Compare and Contrast Hrm and Ir Essay

Introduction There are various conceptions existing in the aspects of definition, academic boundaries and major functions of the fields of human resource management (HRM) and industrial relations (IR). The essay critically discusses the comparison and contrast on the key features of Human Resource Management and Industrial Relations in academic fields. On the base of review of the origins and transition of the tow subjects the paper will explore the general accepted definitions of the HRM and IR respectively. It will then go on to lay out theoretical dimensions of the two subjects, and looks at significant characteristics of HRM and IR. The last part assesses comparison and contrast between the two fields in the light of historical perspectives and literature review. Definition Transition of Human Resource Management The HRM terminology stems from the USA subsequences of human relations movement. In the counterpart, since the first British book on HRM published in the late 1980s, which was notably known as New Perspectives on Human Resource Management (Storey 1989), there have been a large volume of published studies investigating the definition of HRM in diverse standing and approaches. Ackers (2003) provided a general term on the definition of HRM, ‘HRM refers to all those activities associated with the management of work and people in firms and in other formal orgaisations. Although it is conceptualised by involving the entire breadth of HRM studies, it should be embodied to specific nature and pattern of the subject. Sisson (1990) sees HRM of four aspects of employment practice: an integration of HR policies with business planning; a shift in responsibility for HR issues form personnel specialists to line managers; a shift from the collectivism of management and, finally, an emphasis on commitment has further understanding of HRM. According to the classic work edited by Storey J (2007), HRM is defined as a distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of culture,  structural and personnel techniques, which is a comprehensive understanding of HRM. Definition of Industrial Relations There is little doubt that Industrial Relations has become a subject of scholarly analysis since the end of the nineteenth century, when Sidney and Beatrice Webb (1984) couple published their classic series studies of the regulation of employment in Britain. Flanders (1965, 10) suggested, ‘The study of industrial relations may therefore be described as a study of the institutions of job regulation’, which prevailed for a time is beyond satisfaction of the academic study at present. The view that IR is the study of processes of control over work relations, and among these processes, those involving collective worker organization and action are of particular concern is more adaptable to generalise specific and precisely for the subject. (Hyman, 1975) Basic Theory of Human Resource Management In 1990, the launch of two influential journals, Human Resource Management Journal, edited by Keith Sisson at Warwick University, the International Journal of Human Resource Management, edited by Michael Poole at Cardiff facilitates the emergence of courses and models in HRM in universities and colleges. A large and growing body of literature has sprung up amongst which two notable theories is predominant leading, Fombrun et al’s (1984) matching model and the Harvard framework. Matching model focused on the connection between organizational strategy and HRM, in the meanwhile Frombrun et al divided HRM into four integral parts – selection, development, appraisal and reward stressing the significance of efficiency of work performance enhancement. Some commentators have even utilized the terms ‘high commitment’ policies to substitute for HRM (Marchington, 2005). On the other hand, the Harvard framework (Beer et al, 1985) involve six basic components with a broader expand from the inside out , that is, situational factors, stakeholder interests, policy choices, outcomes, long-term consequences and a feedback loop. However, neither of the models pays close attention to the respects of employment relationship. John Storey’s (2007) model is worth considering framework in HRM studies. Four key elements are summarized as foundational structure of HRM, that is Beliefs and assumptions, strategic  qualities, critical role of managers and key levers which activate HRM as an essentially tool and techniques for use by practitioners. However, many HR functions these days struggle to get beyond the roles of administration and employee champion, and are seen as reactive rather than strategically proactive partners for the top management. In addition, HR organisations also have difficulty in proving how their activities and processes add value to t he company. Only in recent years have HR scholars and professionals focused on developing models that can measure the value added by HR. Basic Research Interest of Industrial Relations Colling et al (2010) comment that Academic industrial relations is now outdated’ either the problem of the ‘human factor’ in work have all been