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McDonald’s Corporate Social Responsibility Project Report

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Executive Summary

The Green and Clean Kuwait Company (GCKC) is a Kuwaiti company with environmental and ecological technology and know-how and the company is interested to bid in the CSR project of McDonald’s Corporation as its project partner to introduce and implement an innovative approach that would reduce the environmental hazards by producing organic fertilizers generated from the food wastes of McDonald’s. GCKC would like to set up composting bins outside of every outlet of McDonald’s in Kuwait where the waste would be gathered and then transported to a factory outside the city where the foods and vegetable wastes would be turned into organic fertilizer.

The GCKC also develop a network of organic vegetable producers that would supply green products for McDonald’s at a cheap price in exchange for organic fertilizer. The project aimed to reduce greenhouse gas emissions through advanced technology integrating organic materials management strategies for Kuwait with waste composting bins, trucks, haulers, waste processors, gas generating set, boilers, and 1 master fertilizer with conveyor and packing line that would produce 5000 MT of organic fertilizer per year. It is predicted that the project would be feasible from the commercial and ecological viewpoint, as GCKC is striving for ecological sustainability in Kuwait and McDonald’s is eager to demonstrate its CSR concerns in the country, the joint effort would delegate environmental awareness in this region.

Introduction and background to the proposal

In the global arena, the environment has turned into the major focus of the global communities because the environmental degradation would generate ecological imbalance and hamper socio-economic development all over the world, the United Nations have taken intuitive for global negotiation in this regards. Kuwait is an integral part of global awareness for environmental and ecological sustainability, global warming also drawn significant attention of the government and local administration have taken three-layered waste management projects at the central and local level that incorporated municipal solid waste management, material recovery facility, and anaerobic digestion process (Al-Salem and Lettieri, 2009). Under such a scenario, the corporate houses in Kuwait have kept their highest priority on environmental issues as part of their corporate social responsibility where the multinational corporation McDonald’s would like to invest in this regard.

Kuwait is the pioneer of parliamentary form of government with women’s participation in the GCC region with its rising economic growth and social progress and placed at 4tth at the Human development index of UNDP that pointed to the reasonable stage of development in the scale of life expectancy, education and living standard of the people. The economy of Kuwaiti is mostly dependent on the oil and petrochemical sector, although the government is emphasizing to improve its non-oil sectors including agricultural development, the climate of the country is not favorable to turn it self-dependant for its food supply, 75% of its water supply comes from distillation or import. According to the statistics of 2010, the country has a population of 2.9 million, and the total working force of the country consists of 35% local people, and the rest of them are foreign employees (BTI, 2012).

The Company

The Green and Clean Kuwait Company (GCKC), is a privately owned company incorporated under the local company act of Kuwait, the company has US$ 10 million of paid-up capital with headquarters in Kuwait city with skilled technical and professional working force and a dynamic board of management. GCKC is its corporate, residential, industrial, and pubic customers like municipals with an annual turnover of US$10 billion in 2011.

Business Proposal for Green and Clean Kuwait Company

Introduction to the Project

  • Company Name: – Green and Clean Kuwait Company (GCKC)1
  • Address: –
  • 07, XYZ street, City, Kuwait
  • Name of the entrepreneurs: –
    1. Mr. X
    2. Mr. Y
    3. Mr. Z
  • Telephone number: – (353) 000-123450
  • Fax number: –
  • (353) 000- 45670
  • Email address: – GCKC @google.com, [email protected],
  • Web site address: – http://www.GCKC.com

Budget status: – Initial investment of $1 supplied by McDonald’s Corporation

Mission

Although GCKC is a privately owned company, profit is not its main motto, rather its mission is to maximize the resource values through waste management while reducing the environmental hazards and impact of global warming are a way that would improve the national economy and environment and the company could prosper.

Vision

GCKC strives to reach Kuwait in a stage of western nations for its environmental awareness by reducing its emulation of greenhouse gases and waste management and place it in a suitable position for the upcoming global convention for global warming

Scope and Opportunity

  • GCKC has previous working experience with the municipal waste management project in Kuwait;
  • The company has a strong network with the non-profit nongovernmental organizations working in Kuwait;
  • The company has a strong outsourcing set-up with the Asian emerging nations like Bangladesh, India, and Sri Lanka for low-cost workforce supply;
  • GCKC has well enough global connection for technology supply;
  • GCKC has enough financial and physical resources to implementing any big project.

