technological factors: These factors include new discoveries and technology changes which marks its impact on the business.
• Environmental factors: These factors include the laws, regulation and the present environmental scenario which influence the organizations and their business. For e.g., demand from the consumers to produce ethically sourced products.
• Legal factors: These factors include health, safety and laws which clear out to the companies that what needs to be done and what is not.

Q3: What are high-performance work practices (HPWP)? Please briefly describe its four principles and explain how they can work together to achieve high employee engagement in organizations.

The High-Performance Work Practices are the work practices for the core workers of the organization which helps in achieving the superior performances.

As per Lawler and Worley (2006), there are 4 principles of the high-performance work practices (HPWP). These helps helps to ensure that the different practices within the organization work together and gives a positive impact on the employee engagement.

These 4 principles are:

• Power: the level of autonomy with which employee work and can take decisions. The low level of power reduces the power to take decisions and thus involvement is also reduced and vice versa.
• Information: This is the data and information on various aspects of business. An information system in the organization ensures the flow of timely work process.
• Knowledge: This refers to the employee skill and ability. If knowledge will be improved, the commitment of the employees will improve. It ensures the better decision making and output of the processes.
• Rewards: the rewards are given in return when the employees use their power, information, and knowledge for the best interest of the organization.

This is how, all 4 principles are interconnected to each other and ensures the positive employee engagement in the organization. The level of power, knowledge and information with rewards create positive employee motivation, hence, more employee engagement.

Q4: Chesbrough (2003) talked about two models of innovation: open innovation and closed innovation. Briefly define these two types. What are their advantages and disadvantages (at least three advantages and disadvantages for each type of innovation)?

Innovation is the basis for the growth of the companies. As per Chesbrough (2003), there are two models of innovation: Open and closed innovation.

Open Innovation is the newer model of innovation. As per this model the organizations are able to commercialize their external and internal ideas by using the inhouse as well as external agencies in the market. This can be done in order to generate value for the organization.

 

The closed innovation is the older model in which the companies are self-reliant and generate their own ideas for innovation. So, basically the place of innovation is within the company.

 

Q5: What is culture? What are values and norms? What is cultural intelligence (CQ)? Briefly define its four factors.

Culture can be understood as the system with values and norms. These values and norms are shared among a group of people and they consider it as they way of living a life.

Values can be defined as the beliefs about the right or wrong and which creates a motive to take a specific action. Norms, on the other hand is the concept which defines the rules for the society. These norms are expected to be followed by the society. This also help individual to behave in the prescribed manner in the different situations.

Cultural Intelligence which is also called as CQ can be understood as the capability of an individual to identify and reason on the cultural cues in different situations. So basically, it is the ability to work in different situations and cultures. CQ has 4 factors, which are:

• Metacognitive CQ: this is the level of conscious of an individual for cultural awareness when cross cultural interaction takes place.
• Cognitive CQ: This refers to the knowledge of individual about the cultural norms and practices in various cultural settings.
• Motivational CQ: It is the capacity of an individual to direct all the attention to learn about various cultures and their differences.
• Behavioral CQ: This refers to the capability of an individual to enact the verbal and nonverbal actions while interacting with the people who are from different cultures.

Part B

Please read the below-mentioned case and answer the questions in an essay format (with introduction and conclusion). You should note that the question contains several sub questions, and all sub questions must be addressed.

McDonald's sales hit hard by coronavirus.

McDonald's global comparable sales tumbled 22.2 per cent in March and the burger chain pulled its full-year forecast as coronavirus-related lockdowns forced it to shutter stores and stick to delivery or takeaway.

The company, one of the first major fast-food chains to provide a glimpse into the economic impact of the health crisis, said it had raised $US6.5 billion ($10.4 billion) in the quarter and suspended share buybacks to bolster its cash reserves.

It provided the update, including quarterly sales results, ahead of its planned earnings announcement on April 30.

In March in the United States, when COVID-19 cases began to skyrocket, McDonald's sales fell 13.4 per cent as authorities asked people to stay home and required dining rooms to shutter to curtail the spread of the virus.

It has now infected more than 1.3 million and killed over 81,000 globally.

About 75 per cent of McDonald's 38,000 restaurants around the world were operational during the quarter, the majority of which adapted to focus on drive-thru, delivery or take-away, chief executive Officer Chris Kempczinski said.

"This unprecedented situation is changing the world we live in, and we will need to adapt to a new reality in its aftermath," Kempczinski said in a statement.

The steep drop in March led to a 3.4 per cent fall in comparable sales for the three months ended March 31 globally, compared with the 0.91 per cent drop analysts on average had expected, according to IBES data from Refinitiv.