solved, or they are better addressed by new approaches such as ‘human resource management’ or ‘organisational behaviour’, however, in the statement by the British Universities Industrial Relations Association (BUIRA), they strongly disagree the claim. During the initiative academic research in IR, predominant focus upon collective institutions and processes which embody trade unions, collective bargaining and strikes are the mainstream scope of IR study. Compared with the origin IR, modern IR emphasized on the experience of work, both individual and collective, and with all sources of the rules that govern the employment relationship. Therefore, IR was widely regarded as having two major subdivisions within it. The first dealt with the management of labour, the second with collective bargaining and methods of workforce governance (Russell Sage Foundation, 1919). By many accounts, industrial relations today is in crisis. In academia, its traditional positions are threatened on one side by the dominance of mainstream economics and organizational behavior, and on the other by postmodernism. The importance of work, however, is stronger than ever, and the lessons of industrial relations remain vital. Comparison and contrast of Human Resource Management and Industrial Relations The interrelation between HRM and IR is complicated. In one sense HRM was  considered as a subfield of IR in the early 1960s for majority of scholars, afterwards in prevailing contemporary conception HRM has largely been regarded as a separate subject underlying distinguish perspectives and divergent points of the field. However, HRM and IR do share some commonalities in matters of concern focusing on employment and workplace issues and recognition of the humanness of labour. Moreover, it is common to combine the two academic fields as one integral course named HRM and IR in contemporary university and college teaching. By contrast, John Storey (2007) proposes twenty-five dimensions to differentiate HRM and IR with the same key element in Storey’s model (Table 1.1). Furthermore, from the research interest differentials, it can be concluded that HRM largely takes an ‘internal’ perspective on employment problem emphasizing the solution to labour issues, while IR basically has an external view focusing on the workers’ and community’s solutions. The goal and function is not the same between the two fields. HRM’s primary goal is organizational effectiveness and takes a instrumental approach to promoting employee interests; IR’ aim is a combination of organizational effectiveness and employee well-being as well as employee’s interests priorities. HR assumes conflict not inevitable and can be minimized by management; IR sees conflicts as inevitable requiring third-party intervention. HRM and IR are distinguished in various respects with different standpoints and approaches. Generally, IR provides a multi-layer discernment of employment relationships, interconnections between the workplace, the company, the sector, the national regulatory framework in the light of multi-disciplinary approach involving sociology, political science, economics, history and law. Frequently, HRM teaching accepts management’s objectives uncritically, concentrates on activities at company level without exploring the societal and institutional environment, and has its disciplinary basis primarily in psychology and organizational sociology rather than the social sciences more broadly. Despite of the inevitable irreconcilable antagonisms between the two subjects, there is a closely link of HR and IR providing a complementary foundation of the exchange and development of the employment issues. Conclusion The essay discusses the definition of HRM and IR and significant features  in academic fields largely through an historical analysis of the two fields’ respective origins and development. HRM and IR fields are distinguished by numerous differences in their approach to research and practice. However, scholar on both sides have to give greater recognition to the fact that the different assumptions separating HRM and IR are only specialized tools for investigation and do not represent a full or universalistic explanatory model for studying the employment relationship for more explicitly research perspectives. Reference Ackers, P. and Willkinson, A. 2003. Understanding Work and Employment, Oxford University Press Bach, S(ed), 2005, Managing Human Resources, 4th edition, Balckwell Publishing Boxall, P and Purcell, J, 2008, Strategy and HRM, 2nd edition, Palgrave Bruce E.K, 2001,Human resources and industrial relations Commonalities and differences, Human Resource Review, 11(2001) 339-374 BUIRA 2008. What’s the point of Industrial Relations? A statement by the British Universities Industrial Relations Association Colling, T. and Terry, M. 2010. ‘Work , the employment relationship and the field of Industrial Relations’, in Colling, T and Terry, M (eds), Industrial Relations: theory and practice (3rd ed), Chinchester:Wiley, 3-25 Guest, D. (1987) ‘Human resource management and industrial relations’, Journal of Management Studies, 24(5), September: 503-521 Hyman, R. 1975. A Marxist Introduction to Industrial Relations. Basingsotoke: MacMillan. Paul Edwards edit , Industria l Relations Theory & Practice in Britain, Blackwell Publishers Ltd, 1995 Marchington. M and Wikinson. A, 2005, Human Resource at work, 3th editon, CIPD, London Miller, P. (1987) ‘Strategic industrial relations and human resource management – distinction, definition and recognition’, Journal of Management Studies, 24(4) July:347-361 Sisson, K. (1990) ‘Introducing the Human Resource Management Journal’, Human Resource Management Journal, 1(1):1-11 Strorey, J(ed), 2007, HRM : A critical text. 3rd edition, Routledge Redman, T . Wilkinson. A, 2001, Contemporary Human Resource Management, Financial Times