Limitation

GCKC has not yet conducted any physical study with the stakeholders’ option, but having a Letter of Intent (LOI) from McDonald’s Corporation would go to conducting the study.

Business Concept

Zafar (2012) pointed out that Kuwait including other GCC and MEENA countries generate around 150 million tons of solid waste per year and one-third of the quantity comes from foods and vegetable which are used to landfill and discharging greenhouse gases into the open air. Scott (2011) pointed out that increasing health awareness, rising waste disposal costs and food safety legislation is the reason behind growing foods and vegetable waste, in Kuwait such wastes kept on the landfill and pollute the environment with tremendous health risk. To conduct a successful business with food waste management, it is essential to generate an inventory of food waste and then decide on a cost-effective solution for recycling with a benchmark indicator of the outcomes and their market price.

There are several processes for food and vegetable waste recycling options, for the first instance ‘cone composting system’ is a popular, cost-effective, and time-worthy solution for food waste including meat and other protein, bones, and vegetable and convert them into their original compounds like water and carbon dioxide. These green cones are manufacture made of recycled plastic with a solar power system along with a basket and a movable inner cone that function to eliminate greenhouse gases and separates the compounds in a form with is easily consumable for the plants and trees.

Thus, the compost could be transported to the selected farms to manure in the plants, at the same time it could be packaged into bags for marketing. This process is very cost-effective but may require permission from the local environmental authority for compliance with local.

Where the Project fits In the Organisation’s Existing Business

The project of composting for McDonald’s Corporation by collecting the leftover vegetables from the composting bins outside the 336 branches in Kuwait and selling those to the farmers by trucks will be the very first project for the Green and Clean Kuwait Company. This new company fits this project into the central point of its operations and it will continue to serve the McDonalds Corporation by running as an associate of its corporate social responsibly projects.

The Business Environment In Which GCKC Operates

According to The World Bank (2012), the environment of Kuwait is to a great extent business-friendly because within a very short time it has done remarkable progress in ensuring a corporate responsive atmosphere; the following graph shows how Kuwait and comparative nation rank on the ease of doing business –

Comparing business environment of Kuwait.
Figure 1: Comparing business environment of Kuwait. Source: The World Bank (2012).

How GCKC Will Enhance the Organisation’s CSR

Being socially responsibly is the heart of the Green and Clean Kuwait Company’s business because it aims to generate profit only by recycling waste matters into fertilizers. However, it would enhance its corporate social responsibly by creating awareness among communities through special programs and letting them know about the benefits of using recycled items for nature. After a couple of years of formation, it would also carry out plantation programs throughout the country to achieve its aim to create a greener Kuwait. Conversely, GCKC has plans to collaborate with a few primary schools in the country to educate the kids about the benefits of cultivating with organic fertilizers and motivating them towards recycling.

Explain how and where your proposed business initiative will operate in the context of the organization’s organization structure

The proposed business initiative will operate in the Kuwaiti market, chiefly targeting all the branches of McDonald’s Corporation. It has plans to place several composting beans outside the stores where the corporation will through away its leftover vegetables. When the vegetables will turn into fertilizers, Green and Clean Kuwait Company will routinely send trucks to collect those fertilizers to the farmers, so that they could buy them at cheaper prices. The owners of Green and Clean Kuwait Company decided that the organizational structure would be simple because the function and management system is to easy to understand, but they have to make sure that all departments can coordinate the works by following the instruction of the top leaders including managers to satisfy McDonald’s Corporation and the customers. However, the subsequent figure demonstrates the company structure of Green and Clean Kuwait Company more elaborately –

Company structure of the Green and Clean Kuwait Company.
Figure 2: Company structure of the Green and Clean Kuwait Company. Source: Self-generated from Hitt, Ireland & Hoskisson (2001).

Aim of the project

The project aims to support the corporate social responsibility program of the McDonalds Corporation with a sustainable process of producing organic fertilizer from the waste food and vegetable of McDonald’s and distributing them to the farmers who are interested to supply organic vegetables to the company. The project would generate a huge scope of employment opportunities and involve developing people’s awareness of global warming and ecological hazards. By doing so GCKC would like to create value for its stakeholders and contribute to reducing the environmental degradation of the state of Kuwait which is an integral part of the company’s mission statement.

