Service, Hospitality and Tourism management

Business Understanding

Fall 2020

McDonald’s
SWOT analysis

Group 9

Authors: Klaudia Urbaniak, Ulrika Zaneripa, Daniel Di Gaetano, Ayush Baral

Hand in day: 09th of October 2020

Keystrokes: MAX 25.000 WITH SPACES

Table of contents:
1. Introduction

2. Methodological considerations

3. Mission, vision, values

4. Internal analysis

5. External analysis

6. SWOT – analysis

7. Conclusion
1. Introduction

What’s McDonald’s?

McDonald's is the second-largest fast-food chain founded by two brothers – Richard and
Maurice McDonald. They started in 1948 with small restaurant selling hamburgers for 15
cents. The synonym of change was Ray Kroc who came to them to introduce Multimixer
(machine for milkshakes). He was stunned by the effectiveness of their operation – limited
menu let them focus on quality and quick service. He decided to become a franchising agent
– he founded McDonald’s System, Inc and six years later he bought exclusive rights to the
McDonald’s name. From this day, they have become one of the world's leading food service
brands with more than 36,000 restaurants in over 100 countries.1

2. Methodological consideration
This assignment is in twofold. The first is to explain in detail the ways in which we have
identified and evaluated. Our point is to be as straightforward as possible about our data
gathering and conclusions and to allow readers to assess better for themselves the
significance of our findings. The second reason is to provide baseline methodological
frameworks that can be taken up (and altered) by others, with the aim of expanding the
volume, reliability, and comparability of research in this field. We will continue to make use
of some modified versions of this methodology in our own future research but expect that it
will change into different shapes as we learn about its strengths and weaknesses and as we
test the pros and cons of employing universal norms in a heterogeneous world of service
delivery. We have already learned much and will adjust some aspects of our work in the
future. What we present here, however, are the frameworks and terms of reference given to
our team.2

Primary Data: Primary data in this assignment is collected through observation. In data
collection here observation means judging the normal behavior of the customers. Observation
is also the most cost-effective method for collecting data. This method proved to be of great
help in acquiring the required information.

1
McDonald’s website: Our history. (2020) https://www.mcdonalds.com/us/en-us/about-us/our-history.html

2
McDonald D. Weighing the options: Methodological considerations (2012)
https://www.researchgate.net/publication/286501882_Weighing_the_options_Methodological_considerations
Secondary Data: According to Hair et al. 2007 “Secondary data details the data which is
already collected by other researchers and is available for the others to be used". This method
is considered as a time efficient way for us to discover new information. It is not possible to
collect firsthand information for each and everything that is why secondary data from various
sources like internet, newspaper, magazines were used.

This assignment involves both primary and secondary data. Secondary data collection is done
regarding McDonald’s about their history, operations, profits etc. and it includes internal and
external analysis of McDonald’s which explains strength, weakness, opportunities, and
threats.

Internal models:

Internal analysis is analyzing company strengths and weaknesses. In this assignment there is
used two models: Porters values chain and VRIO. In porter value chain McDonald´s can
select and source quality raw material and develop customer loyalty. It can also achieve
competitive differentiation by speeding up the delivery of products to the final customers.
Along with that the VRIO model helps McDonald´s to reinforce its value chain to deliver
actual value to consumers and ensure long term competitive advantage in the international
fast-food market. This model helps to see the value of resources for customers.

External models:

In our external analysis it is decided to use PESTEL and Porters 5 forces.

These 2 models give us a good understanding about the macroenvironment and

microenvironment, respectively.

PESTEL looks on conditions in the country where we are based, looking at political,
technological and social, to name a few, conditions that are important to understand if you
want to run a successive business.

With Porters 5 forces, you look into the microenvironmental aspects of your business and you
clarify the relations between business to buyer and business to business. This is a model
where you attempt to understand the market and your competitors to give you an edge with
USP (Unique selling points) and ESP (Emotional selling points).
 3. Mission, vision, and values
Mission: “to be our customers favorite place and way to eat and drink.” 3

McDonald’s puts customer on first place and their purpose is to make their restaurant favorite
place to eat. Besides they want to make the way they offer food special – quick but good
food. Their mission is to meet customer expectations and keep up with changing world and
that’s why they changed the policy of company and every burger is cooked when you order to
ensure quality of the food. Except food they are focused on environment for their customers –
McDonald’s offers free Wi-Fi, play places and give you a chance to have a big party.