Filing Federal Timber Income Tax

Filing Federal Timber Income Tax Congress has provided timberland owners with some favorable tax provisions. Here are five tips designed to help you make the most of these provisions and avoid paying unnecessary income tax or making costly mistakes. This report is only an introduction. Consult the references and links provided for complete information on the topic. Also understand that we are discussing Federal income tax here. Many states have their own taxing systems which can be dramatically different from federal taxation and is usually an ad valorum, severance, or yield tax. Remember these five points when filing your Federal income taxes on timber: Establish Your Basis Its key to establish your basis as soon as possible and to keep good records. Basis is a measure of your investment in timber as opposed to what you paid for the land and other capital assets acquired. Record your cost of acquiring forestland or the value of inherited forest land as soon as possible. When selling your timber in the future, you can use these costs as a depletion deduction. Adjust or step up your basis for new purchases or investments. Step down your basis for sales or other disposals. Keep records to include a management plan and map, receipts for business transactions, diaries, and landowner meeting agendas. Report basis and timber depletion on IRS Form T,â€Å"Forest Activities Schedule, Part II. You are required to file a Form T if you claim some timber depletion deductions or sell timber. Owners with occasional sales may be excepted from this requirement, but it is considered prudent to file. File your years documentation using this electronic version Form T. Know Whats Deductible If you own a forest to make money, ordinary and necessary expenses incurred for managing forest land as a business or an investment are deductible even if there is no current income from the property. This includes if youve performed reforestation work or established significant timber stand regeneration costs. You can deduct outright the first $10,000 of qualified reforestation expenses during the taxable year. In addition, you can amortize (deduct), over 8 years, all reforestation expenses in excess of $10,000. (Due to a half-year convention, you can only claim one-half of the amortizable portion the first tax year, so it actually takes 8 tax years to recover the amortizable portion.) Do You Quality for Long-Term Capital Gains? If you sold standing timber during the taxable year held for over 12 months, Yyu may be able to benefit from the long-term capital gains provisions on timber sale income which will lower your tax obligation. When you sell standing timber either lump-sum or on a pay-as-cut basis, the net proceeds generally qualify as a long-term capital gain. Remember, you can qualify for this long-term capital gains treatment on timber only if you hold the timber over one year. You do not have to pay self-employment tax on capital gains. Did You Have a Timber Loss? If you had a timber loss during the taxable year, you can, in most cases, only take a deduction for (casualty) losses that are physical in nature and caused by an event or combination of events that has run its course (fires, floods, ice storms and tornadoes). Remember that your deduction for a casualty or qualifying non-casualty loss is limited to your timber basis, minus any insurance or salvage compensation. Make Required Reports to the IRS If you had federal or state cost-share assistance during the taxable year via receiving a form 1099-G, you are obligated to report it to the IRS. You may choose to exclude some or all of it but you must report it. But if the program qualifies for exclusion, you can choose either to include the payment in your gross income and make full use of beneficial tax provisions or to calculate and exclude the excludable amount. Excludable cost-share assistance includes the Conservation Reserve Program (CRP payments only), Environmental Quality Incentives Program (EQIP), Forest Land Enhancement Program (FLEP), Wildlife Habitat Incentives Program (WHIP) and Wetlands Reserve Program (WRP). Several states also have cost-share programs that qualify for exclusion. Adapted from USFS, Cooperative Forestry, Tax Tips for Forest Landowners by Linda Wang, Forest Taxation Specialist and John L. Greene, Research Forester, Southern Research Station. Based on a 2011 report.

