McDonald’s

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Company: McDonald’s Corp.
CEO: Chris Kempczinski
Founders: Richard and Maurice McDonald’s
Year founded: 1940
Headquarter: Chicago, Illinois
Number of Employees (Dec 2018): 210,000
Type: Public
Ticker Symbol: MCD
Annual Revenue (Dec 2018): $21.025 Billion
Profit |Net income (Dec 2018): $5.925 Billion

Products & Services: Fast food and Beverages
Competitors: Burger King | Chipotle | Wendy’s | Shake Shack | KFC | Chick-Fil-A | Subway

Did you know

McDonald’s is the largest supplier of toys in the world, remember the toys that you get with every happy meal!

Introduction

McDonald’s is one of the most celebrated fast food chains worldwide. This American food restaurant was founded seventy-five years ago, in 1940, by two brothers Richard and Maurice.

The first McDonald’s stall was a BBQ joint, which was opened in San Bernardino, California.

After eight years, it was turned into a fast-food restaurant, which was later purchased by Multimixer salesman Ray Kroc. In 1955, he started his first franchise in Des Plaines, Illinois, transforming it into a proper corporation gradually.

Today, McDonald’s Corp. is one of the top ten international brands running thousands of franchise in almost all over the world, including Australia, Canada, France, Germany, the United Kingdom, China, Italy, Korea, Poland, Russia, Spain, Switzerland, the Netherlands and many other countries in the world.

Let’s explore the latest dynamics of SWOT analysis of McDonald’s . It reveals how the most thriving food chain business of all time uses its competitive advantages to continue ruling the fast-food industry.

McDonald’s Strengths

The following factors are McDonald’s most potent aspects which have ensured the company’s profitability, development and universal brand image.

1. Tenth Most Valuable Brands

McDonald’s is the tenth most valuable brand in the world. With an incredible brand value worth, the company rules the restaurant industry regardless of the fierce competition.

2. Tasty Food

McDonald’s French fries are considered the best tasting fries in the fast food industry.

McDonald's French fries are best tasting fries says customer survey
Source: Statista

3. McDonald’s – A Real Estate Company

Very few people know that apart from selling burger and fries, McDonald’s has a multi-billion real estate empire. Imagine having thousands of premium locations around the globe.

As of end of 2018, it has 37,855 restaurants in 120 countries, out of which 35,085 are franchises and rest are company-operated restaurants.

McDonald’s franchise works slightly differently. McDonald’s not only provides their brand name, recipes, ingredients, processes to franchisees but also owns the land and operates as a landlord and makes revenue through rent payments.

4. Technology Initiatives

McDonald’s is taking revolutionary technology initiatives to make their ‘Experience of the Future’ dream come true. Initiatives like implementing self-service with kiosks, mobile order and payment systems are benefiting McDonald’s image as the ‘restaurant of the future.’

5. Technology Acquisitions

The company’s latest acquisition of ‘Dynamic Yield’ is another step towards enhanced personalized marketing and customizations. Dynamic Yield is an Israeli startup that assists brands like McDonald’s to boost their customer experience with brands personalize offerings.

6. Highest Brand Value in Fast Food Brands

McDonald’s enjoys the privilege of being the most valuable fast food brand in the world with the brand value of $126.04 billion in 2018. No other brand, in the fast food category, was even close to McDonald’s worth as Starbucks, which was the second most valued brand had a worth of just $44.5 billion.

Brand Value of McDonald's
Source : Statista | Brand Value of McDonald’s

7. Improved Quality Control and Health Protocols

You can debate about the taste and overall customer experience, but McDonald’s’ quality standard has always been its strong point. The Company enforces complete food safety and quality protocols before buying the ingredients from third-party intermediaries.

Recently McDonald’s has begun restricting the use of the high-value human antibiotics. It was established by the World Health Organization (WHO) as “highest priority critically important antimicrobials” (HPCIA) to human medicine, in its global chicken supply since 2018.

The policy also appreciated by many public health and consumer group as it is a great effort to prevent dangerous superbugs.

8. Leading quick-service restaurant

According to Statista, McDonald’s is the leading quick-service restaurant (QSR) chains in the United States in 2018, by system-wide sales. The accounting for transactions of McDonald’s topped the chart with $38.52 billion in 2018.

McDonald’s Weaknesses

Here are some of the shortcomings of McDonald’s’ strategy and structured composition, which affects its overall growth.

1. The Franchise business model

McDonald’s is the best example of international franchising models. However, having this complicated web of franchised and company-operated restaurants expose the brand to certain risks.

The risks of financial deterioration, mismanagement, customer dissatisfaction, and low revenue generation. The company heavily depends on the franchises which works independently and hence they have no control over their day to day performance, but it affects the brand directly.

2. Supply chain interruptions

McDonald’s being one of the busiest food chains often faces issues due to disruption in the supply chain. Also, it limits the availability of products, which are critical to the operations.

Therefore, when a franchise experiences such interruptions, the operational expense increases, which there by results in reduce revenue and lower profitability.

3. Lack of Employee Satisfaction

Due to recent employee right revolutions worldwide and increased wage limits, many organizations have faced critical dissatisfaction from employees.