According to Erica Olsen check list what should be in mission statement it partly matches
criteria.4 McDonald’s mission is not original. Every restaurant and fast-food company want
their place to be favorite people’s place. It is important for business to have loyal customers
and that’s why owners and managers do their best to keep them. Mission is short and
memorable.

Vision: “To move with velocity to drive profitable growth and become an even better
McDonald’s serving more customers delicious food each day around the world.” 5

McDonald’s wants to be better and better version of itself. Their vision is to provide good
food quick. In next years they would like to become available in every global location.
Besides they have never been satisfied enough with quality of serving customer. Progressive
training is their way to make it improved and become the largest fast-food restaurant.

According to Erica Olsen McDonald’s vision is quantitative and superlative. This vision is
for 5 or more years. There is said that McDonald’s become an even better in the future.
McDonald’s vision is audacious.

3
McDonald’s Mission Statement & Vision Statement (2020) https://mission-statement.com/mcdonalds/
4
Olsen E. How to Write a Mission Statement, 2016: https://www.youtube.com/watch?v=1xs4I349cdc
5
McDonald’s Mission Statement & Vision Statement (2020) https://mission-statement.com/mcdonalds/
This day McDonald’s is in 119 countries and new restaurant opens on average every 14,5
hours.6 According to financial statement from 2019 we can see that they are going to reach
their purpose and becoming bigger every year. 7

https://corporate.mcdonalds.com/content/dam/gwscorp/nfl/investor-relations-content/annual-reports/2019%20Annual%20Report.pdf

Values:

McDonald’s have five main values:

 Serve,
 Inclusion,
 Integrity,
 Community,
6
Mehta F. 31 Facts About McDonald’s You Never Knew You Wanted To Know, 2014;
https://wallstreetinsanity.com/31-facts-about-mcdonalds-you-never-knew-you-wanted-to-know/
7
McDonald’s Annual Report, 2019: https://corporate.mcdonalds.com/content/dam/gwscorp/nfl/investor-
relations-content/annual-reports/2019%20Annual%20Report.pdf
  Family.

They are putting every customer as a priority and treat them equal. They don’t divide people
on category and the most important thing is client satisfaction. Their menu is customized, and
every client can find something special. They are opening doors for everyone and they
present themself as good neighbors. McDonald’s wants every person to feel like a part of a
family and spend quality time at their restaurants where you can eat dinner, play and throw a
party.8

4. Internal analysis
In Internal analysis has been used Porters Value chain and VIRO to analyze McDonald’s
Strengths and Weaknesses.

Porters Value chain

Porters Value chain explains how you create and understand value, the cost of making value
and lastly looking at the result, the margin, which loosely can be described as the profit. 9 10

McDonald’s is incredible consistent in their delivery and you will always have the same
product and fast time wherever you go globally. It works almost like a factory where there
are different posts for different food types and they are all easy to use, this support chain
makes the result the same every time.

The gaps are filled in relation to how McDonald’s is structured by the Porter Value chain.

McDonald’s is a fast-food chain, and their value lies in how fast and convenient their restaurant is.

Organizational Structure
 Financial management,
 Infrastructure for workers,
 All administrative actions

8
McDonald’s website: Our values (2020) https://corporate.mcdonalds.com/corpmcd/about-us/our-values.html

9
Mindtool, Porter’s Value Chain – understanding how value is created within organizations (2020)
https://www.mindtools.com/pages/article/newSTR_66.htm
10
Nikhil B. McDonald's Value Chain Model (2020) https://www.academia.edu/22004170/McDonalds_Value_Chain_Model
 Personnel Management
 Meetings,
 structure,
 bonuses,
 staff,
 human resources management

Research Development/ technology

Great equipment resulting in fast communication, satisfaction survey, Margin
Procurement
Supplier management

Inbound Production Outbound Sales and Service

Logistics Logistics marketing
Handling
Suppliers of Making of food Fast delivery Worldwide customers
products at the restaurant, of food franchise
Ex: Coca cola serving and Training of
cleaning Storage of the Different employees
afterwards products menus for
different times
of the day Free Wi-Fi

Social media Keeping the

activities, McD quality of
app and products and
competitions service
with a possible
reward / free
food.