7 Free Online Courses That Will Make You Happier

7 Free Online Courses That Will Make You Happier Here’s something to smile about: These 7 free online courses are waiting to teach you how to create a happier, more fulfilling life. Learn about the study of happiness from professors and researchers at top universities as you implement techniques such as meditation, resilience, mindfulness, and visualization into your own life. Whether you’re going through a rough spot or are simply looking for a few tips on creating a happier life, these courses can help bring a little sunshine your way. The Science of Happiness (UC Berkeley) Created by leaders in UC Berkeley’s â€Å"Greater Good Science Center,† this extremely popular 10-week course gives students an introduction to the concepts behind Positive Psychology. Learners study science-based methods of increasing their happiness and monitor their progress as they go. The results of this online class have also been studied. Research shows that students who consistently participate throughout the course experience an increase in well-being and a sense of common humanity, as well as a decrease in loneliness. The Year of Happy (Independent) Want to make this year your happiest yet? This free email course walks recipients through one major theme of happiness each month. Every week, receive an email related to that theme containing videos, readings, discussions, and more. Monthly themes include: gratitude, optimism, mindfulness, kindness, relationships, flow, goals, work, savoring, resilience, body, meaning, and spirituality. Becoming a Resilient Person: The Science of Stress Management (University of Washington) When stress strikes, how do you react? This 8-week course teaches students how to develop resilience – the ability to positively withstand adversity in their lives. Techniques such as optimistic thinking, relaxation, meditation, mindfulness, and purposeful decision-making are introduced as ways to develop a toolbox for dealing with stressful situations. Introduction to Psychology (Tsinghua University) When you understand the basics of psychology, youll be better prepared to make decisions that bring you ongoing happiness. Learn about the mind, perception, learning, personality, and (ultimately) happiness in this 13-week introductory course. A Lifetime of Happiness and Fulfillment (Indian School of Business)   Developed by a professor nicknamed â€Å"Dr. HappySmarts,† this 6-week course draws on research from a variety of disciplines to help students understand what makes people happy. Be prepared for videos featuring interviews with happiness experts and authors, readings, and exercises. Positive Psychology (The University of North Carolina at Chapel Hill) Students in this 6-week course are introduced to the study of Positive Psychology. Weekly units focus on psychological techniques that are proven to improve happiness levels - upward spirals, building resilience, loving-kindness meditations, and more. Psychology of Popularity (The University of North Carolina at Chapel Hill) If you think that popularity doesn’t affect you, think again. This 6-week course introduces students to the multitude of ways that experiences with popularity in their younger years shape who they are and how they feel as an adult. Apparently, popularity can even change DNA in unexpected ways.

Social Law Essay Example | Topics and Well Written Essays - 2000 words

Social Law - Essay Example Link between corporate crime and Social crime Corporate crimes engage planning, tactical residency the deviance ought to be harmful to people exterior of a corporation or rather the deviance of corporate representatives ought to extend the intentions and desires of a Corporation. The deviance should be supported or abided by top administrative and/or colleagues. The prime recipient of this deviant deed is the corporation. Social crime denotes a cluster of peoples who occupy a comparable place in the economic structure of production. In that classification profession is extremely vital since it offers monetary incentives, steadiness and benefits like healthcare. Has the law’s view of the criminal responsibility of corporations changed over the years? The conclusion of the century provides a chance to mirror on legal replies to alterations in social and monetary organization. Increasing dependence on sophisticated expertise, the developing trendy terminology of risk, and endeavo rs to position the wherewithal of criminal law in opposition to business ventures are a number of the expressions of those alterations. There has developed a debate concerning probable criminal accountability for 'Millennium Bug' tragedies captures these prime features of modern life. Civil and Criminal Law Civil decree endeavors to determine non-criminal arguments for instance divergences over the connotations of contracts, land ownership, annulment, child care, and harms for individual and property denting. Civil law ought to be used since its purpose is to give a legal solution to resolve problems. Criminal decree is that organization of the decree that tackles conduct deemed so dangerous to community entirely that it is forbidden by statute, impeached and penalized by the governing body (Gardner and Terry, 17). Criminal law is a matter of enforcement looking in the sheriff viewpoint. A sheriff is a bureaucrat of the court, plus his chief purpose and role is to serve and performs the diverse legal courses and mandates issued. Secondly, Divisional and government department policies and courses are reliable throughout the court case law in the U.S. These rules are crafted and established to cover the accurate, prompt, and