Key Objective of the Project

Marketing Objective

The marketing objective of Green and Clean Kuwait Company (GCKC) is to expand its business by targeting new farmers (apart from those who supplies to McDonald’s only), with the explicit aim to attain a 25% augmentation in total-sales that would represent an additional $50448 in profits by 2014; to attain this marketing objective of increasing the customer-base, GCKC will undertake many strategies. These strategies could include advertising through different feasible media; the table below assesses the suitability of different advertising methods that are necessary to achieve the marketing objective –

Choosing advertising methods – Assessing the feasibility of choosing the advertising methods
Advertising through television Deighton, Henderson, and Neslin (1994) stated that television campaigns are expected to be the best media to attract people of all ages, including middle-aged men and women spending their leisure, or working people watching TV on a Saturday night. Deighton, Henderson, and Neslin (1994) also affirmed that this form of the campaign would also be effective for the young generation aging from 20 to 35 as well as the youngsters as they are the majority of the population to watch television. Arguably, the Green and Clean Kuwait Company could get more opportunities to exhibit their creativity through TV campaigns besides reaching mass farmers at the same time. However, this media is not so feasible because it requires a huge amount of investment and at the initial stage, spending so much would not be possible for the company.
Advertising through print media Newspaper is one of the most essential campaigning media for any company to come into the attention of mass people; the Green and Clean Kuwait Company will start and continue paid circular advertising together with descriptions of benefits of using recycled products; moreover, the business also wants to come up with press kits, brochures, and posters for the farmers
Radio advertising The advertisement of the GCKC must also go through radio-advertising, as this form of advertisement will better address those busy farmers who, for example, hear the radio while working on fields; also, radio-advertising would develop potential-outcomes for the campaign with a sense of flexibility and this can also have a good capture over audiences with help of good scripts and slogans
Online advertising This form of advertising will include in web marketing, including search engine optimization (SEO), advertisement through social networking sites, website development, blogs, and e-mails; moreover, by advertising through Google +, Foursquare, Twitter, Facebook, Myspace, or Hi5, GCKC could get a better arena where further public awareness can arise. This advertising will be successful based on the fact that the individuals in networking communities “trust” each other – so, they would come up to appreciate GCKC’s initiatives if another person appreciates it
Outdoor advertising According to Deighton, Henderson, and Neslin (1994), outdoor advertising can be a great form of marketing to keep great contributions to attain a huge customer base; this may include setting billboards at busy streets beside farmlands, poultries, fisheries, rural places, vegetation fields, or busy bazaars to attract an increasing number of farmers to buy the products at cheaper prices
Special campaigns & others GCKC could also undertake other forms of advertising, such as promoting through magazines, sponsoring concerts, sporting events, and so on

Table 1: Choosing advertising methods to help achieve the marketing objective. Source: Self generated.

Financial objective

The financial objective of Green and Clean Kuwait Company is to become a market leader and expand its business in GCC countries after three years of its operation; however, it expects to increase its yearly profit from 18.0% to 25.830% within the fiscal year 2015.

CSR Objective

The CSR objective of the Green and Clean Kuwait Company (GCKC) is to recycle 78480 units of waste by 2015.

Operational objective

Brealey & Myers (2002) stated that operational or tactical objectives are short-term or limited aims that are prepared to achieve the ultimate goal; besides, and Hitt, Ireland & Hoskisson (2001) argued that it concentrates on some characteristic of the business operation to change the position of the business. By introducing its fertilizer in the existing market in Kuwait, it will increase its business operating profit from $326,273.0 in 2013 to $1,807,500 by December 2015; at the same time, it has a plan to spend 1.5% of its operating income on market research and to increase investment for the promotional activities to aware 50% of its target customer by 2014.

Feasibility analysis

Market Analysis

The Nature of the Industry and Competition

In today’s world, global warming is the major concern that has led people around the world to find out ways in which emissions of sulfur, CFC gases, and other toxic substances can be reduced. This has created a drive towards recycling waste materials into useful substances so that the effect on the environment from making those substances new and discarding waste into the river can be lowered. As a result, there is an increasing demand for recycling service providers not only in the European or American market but also in the Middle East countries like Kuwait.