VRIO

VRIO (Valuable, rare, inimitable, organizational) analysis represents company's resources.

Valuable: To see if McDonald’s is offering resources that adds value to their customers to
check by using NPV (Net present value). If discount rate is more than 0% then company is
offering resources that adds value to their customers.11

NPV= cash flow/ (1+r)t = $6,025,000 / $1,000,000 NPV = $6,025

Discount rate is 6%

With 6% discount rate it is McDonalds are adding value to the company’s resources. 11

Rare: McDonald’s started a fast-food industry. At that time, it was unique and rare. Many
companies have tried to copy McDonald’s products and found out what is their secret.9
Inimitable: McDonald’s has their own unique historical production machines from different
suppliers who has now modernized. McDonald’s now is located all over the world. As social
complexity employees need to work together as a team. They are trying to reach that
customers in their place you can feel like home.

Organized: McDonald's have their management control systems, to control their business.11

External Analysis
In our external analysis we are going to use different models to get a broad view on the
external conditions McDonald´s is faced with. One of these models is called PEST/PESTEL,
and through it we will discover different aspects of the external macro environment.

Political factors:

Fast food chains are often targeted for different government regulations concerning the health
of the citizens. Each government decides their on regulations and in one instance, the
government of Denmark decided to limit the amount of trans fats that can be used in the
products, because it negatively affected the heart by increasing the cholesterol, and therefor
increasing heart diseases.12 McDonalds now puts 30 times less trans fats in the products and
on average there is only around 1 gram in a portion of chicken nuggets.13

These regulations be a restrain on the McDonald´s business, but if viewed opportunistic, also
be a chance to create something new. The regulations puts pressure on McDonald´s to
improve their line of food and offer more healthy products and therefor having another go at

11
https://www.business-to-you.com/scanning-the-environment-pestel-analysis/
12
https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-industry-
marketing-essay.php
13
https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-industry-
marketing-essay.php
regaining some customers, who maybe despised McDonald´s because of a bad public image,
and then try to rebrand14¨

Economic factors:

As McDonalds have a lot of restaurants all over the world, there is also many different
economies to understand to better grow on the market. You can for one instance divide
economies into global, regionally, and local to get a stronger understanding about where you
want to open a McDonald´s restaurant and decide where you want to buy the raw material
from.15

Another instance of an economic factor would be the economic recession we experienced

back in 2008. These led to high unemployment and lack of money and the citizens of the
world were in shambles. Most business had a hard time, but McDonalds grew in the period
because of its bang for the buck's way of selling food. You would always get a lot of calories
for a cheap price, and when the money is low and you need to save, why not?

On top of the cake they also launched cheap coffee going for a totally other market, which
netted them a big profit and was a cheap alternative to the likes of Starbucks.16

Social-cultural factors:

The young generation has grown up being used to the mockery of McDonald´s and the view
in Denmark was always that McDonald´s is a capitalistic unhealthy fast-food chain with no
moral or ethics. In an ever-growing modern society, where being healthy is fashion,
McDonald´s is just not an option for many health-concerning adults.

In a very famous documentary by Michael Moore called “Super-sizer Me” (2004) an

experiment is taking place testing how harmful or unhealthy eating McDonalds every day is.
He managed to eat 3 meals a day from McDonalds and had to take up the offer of super-size
meal every time he was asked. He gained around 11 kilos in one month and showed an

14
http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations
15
http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations
16
https://www.forbes.com/2009/02/17/mcdonalds-recession-stock-intelligent-
investing_0217_mcdonalds.html#4a7a7cc7bd72
unhealthy amount of cholesterol.17 The mockery through documentaries or other articles can
definitely be seen as threats.

For a long time, environmental issues have become a big topic of every nation and for the
public. Green initiatives and business plans that are sustainable are almost a must, especially
for a big company like McDonald's that have eyes on them all the time.