judicious service and implementation of all matters regarding the enforcement of consents and course. Thirdly, the FEC has private power over the public enforcement of the centralized fight against finance law. In implementing that influence, the Commission utilizes a multiplicity of techniques to uncover probable election law breaches. How crime in the streets is viewed versus how crime in the suites is viewed by society? By means of burglary and fraud as two paradigms, the judgments indicate that public viewpoints of sanction conviction and relentlessness advocated that street criminals were exceptionally credible to be caught and be judged to more harsh sentences as opposed to white-collar criminals. There is much debate on which crime sh ould be punished severely. Both crimes are perceived to receive the exact sentence and are at par. With this in consideration, there is no varying perception in crime in the suites, and it is not supposed to be changing. Question Two Functionalist verses Conflict view of change Conflict philosophers perceive social change as happening merely via infighting amid social classes. Even as, it is factual that numerous revolutions have emerged in the emergence of class plus/or cluster conflict, it is a terrific deal different from the outlook functionalists inclination. Functionalists characteristically employ the additional tangible factors, for example, population development and industrial advances as pioneering the indict

Formal legal brief Essay Example | Topics and Well Written Essays - 750 words

Formal legal brief - Essay Example Their demand was that the statute should be declared unconstitutional as it makes impossible to exercise the liberty interest protected under the Fourteenth Amendment to the Federal Constitution. Both the District Court and then the Court of Appeals for the Ninth Circuit expressed the view that the Fourteenth Amendment to the Constitution encompasses a due process liberty interest in controlling the time and manner of one’s death, and that the Washington statute is unconstitutional when it applies to terminally ill competent adults who want to hasten their deaths. Whether the Washington state statute which holds that a person who assists in hastening the death of terminally ill people is unconstitutional as it violates the due process clause of the Fourteenth Amendment? The Washing state statute which holds that a person who knowingly causes or aids another person to attempt suicide is guilty of felony of promoting suicide attempt is not unconstitutional as it does not violate the Fourteenth Amendment due process clause. The first point is that the due process clause does not protect the right to commit suicide and hence the same does not allow the right to assist in committing suicide. Secondly, from the legal traditions of the nation and its history, it is evident that the due process clause does not consider the right to assistance in committing suicide as a fundamental liberty interest. First of all, a patient who is suffering from such a terminal illness with extreme pain has no legal barriers to getting such medications which will even cause unconsciousness and hasten death if the main purpose is to help reduce pain. In such a situation, it is unnecessary to answer the question whether a mentally competent person with great suffering and pain has a constitutionally cognizable interest to control his or her own death. Secondly, the liberty as protected under the due process clause does not include

MARKETING ESSAY QUESTION Example | Topics and Well Written Essays - 2000 words

MARKETING QUESTION - Essay Example 538). Most marketers today are experiencing difficulties with effective and systematic planning due to a number of market forces such as globalization, fierce competition among market players, radical changes in technology and changing consumer behavior. This piece of research work presents a brief study on systematic approach to marketing planning from the perspective of contemporary international marketing contexts. This paper reviews relevant literatures to critically evaluate the statement â€Å"A systematic approach to marketing planning is essential to successfully inform the marketing decisions made within a contemporary international company†. Marketing planning Planning is basically a systematized method of relating to the future (Cateora and Graham, 2007, p. 317) and therefore many literatures have considered marketing planning as all rational, incremental and intuitive processes that guides a firm’s marketing activities to its future (Greenley, Hooley and Sau nders, 2004, p. 933). Dibb and Simkin (1996, p. 3) who provided a clear and systematic approach to marketing planning defined it as a systematic process that involves assessing marketing opportunities and resources, determines marketing goals and develops future plan for implementation and control. Traditionally, literatures described marketing planning as a model of logical-sequential decision making that incorporates a firm’s objectives, strategies, tactics and control. Greenley, Hooley and Saunders (2004, p. 933) pointed that this explanation to marketing planning has focused on what marketing planning decisions could be and not on how they could be made. They emphasized that marketing planning is used to pursue dynamic marketing opportunities in order to guide a firm’s marketing to its future. In today’s rigorously competitive marketing contexts, market opportunities keep on changing and hence firms need to adopt their plans with a view to pursue these dynam ic opportunities. Marketing planning involves deciding on significant marketing strategies