All over the 1990s, recycling was chiefly regarded as a disorganized procedure, which would support a technique that frequently produced a finished product of poor quality at a higher cost; but these days, the impulsion for recycling is determined almost as much by its economic benefits as it is for the safeguard of the flora and fauna. The total quantity of solid waste created in the GCC area is approximately 120 million tons annually; so, in Kuwait, the recycling industry is an emerging business sector with excellent prospects in terms of growth and profitability (ProMedia International, 2012). Providing recycling service is not a new concept anymore, as there are numerous competitors throughout the Kuwaiti recycling industry. Consequently, it can be argued that the nature of the Kuwaiti recycling industry is moderately competitive, although it is not a mature industry in terms of experience and performance.

Relevant Information about the Nature of the Market

The Green and Clean Kuwait Company (GCKC) will be operating in the Kuwaiti market, and the targeted customers would be the farmers. When it comes to the nature and characteristics of the market, it is important to state that as the soil quality of the country is not so good for agriculture, there will be a high demand for organic fertilizers among the customers. However, to assess the nature and characteristics of the market, it is also essential to assess the purchasing power parity of the customers to roughly identify the extent to which the customers would be able to afford the products of GCKC. According to Index Mundi (2012), the purchasing power has varied in different years as suggested in the table below: –

Year Purchasing Power Parity In Kuwait (Based on GDP) Percentage Variation
1990 – 41.6410 -23.380 percent
1991 – 25.4360 -38.920 percent
1992 – 39.2380 54.260 percent
1993 – 53.6430 36.710 percent
1994 – 59.4990 10.920 percent
1995 – 61.5750 3.490 percent
1996 – 63.1260 2.520 percent
1997 – 65.830 4.280 percent
1998 – 69.0120 4.830 percent
1999 – 68.7820 -0.330 percent
2000 – 70.360 2.290 percent
2001 – 72.4310 2.940 percent
2002 – 75.6980 4.510 percent
2003 – 90.7430 19.880 percent
2004 – 99.1550 9.270 percent
2005 – 110.5420 11.480 percent
2006 – 120.120 8.660 percent
2007 – 129.1160 7.490 percent
2008 – 138.5350 7.290 percent
2009 – 132.7850 -4.150 percent
2010 – 138.8930 4.600 percent

Table 1: Purchasing power parity in Kuwait (twenty years comparison). Source: Index Mundi (2012).

The purchasing power parity of the customers in Kuwait is graphically represented below –

Purchasing power parity. 
Figure 3: Purchasing power parity. Source: Index Mundi (2012).

Demographic Influences

The Green and Clean Kuwait Company (GCKC) will start its business by focusing on all the stores of McDonald’s in Kuwait. Initially, it will sell the fertilizers only to the farmers from whom McDonald buys its raw materials; however, after a few years, it would also target external farmers from the whole country. Nevertheless, it is highly essential to assess the demographic configuration of the country before entering the market; the following table shows the demographic features of Kuwait –

Demographic features of Kuwait
Total inhabitants 2646314 in 2012 estimation
Zero to fourteen year old 25.8 percent (men 348816 & women 321565)
Fifteen to sixty-four year old 72.2 percent (men 1153433 & women 720392)
Sixty-five year old and above 2 percent (men 25443 & women 25979)
The total average age of the population 28.5 yrs in 2011 estimation
Men: the average age 29.8 yrs
Women: the average age 26.3 yrs
Inhabitants growth rate 1.883 percent in 2011 projection
Birth- rate 20.96 births per thousand inhabitants
Death- rate 2.13 deaths per thousand inhabitants
Below fifteen years 1.08 man per woman
Fifteen to sixty-four years 1.6 man per woman
Sixty-five years and above 0.96 man per woman
Literacy 94.4 percent men and 91 percent women

Table 2: Demographic features of Kuwait. Source: Self- generated from Index Mundi (2012).

While starting the business, it is important for the Green and Clean Kuwait Company to make sure that it has the appropriate preparations and competencies to serve people from every ethnic background; however, the table below illustrates the ethnic and the religious groups present in the country:

– Ethnic Groups –
Kuwaiti 45 percent
Other Arab 35 percent
South Asian 9 percent
Iranian 4 percent
Other 7 percent
– Religions –
Muslim (authorized percentage) 85 percent (among which Sunni 70 percent and Shia 30 percent)
Other (comprising Christian, Hindu, Parsi) 15 percent

Table 2: Religious and Ethnic Groups in Kuwait. Source: Self- generated from Index Mundi (2012).

