SWOT Analysis McDonald's

Strengths
 McDonald's has been a thriving business since 1955 and 20 of the top 50 corporate
staff employees started as a restaurant level employee. In addition, 67,000 McDonalds
restaurant managers and assistant managers were promoted from restaurant staff.
Fortune Magazine 2005 listed McDonald's as the "Best Place to Work for Minorities."
McDonalds invests more than $1 billion annually in training its staff, and every year
more than 250,000 employees graduate from McDonald's training facility, Hamburger
University.

 The business is ranked number one in Fortune Magazine's 2008 list of most admired
food service companies.

 One of the world's most recognizable logos (the Golden Arches) and spokes character
(Ronald McDonald the clown). According to the Packard Children's Hospital's Center for
Healthy Weight children age 3 to 5 were given food in the McDonalds packaging and
then given the same food without the packaging, and they preferred the food in the
McDonald's packaging every single time.

 McDonalds is a community oriented, socially responsible company. They run Ronald

McDonald House facilities, which provide room and board, food and sibling support at a
cost of only $10 a day for families with children needing extensive hospital care. Ronald
McDonald Houses are located in more than 259 local communities worldwide, and
Ronald McDonald Care Mobile programs offers cost effective medical, dental and
education services to children. They also sponsor Olympic athletes.

 They are a global company operating more than 23,500 restaurants in 109
countries. By being spread out in different regions, this gives them the ability to
weather economic fluctuations which are localized by country. They can also
operate effectively in an economic downturn due to the social need to seek out
comfort foods.

 They successfully and easily adapt their global restaurants to appeal to the
cultural differences. For example, they serve lamb burgers in India and in the
Middle East, they provide separate entrances for families and single women.

 Approximately 85% of McDonald's restaurant businesses world-wide are owned

and operated by franchisees. All franchisees are independent, full-time operators
and McDonald's was named Entrepreneur's number-one franchise in 1997. They
have global locations in all major airports, and cities, along the highways, tourist
locations, theme parks and inside Wal-Mart.
  They have an efficient, assembly line style of food preparation. In addition they
have a systemization and duplication of all their food prep processes in every
restaurant.

 McDonald's uses only 100% pure USDA inspected beef, no fillers or additives.
Additionally the produce is farm fresh. McDonald's serves 100% farm raised
chicken no fillers or additives and only grade-A eggs. McDonald's foods are
purchased from only certified and inspected suppliers. McDonalds works closely
with ranchers, growers and suppliers to ensure food quality and freshness.

 McDonalds only serves name brand processed items such as Dannon Yogurt,
Kraft Cheese, Nestle Chocolate, Dasani Water, Newman's Own Salad Dressings,
Heinz Ketchup, Minute Maid Juice.

 McDonald's takes food safety very seriously. More than 2000 inspections checks
are performed at every stage of the food process. McDonalds are required to run
through 72 safety protocols every day to ensure the food is maintained in a clean
contaminate free environment.

 . McDonald's was the first restaurant of its type to provide consumers with
nutrition information. Nutrition information is printed on all packaging and more
recently added to the McDonald's Internet site. McDonalds offers salads, fruit,
roasted chicken, bottled water and other low fat and calorie conscious
alternatives.

Weaknesses
 Their test marketing for pizza failed to yield a substantial product. Leaving them much
less able to compete with fast food pizza chains.

 High employee turnover in their restaurants leads to more money being spent on
training.

 They have yet to capitalize on the trend towards organic foods.

 McDonald's have problems with fluctuations in operating and net profits which
ultimately impact investor relations. Operating profit was $3,984 million (2005) $4,433
million (2006) and $3,879 million (2007). Net profits were $2,602 million (2005),
$3,544 million (2006) and $2,395 million (2007).

Opportunities
 In today's health conscious societies the introduction of a healthy hamburger is a great
opportunity. They would be the first QSR (Quick Service Restaurant) to have FDA
approval on marketing a low fat low calorie hamburger with low calorie combo
 alternatives. Currently McDonald's and its competition health choice items do not
include hamburgers.

 They have industrial, Formica restaurant settings; they could provide more upscale
restaurant settings, like the one they have in New York City on Broadway, to appeal to
a more upscale target market.

 Provide optional allergen free food items, such as gluten free and peanut free.

