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Assignment Front Sheet

Qualification: Unit Number and Title:

Pearson BTEC Level 4 HND Diploma Business UNIT 20 Business Health Check (BHC)

Student Name:

Student No.

Assessor name: Amerjit Walia

Date of Issue: Completion date: Submitted on:

16th February 2015 27th March 2015

Assignment title:

BHC McDonalds Case Study Improving Performance

Learner declaration:

I certify that the work submitted for this assignment is my own and research sources are fully acknowledged. Student Signature: Date:

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Assignment Brief

Unit Number and title: UNIT 20 Business Health Check

Qualification: Pearson BTEC Level 4 HND Diploma in Hospitality Management

Start Date: 16th February 2015

Deadline: 27th March 2015

Assessor: Amerjit Walia

Assignment title BHC McDonalds Case Study Improving Performance

Purpose of this assignment: To review and analyse McDonalds performance current position by utilising business tools & techniques and provide a business improvement plan.

Business Health Check McDonalds Case Study Improving Performance http://www.mcdonalds.com/us McDonald's just posted the worst sales decline in a decade. The brand faces competition from fast-casual chains like Chipotle, Burger King and Panera Bread. Results also show that young people, millennials and children, are rejecting the brand for healthier, fresher food. But McDonald's isn't going down without a fight. Financial Performance McDonald's global sales at stores open at least 13 months declined 3.7% in August 2014. That the worst same-store sales decline that the fast-food giant has reported since March 2003, when global sales also fell 3.7%. It also marks the fourth straight month of comparable sales declines in the U.S., which accounts for about 32% of McDonald's revenue. Same-store sales in the U.S. were down 2.8%, and in the Asia/Pacific, Middle East, and Africa region they dropped 14.5%. "During August, McDonald's global business faced several headwinds that impacted sales performance," McDonald's President and Chief Executive Officer Don Thompson said in a statement. "We are diligently working to effectively navigate the current market conditions to regain momentum. For the long term, we remain focused on strengthening the key foundational elements of our service, operations and marketing to maximize the impact of our strategic growth priorities for our customers and our business." The company cited weak performance in Russia and ongoing fallout from a health scandal that affected one of its food suppliers in China as key factors affecting its sales. Domestic same-store sales dropped 3.2% in July and 3.5% in June.

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2014 was a challenging year for McDonalds around the world. Our results declined as unforeseen events and weak operating performance pressured results in each of our geographic segments, said McDonalds President and Chief Executive Officer Don Thompson. "As we begin 2015, we are taking decisive action to regain momentum in sales, guest counts and market share. This involves driving foundational improvements in our major markets and continuing our recovery efforts in markets affected by unusual events. We are accelerating our efforts behind solutions that capitalize on the investments were making in our technology and our restaurants to bring McDonalds Experience of the Future to life for our customers and deliver on our commitment to drive sustained, profitable growth for all stakeholders. Full year results included: Global comparable sales decrease of 1.0%, reflecting negative guest traffic in all major segments Consolidated revenues decrease of 2% (flat in constant currencies) Consolidated operating income decrease of 9% (8% in constant currencies), primarily due to the impact

of the previously disclosed supplier issue in APMEA (Asia/Pacific, Middle East and Africa) and weak operating performance in the U.S.

Effective tax rate of 35.5%, primarily due to an increase in reserves related to certain foreign tax matters Diluted earnings per share of $4.82, a decrease of 13% (11% in constant currencies). The following

items, which total $0.54 per share, negatively impacted diluted earnings per share by 10% (10% in constant currencies) for the year:

$0.31 per share due to an increase in reserves related to certain foreign tax matters $0.23 per share due to the estimated impact of the supplier issue resulting from lost sales and

profitability in APMEA Excluding the impact of these items, earnings per share for the year would have been down 3% (1%

in constant currencies) compared to the prior year Returned $6.4 billion to shareholders through dividends and share repurchases, in connection with our

$18-$20 billion, 3-year cash return target for the years 2014-2016 Fourth quarter results included: Global comparable sales decrease of 0.9%, reflecting negative guest traffic in all major segments Consolidated revenues decrease of 7% (1% in constant currencies) Consolidated operating income decrease of 20% (15% in constant currencies), primarily due to weak

operating performance in the U.S. and the impact of the supplier issue in APMEA Diluted earnings per share of $1.13, a decrease of 19% (14% in constant currencies), which includes a

negative impact of $0.09 per share due to the supplier issue in APMEA Returned $1.8 billion to shareholders through dividends and share repurchases In the U.S., fourth quarter comparable sales decreased 1.7% and operating income declined 15%, reflecting negative guest traffic amid ongoing broad-based challenges, including sustained competitive activity. In addition, results were impacted by higher selling, general and administrative and other expenses associated with positioning the business for the future.