Past and Future Trends of the Industry and the Business Proposal

In the past, the recycling industry was not very lucrative and people from relevant business sectors had no interest in entering such a market; the reasoning behind this was that recycling was something which required too much investment to be made to make the waste reusable, but the outcome was poor quality items. The recycling companies were then forced to sell those items at lower prices because of their poor demand and this in turn resulted in losses for those businesses. However, with changing viewpoints of the global communities in terms of environmental awareness, people now find it necessary to contribute to nature by purchasing recycled items. As a result, although the past trend of the business has proved to be quite disappointing, the future trend of the industry will be quite encouraging. This is because further public awareness would mean that the government would come ahead to make large investments in this sector, making it helpful for new entrants to come up with interesting ideas.

Potential Customers

In the beginning, GCKC will sell the fertilizers only to the farmers from whom McDonald’s obtains its raw materials (like vegetables, fruits, etc); however, GCKC will sell those fertilizers for a cheaper price to the targeted customers.

Potential Suppliers

The main supplier for the Green and Clean Kuwait Company (GCKC) would be McDonald’s Corporation; to be specific; GCKC will collect leftover vegetables from the 336 branches of McDonald’s in Kuwait. Moreover, other suppliers include providers of composting bins, trucks, and all other essential equipment.

Potential Competitors

There are numerous competitors throughout the Kuwaiti recycling industry and the industry is fairly competitive because of the presence of well- established companies such as Metal & Recycling Company, the Green Target Company, Bin- Saleem Environmental Recycling, Kuwait Waste Collection, and Recycling Company, and Trust Cleaning Company.

Future Trends to Justify the Proposal

According to BIR (2010), the future will bring outstanding opportunities for the recycling industry based on the fact that this segment possesses the globe’s most prominent raw material suppliers and proffers the ideal reaction to the rising international responsiveness regarding the necessity for ecological safeguard throughout the planet. Also, BIR (2010) suggested that the industry will turn out to be obligatory for life on earth providing the most profitable trends for the future; this is because the corporate world is increasingly distinguishing the importance of creating an eco-friendly reputation, this will mean to be a great advantage for the industry. Standing on such a phase, it is arguable that the proposal will bring a huge success not only in terms of profit-making but also in terms of ecological assistance.

SWOT Analysis

Strength

Green and Clean Kuwait Company intended to establish this business because it will help farmers, and general people to develop a green environment. However, this project has several strong points to develop a green image and to dominate the market with its products and services, such as –

  • Recycled products of Green and Clean Kuwait Company will assist farmers to reduce production costs because this company will sell fertilizer at a comparatively lower price;
  • Mahdi & Majda (2002, p.2) stated that Soils of Kuwait are mostly sandy with limited organic matter; therefore, farmers will be benefited by using alternate fertilizer, which will increase soil productivity along with soil quality;
  • At the same time, the products of this company will change the financial position of the farmers because they will get better quantity and quality of crops;
  • The employees of this company have a long experience to deal with such a big project;
  • Besides, the industries will get cost-effective pollution abatement technology (Nagavallemma, Wani, Lacroix & Padmaja 2006, p.15);
  • It has the financial capability to ensure the success of the project, and provide top quality, recycled material to the customer;
  • Supply chain management systems and innovative ideas of the human resources are also potential strengths of the company.

Weaknesses

Some possible weaknesses of this company will be –

  • Due to high start-up costs, the management of this company has to face some limitations to manage its assets and human resources effectively to increase the production level at minimal operating costs;
  • At the initial stage, it will not be possible for Green and Clean Kuwait Company to introduce online purchasing or e-commerce facilities;

Opportunity

Green and Clean Kuwait Company will start this business because it is a subject of enormous opportunities –

