MBA 5101 Unit II Mini Project: SWOT Analysis of McDonald’s

SWOT Analysis of McDonald’s

Columbia Southern University

“McDonald’s SWOT Analysis”

Strengths Strong Global Brand: McDonald’s is the only fast food chain recognized in the world. It is the market leader and its strength is having a competitive edge in market.Economies of Scale: McDonald’s shares its fixed cost over many restaurants, so it is the cheapest place to eat. These cheap prices attract a lot of customers hence becoming its strength. Diversified income: McDonald’s operates in 120 countries if the sales are low in one country, it is generating huge profits from another country and hence it balances its loss with high profit areas, and results in annual growth of the company. Market Power over suppliers: Coca Cola Company allows only McDonald’s to offer lowest prices for coke. Weaknesses Less Focus on Nutritious Food: McDonald’s does not focus on nutritious food. All the food they offer is high carb and fat. Many people who cut down carbs are not going to McDonald’s cutting down company’s profit. High Employee Turnover: McDonald’s offer very low wage rates with very low skilled labor, hence the employee turnover rate is very high. This high turnover rate affects the company negatively due to high training costs.Less focus on Customer complaints: McDonald’s is most famous business chain so it does not pay attention towards customers complaints due to which the company has to face many lawsuits and have to pay costs for that cutting down company’s profit.
Opportunities Addition of Organic Products: McDonald’s can focus on healthy organic food to attract more population which is now health-conscious.Focus on Recycling: The Company can start go green campaign and use products which are environment friendly and can easily be recycled, playing an important role to control pollution.Expanding in developing countries: McDonald’s is very easily accessible in developed countries, but there is great opportunity for expansion in developing countries by opening new franchisees to earn more profits. Product Diversification: McDonald’s can offer new product line for health conscious people.Gluten-Free Menu: There is not a single fast food chain in the market offering gluten free fast food product line. McDonald’s has the golden opportunity to take this advantage. ThreatsIncreasing Health Awareness: People are becoming more aware of healthy food and switching to healthy diet. McDonald’s can lose a very big market by not offering healthy food. Increasing Competition: Subway is the biggest competitor of McDonald’s today. They are focusing on healthy food like salads. Also offering very low prices. GMO Trends and regulations: With the increased health awareness McDonald’s needs to develop new policies which focus on GMO ingredients for health-conscious people.

Introduction:

McDonald’s opened its first restaurant in 1940 and since than it has become the world’s largest fast food chain business in the world. According to 2018 statistics, McDonald’s is the second-largest fast food business in the world. McDonald’s has 37,241 franchisees in over 120 countries in the world.

Strategic-Prospect:

McDonald’s customer-focused strategy “Plan to Win” is a Global business strategy. McDonald’s also focused on reducing its prices gaining competitive edge in market as well as by providing innovative food menu. There focus is only on providing better quality to satisfy its customers instead of just getting bigger (David, 2011). MCD’s continuously maintain competitive edge in market. It is also listed among “top 40 companies by “Black enterprise Magazine”.

According to McDonald’s 2009 annual report the main reason for its success is Alignment between company, its franchisees & Suppliers which helps to identify, implement & scale new innovative ideas to meet customer’s needs. Industry analysts concluded that investing in McDonald’s is a “buy” which means it is risk-free or no risk at all investment.

SWOT Analysis

Strengths:

McDonald’s biggest strength is that the company has the competitive edge in the market due to which it regularly increases its annual revenues and market growth generating more profits which ultimately open doors for more opportunities. McDonald’s shares its fixed cost over many restaurants, so it is the cheapest place to eat. These cheap prices attract majority of customers, the customers are happy to pay low-prices for their food and McDonald’s generates huge profits offering them the low-priced menu because it makes its huge profit from reducing fixed costs. McDonald’s operates in more than 120 countries if the sales are low in one country, it does not impact McDonald’s business because it is generating huge profits from another country e.g., United States and European Countries where more than 50% of people eat McDonald’s. In this way it balances its low profits with high profit areas, and results in annual growth of the company.

Due to the most successful fast food brand in the world, McDonald’s take advantage by exercising its market power over its suppliers and taking advantage by lowest prices offered to the company. McDonald’s company clearly demonstrates this as McDonald’s has an agreement with Coca Cola Company and no other fast food chain can lower their prices than McDonald’s. If any company wants to do so, they are not allowed to have Coca Cola ultimately switching to PepsiCo.