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Date: January 2015 McDonalds U.S. business begins 2015 evolving to a more nimble, customer-led organization with a strategic roadmap focused on menu simplification and local customer tastes and preferences. Europes fourth quarter comparable sales declined 1.1% and operating income decreased 14% (down 6% in constant currencies). While consumer confidence issues, particularly in Russia and Ukraine, and weakness in France and Germany negatively impacted the segments quarterly results, the U.K. delivered positive comparable sales and operating income results. APMEA's fourth quarter comparable sales decreased 4.8% and operating income declined 44% (down 40% in constant currencies) primarily due to the lingering impact of the supplier issue on sales and profitability in China, Japan and certain other markets. Sales and operating income benefited from solid performance in Australia. Pete Bensen, McDonalds Chief Financial Officer noted, Last year, we announced a set of financial goals for the three-year period from 2014 through 2016. We outlined specific targets to return $18-$20 billion to shareholders through a combination of dividends and share repurchases, refranchise at least 1,500 restaurants and reallocate resources to higher

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growth initiatives. These targets are designed to enhance long-term shareholder value while supporting the work underway to reignite our business results, and we remain on track to meet these targets. Bensen continued, As we begin 2015, were exercising further financial discipline - starting with a capital expenditure plan for the year of approximately $2.0 billion - our lowest capital budget in more than 5 years - as we're strategically targeting fewer openings in our most challenged markets. We believe this lower level of capital spending is prudent while we work to regain our business momentum and improve the sales and profitability at our more than 36,000 restaurants around the world. Don Thompson concluded, Our business continues to face meaningful headwinds. As the worlds leading food service organization, we will continue to evolve, focusing on the customer as our first priority. Over the next 12 months, our charge is to ensure that we are adapting to the changing marketplace and maximizing the potential of our global growth priorities to serve our customers favourite food and drink, create memorable experiences, offer unparalleled convenience and become an even more trusted brand. While January comparable sales are expected to be negative and results are expected to remain pressured, particularly in the first half of the year, I am energized by the opportunities ahead for McDonalds and remain confident that we can regain our momentum and build value for shareholders over the long term. The Chipotle Strategy McDonald's just expanded a test for burgers that are 100% customizable. The brand hopes the strategy, which is currently in four restaurants in San Diego, California, could help attract a younger crowd and revive lagging sales. Many analysts believe that the customization will soon become widespread at McDonald's and allow it to better compete with fast-casual competitors like Chipotle. Chipotle is largely successful because the ingredients for its burritos, bowls, tacos, and salads are entirely selected by customers, who increasingly crave tailored options and high-quality ingredients. Here are some drastic changes to the McDonald brand is making to improve business.

1. Changing up the menu. McDonald's is testing customizable burgers that can be topped with guacamole, bacon, or tortilla chips. This nod to Chipotle's strategy, where customers build burritos to their exact specifications. In a bid to appeal to millennials last year, the brand introduced the McWrap. The wrap has between 360 and 600 calories and comes stuffed with chicken, veggies, cheese, and sauce. McDonald's hopes that customization and healthier options will bring in a younger crowd. McDonalds bacon clubhouse burger McDonald's Facebook Page McDonald's new burgers are part of a more upscale image. But the menu will also get smaller. McDonald's CEO Don Thompson has said the company is going to start paring down on items. The chain's offerings have expanded by 70% since 2007, which has contributed to an overwhelmed staff and longer wait times. Some of the recent menu items to go are the Chicken Selects and Angus Third Pounders.

2. Improving customer service. In addition to trimming the menu, McDonald's is working on speeding up drive-thru wait times. The company is redesigning kitchens to be more efficient for workers and testing a mobile ordering app that allows customers to place orders from their phones and pick up in restaurants. Thompson said that the company

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was sending corporate representatives in for a "service reset." This could include adding more workers and assigning new tasks to existing ones. The company is retraining workers to improve customer service.

3. Revamping marketing. Thompson is aware that many view McDonald's as unhealthy junk food. This problem has been exacerbated by a food factory scandal in China. To improve public perception of the company, McDonald's is doing a global audit of the marketing department. Thompson said he planned to make new internal hires. "We are also strengthening our creative messages by placing greater emphasis on the quality of our food and again re-establishing the emotional connection that our customers associate with the McDonalds experience," Thompson said.