  • The management team of this company has already conducted a market survey and expected that fertilizer from vegetable waste will be popular to the farmers and it will help the nation boosting the rural economy;
  • It has the opportunity to expand its business inside and outside of Kuwait;
  • It will develop an online order system and door-to-door delivery facilities within a very short period to increase loyal customer base;
  • The purchasing power of buyers decreased all over the world; so, the competitive pricing structure will enhance business;
  • It has the opportunity to contribute to reducing environmental hazards and global warming;
  • Green and Clean Kuwait Company has bright prospect to diversify its product line;
  • This company will get more offers from other companies to recycle their waste;
  • Successful completion of this project will influence McDonald’s to invest more to start the same project in other Arabian nation;

Threats

There are many external threats, such as –

  • Kuwait is one of the highest producers of waste in the world; therefore, their many renowned competitors, such as Metal and Recycling Company, Kuwait Waste Collection And Recycling Company (KWCR), Trust Cleaning Co. are the main threat to the Green and Clean Kuwait Company. However, it will build a good relationship with customers to save the company from future competition;
  • Lack of consciousness of the target customer many create a serious crisis for this company;
  • Other threats for this company are volatility in the price of raw materials, increase in the price of equipment and remuneration of employees, inflation rates, lack of market research, and global financial crisis, strategic plans of the competitors, threats of new entrants, and so on. Financial Projections:

The Green and Clean Kuwait Company design the following financial plan to assess the prospect of the business and estimate the return on investment; however, maximizing profits is not the prime intention of this company as the main purpose of this business to consider corporate social responsibility to develop green Kuwait. Also, this project needs additional fund since it focuses on the integrated marketing campaign and green program to aware the target customer regarding the importance of recycling waste and use of fertilizer; however, the financial projections include a Pro-forma profit and loss statement, cash flow statement, the balance sheet for the year 2013 to 2015, and break-even analysis.

Key financial indicators

McDonald’s Corporation and Green and Clean Kuwait Company will jointly coordinate this project where McDonald’s will invest $1 million or $1,000,000.0 for this project as it has a CSR program. However, the following table provides more information about the total budget, assets, long-term liabilities, etc.

Start-up Costs Key indicators
Start-up Expenses to Fund $92,180.0
Start-up Assets to Fund $907,820.0
Total Funding Required $1,000,000.0
Non-cash Assets from Start-up $826,920.0
Cash Requirements from Start-up $80,900.0
Cash Balance on Starting Date $80,900.0
Total Assets $907,820.0
Long-term Liabilities $850,000.0
Total Liabilities $850,000.0
Planned Investment
Owner $150,000.0
Other $0
Total Planned Investment $150,000.0
Loss at Start-up (Start-up Expenses) ($92,180.0)
Total Capital $57,820.0
Total Capital and Liabilities $907,820.0
Total Funding $1,000,000.0

Table 4: Startup costs for Green and Clean Kuwait Company. Source: Self-generated.

Projected Profit And Loss of Green and Clean Kuwait Company

In the projected profit and loss account, Green and Clean Kuwait Company can make $1,121,168 sales revenue from sales in the first year, and the expenses incurred in the year is $672,345, which indicates the net profit for the project. On the other hand, the company will reach the break-even point within the first year and the profit will increase year by year; however, the following table gives more information in this regard-

Pro Forma Profit and Loss
Year 2013 ($) 2014 ($) 2015 ($)
Sales 1,121,168.0 2,555,069.0 5,108,918.0
Direct Cost of Sales 122,550.0 297,853.0 612,688.0
Other Costs of Goods 0 0 0
Total Cost of Sales 122,550.0 297,853.0 612,688v
Gross Margin 998,618.0 2,257,215.0 4,496,230
Gross Margin % 89.070% 88.340% 88.010%
Expenses
Payroll 374,053.0 766,326.0 1,422,040.0
Sales and Marketing and Other Expenses 12,000.0 24,000.0 48,000.0
Depreciation 165,384.0 325,384.0 645,384.0
Rent 0 40,000.0 100,000.0
Utilities 18,000.0 36,000.0 72,000.0
Insurance 18,000.0 36,000.0 72,000.0
Payroll Taxes 56,108.0 114,949.0 213,306.0
Maintanence and Repair 4,800.0 9,600 20,000.0
Other 24,000.0 48,000.0 96,000.0
Payroll 374,053.0 766,326.0 1,422,040
Sales and Marketing and Other Expenses 12,000.0 24,000.0 48,000.0
Depreciation 165,384.0 325,384.0 645,384.0
Rent 0 40,000.0 100,000.0
Utilities 18,000.0 36,000.0 72,000
Insurance 18,000.0 36,000.0 72,000
Payroll Taxes 56,108.0 114,949.0 213,306
Maintanence and Repair 4,800.0 9,600 20,000.0
Other 24,000.0 48,000.0 96,000.0
Total Operating Expenses 672,345 1,400,259.0 2,688,730.0
Profit Before Interest and Taxes 326,273.0 856,956.0 1,807,500.0
EBITDA 491,657.0 1,182,340.0 2,452,884.0
Interest Expense 57,217.0 52,956 48,223.0
Taxes Incurred 67,264.0 201,000 439,819.0
Net Profit 201,792.0 603,000 1,319,458.0
Net Profit/Sales 18.0% 23.6% 25.830%

