Macroeconomic Analysis of Government Fiscal Policy
According to the Bureau of Economic Analysis, Government fiscal policy had an effect on the overall economy. A report published by the Bureau, explains that in the first quarter of 2003:
Real federal government consumption expenditures and gross investment increased 2.6% in the first quarter, compared with an increase of 11.0% in the fourth. National defense decreased 1.5%, in contrast to an increase of 11.0%. Nondefense increased 10.5%, compared with an increase of 11.1%. Real state and local government consumption expenditures and gross investment decreased 0.1%, in contrast to an increase of 1.2%. ("Gross Domestic Product: first quarter 2003")
Other Factors
The consumer price index (inflation) was at 0.3 and the unemployment rate was 5.8 in March of 2003. The Import Price Index was.5 and the Producer Price Index was 1.5. In the latest report published by the Bureau of Labor and statistics, consumer expenditures averaged 39,518 per consumer unit. The components of consumer spending include; housing, food, transportation, entertainment, health care and pensions.
Business Cycle
Currently, we are in the recession stage of the business cycle. There was a slight increase in real GDP growth during the first quarter of 2003. The bureau and economic analysis explains that this growth was due to decreases in imports, equipment, software, private investment and a foreseen increase in the amount of federal government spending. ("Gross Domestic Product: first quarter 2003")
Restaurant Industry Analysis
According to an industry analysis conducted by the National Restaurant Association, sales in the industry topped $426.1 billion in 2002. There were over 870,000 restaurant locations and the industry employed 11.7 million people. Average daily sales for the industry are over $1.2 billion and overall sales are expected to increase by 4.5% by 2003 and are expected to make up 4% of the Gross Domestic Product. In the thirty-three years spanning 1970 until 2003 the annual growth rate of the industry has been 7.2%.
McDonalds Industry Analysis
The McDonald's Corporation is a part of the fast food segment of the restaurant industry and operates in 119 countries around the globe. Most of the corporation's locations are quick-service franchises that operate under the McDonald's brand name. ("McDonald's Corporation (NYSE) - Business Description") According to Multex Investor, 80% of the corporation's locations and 75% of total revenues are derived from nine markets including: Canada, China, Brazil, Japan, Australia, France, Germany, America and the United Kingdom. ("McDonald's Corporation (NYSE) - Business Description")
All of McDonald's restaurants are company operated, franchised, or operating under the structure of a joint venture. Restaurants that are franchised "supply capital by initially investing in the equipment, signs, seating and decor of their restaurant businesses and by reinvesting in the business over time." ("McDonald's Corporation (NYSE) - Business Description")
In turn, McDonald's shares the investment with the franchise by taking general ownership or leasing the building and land.
Franchisees are vital to the success of the McDonalds Corporation because they provide the company with a stream of revenue. The revenue stream is created through rent payment, initial fees and service fees. The company maintains a uniform structure of the franchise arrangement throughout the world. In most cases, the arrangement between the franchise and the company ends after 20 years. ("McDonald's Corporation (NYSE) - Business Description")
According to Multex Investor, McDonald's and its franchisees purchase food, equipment and packaging from independent suppliers. All of the independent suppliers must be approved by the McDonald's Corporation. All of the restaurant's personnel and staff are trained in food handling and preparation, food storage and customer service. McDonalds also has quality assurance labs all over the globe to make certain the company's restaurants and franchises have uniformity.
Multex explains,
The quality assurance process not only involves ongoing product reviews, but also onsite inspections of suppliers' facilities. Further, there is a quality assurance board, composed of the Company's technical, safety and supply chain specialists, which provides strategic global leadership for all aspects of food quality and safety." ("McDonald's Corporation (NYSE) - Business Description")
In addition to the McDonald's Brand the corporation also has several partner brands. These partner brands include Donatos Pizza, Boston Market and Chiptole Mexican Grill. The corporation also has a small interest in the United Kingdom-based Pr t A Manger. ("McDonald's Corporation (NYSE) - Business Description")
Most of the company's restaurants are opened for breakfast, lunch and dinner and have a limited menu. Most menus include egg mcmuffins, hotcakes, bagels, French fries, hamburgers, chicken sandwiches, salads, desserts and soft drinks. McDonald's Restaurants...
Even the state needs resources, so it may decide to borrow money from the bank. JP Morgan could also emit bonds for the government, and a nice fee could be made out of that. However, should government spending be excessive, this could lead to inflation, which would seriously affect the bank's activity and profit margins. The ways in which JP Morgan would feel the effects of fiscal policies are countless.
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