Business Integration Role McDonalds Europe has announced that Patricia Abril, currently President and Managing Director of McDonalds Spain, will be appointed Vice President, Business Development & Integration Europe. The move, effective 1 October 2014, will see Abril join McDonalds European Management Team. Patricias responsibilities will include developing design concepts for new and existing restaurants and leading the strategic planning of new restaurants on a pan-European basis. She will also help to implement digital solutions in McDonalds restaurants, building on her successful leadership in Spain over the last ten years. In the role, Patricia will bring together McDonalds Development function within the European team and will work closely with other functions such as Finance, Brand & Strategy, Digital and Operations. Doug Goare, President, McDonalds Europe said: Patricias strategic customer-focused thinking, her understanding of our business and her strong leadership skills will be invaluable in this increasingly important area and she will be a great addition to the European Management Team.

New Chief People Officer 5th December 2014 - McDonalds Corporation has announced that David Fairhurst, currently Chief People Officer, McDonalds Europe, has been promoted to Senior Vice President, International Human Resources and Strategy, McDonalds Corporation, effective 1st May 2015.

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In his new role Fairhurst will be responsible for international Human Resources which includes Europe, Asia Pacific Middle East and Africa (APMEA), and Latin America, as well as the global Human Resources functions of Systems, Strategy and Design. He will continue to be based in London and will report to Rich Floersch, Executive Vice President and Chief Human Resources Officer, McDonalds Corporation. Floersch, said: With his strategic vision, passion for the business and his international experience, David will be a valuable addition to our corporate team. His keen insights on development will benefit us greatly as we continue to strengthen our talent pool to drive our business for the future. Fairhurst joined McDonalds UK in 2005 as Vice President of People and was promoted to Chief People Officer, Northern Europe, in 2007 with responsibility for HR, training, education, customer services and environment. In 2011 he was appointed to the newly created position of Chief People Officer, Europe. Doug Goare, President, McDonalds Europe, said: David is a highly innovative leader who has made a significant impact on our business. He has led the creation and implementation of a ground breaking People strategy that has played a critical role in driving our results and building trust in our brand across Europe.

New CEO 28th January 2015 CNBC reported - Amid a tumultuous past year for McDonald's, the world's biggest restaurant chain's CEO Don Thompson is retiring after two years on the job, effective March 1 2015. The fast food is also getting a new CFO. The restaurant's Senior Executive Vice President and Chief Brand Officer Steve Easterbrook will replace Thompson, who is a 25-year veteran of the company, the company announced on Wednesday. Previously, Easterbrook served as president of McDonald's Europe and led the chain's "efforts to elevate its marketing, advance menu innovation, and create an infrastructure for its digital initiatives," it said in a release. The company's CFO Pete Bensen will also transition to the role of chief administrative officer while Kevin Ozan, the company's current corporate controller, will become the chain's new CFO. On Friday, the company delivered its latest update on its continuing U.S. turnaround, ongoing problems in Asia and the currency headwinds it faces. Following the CEO departure news, the company's stock ticked up 3 percent. As McDonald's continues its turnaround effort, Bill Smead, CEO and chief investment officer of Smead Capital Management, said he'd like to see the company take more risks and focus more on what customers want. The firm is a long-term shareholder in the company with about 180,000 shares. "Trying to please everybody is one of the issues that they're dealing with," he said in a phone interview. He also added he thinks the current low interest environment and McDonald's high dividend yield has kept McDonald's stock higher than it typically would be. McDonald's stock is nearly flat during Thompson's tenure as CEO, compared to a 33 percent surge in the Dow and a 47 percent jump in the S&P 500. In fiscal year 2014, global comparable sales growth, a key restaurant industry metric, dropped 1 percent, and its U.S. unit delivered a 2.1 percent decrease in comps. In fiscal year 2013, global comparable sales growth, a key restaurant industry metric, rose just 0.2 percent.

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TASK 1: (a) Critically analyse and evaluate McDonalds business environment and its impact on the industry and McDonalds business performance by applying:

PESTLE

PORTERs 5 Force Model

SWOT

(b) Outline potential areas for business improvement to the business organisation and its operations. You should consider the current business situation of McDonalds finance, market share, trends in sales and eating habits, etc. (LO1, 1.1., 1.2, 1.3; M1, M2, M3, D1, D2, D3)

TASK 2: (a) As a Business Development Consultant to McDonalds outline the steps you would take to carry out a Business Health Check (BHC) on McDonalds (you may concentrate on one region or one branch of McDonalds for the BHC); (b) Based on your findings in (a) and the information the case study, provide a business Improvement Plan for McDonalds. (LO1, LO2, M1, M2, M3, D1, D2, D3) (1000 words)

TASK 3: You are the HR Consultant to the new Chief People Officer and he has asked you to provide an evaluation of the current skills of management and staff an outline of a development plan. Provide a short report on how you would evaluate the skills of management & staff in a Branch of McDonalds? The report should provide justification for why management and staff should be developed and trained. You should use your knowledge from the case study. (LO3, M1, , M3, D1, D2, D3) (700 Words)

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Evidence Checklist

Summary of evidence Evidence presented

Task 1 Learners are required provide a critical analysis and evaluation of the business context and its impact on McDonalds by applying key business tools & techniques from their learning from this units and others, as well as their personal life experiences.