Table 1: Projected Profit And Loss of Green and Clean Kuwait Company for the year 2013 to 2015. Source: Self-generated/

Projected Cash Flow Statement of The Green and Clean Kuwait Company

From the following cash flow statement, it was observed that Green and Clean Kuwait Company would be able to generate positive cash flow in the beginning year though initial set-up costs can surpass the expectation level of the management team. In the first year of operation, this recycling company can generate a positive flow of cash since the revenue overlaps the cost and the flow will increase at a good pace, for instance –

Pro Forma Cash Flow
Year 2013 ($) 2014 ($) 2015 ($)
Cash Received
Cash from Operations
Cash Sales 448,467.0 1,022,028.0 2,043,567.0
Cash from Receivables 542,495.0 1,366,516.0 2,768,762.0
Subtotal Cash from Operations 990,962.0 2,388,544.0 4,812,329.0
Expenditures 2013 2014 2015
Expenditures from Operations
Cash Spending 374,053.0 766,326.0 1,422,040.0
Bill Payments 357,477.0 843,317.0 1,684,617.0
Long-term Liabilities Principal Repayment 60,859.0 65,258.0 69,976.0
Purchase Long-term Assets 0 800,000.0 1,600,000
Dividends 20,000.0 30,000.0 40,000.0
Subtotal Cash Spent 812,388.0 2,504,901.0 4,816,633.0
Additional Cash Spent
Long-term Liabilities Principal Repayment 60,859.0 65,258.0 69,976.0
Purchase Long-term Assets 0 800,000.0 1,600,000
Dividends 20,000 30,000.0 40,000.0
Subtotal Cash Spent 812,388.0 2,504,901.0 4,816,633
Net Cash Flow 178,574.0 (116,357.0) (4,303.0)
Cash Balance 259,474.0 143,117.0 138,814.0

Table 2: Projected Cash Flow Statement of Green and Clean Kuwait Company for the year 2013 to 2015. Source: Self-generated.

Projected balance Sheet of Green and Clean Kuwait Company

In the projected balance sheet, the Green and Clean Kuwait Company will have $1,064,710 total liabilities and capital a profit of in the first year while the second year after the initial setup of this company, it will be $1,608,796.0; however, the following table shows that assets and liabilities are increasing –

Pro Forma Balance Sheet
Year 2013 2014 2015
Assets
Current Assets
Cash 259,474.0 143,117.0 138,814.0
Accounts Receivable 130,206.0 296,731.0 593,320.0
Inventory 13,494.0 32,796.0 67,463.0
Other Current Assets 00 00 00
Total Current Assets 403,174.0 472,644.0 799,597.0
Long-term Assets
Long-term Assets 826,920.0 1,626,920.0 3,226,920.0
Accumulated Depreciation 165,384.0 490,768.0 1,136,152.0
Total Long-term Assets 661,536.0 1,136,152.0 2,090,768.0
Total Assets 1,064,710.0 1,608,796.0 2,890,365.0
Liabilities and Capital 2013 2014 2015
Current Liabilities
Accounts Payable 35,957.0 72,301.0 144,387.0
Long-term Liabilities 789,141.0 723,883.0 653,908.0
Total Liabilities 825,098.0 796,184.0 798,294.0
Paid-in Capital 150,000.0 150,000.0 150,000.0
Retained Earnings (112,180.0) 59,612.0 622,612.0
Earnings 201,792.0 603,000.0 1,319,458.0
Total Capital 239,612.0 812,612.0 2,092,070.0
Total Liabilities and Capital 1,064,710.0 1,608,796.0 2,890,365.0

Table 1: Projected Balance Sheet of Green and Clean Kuwait Company for the year 2013 to 2015. Source: Self-generated.