There is a consensus that people are busier than ever, and especially in the big cities it is
apparent. When the culture is in a rush, that is when McDonalds thrives! Placing restaurants
at central train stations has proven to be a strong strategy and a great opportunity to catch
customers on the run. 18

Technological factors:

When thinking about technological innovation, the fast-food industry is not really a contender
for using it. Even though McDonalds uses technological equipment to make everything faster
in the restaurant and new screens makes the menu stand out beautiful and clear, one wonders
about the great possibilities from the technological innovation and why there haven’t been
anything groundbreaking from the fast-food industry yet. There is certainly a lot to gain for
McDonalds and many opportunities to harvest.

Environmental factors:

For a long time, environmental issues have become a big topic of every nation and for the
public. Green initiatives and business plans that are sustainable are almost a must, especially
for a big company like McDonald that have eyes on them all the time.

McDonalds has taken a range of procedures to arrive in a green business model and they have
a whole section on their webpage dedicated to this project.19

17
https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-industry-
marketing-essay.php
18
http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations
19
https://corporate.mcdonalds.com/corpmcd/scale-for-good/our-planet.html
By being one of the first to take initiative, McDonalds shows a lot of will power and by going
as green as possible is a great opportunity to gain a bigger part of the fast-food market’s
customers.

Legal factors:

McDonald’s having to abide by different rules and regulations of each different country.
Generally, laws and regulations are mostly a hindering for businesses and can therefore be
threats.

McDonalds must abide by different rules and regulations of each different country.
Generally, laws and regulations are mostly a hindering for businesses and can therefore be
threats.

Porters 5 forces:
 20

Competitive rivalry within the industry/ Threat of new Entrants:

The food and drink markets are one of the biggest in the world and the entry barrier is low as
not much education and specialization is needed for the workers of a restaurant.

But it is also important to distinctive between local restaurants and big global chains.21

As such, McDonald´s faces tough competition as there are many competing companies
fighting for the same costumers with aggressive marketing. The cost of switching is not
existing and brand loyalty is neither very important. It is a market of convenience and
customers, though having their favorite restaurants, visit the places that are placed most
convenient for them.22

Bargaining power of suppliers:

Bargaining power of suppliers in context to McDonald´s is considered weak, as there are a

large number of suppliers in every area and the materials are in high stock on a global level.23

This is as so not considered a threat to McDonald´s and their business model does not have to
plan according to their suppliers in the current state.
20
https://www.interaction-design.org/literature/article/porter-s-5-forces-model-design-in-context-
understand-the-market
21
https://www.porteranalysis.com/porter-five-forces-analysis-of-mcdonalds/
22
http://panmore.com/mcdonalds-five-forces-analysis-porters-model
23
http://panmore.com/mcdonalds-five-forces-analysis-porters-model
Bargaining power of buyers/Threat of substitute products:

As commented before, the food and drink markets are one of the biggest in the world and
there are many customers buying and likewise many companies and local restaurants that are
a part of this industry.

If we analyze these 3 forces

 Low switching cost

 Large number of providers
 High availability of substitutes

We can see how much power the buyers have.24

The big fast-food chains need to be ever changing with new ideas and marketing strategies to
lure in the customers as the market not only have other fast-food chains as competitors, but
also shops like 7/11, kiosk and local restaurants and even supermarkets.25

The buyers are a strong force and therefor special offers must be made to secure loyalty from
the buyers and the business model must place the buyers in the center.

6. SWOT analysis
Strength Weaknesses
 2nd largest fast-food chain  Sales going down
 Marketing  Producing unhealthy foods.
24
http://panmore.com/mcdonalds-five-forces-analysis-porters-model
25
http://panmore.com/mcdonalds-five-forces-analysis-porters-model
  Drive-thru services  Limited options for vegetarians and
 Online ordering vegans
 Brand name  A lot of changes in staff

 Big menu  Promoting obesity in children

 Ronald McDonald House Charities  Negative publicity

 Tasty food

Opportunities Threats
 New restaurants  Competitors
 Better menu for vegan/vegetarian  Growth in Starbucks type stores and
people other fast-food companies
 Healthy food options  Healthier fast-food
 Restaurants with breakfast menu
 Popularity of fast food in markets that
are easy to prepare at home
 Trends

7. Conclusions
There are many companies which tried to develop fast-food chains. None were as successful
as McDonald’s at maximizing profit and minimizing cost. One of McDonald’s keys to
success is the value the company gives to its customers, smart strategies, good marketing,
management, service and finances.
Having a look at the external factors, we can conclude that the market doesn’t promote
loyalty and that you must be constantly promoting new marketing strategies to compete for
the customers. There are a lot of opportunities in the environmental section, and doing
improvements there, is important as this is something everyone must take a stance to if they
want to be successive in the modern times.