The CEO of the company claims that in five of its major markets, 75% of people lives within the distance of three miles from McDonald’s. This explains that how accessible McDonald’s is to every person. According to Forbes, McDonald’s is the 9th most valuable brand in the world.

Weaknesses:

The biggest weakness of McDonald’s is that it does not focus on nutritious food. All the food they offer has high carbs and fat. The increased health awareness has caused many people to who cut down high-carb and fat food also cutting down company’s profit. The most dangerous foods which are responsible for 77% of obesity in U.s are high carb foods with fats. French Fries, Burgers and fried food are unhealthy and causing many serious health issues. McDonald’s needs to focus on healthy food strategies and should attract people by making health focused strategies.

McDonald’s offer very low wage rates with very less skilled labor, hence the employee turnover rate is very high. This high turnover rate affects the company negatively because company continuously hires new employees which results in high training costs. McDonald’s needs to rethink their strategy and should work on their employee retention strategies. By offering high-wage rate McDonald’s can retain its employees and can save on training costs.

McDonald’s is the most famous fast food business chain in the world, many franchisees provides poor quality food but the company does not care much about it because in anyways they are still the best company in restaurant industry, so it does not pay attention towards customers complaints due to which the company has to face many lawsuits yearly which are not only damaging company’s brand name but also company has to pay costs for that cutting down a big amount of company’s profit.

Opportunities:

McDonald’s should focus more on organic menu to satisfy its customers by providing healthier foods. McDonald’s has a big opportunity to introduce Organic products as there is increased health awareness & people are more concerned about eating healthy organic food these days. This will increase McDonald’s sales and create positive public image. There is not a single gluten free fast food in the market, McDonald’s can become a pioneer by opening new product line which is gluten free, as many people today are gluten in-tolerant this opportunity will attract people towards McDonald’s as it is focuses on their health.

McDonald’s should spend more money on research & development to make new products to increase the overall satisfaction level of customers and also to boost up efficiency of operations. Advertising organic & healthy food menus to older demographic areas will also add value to McDonald’s. McDonald’s should spend even more on conducting surveys on customer service & customer satisfaction to improve areas of complaints; it will also decrease many legal challenges McDonald’s face every year.

McDonald’s biggest opportunity is its openings to new geographic areas worldwide. Every year McDonald’s opens new outlets in many different countries. According to one research in 2011, McDonald’s is going to open one outlet daily in China for next four years. Developing green packaging for all McDonald’s stores will decrease its operational expenditure and will also create a better atmosphere in the long run. McDonald’s introduction to new tempting beverages is its biggest opportunity.

Threats:

McDonald’s has many competitors who are striving day & night to compete with it. According to latest research chains like Chipotle & Five-guy are continuously stealing McDonald’s customers. The biggest threat McDonald’s has is growing competition. McDonald’s franchisees are mostly surrounded by at least 3-4 other well-known fast food chains. McDonald’s needs to introduce new products to compete with its competitors.

Another big threat from macroeconomic environment is increased health-awareness. The documentary film “Super-Size Me” argued that McDonald’s provides no nutritional foods. McDonald’s does not pay much attention on its nutritious value. According to recent research McDonald’s is selling 1/3 of French fries comparing to all other competitors. Many other competitors are trying to compete by focusing on healthy & nutritious food.

McDonald’s another threat is that due to the increased health awareness it needs to develop new policies which focus on Non-GMO ingredients for health-conscious people? Health department can also limit McDonald’s sales based on unhealthy NON-GMO food.

Conclusion:

McDonald’s is no doubt the world’s leading fast food retailer. Every year McDonald’s profits are increasing and the company is expanding its business to new geographic area. The company is successful but it is also facing fierce competition with its competitors. According to 2018 statistics Subway is the biggest retailer and now McDonald’s has to compete with Subway to maintain its market position as in past. The biggest challenge company is facing is the unhealthy menu offered by them. Due to the increased awareness of healthy food, McDonald’s sales are cut down; people are nowadays more health conscious. The CEO of the company should rethink about food strategies make it more healthy and attractive for people.

References