SWOT Analysis of McDonald’s and Derivation of Appropriate Strategies

Table of Contents

Declaration

Summary

Reminder

1. Introduction

2. Overview of McDonald’s

3. SWOT Analysis of McDonald’s
3.1 Strengths
3.2 Weaknesses
3.3 Opportunities
3.4 Threats

4. TOWS Analysis of McDonald’s for the ‘Products’ and Strategies

5. Evaluation of Strategies

6. Conclusions and Recommendations

References

Summary

This essay deals with the SWOT Analysis of McDonald’s and the selection of the final strategy derived amongst all strategies revealed for the ‘Products’.

Firstly, an overview of the McDonald’s was given and then SWOT Analysis which was made by the team and the determined strengths, weaknesses, opportunities and threats were shortly explained. After that TOWS Analysis was made for the generation of SO, TO, WO and TW strategies. All the strategies were evaluated; finally, the selected strategy for Germany and the reasons for the selection of it were explained.

Reminder

SWOT Analysis of McDonald’s was made as a teamwork containing five people and focus points were determined as follows: Services, expansion, products, healthy food and environmental aspects & corporate social responsibility.

1. Introduction

SWOT Analysis is a method to identify the strength and weak aspects, additionally to examine the opportunities and the threats which arise from the external environment. Companies can develop and practice a strategy by the evaluation of the elements that are exposed from the SWOT Analysis to be foremost. In this essay, the SWOT Analysis of McDonald’s, which was created as a team, is explained and the strategy revealed from it for the ‘Products’ is discussed.

2. Overview of McDonald’s

McDonald's Corporation (McDonald's or ‘the company’) is one of the world's largest foodservice retailing chain. The company is mainly known for its burgers and fries which it sells through more than 33000 restaurants in 119 countries serving 68 million people each day. It mainly acts in Europe, Asia Pacific, and Americas. The company headquarter is located in Oak Brook, Illinois and has about 400,000 people worldwide. The company had the revenues of $24,074.6 million during the financial year ended by December 2010 (FY2010), an increase of 5.8% over 2009. The revenue growth was primarily driven by the positive comparable sales growth. The operating profit of the company was $7,473.1 million in FY2010, an increase of 9.2% over 2009. The net profit was $4,946.3 million in FY2010, an increase of 8.7% over 2009 (McDonald’s Corporation 2012 & McDonald’s 2012)

3. SWOT Analysis of McDonald’s

Table 1. SWOT Analysis of McDonald’s

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3.1 Strengths

- Global Presence / Market leader (Domestic & international markets): With more than 33,000 restaurants serving 68 million people each day in 119 countries, McDonald’s is the market leader in the US and the international market (Getting To Know Us 2012).
- Very high brand recognition and world’s most recognized logo: McDonald’s is the number 9 best global brand in the world and it had the most recognized logo with Coca Cola and Nike in the world (The World’s Most Recognizable Symbols and Trademarks & The 100 Top Brands 2012). Strong brand recognition and robust brand equity enable the company to keep its leading position, opening new restaurants and increasing the product numbers (McDonald’s Corporation, Company Profile 2011).
- Cost reduction through economies of scale: From cost reduction through economies of scale, McDonald’s can get benefits because of being very large and acting globally (Orji et al. 2005).
- Franchising / Fast Food sales & Property investor (Real estate portfolio): One of the most premier franchising company, more than 80% of its restaurants in the world are owned and run by the Franchisees.
- Strong own brand items (i.e. Big Mac, McChicken McNuggets, Mc Muffin):
McDonald’s serve the world some of its favorite foods - World Famous Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin (Full Menu Explorer 2012).
- Use of well-known food brands in their products (i.e. Heinz, Coca Cola): McDonald’s has got a strategic alliance with Coca-Cola and only sells carbonated drinks from this company. Use of well-known food brands increases the reliability of them by the customers (Cui, Y. & Ting, Z., 2009).
- Adaption to cultural differences: For instance, McDonald’s introduced Chicken Maharaja-Mac in India as most of the people in India do not eat beef (Menu 2012).
- Absolute efficient food preparation process: McDonald’s operation process was
designed to move quickly and as cheap as possible to provide the customer the order quickly (Ritzer, G., 1983)
- Excellent locations (theme parks, train stations, airports…): As we experience, McDonald’s restaurants are located at the locations where the people visit mostly.
- Own academic institutions (Hamburger university): McDonald’s has a global centre of excellence named as Hamburger University and used for giving operations training and leadership development (Hamburger University 2012).

3.2 Weaknesses

- Mostly targets children: McDonald’s uses advertising that mostly targets children (Fast Food Targeted Marketing 2012). Children eat more McDonald’s food and this may cause health problems and rise in obesity.
- High employee turnover: In comparison to its competitors, McDonald’s has the highest employee turnover rate which is one of the reasons for having the lowest customer service ranking among its competitors (Pae et al. 2005).
- Product failures (e.g. McFish): McDonald’s has had some product failures in the last years (i.e. McSoup, McFish, Arch Deluxe, McLean Deluxe) (McDonald’s Corporation Company Profile 2011)
- Not much variation in products (e.g. seasonal, events etc) / Product flexibility: McDonald’s does not have variations related to season etc.
- Not yet capitalize to organic foods: McDonald’s has not yet capitalized on organic foods because the fluctuations in the market and the net profits have affected the investor relations (The Trends in Retailing of Organic Foods and the Impact of These Trends on Whole Food Market 2012).
- Very big network - Difficult to check everything and keep under control: Because of being active in 119 countries and having more than 33,000 restaurants make check everything and keep under control for McDonald’s and increases the customer complaints as well.
- High training costs due to high employee turnover: In comparison to its competitors, McDonald’s has the highest employee turnover rate and as a result it increases the training costs (Pae et al. 2005).
- Less focus on healthier products (Only fries / Burgers): McDonald’s has recently started introducing healthier products, but basically the focus products are still fries and burgers (Hitt et al. 2011)

3.3 Opportunities

- Optional food e.g. for allergics, gluten free, peanut free etc.: McDonald’s bread contains gluten and deserts also mainly contain peanut. For the people who have allergy, the bread without gluten or a kind of desert without peanut can be offered optionally.
- Creating new brand items: McDonald’s already have world Famous Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin brand items (Full Menu Explorer 2012). By means of the usage of its brand recognition, McDonald’s can continue creating more brand items
- Increasing trend of preferences for healthier food options: Apart from salads, McDonald’s basically have fries and burgers. Healthier food options can be created. It will be helpful for McDonald’s to change its unhealthy image a little as well.
- Expansions of business to newly developed parts in the world: According to James Cantalupo who was the CEO of McDonald’s International in the past developed a formula seen below to forecast the potential market for the growth of McDonald’s (Yu, L. 1999).

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Figure 1. The Growth Forecast Formula of McDonald’s

The formula also supports that it is a kind of opportunity for McDonald’s to expand its business in the newly developed parts, countries. As an example of achievement can be given as India.

- Greener image in relation to the energy used for production and showing a responsibility for the environment and nature: McDonald’s publishes Corporate Social Responsibility (CSR) scorecards and its focus areas are Nutrition & Well- Being, Sustainable Supply Chain, Environmental Responsibility, Employee Experience, and Community (Sustainability 2012). The focus areas can be expanded to every operation.
- Growing take-away and home delivery market: According to the forecast of Euromonitor, the household consumers will increase in Western Europe by 3.2% over the period of 2010-2015. The expenditure forecast for Germany is 1.5% (Foodservice Profile Western Europe 2011).

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