 In 2008 the business directed efforts at the breakfast, chicken, beverage and
convenience categories. For example, hot specialist coffees not only secure sales, but
also mean that restaurants get increasing numbers of customer visits. In 2009
McDonald's saw the full benefits of a venture into beverages.

Threats
 They are a benchmark for creating "cradle to grave" marketing. They entice children as
young as one year old into their restaurants with special meals, toys, playgrounds and
popular movie character tie-ins. Children grow up eating and enjoying McDonalds and
then continue into adulthood. They have been criticized by many parent advocate
groups for their marketing practices towards children which are seen as marginally
ethical.

 They have been sued multiple times for having "unhealthy" food, allegedly with
addictive additives, contributing to the obesity epidemic in America. In 2004, Michael
Spulock filmed the documentary Super Size Me, where he went on an all McDonalds
diet for 30 days and wound up getting cirrhosis of the liver. This documentary was a
direct attack on the QSR industry as a whole and blamed them for America's obesity
epidemic. Due in part to the documentary, McDonalds no longer pushes the super size
option at the dive thru window.

 Any contamination of the food supply, especially e-coli.

 Major competitors, like Burger King, Starbucks, Taco Bell, Wendy's, KFC and any mid-
range sit-down restaurants.

McDonald's is the leading global foodservice retailer with more than 31,000 local
restaurants serving more than 58 million people in 118 countries each day. More than
75% of McDonald's restaurants worldwide are owned and operated by independent
local men and women.
McDonald's SWOT analysis and recommendations

SWOT Analysis:

1. Strengths:

- Strong brand name, image and reputation

McDonalds has built up huge brand equity. It is the no 1 fast food company by sales, with more than
31,000 restaurants serving burgers and fries in almost 120 countries. The image of McDonalds is
recognized everywhere. This brand is in top ten of the most powerful brand names in the world with
Coca-Cola, Nokia or GM.

- Large market share

McDonalds is considered as the largest player in size and global reach. When Wendy’s or Burgers
King are losing market share in 2006, McDonalds still increases its market share. Market share of
McDonalds in the recent time is about 19% while Yum!Brands is 9% and both Wendy’s and Burger
King is 2%.

- Specialized training for managers

McDonalds is very serious on training managers. This company has its own program to train
managers the most professionally, which is called Hamburger University. As a result, McDonalds
has many good managers who can help company development well.

- McDonalds Plan to Win

McDonalds customer – focused Plan to Win provide a common framework for its global business yet
allows for local adaptation. Through the execution of initiatives surrounding the five elements of its
Plan to Win – People, Products, Place, Price and Promotion – McDonalds has enhanced the
restaurant experience for customers worldwide and grown comparable sales and customer visits in
each of the last eight years. This Plan, combined with financial discipline, has delivered strong
results for company’s shareholders.

- Introduction of new production

McDonalds is considered the first one enter to fast food industry. It initiates to other brand to enter
this industry. As a result, when think about fast food, customers always remember McDonalds first.
In fact, in some big countries, especially in US, McDonalds is the first choice of a large number of
customers.

- Technology Innovative:

McDonald’s is keeping at the forefront of technology around the globe. For example, In Brazil
McDonald’s is currently studying the installation of Internet access terminals in some outlets as well
as enabling customers to order online. This will create a more efficient process that will reduce the
amount of lag time between a customer’s orders and pick up of the order.

- Good marketing strategies:

No matter the continent, children and adults know the face of Ronald McDonald is synonymous with
the colossus restaurant chain. This results in wonderful marketing strategies among management
which conducts a very thorough market analysis, resulting in much success around the globe.

2. Weaknesses:

- Unhealthy food image

McDonald's has been impacted by negative press like the documentary "Supersize Me" by Morgan
Spurlock in which he contributed our society’s obesity to McDonald's and other fast food chains. In
fact, each McDonalds dishes provides large amount of calories but not too much nutrition.

- Customer looses due to fierce competition

McDonalds has to compete with many strong brand name in fast food industry such as Wendy’s,
Burger King or Yum!Brands. This fierce competition makes McDonalds loose a large number of
customers who prefer favor of other brands.

