McDonalds Corporation

Case Study

Researchers:
Abellar, Ma. Angelique Tammie K.
Acaya, Arvin Jay A.
Anadon, Eutemio B.
Castillo, Jojo G.
Palileo, Karren Cassandra R.
Raymundo, Timmy Joy R.

I. Statement of the Problem

 The main purpose of this study is to determine how they are

going to spend the excess cash for the benefit of the company.

II. Objectives

This study aims to discover the best possible solution in the

problem of the McDonalds Corporation and to suggest strategies

to carry such solutions.

III. Factors of Consideration

Within the study, the researchers found out that the key

features, internal and external, to be considered in determining

the best possible solution are the following:

 degree of government regulation in the region/country

they are operating

 state of currency fluctuation and the responsiveness of

the currency to changes in economic

  threat of competitors and the degree of its competitors

influence to price manipulations an price war

 competitors’ advantage on product quality

 competitors market shares

 shareholder’s perception an responses to the courses of

action taken by the management.

In lieu with this study, the researchers found out that the

McDonalds give higher dividends out of its excess cash in the

previous years.

IV. Alternative Forces of Action

 Plan A – McDonald Coporation will utilize its

excess cash in paying large dividends.

  Plan B – Acquire other assets / business of the

same industry.

 Plan C – Diversification

Key Features of the Three Plans

Plan Advantage Disadvantage

 Some investors may

 Attractive to potential think that the company

investors due to the given doesn’t want to invest in

rate of the dividend payout. the growth of the

A
 Beneficial to present company.

investors for they will receive  Decrease available cash

the return of their investment. for the company’s

operation.
 May be costly.

 Increase its market  May encounter

B
share in the industry. opposition from the both

sides of the companies.

C  Lesser risk.  Uncertain stability.
  New opportunity to other  Costly.

industry.  May encounter

 New market segment. opposition from the both

 Greater power. sides of the companies.

V. Decision

The researchers, upon careful evaluation, decided to adopt

Plan B for the following reasons:

 No substantial training required because only the

successful and well establish firms will be acquired.

 Less chance of failure.

 In the long run, investing “excess” cash is more

beneficial for the company than paying large dividends.

VI. Implementation

We, the researchers, would like to suggest the following

measures of implementing Plan B:

 Invest 55% of available cash in the acquisition of

successful small restaurants, either local or regional,

offering the same product or close substitute to

McDonald’s products and services.

 Use 30% of the available fund as dividend payment, so

as to please potential investors. Paying “reasonable but

not excessive” dividends will project a vey good image

for the company, both for the stockholders an for the

investors in the open market.

 Spend 15% of the fund into advertising / promotional

campaign for the newly acquired firms.