Break-even Analysis for Green and Clean Kuwait Company

According to the projected profit and loss account, Green and Clean Kuwait Company anticipated that this company would be able to reach a breakeven point within six months of its operation because it will generate $201,792 in profits. From the financial projections for the next three years (2013 to 2015), it can be argued that the Green and Clean Kuwait Company would reach at break-even point if it can sell 2180 units/ per month or 26160 units/ per year fertilizer, otherwise, it has to face unexpected losses; however, the subsequent figure demonstrates the break-even point of the Green and Clean Kuwait Company –

 Break-even analysis of Green and Clean Kuwait Company.
Figure 2: Break-even analysis of Green and Clean Kuwait Company. Source: Self-generated.

The Feasibility of Business Initiative from a practical point of view:

Operational Issues

Green and Clean Kuwait Company will focus on environmental factors to sustain in the market and increase brand awareness; however, many specific issues may impact the success of your projects, such as specific operational procedures, business location and facilities, business management, and monitoring process.

  • The management of this recycling company will purchase the necessary equipment;
  • However, they will visit the outlets of McDonald’s at least two days a week and make phone all regularly;
  • They also develop an effective communication system, supply chain management and
  • At the same time, managers are each department will direct the employees, accountants, and other sub-ordinates;
  • Also, the service will open for seven days a week to satisfy investor, farmers, and other customers

Legal Issues That May Impact on the Success of the Project

To ensure the success of the project, GCKC will need to fully conform to the laws and regulations of Kuwait; besides, the management of this company concentrates on the Companies Act to make license, Labor law ensure rights of the employees, employment laws for wage issue, Consumer Protection Act and environmental law to ensure environment safety issue.

The viability of the project

Brealey & Myers (2002) and Hitt, Ireland & Hoskisson (2001) argued that costs and benefits analysis takes into account the amount of monetary gain; however, the project considers prospective if it achieves higher CBR –

The success of the projects = Financial benefits – financial costs

However, the projected profit and loss account along with the balance sheet makes it clear that this project is highly profitable and it also ensures corporate social responsibility.

Return on investment (ROI) of GCK

Year 2013 2014 2015
ROI Return on investment (%) = Net profit ($) / Investment ($) × 100
Net profit 201,792.0 603,000 1,319,458.0
ROI = (201,792.00 / 1000000) x 100
= 20.1792%
= (603,000 / 1000000)
= 60.3%
= (1,319,458.0 / 1000000)
= 131.94%

Table 2: Return on Investment of Green and Clean Kuwait Company. Source: Self-generated.

Return on investment of Green and Clean Kuwait Company will satisfactorily increase year by year, which indicates the fact that McDonald’s Green project is a prospective project for this recycling company.

Reference List

Al-Salem, S.M. & Lettieri, P. (2009) Life Cycle Assessment (LCA) of Municipal Solid Waste Management in the State of Kuwait. European Journal of Scientific Research, Vol.34 No.3 , Web.

BIR (2010) General Assembly: Future brings excellent opportunities for the recycling industry, Web.

BTI (2012) Kuwait Country Report, Web.

Brealey, A. R. & Myers, S. (2002) Principles of Corporate Finance. 7th ed. New York: McGraw Hill.

Deighton, J., Henderson, C. M., & Neslin, S. A. (1994) The effects of advertising on brand switching and repeat purchasing. Journal of Marketing Research, 16(1): 28-43.

Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2001) Strategic Management. 4th ed. South-Western Thomson Learning.

Index Mundi (2012) , Web.

Index Mundi (2012) , Web.

Mahdi, A. & Majda, S. (2002) , Web.

Nagavallemma, K.P., Wani S.P, Lacroix, S. & Padmaja V. V. (2006). , Web.

ProMedia International (2012) Kuwait Waste Management Conference & Exhibition. , Web.

Scott, S. (2011) Focus on Food Waste, Web.

The World Bank (2012) Doing Business, Web.

Zafar, S. (2012) Food Waste Management and Anaerobic Digestion, Web.

Footnotes

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