SWOT Analysis of McDonald’s

McDonald’s today is one of the largest and the best known global food service retailer with more than 31,000 restaurants in 125 countries serving 49 million customers each day. McDonald’s serves more than one percent of the world’s population. McDonald’s outstanding brand recognition, experienced management, high quality food, advanced operational systems and unique global infrastructure ensure a position that enables them to capitalize on global opportunities.

SWOT (Strength, Weaknesses, opportunities and threats) analysis provides a basis for crafting a strategy that capitalizes on the company’s resources, while taking advantage of the best opportunities, and defending against the threats to its well being.

Strengths

McDonald’s is the market leader in fast food franchise with huge customer base around the world. It has a strong global presence with its nearest domestic competitor being only half its size. Approximately 85% of McDonald’s businesses are owned by franchisee operating full time in more than 31,000 restaurants in 125 countries. MacDonald’s benefit from cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries. In international markets, MacDonald’s is well placed to expand and take advantage of long-term economic growth.

One of the main competitive advantages of McDonald’s is strategic locations; these restaurants have global locations in all major airports, cities, along the highways, tourist locations and shopping malls.

The McDonald’s brand is the most well known house-hold brand, the golden arches and spokes character (Ronald McDonald’s the clown) is most recognizable logo in the globe. McDonald’s marketing has successfully created a brand image of fast food delivery speed, cleanliness and customer care in the minds of millions of consumers. This strong brand recognition creates significant opportunities for the company. MacDonald’s is able to generate more sales because of its brand recognition.

Strong and marketable product which comes with affordable price are able to captivate children and youth society, also the low and mid-range income community who forms the majority of the consumer power in fast food industry.

Customer knows what to expect when walking into McDonald’s restaurant. Innovation is a key emphasis for McDonald’s to produce new product and diversifies its business venture to suit to the changing trends and tastes of people and culture around the globe. McDonald’s is easily adapted their global restaurants to appeal to cultural indifference’s around the world. Its products are localized to the people’s culture and taste in the country. For example, in Islamic countries, McDonald’s restaurants maintain “Halal” menu, signify the compliance with Islamic laws of food preparation. In China, the McDonald’s menu is adapted to local Chinese culture for which soups and vegetables are included in the all menu.

McDonald’s has good governance of its operating line, following strictly food safety guidelines to provide nutritional values in the food. There were more than 2000 inspections checks in the food preparation processes. McDonald’s runs through 72 safety protocol days to ensure food is maintained in clean and contaminate-free environment. Nutrition information is provided to customer and it is printed on all packaging including in McDonald’s internet web-sites.

McDonald’s is a community oriented and socially responsible company. The famous Ronald McDonald’s Houses provides accommodation, food and sibling support for families with children needing extensive hospital care.

Weaknesses

Over the years, McDonald’s had created successful branding and image in the heart of children and teenage group. The market segment is too focusing on kids. McDonald’s must start to change its marketing strategy and expand their business into other segment to remain competitive. McDonald’s brand is often related to unhealthy food and obesity, such as hamburger, french fries. Little has been done by McDonald’s to counter these claims. One of the fastest growing trends in recent year is organic food. McDonald’s has yet to capitalize on the trend towards organic food.

Like any other organization in the hospitality industry, McDonald’s is also faced with high employee turnover rate, which leads to more money spent on recruitment and training. McDonald’s has problem with fluctuations in operating and net profits which impact its investor relations.

Another point id that fast food industry is really saturated. As a result of this, MacDonald’s has to deal with the prospect of looming market saturation, which could make it difficult to add new outlets. There is also an increasing price competition driven by too many competitors, which reduces the company’s ability to increase revenue. Nevertheless, the swift of the company’s focus from a value menu to a more diverse one has recently limited the negative effect of the intense price competition that was traditionally taking place among the industry leaders.

Opportunities

With a good management and product development, the company will survive all the changes and competition in these day and future. Changing trends in eating habits toward more healthy eating, seen as a threat to McDonalds can also be seen as an opportunity. McDonald’s can introduce healthy food such as low calorie items, putting more effort in the R&D on introducing healthy food and eating habit. McDonald’s can expand its product offering into organic food. These strategies will allow McDonald’s to ensure their place in top spot above all others. The management can improve the company fluctuating operating profit with better cost control to reduce food wastage and better manage its production and front-line offices with lean management.

McDonald’s can tapped on outsourcing to reduce resources spent on administration and also food delivery, leverage on off shoring for 24 by 7 customer care hotline and internet online technology for taking orders. McDonald’s also needs to cope with the fast changing consumer needs and trends to ensure sustainability and competitive advantages.   The marketing and product R&D will need to work on offering more varieties to entice existing and new customer base. For example, besides “fast food”, the business can be expanded to offer “fast beverages” such as coffee varieties, milk shake series. Currently McDonald’s have industrial, formica restaurant settings. One of the strategies that McDonald’s can venture into is expanding its restaurant varieties to capture different market segments such as business executives, internet cafe surfer. Such recent business innovative is Mc Cafe.

McDonald’s still needs to penetrate in many countries especially in Europe, Asia and Latin America.

Threats

McDonald’s faces major competition from the fast food industry and hamburger business. The greatest competitor for McDonald’s is KFC and Burger King. Other competitor in the franchise and fast food industry are Starbucks, Taco Bell and Wendy’s. McDonald’s had faced critics from parent advocate groups for their marketing practices and ethicality.

McDonald’s, just like other fast food industry, often receives bad press because of its link obesity. Increased concern such as this has led the Food Standards Agency and the Department of Health in the UK to review the advertising of ’junk’ foods such as McDonalds to children. McDonald’s has been sued multiple times for “unhealthy food” allegedly with addictive additives contributing to obesity epidemic in the US. As a leader in the global food service retailing business, McDonald’s needs to strategize on its business, market, product R&D to minimize and overcome these threats.

McDonald’s is exposed to changes in the global economy. The company’s aggressive international expansion has left it extremely vulnerable to other countries economic slowdown. Foreign currency fluctuation is also another problem global companies like McDonalds.

Credit: Strategic Management-MGU KTM