Task 2 Learner must provide toolkit that acts as a business health check for the organisation; which then forms the basis of the business improvement plan.

Task 3 Learners ae required to provide a basis for evaluating current management & skills levels and then outline a development plan that justifies the need to improve customer services as well as key role competencies to improve overall business operations.

Important Plagiarism, collusion and non-compliance with assessment regulations are offences under the awarding

body regulations and where suspected will be thoroughly investigated under official procedures.

Penalties may be imposed depending on the severity of the offence, as per the awarding body guidance.

Appropriate citations of source documents are essential when presenting written/word processed work and it is crucial that you quote the books, journals, websites etc. that you used whilst you carried out desk research.

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Learning Outcome

Learning outcome

Assessment criteria

In this assessment you will have the opportunity to present evidence that shows you are able to

Task No.

Evidence (Page no)

LO1 Understand the focuses of the business

1.1 analyse the objectives of the business

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1.2 explain factors that impact on the business

2

1.3 determine potential improvements to the business organisation and/or operation

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LO2 Be able to develop plans for businesses

2.1 review the effectiveness of the business

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2.2 develop plans to improve the business, justifying their value

2

LO3 Be able to evaluate and develop skills of management and staff

3.1 evaluate the current skills of management and staff

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3.2 devise and justify plans for the development of skills for management and staff

3

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In addition to the above PASS criteria, this assignment gives you the opportunity to submit evidence in order to achieve the following MERIT and DISTINCTION grades.

Grade Descriptor

Indicative characteristic/s Contextualisation

M1 Identify and apply strategies to find appropriate solutions

Effective judgements have been made Complex problem with more than one variable have been explored

Problems have been approached from multiple angles leading to well evaluated judgements (all tasks)

M2 Select/Design and apply appropriate methods/techniques

A range of methods have been applied A range of sources of information have been used. The selection of methods and techniques/sources has been justified

Information in addition to the sources provided is used alongside provided information Methods beyond those highlighted in the information provided have been used. (Task 1 and 2)

M3 Present and communicate appropriate findings

The appropriate structure and approach has been used

Detailed tools & techniques have been applied and used for critical analyses & evaluations:

Contextual PESTLE & Porters 5 Forces

SWOT

Financial forecasting techniques

Marketing tools & techniques 4Ps People Management Issues performance, training &

development investment

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Mentoring & coaching for business success (all Tasks)

D1 Use critical reflection to evaluate own work and justify valid conclusions

Conclusions have been arrived at through synthesis of ideas and justified

Exceptional arguments provided for conclusions & recommendations (all tasks)

D2 Take responsibility for managing and organising activities

Autonomy/Independence has been demonstrated

Additional relevant source of information have been used to support arguments, with proper referencing.( all tasks)

D3 Demonstrate convergent/lateral and creative thinking

Ideas have been generated and decisions taken Self-evaluation has taken place; Convergent & lateral thinking have been applied; Problems have been solved; Innovation and creative though have been applied; Receptiveness to new ideas is evident; Effective thinking has taken place in unfamiliar contexts.

Evaluation of conclusions based on strengths and weaknesses of sources of data about the business environment. (all tasks)

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Achievement Summary

Qualification Pearson BTEC Level 4 HND Business

Assessor Name

Amerjit Walia

Unit Number and title

UNIT 20 Business Health Check

Student Name

Student No.

Criteria Reference

To achieve the criteria the evidence must show that the student is able to:

Achieved? (tick)

LO1 Understand the focuses of the business

1.1 - analyse the objectives of the business

1.2 - explain factors that impact on the business

1.3 - determine potential improvements to the business organisation and/or operation.

LO2 Develop plans for business improvement

2.1 - review the effectiveness of the business

2.2 - develop plans to improve the business, justifying their value

LO3 Evaluate and develop skills of management and staff

3.1 - evaluate the current skills of management and staff

3.2 - devise and justify plans for the development of skills for management and staff

Grade Descriptor Achieved? (tick)

Grade descriptor Achieved? (tick)

M1 Indentify and apply strategies to find appropriate solutions

D1 Use critical reflection to evaluate own work and justify valid conclusions

M2 Select/Design and apply appropriate methods/techniques

D2 Take responsibility for managing and organising activities

M3 Present and communicate appropriate findings

D3 Demonstrate convergent/lateral and creative thinking

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Assignment Feedback

Formative Feedback: Assessor to Student

Action Plan

Summative feedback

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Feedback: Student to Assessor

Assessor

Signature

Date

Student

Signature

Date