that help the firm achieve its overall strategic objectives and future goals. A marketing planning is required for each business, each product and each brand (Armstrong and Kotler, 2005, p. 59). A Systematic approach to Marketing Planning A systematic approach to marketing planning has been considered to be the most difficult of all marketing tasks since it involves bringing together all the various marketing elements in to coherent and realistic plan (McDonald, 2007, p. 9). A systematic marketing planning necessarily requires certain degree of organizational procedures and compromise between conflicting objectives. McDonald (1992, p. 5) identified ‘lack of systematic approach to marketing planning’ as one of the most difficult barriers to marketing planning. Marketers need to design and implement most appropriate planning system for their firms. As McDonald (1992, p. 14) pointed, a marketing planning system is essential to ensure that all key issues are systematically

Introduction To Service Industry Restaurants Marketing Essay

Introduction To Service Industry Restaurants Marketing Essay The food service industry continues to grow in volume and revenue every year and typically divides itself into two categories: full-service restaurants and fast-food restaurants. Each individual restaurant is in competition with other food service operations within the same geographical area. The fast food restaurant industry is highly competitive. McDonalds competes with other restaurants through the quality, variety and value perception of food products offered. McDonalds Corporations main competition comes from other fast-food restaurants; most notably, YUM! Brands Inc, Wendys International, Dominos and Burger King. Figure1: The total revenues of the major players in the fast food industry (www.ycharts.com) The figure represents the market share of McDonalds in the fast food industry. McDonalds Corporation (MCD) has company operated and franchise restaurants all over the world. They are the leading global food service retailer by means of over 30,000 restaurants in more than 117 countries, serving about 50 million people every day. Franchising plays a major role in McDonalds system with 26,216 were operated by franchisees (including 19,020 operated by conventional franchisees, 3,160 operated by developmental licensees and 4,036 operated by foreign affiliated markets (affiliates)-primarily in Japan) and 6,262 were operated by the company. Their total revenue in 2009 was $ 23 billion. McDonalds success in the fast food industry stems from their main success factors which are branded affordability, menu variety and beverage choice, convenience and daypart expansion, ongoing restaurant reinvestment and operations excellence. These success factors are used to promote McDonalds brand image, p rovide customers with quality products and differentiate themselves from other competitors like YUM Brands (YUM owns brands like KFC, Pizza Hut, Taco Bell and Long John Silver) After extensive research, analysis and valuation, it is found that McDonalds corporation is currently an undervalued company and rated as a Market Outperform and thus I recommend this stock as a Buy. Executive Summary The food service industry is one of high competition; however, McDonalds has been able to obtain the position as the leader in market capitalization with a market capital of $74.6B in 2009. While McDonalds has deployed high amounts of capital, the company manages its asset base with high inventory turnover while also maintaining cost efficiency. Industry Demand Drivers: The market of the food service industry attributes much of its growth to global sales and revenue. Despite tough environment, McDonalds delivered an exceptional year of growth, posted strong sales and increased market share around the world. In 2009, global comparable sales increased 3.8 percent, fueled by solid gains in the United States (+2.6 percent), Europe (+5.2 percent), Asia/Pacific, Middle East and Africa (+3.4 percent), Latin America (+5.3 percent) and Canada (+5.8 percent). Earnings per share for the year increased 9 percent to $4.11 (13 percent in constant currencies), while consolidated operating income increased 6 percent (10 percent in constant currencies). We also returned $5.1 billion to shareholders through share repurchases and dividends paid, bringing our three-year cash return total to $16.6 billion-notably at the high end of our stated target of $15 to $17 billion for the years 2007 through 2009. Globally, McDonalds caters and adapts to different cultures and societies, while still providing them with the same McDonalds experience. With a significant portion of McDonalds sales derived from international stores, foreign denominated sales should generate additional earnings leverage given the weakening of the US dollar against other currencies. McDonalds is well positioned: McDonalds is able to maintain a loyal customer base, and compete with the existing competitors by introducing variation to their menu, such as the Dollar Value Menu. Also, in order to adhere to a more concerned health concise society, McDonalds has implemented holistic approach which consists of High-Quality Choices for customers, Consumer-Friendly Nutrition Information and communicate responsibly. The Happy Meal, which has been a long standing childs favorite, now has options such as fruit instead of French Fries and all white meat chicken nuggets. As for one McDonalds company goals is to adhere to outstanding customer service, strengthens the maintenance of long standing customers, as well as develop new relationships with customers of a new generation. Franchising business model: Within Fast Food restaurants franchise models are common. Franchise models can grow faster using others capital. Franchises have to be pay rent and royalties based on a percent of sales along with minimum rent payments, and initial fees. On the other hand, company-owned models have greater control over pricing, operations and can close underperforming restaurants more quickly. In 2009 the total no of franchised restaurants was 26,216 compared to 25,465 in 2008 and the number of company operated restaurants decreased by 3.6%. The total revenue from franchises in 2009 was $7,286.2 Million an increase in 4% compared to 2008. McDonald Franchises Revenue from Franchises Key challenges and Adaptability Intensity of competition: Competitors of the industry also try to compete with similar products; therefore, leading to price wars. McDonalds created a Dollar Value Menu, in response to competitors such as Wendys 99 cent menu. Overall, the industry has tried various product differentiations in order to accumulate greater market share, but most consumers are drawn to the classics. McDonalds is doing more and more to compete with health focused restaurants like Subway. Nutritionist and other leading experts have been hired to join the McDonalds team in order to ensure that the correct items are added to the menu, while still keeping and improving the classics that they are famous for. For example, the chicken nuggets that we all grew up on are now 100% white meat. McDonalds is flexible in their menu to conform to the changing tastes of society. Bargaining Power of Suppliers: In recent years the industry has had a small problem with beef, because of the outbreak of the mad cow disease. This problem raised the cost of beef in Europe tremendously but the cost actually went up around the world because of the beef shortage in Europe. The suppliers that sell to McDonalds have a strong voice also because of the fact that the switching cost for McDonalds as a whole would be so tremendous, so any problems or disputes would be worked out with there suppliers. Comparative Ratio Analysis Ratio analysis helps us analyze the financial trends of previous years and extrapolate those trends into future years for McDonalds and its core competitors within the industry. It is divided into three areas: fundamentals, growth and profitability, and capital structure of the company. Liquidity ratios are used to determine how liquid the firm is, and how it will meet its obligations. This also helps us determine how risky the firm is by determining if the company is employing an adequate amount of liability or risk to generate profit. Profitability ratios give us the perspective profitability of the firm is operating. The ratios will help in accurately valuing the company at its current condition, compare its performance against competitors, and project the future results of the company. Fundamentals of McDonalds (MCD) vs. YUM Brands (YUM) Table 1 Financial Condition Company Industry Average SP 500 Debt/Equity Ratio 0.74 1.82 1.13 Current Ratio 1.4 1.3 1.4 Quick Ratio 1.3 1.2 1.2 Interest Coverage 30.6 18.8 28.0 Leverage Ratio 2.1 3.8 3.8 Book Value/Share 13.12 11.95 22.35 The industry average is calculated as an average of competitor brands like YUM, Burger King and Wendys. Current ratio: Since 1999 McDonalds has experienced a steady increase in their current ratio. The present current ratio of 1.4 is higher compared to industry average of 1.3. This increase shows that McDonalds has more ability to pay off their short term debts from the sale of their currents assets. Overall, McDonalds is in fairly good shape because their current ratio is growing. Receivables Turnover: McDonalds has consistently been well below its competitors YUM with accounts receivables turnover. This means that they arent collecting their accounts receivables as promptly as their competitors. This prevents McDonalds from reinvesting and expanding their restaurants which is a major source of revenue. This also allows for a greater chance of default on their accounts receivables. Asset Utilization: This ratio indicates how profitable a company is relative to its total assets. The return on assets (ROA) ratio illustrates how well management is employing the companys total assets to make a profit. The higher the return, the more efficient management is in utilizing its asset base. McDonalds Asset Turnover has consistently been lower than its competitor YUM since 1999. Debt to Equity Ratio: The debt-equity ratio is another leverage ratio that compares a companys total liabilities to its total shareholders equity. McDonalds has maintained a fairly low Debt to Equity Ratio of 0.74 which means that the company has an efficient amount of equity that can cover the cost of its liabilities compared to Yum of 3.14 or the industry average of debt to equity ratio of 1.82. Book value per share: This is an indication of how much shareholders are paying for the net assets of a company. McDonalds book value of 13.12 is higher than the industry average (11.95) or YUM (3.05) Net Income: The net income for McDonalds suffered a dip of 23% in 2007 but recovered in the year 2008, 2009. The total net income in 2009 was $ 4,555 Million compared to YUM who had a net income of $1071Million Shareholders Equity: Shareholders equity represents the amount by which a company is financed through common and preferred shares. The average Shareholders Equity for MCD is $13,287M compared to YUM who has a $709M. Dividend: MCD has consistently grown in dividends over the years. This is one of the most attractive features of MCD. Comparing the dividends of MCD and YUM, MCD has 25% increase on YTY