Recently McDonald’s has faced extreme backlash from their workforce. The workers went to several protests and strikes with a demand to increase their minimum wage to $15 an hour, causing the company reputational harm.

4. McDonald’s Breakfast Menu Has Lost Its Charm

For nearly a decade, McDonald’s breakfast sales remained unbeatable especially in the US. However, in May 2018, the company’s CFO accepted that they have been observing a downfall in McDonald’s breakfast menu consumption and they must do something to fix it.

But with such fierce competition around, it won’t probably be easy to regain the popularity for breakfast meals.

5. CEO got fired

In Nov 2019, McDonald’s CEO, Steve Easterbrook, was fired after having a consensual relationship with an employee. It violated company policy. Also, the company’s board stated that Steve had “demonstrated poor judgment.”

McDonald’s Opportunities

The following opportunity section for McDonald’s emphasizes the emerging chances of growth. It can help the company to improve its business performance, management structure, and strategic growth and other aspects.

1. Value Meals

In 2018, McDonald’s launched its “$1, $2, $3” menu and “2 for $5 Mix and match deal” proposed toward its value-conscious consumers. The menu was a successful addition, resulting in increased sales.

2. Innovative Products

McDonald’s must put efforts to introduce new, innovative items on their menu to make customers choose them instead of the new fast food outlets.

In 2018, the company started to serve an exclusive beverage – MIX by Sprite Tropic Berry in their New York outlets. It became an instant hit and is likely to be served in all of the US.

Launching more items like this according to the geographical conditions and culture can help McDonald’s maintain their charm for a longer period of time.

3. Global Expansion

McDonald’s rules over the US, but it is often that it struggles in the international market. However, the company has high potential to continue its global expansion by focusing more on international markets rather than different states of America.

4. Rebuilding the Brand Image

While fast-food restaurants are struggling to fight the image of ‘junk producing centers’, McDonald’s can play it smartly by continuing its aggressive initiatives towards, healthy and customized offerings.

These developments have begun to show progress, with positive comparable sales leading to a growth in profits. The re- franchising mission have surely pushed the sales back, but in the long run, the healthy image of McDonald’s can continue to make bigger differences.

5. Mobile order and McDelivery

McDonalds has initiated a partnership with UberEats and Door dash for US food delivery. These mobile order and delivery initiatives help McDonald’s to reach and fulfil customer’s ever-changing needs.

McDonald’s Threats

The threat factor is connected with the phenomenon which stops the company from taking full advantages of the benefits that can be derived from the available strengths. Therefore these are the few threat that McDonald’s faces.

1. Risky Investments on Technology Initiatives

Although the innovative changes done by McDonald’s have a positive outlook, the investment in technology is still risky.

The public pace of adapting new technologies may slow down the return on investment, and the results of enhancing customer experience may not generate the expected returns.

2. Fierce Competition from Competitors like Chick-Fil-A

We might think that burger giants like ‘Burger King’ are McDonald’s only competitors, but the table is beginning to turn.

Recently, Restaurant Business revealed that Chick-fil-A is now McDonald’s biggest competitor in the wildly competitive Quick Serve Restaurant (QSR) area.

3. Cultural Threat While operating in Various Countries

Being a global fast-food chain, McDonald’s has often faced multiple cultural threats in different parts of the world, causing harm to the image of the brand.

Also, it gets challenging to adapt and operate differently as per the location of the franchise. For example, a few years ago, McDonald’s faced quite a big scandal for using ingredients which were not ‘halaal’ in Muslims countries.

Such controversies make it difficult for McDonald’s to meet customer expectations with inherited risks in the international operating environment, deteriorating the brand image.

4. New Age Fast Food Trends

McDonald’s often for millennial is considered an old school with its traditional menu and taste. In this situation, food chains like shake shack and Wendy’s take full advantage with their often experimented menu and recipes to include variety.

For example, McDonald’s failed to compete with Wendy’s “Signature-Crafted Burgers.” and hence had to stick with its conventional Quarter Pounders to save face.

5. Constant Environmental Concerns

Like every other food giant, McDonald’s face immense pressure to improve its practices to minimize the waste, which causes environmental pollution.

The growing ecological concerns demand McDonald’s to take initiatives in this regard and set an example for other food outlets but it is not that simple.

In March 2018, environmental activists proposed the board of directors of McDonald’s to abandon the use of plastic straws in its over 37,000 restaurants worldwide due to explosion of plastic pollution.

Conclusion

McDonald’s is one of the most powerful food brands of all time, deriving incredible globalization and customer loyalty. But despite the company’s continuous legacy, it needs to keep in check the aspects which can cause trouble.

In this SWOT analysis for the company, we highlighted each of the strength, weakness, opportunity and threat which McDonald’s faces in the market.

Source:

https://bstrategyhub.com/mcdonalds-swot-analysis/
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Martínez., R., Holman, & Fely. (2019, November 28). McDonald’s SWOT Analysis. Business Strategy Hub. https://bstrategyhub.com/mcdonalds-swot-analysis/.
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Acknowledgement: We gratefully acknowledge the Business Strategy Hub organization for their efforts in sharing information about strategic management and corporate analyses. Thank you Business Strategy Hub team.
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