- Problem related to health issue

McDonalds use Trans - fat and beef oil in their food. Although it is not illegal, it affects badly on
customer’s health because Trans – fat is causes of some kind of cancer. Consequently, a number of
customers who care about their health stop eating at McDonalds restaurants. It makes revenue of
company decrease.

- Legal action:

McDonald’s has been involved in a number of lawsuits and other legal cases in the course. For
example, there are many case which involved with trademark issue. McDonald’s force many others
restaurant, company of just a coffee shop to change their brand name because of keeping “Mc”
letters.

- Unbalance meals:

Although McDonalds tries to update its menu by healthy criteria, McDonald’s meals are still
unbalance. For example, there are many dishes with chicken (both grilled and fried), bacon, beef, rib
or egg. Besides, just several dishes are salad with vegetable and fruit. Moreover, amount of fruit or
vegetable is not much.

- High employee turnover rate

Although McDonalds has many good managers as well as skillful employees, the turnover rate is still
high. Every year many of their employees are fired out of the restaurants. Moreover, many others
quit their jobs, especially part time employees because of low salary as well as too high working
pressure.

- Action related to environmental issue

McDonalds uses HCFC – 22 to make polystyrene that is contributing to ozone depletion. The
company has to repair this weakness if doesn’t want to be criticized.

- Dissatisfied Franchisees:

Franchisees are beginning to become very dissatisfied with the fees that McDonald’s are forcing
them to pay. As the company continues to expand, they are also increasing the amount of fees
franchisees have to pay for the use of the notorious fast-food brand. Many people are not very
happy about this and as a result many franchisees are selling their businesses.

3. Opportunities:

- Growth of the fast food industry

Fast food industry now is developing significantly. The change of lifestyle leads to the change in
people eating habit. In the past, if just workers, drivers or someone who had to work busily and didn’t
have enough time for a home meal choose fast food; nowadays, almost people eat fast food and a
major of them like fast food very much. It is a huge chance for fast food brand to increase their
revenues, especially McDonalds.

- Conservation:

McDonald should research green energies and green packaging solutions and incorporate these
finding as a part of their marketing strategies and advertisements.

- Globalization, expansion in other countries

McDonalds has more than 31,000 restaurants serving in almost 120 countries. Of the 31,000
restaurants, at least 14,000 are in US. However, now, because the care of McDonalds about favors
and cultures in each countries it enters, McDonalds can open more restaurant in new areas such as
China or India – the countries which culture influences on people lifestyle deeply. They are very
potential markets. The expansion of these areas is big opportunities For McDonalds.

- Low cost menu is preferred by large number of customers

With low cost menu, McDonalds can attract customers who just have low income. This segment
makes up a fairly remarkable part, especially in the recent time, when global economic is struggling.
It is not difficult for McDonalds to apply low cost menu on all restaurants.

- Appearance of freebies and discounts

Discounts given on every food item may help them gain more customers. Moreover, a new trend is
rising among customers that they like freebies and discounts, even when they don’t need it or don’t
use these freebies after.

- Diverse tastes and needs of customers

Customer’s tastes now become more diverse. As a result, they require new format of service in
order to satisfy them. McDonalds, with new format of business such as McCafe, it can attract new
segment of customer; for instance civil service, who prefer coffee as well as want to use Wi-Fi to
work when drink coffee.

- Growing health trend among the customers:

Although people concern about how McDonalds influence badly on their health, it is also a chance
for McDonalds. This company can develop new products, specifically fresh burger or healthy
dessert.

4. Threats:

- Intensity competitors

Along with the development of fast food industry, there are many new fast food brand enter to the
market. It is nothing to say if there is no strong brand which can compete with McDonalds. However,
in fact, there are some and they are stronger gradually, for example Yum!Brands, Wendy’s or Burger
King. Although market share of these brand are lower than McDonalds, they try to gain more
customers from McDonalds. Moreover, more casual dining restaurants increase their burger offering
and decrease the price. If we are not really hurry, we may choose this kind of restaurant instead of
fast food restaurants. They also become the competitors of McDonalds.

- Public health crisis

With a growing number of obesity cases among Americans, fast food chains like McDonalds will
continued to be overshadowed by their previous products offerings, for example Supersized Meal,
no fruit or yogurt, slim salad selection. Besides, people nowadays are facing heart problem more
seriously. As a result, they require nutritious and healthy food as well as lifestyle.