compared to YUM who has only 14%. Growth and Profitability Table 2 Investment Returns % Company Industry Average SP 500 Return On Equity 34.8 48.2 21.4 Return On Assets 16.2 13.1 7.5 Return On Capital 17.6 15.4 10.0 Return On Equity (5-Year Avg.) 22.7 29.0 16.4 Return On Assets (5-Year Avg.) 11.4 10.1 7.6 Return On Capital (5-Year Avg.) 13.0 12.5 10.3 The industry average is calculated as an average of competitor brands like YUM, Burger King, and Wendys. Revenue Growth: The global recession has affected the revenue of both the companies. By year 2009 the consumer demand and currency exchanges have helped recover to pre-recessionary levels. EPS and Growth: The portion of a companys profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a companys profitability. The EPS for MCD is 4.11 which have increased from 9% from the previous year while the EPS for YUM is 2.26. The growth of EPS has been fluctuating due to the global economic crises. Profit Margin: A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. MCD has a profit margin of 20% compared to Yum is 10%. Return on Equity (ROE): Return on equity measures a corporations profitability by revealing how much profit a company generates with the money shareholders have invested. The ROE for MCD is 34.8 which is less than the industry average of 48.2. From the above figure we can infer for 2009 the ROE for YUM is 180%, but this has not been consistent over the years. For a long term investor this is not good. Capital Structure Charts Table 3 Price Ratios Company Industry Average SP 500 Current P/E Ratio 16.4 20.9 22.4 P/E Ratio 5-Year High NA 6.8 15.8 P/E Ratio 5-Year Low NA 3.2 2.4 Price/Sales Ratio 3.21 2.33 2.03 Price/Book Value 5.30 7.11 3.21 Price/Cash Flow Ratio 12.70 11.90 13.80 The industry average is calculated as an average of competitor brands like YUM, Burger King, and Wendys. Market Capital: Market capitalization represents the public consensus on the value of a companys equity. McDonalds in 2009 had a market capital of $67.3B compared to YUM brand that had a market capital of $16.35B. It also represents the market estimate of a companys value, based on perceived future prospects, economic and monetary conditions. Price to Earnings Ratio: A stock with a high P/E ratio means that investors are expecting higher earnings growth in the future compared to the overall market, as investors pay more for todays earnings in anticipation of future earnings growth. From the table 2 McDonalds PE is 16.4, which is below the industry average of 20.4. However there are limitations since the ratio depends on the earnings per share. McDonalds earnings per share of 4.24 are above the industry average of 1.43. Price to Book Value: This ratio used to compare a stocks market value to its book value. A lower P/B ratio could mean that the stock is undervalued. From the above figure McDonald has a stable P/B ratio compared to the Yum. From table 3 the P/B ratio for McDonald is 5.31 which is below the industry average of 7.11. Price to Sales ratio: The P/S ratio measures the price of a companys stock against its annual sales. From table 3 we can understand that the P/S ratio for McDonalds is 3.21 compared to the industry average of 2.33. This means that the investor would be paying $3.21 for every dollar of McDonalds sales. Price to Cash Flow Ratio: This ratio compares the stocks market price to the amount of cash flow the company generates on a per-share basis. McDonalds has a Price/Cash Flow ratio of 12.70 which is higher than the industry average of 11.90. Conclusion In our overall analysis of McDonalds Corporation using a variation of methods and models, we have conclusively found that McDonalds is currently undervalued in the market and is a Buy. The Method of Comparables was used, which included such ratios as: Price/Earnings, Price/Book, Price/Sales, and Price Earnings growth ratio valuations. The ratio valuations were calculated by finding the industry average and using a varying of other factors to project an expected share price. The industry average is calculated as an average of competitor brands like YUM, Burger King, and Wendys. Price to Book Ratio $ Industry Average of Price to Book value 7.11 Current Book Value of McDonald 13.12 Estimated price of share $93.28 Current Market Price 69.37 Trailing Price to Earnings Ratio Industry Average of Trailing Price to Earnings Ratio 17.9 Current McDonalds earnings per share $4.11 Estimated Market price $73.59 Current Market Price 69.37 Dividends Yield Ratio Analysis Industry Dividend Average (%) 2.73 McDonald Dividend per share 2.2 Expected share price found by dividing McDonalds (Dividends per share)/ (Industry average Dividends yield ratio) $80.50 Current Market price $69.37 Forward Price to Earnings Ratio Industry Average of Forward Price to Earnings Ratio 14.73 Current McDonalds earnings per share $4.11 Estimated price of share $60.54 Current Market Price 69.37 All Data obtained from Yahoo finance on 13/016/2010 From the above calculation the estimated price of McDonald is between $60.54 $93.28. However McDonalds corporation has faced previous law suits on being held accountable for obesity, similarly following the litigation process of cigarettes and tobacco companies. The courts ruled against this issue in McDonalds favor, making this a remote future risk factor. In addition, MCD in its effort to be a more socially responsible corporate citizen, by supporting a healthier society, has developed light and healthy menu items in order to give customers additional eating options and in doing so, broadening the array of its customer base while offering its existing customer base with healthier menu options.