FIN$561$ Week $1$ Homework $(50$ points$)$

Assume you are the CFO of McDonald's Corporation. Your overall revenues have been steadily falling since $2016,$ however, you've managed to keep net income fairly stable by reducing operating costs. However, due to the economic effects of COVID$19,$ your revenues again took a huge $$1\mathrm{.}2$B hit in $2020.$

It hasn't escaped your attention that despite COVID KFC$\text{'}$s revenues increased by more than $$34$ million in $20201($Note: Up to this point, everything is based on actual financial statements. However, the next sentence is a made$-$up scenario.$)$ Unfortunately, it appears that McDonalds' McNuggets are not in as much demand as KFC$\text{'}$s chicken is among the quarantining and take$-$out populace.

You have created SWOT analyses $($see below$)$ of both McDonald's and KFC to see if KFC might be worth acquiring or aligning with in some way.

Using the Framework for Choosing a Path for Inorganic Growth section in Chapter $6$ of your text and the decision flowchart $($Exhibit $6\mathrm{.}20),$ determine the following.

a$.(4$ points$)$ Based on your SWOT analysis, what inorganic growth opportunity would be the best approach for McDonald's to take with KFC as an acquisition target? Select only one.

b$.(6$ points$)$ Explain your reasoning in terms of what benefits, coordination, and$/$or learning you expeh to gain from your selected approach.

c$.(6$ points$)$ Explain your reasoning in terms of McDonald's need for ownership and control.

d$.(6$ points$)$ Explain your reasoning in terms of managing risk exposure.

$($Note: Fictional scenario!$)$ Three years ago, McDonald's acquired KFC as an outright purchase simply to obtain their chicken recipe. McDonald's let go of all KFC management and employees, selling off all KFC locations. McDonald's rebranded McNuggets as KFC McNuggets and uses the former KFC recipe in a new line of chicken products. However, chicken sales have lagged completely, and this occurred even prior to the COVID pandemic, which made sales even worse. You've decided it's time to refocus your product line, hoping that will improve your bottom line.

Using the Framework for Choosing a Path for Restructuring section in Chapter $6$ of your text and the decision flowchart $($Exhibit $6\mathrm{.}21),$ determine the following.

a$.(4$ points$)$ What restructuring alternative would be the best approach for McDonald's to take considering their declining sales of chicken products? Select only one.

b$.(6$ points$)$ Explain your reasoning in terms of what relationship the KFC purchase has to McDonalds' core business.