In an ever-changing technological world, one must constantly improve and use the new
technology that are available. The fast-food/restaurant industry aren’t known for having used
it a lot, and there are a lot of possibilities to be the frontrunner in this section.

Fast-food is a subject of big criticism as it have a history of being very unhealthy. The
companies must be morally responsible in these times as bad press have the possibilities to
ruin the business.

This assignment made it possible to obtain more about the structure of McDonald’s and
familiarize with the missions, visions and values. Look into the McDonald’s internal analysis
and external analysis to make a SWOT analysis.

References:
Frue K., PEST Analysis of Mcdonald’s: Which factors affect their future success,
https://pestleanalysis.com/pest-analysis-of-mcdonalds/(2018)

Greenspan R., PESTLE Analysis, http://panmore.com/mcdonalds-pestel-pestle-analysis-

recommendations, (2018)
Kempczinsk C. J., Financial statement,
https://corporate.mcdonalds.com/content/dam/gwscorp/nfl/investor-relations-content/annual-
reports/2019%20Annual%20Report.pdf (2020)

McDonald’s Financial statement,

https://www.macrotrends.net/stocks/charts/MCD/mcdonalds/financial-statements, (2005-2020)

Olsen E., How to Write a Mission Statement, https://www.youtube.com/watch?v=1xs4I349cdc,

(2017)

Olsen E., How to Write a Vision Statement, https://www.youtube.com/watch?v=7yBUBmciQBk),

(2017)

Olsen E., How to Write a Values Statement 5, How to Write a Values Statement 5), (2017)

PESTLE analysis of McDonald’s, https://www.ukessays.com/essays/marketing/pestel-analysis-of-

mcdonalds-and-the-food-industry-marketing-essay.php, (2017)

SWOT Analysis of McDonald’s during COVID-19, https://www.youtube.com/watch?

v=5O0NzvMxX8A,( 2020)

VIRO analysis, https://www.rancord.org/mcdonalds-vrio-analysis-core-competencies-competitive-

advantages, (2020)

VIRO Framework, VRIO Framework EXPLAINED | B2U | Business To You, (2016)

Burin L., VRIO Framework in video https://www.youtube.com/watch?v=SD8XJw_qeNI&t=667s ,

(2020)

External analysis

PESTEL analysis https://www.business-to-you.com/scanning-the-environment-pestel-

analysis/, (2016)
PESTEL analysis of McDonald’s and the food industry marketing
https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-
industry-marketing-essay.php, (2017)
PESTEL analysis of McDonald’s and the food industry marketing
https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-
industry-marketing-essay.php, (2017)
Greenspan R., PESTEL analysis and recommendations, http://panmore.com/mcdonalds-
pestel-pestle-analysis-recommendations, (2018)
Greenspan R., PESTEL analysis and recommendations, http://panmore.com/mcdonalds-
pestel-pestle-analysis-recommendations, (2018)
Dahle S., McDonald’s recession, https://www.forbes.com/2009/02/17/mcdonalds-recession-
stock-intelligent-investing_0217_mcdonalds.html#4a7a7cc7bd72, (2009)
https://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-
industry-marketing-essay.php
http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations
McDonald’s,https://corporate.mcdonalds.com/corpmcd/scale-for-good/our-planet.html
(2019)
Fadeev D., Porters five forces, https://www.interaction-design.org/literature/article/porter-s-
5-forces-model-design-in-context-understand-the-market, (2017)
Porters five forces of McDonald’s, https://www.porteranalysis.com/porter-five-forces-
analysis-of-mcdonalds/, (2017)