McDonald’s is an American international enterprise that deals with fast foods. The franchise business that operates in more than 100 countries is based in the United States and is greatly influenced by federal regulations. Following the enactment of a law to promote healthier nutritional behavior, McDonald’s Company has moved to comply with stipulated legal requirements and to modify the nutritional content of its products. This paper seeks to discuss the costs that are involved in the decision to enhance nutritional standards. The paper will identify relevant costs and costs that are not relevant to the decision.
Corporate social responsibility aimed at improving nutritional standards is one of the decisions that have recently been made by McDonald’s corporation. One of the major initiatives in this decision involves the production of dairy products that are low in fat content. The company also ensures that the percentage of calories in its products is reduced to about 20 %. The company’s move further extends to conducting awareness campaigns that target families as a whole with the main agenda of enhancing better nutrition among children. Other initiatives about the decision involve the production of specialized packaged meals, reducing sodium content in products, advertisements, and organized field trips by the organization’s key personnel.
This decision was made in the year 2011 and its implementation is expected to be long term. Full compliance with the legislation to set nutritional standards is expected to be accomplished by the end of March 2012. Further considerations such as reduction of sodium content in foods are projected to be fully implemented by the end of the year 2015. Though advertising was to be reinforced, it has significantly been used by McDonald’s to spearhead nutritional awareness campaigns. The period for implementation of the decision, therefore, includes the years 2011 and 2012 for active measures with slight extension to future periods.
To implement the decision to improve nutritional standards, the company faced a variety of inputs in terms of implementation costs. The first initiative, aimed at reducing fat, sodium and calorie content in the foods would, for instance, require inputs such as research and evaluation machinery and personnel. There was also the option of using alternative sources of raw materials that would yield low percentages of the minerals in products. Similarly, advertisements would call for the company’s marketing inputs while field trips would require the application of the company’s vehicles, work hours, and monetary expenses.
These inputs can be classified into either relevant costs or costs that are not relevant to decision making. The first classes of inputs that are considered irrelevant to making decisions are historical costs. Historical costs include costs of plants, machinery, and vehicles and are costs that have already been incurred before the decision. Relevant costs, on the other hand, include opportunity costs and sunk costs. These include benefits that would have been derived if another alternative were adopted instead of the decision and the costs that must be incurred in implementing the decision.
The table below summarizes some of the relevant costs and costs that are not relevant to the company’s decision to improve its nutrition standards.
Table 1. Estimates of involved costs
Though the involved inputs are costly, a large percentage either are not relevant costs as they are historical costs or would have been incurred irrespective of the decision. The company, however, stands to benefit from the improved corporate image that may boost its sales.