- Economic recession

The company's revenue streams are diversified, but depending on the length of this "recession",
they will inevitably be negatively impacted by the trickledown effect. Recession or down turn in
economy may affect the retailer sales, as household budgets tighten reducing spend and number of
visitors.

- Serious environmental issue:

Environment is one of the hottest topics all over the world. Any action which influence on the earth
and human life is criticized strongly. Consequently, if McDonalds keep using HCFC -22, it may lose
customers, especially who really care about the earth.

Recommendation:

McDonalds is a powerful brand name. Thus, its strategies seem so good. However, in my opinion, I
still have several recommendations for this company. Besides, looking at the grand matrix and
SWOT matrix, there is something McDonalds should do with its strategies:

The first, although saturated in the United States, McDonalds has great expansion capabilities
abroad. According to the grand matrix, market development is one strategy that McDonalds should
implement. Company should prepare an international strategy which focus on big cities along with
high populated areas, especially in Asia. There are not many McDonald restaurants in this potential
market. Japan is the only Asian country which has a lot of McDonald’s fast food restaurants. In
contrast, China is considered as one of the biggest market in the world because of this country’s
population. Nevertheless, according to the recent figures, China is just in ninth position among the
countries which have McDonald’s restaurants with about 1000 restaurant while this number in US is
about 14000. If McDonalds can develop more and more in Asia, it is a huge advantage for company
to gain market share.

The second is about the name recognition. Everywhere, millions of people are familiar with the
Golden Arches that are on top of every McDonalds restaurants. McDonalds should use this
advantage to gain more attraction from customers. It does not mean that this company should
become involved into many areas of the food industry. In fact, soft drink and fast food bring large
profit for McDonalds. However, if keep involving in other areas, it would increase the potential for
liability to the company because of many intensity competitors. McDonalds has built the McDonald
Hotel in Zurich, Switzerland. Needless to say it is a very unique hotel. A lot of customers in other
countries want McDonald open the same hotel in their countries. As a result, McDonalds should care
about this chance more than developing new kind of food business which the company is not sure
about this success. In addition, aside from exploiting brand name, company can exploit its sources
of food and drink in McDonald’s fast-food restaurants for the hotel, as well as service skills of
employees.

In addition, McDonald’s strength as I told above is that introduction to new production. Company
should focus on this strength to develop stronger. However, the company seems not diversify its
products regularly while competitors are stronger and have new products gradually. Because of this
reason, McDonalds should spend more money on Research and Development to create new
products and services as well as increase the efficiency of operations. First, one thing McDonald
should focus on is that the play place for kids. McDonalds has play place but not in every
restaurants. If you eat in McDonald’s restaurant, you can be free to party while your children play at
the place for kids. Customers love this service. Thus, if it is popularized in all restaurant of company,
customers will be more satisfy and of course they want to comeback regularly. Moreover, toys have
to be cared much more with many new interesting toys as well as safety. Jolly Bee is one brand
which applies this strategy very successful. McDonalds can learn from Jolly Bee developing this
service to improve its market position. Next, even if the company’s menu is still relatively
inexpensive compare to that of its competitors, it is not totally enough. Because apart from price,
customers also make decision rely on menu. After bring a fresh menu with tuna sandwich and salad
in some restaurants, especially in Britain and get support from a lot of customers, there is no new
one like that. McDonalds focus too much on cheese,beef or chicken menu, more than vegetable. For
instance, McDonalds has fruit slice in menu. However, it is served once a week. In the recent time,
with the change in eating habit of a large part of customers, McDonalds also should change.
Company should bring new vegetarian products to restaurant’s menu. An organic menu is very
necessary. This would give customers an alternative while allowing McDonalds to maintain its
market share globally.

The last one is also about customer service. Managers of McDonalds are trained professionally. As
a result, they can train employees well. McDonald’s employees are evaluated high by customers
because of their behaviors as well as attitude. However, customers are not pleased at the idea of
waiting in long lines and insufficient employees to handle the volume of customers. Just the minority,
but sometimes the employees are rude forcing the customers to go to a competitor’s restaurant next
time. At the market which has high market share and very huge number of customers such as USA,
Canada or United Kingdom, this issue occurs more frequently. McDonalds should find a way to solve
it. For example, the company has to rent more employees and increase their salary in order to keep
them working for a long time. This time is just enough for them to get skills to service customers well.
Besides, it is necessary to increase the number of employees at the weekend or in the lunch time.
More employees means that pressures are shared and avoid the bad attitudes.