However, a few of the brokers surveyed by Refinitiv had not updated their estimates to include the impact of the coronavirus in the consensus.

Still, Wall Street analysts said strong sales at the start of the quarter, when global same-store sales rose 7.2 per cent, could mean the company may soon recover.

"The business update implies McDonald's is well-positioned for an eventual recovery following Jan/Feb momentum," said BMO Capital Markets analyst Andrew Strelzik.

McDonald's said it would defer rent and royalties for its franchisees, who are already facing difficulties due to the outbreak and are burdened with other expenses like restaurant renovations as a part of the company's push to modernize stores.

The company said it expects to reduce capital expenditures by about $US1 billion for 2020 due to fewer store renovations in the United States and fewer restaurant openings around the world.

McDonald's said the cancellation of its Worldwide Owner/Operator Convention due to the health crisis could cost about $US40 million due to refunds.

The Chicago-based company's shares closed nearly 2 per cent higher amid a bounce in the broader market.

The above article is extracted from
https://www.reuters.com/article/us-mcdonald-s-corp-results-idUKKCN24T1FO

Please read the above case and prepare an essay that will help McDonalds' CEO develop a strategy for retaining and preferably improving its performance by incorporating the following analyses in your essay.

Q1. Conduct a SWOT analysis to help McDonald's CEO gain a deeper understanding of the company. Your answer must include a brief explanation of the SWOT factors and its practical application to the given organization (McDonald).

Q2. Evaluate the fast-food industry's attractiveness based on Porter's Five Forces Model considering the Covid-19 factor. Your answer must include a definition of this theoretical model (Porter’s Five Forces Model) and its practical application to the given organization (McDonald).

Essay

Introduction
McDonalds, an American fast-food chain sells hamburgers, French fries, beverages, and deserts. It is the biggest fast-food chain in the world which is available in almost every country and location. As per the given case study, the global sales of the company tumbled in March 2020 by 22.2%. The reason being the lockdown period due to the pandemic. The company had to shut its stores which impacted its sales and profits of most of the stores.

The CEO of the company want a deeper understanding of the company’s internal and external factors and thus, a SWOT and PESTEL analysis would help in getting the same.

Internal and External environmental Scan

SWOT analysis
The SWOT analysis helps in scanning the internal and external factors of the organisation which influence the busines of the organisation. Here, Internal factors are the SW, Strengths and Weaknesses and External factors are the OT which is Opportunities and Threats. Here is the SWOT analysis of McDonalds which would help the CEO to have a deeper understanding of the current business situation of the company.

Porters 5 Forces model
For evaluating the fast-food industry’s attractiveness, Porters Five forces model will eb used considering the COVID-19 factor. Porter’s five forces model is the framework for analysing the organisation’s competitive environment. It helps in analysing this is on the basis of 5 factors given below.

This model has 5 forces namely.

• Competitive Rivalry (HIGH): This means that the larger number of competitors, the lesser power will be there with the company. In this case, the competitive rivalry is high because the number of brands serving same menu is high and the customers have stooped purchasing such food items. They have moved to healthier options. The competitors like Dominos, KFC and Burger King are also in the market who are adopting various marketing gimmicks to earn more profits; Thus, the competitive rivalry is high.
• Supplier Power (LOW): This refers to the bargaining power of suppliers. This is affected with the number of suppliers of the inputs I the market. McDonalds has a long list of suppliers who are ready to sell their raw material to the brand. Thus, the bargaining power of suppliers is lesser. Also, in the COVID-19 period, the suppliers have enough material to sell but the buyers are less, so they do not have much power.
• Buyer Power (HIGH): This refers to the bargaining power of buyers. Also, the ability of the customers to drive the prices of the products or services. In the COVID-19 period the bargaining power of buyers is high because there are many brands who are ready to overcome their losses, but the buyers have tons of options and lesser demand as majority of them preferring healthy and homemade food.
• Threat from Substitutes (HIGH): This comes from the competitors. Substitutes can be used in place of the organisation’s products and the companies which produces good who have a large number of substitutes are at higher risk. Now, in the COVID-19 period many small vendors and local brands have started providing home deliveries and started offering healthy food which has become the latest interest for the buyers. Thus, threat from substitutes is high.
• Threat of new entries (LOW) : This means that the power of the company is affected when there are new entrants in the market. During the COVID-19 period, the threat of new entrants is low as no new stores are opened and people are avoiding to treat such businesses which are already going in losses.

Conclusion
It can be concluded that McDonald’s should work on its menu items in order to attract more customers after the COVID-19 period. Health is open factor which can be used to attract people and thus, it can gain its position back in the market.