Conclusion:

McDonalds has undergone several changes since its inception in San Bernardino, California. The
fast food chain has conquered the US and it now focusing on the rest of the world. McDonalds,
along with this trend, continues to strive toward customer satisfaction while still enhancing its
international market position. The company is doing very well and keeps trying in Africa, China, and
the Middle East, which will be continued source of revenue for many coming years. If McDonalds
can overcome all of its challenges, makes use of advantages and has right strategies, it will win the
market again and hold fast to first position in fast food industry.
CASE ANALYSIS
McDonald’s, Inc.
COMPANY NAME: McDonald’s, Inc.
INDUSTRY: Food Service
COMPANY WEBSITE: www.mcdonalds.com
COMPANY BACKGROUND:
As a company, McDonald’s was first introduced in Des Plaines, Illinois in 1955. This was the very first
McDonald’s restaurant, which all started in San Bernardino, California in 1954 when Ray Kroc
approached the McDonald brothers with a business proposition to start a new company. In 1965
McDonald’s went public and was later, in 1985 added to the Dow Jones Industrial Average.
(www.mcdonalds.com) The company has gone through quite a few changes with its changing CEO’s over
the years, but the company seems to be on track with CEO Jim Skinner, named in 2004. Skinner was
named the new CEO just in time to clean up after McDonald’s first ever quarterly loss. He succeeded by
showing that McDonald’s revenue had climbed 11% during 2006 and net profits had climbed 36%. (Dess,
Case 40 Pg. 1)

SWOT ANALYSIS:
STRENGTHS: Jim Skinner had to clean up a big mess after the 2003 slump, and did so by coming up
with a strategy to turn everything around. His strategy had to consist of staying competitive with the
numerous other fast-food restaurants popping up all over the world. In order to maintain this, they had to
reorganize the way they presented themselves to the community. Jim Skinner did so by cleaning up the
customer service, cleaning up and modernizing the physical buildings, and changing the menu to the
changing tastes of their customers. McDonald’s also introduced their slogan “I’m Loving It” to reach out to
the younger customers. The advertising is very much targeted toward teens and young adults. (Dess,
Case 40)
WEAKNESSES: The first weakness was the changing of three different CEOs in only one year. These
were unexpected changes, but all had to be dealt with by the newest CEO Jim Skinner, and directly after
McDonald’s first ever quarterly loss in 2003. The second weakness is an issue with trying to find new and
exciting things to put on the menu to bring in new customers. Many of today’s fast-food customers are
making different kinds of foods, like Chinese and Mexican food, normal to the everyday menu.
OPPORTUNITIES: McDonalds has many opportunities to change its look, menu, and customer service.
McDonald’s started building newer building incorporating the arch, along with more modern furnishings.
The menu has changed by adding more breakfast items and introducing the McCafe in certain areas. It
has also added more health concerned items such as the Asian salad and Premium white chicken. (Dess,
Case 40)
THREATS: McDonald’s biggest threat is competition. Wherever there is a McDonald’s, there are at least
3 other fast-food restaurants near it. It constantly has to advertise what makes them unique to other fast-
food places, which means there always has to be something different about them than anybody else. Just
the fact that McDonald’s was the first company to go big with their burgers does not necessarily help
them today. Every customer is looking for a new experience and new products to keep them excited with
what they are eating and where they are going to eat, and with so many choices, it is hard for McDonald’s
to compete with. (McDonald’s 2007)
ANALYSIS VIA PORTER’S FIVE FORCES MODEL:
THREAT OF NEW ENTRANTS: The threat of new entrants for McDonald’s and the fast-food industry is
low. With so many different kinds of fast-food restaurants already in the industry, entering at this point
would cause struggle for the new entrant. (McDonald’s 2007)
BARGAINING POWER OF SUPPLIERS: According to Siehoyono (2005), there are 3,700 new outlets
being built each year in the U.S., meaning the power of suppliers is not an issue for McDonald’s.
BARGAINING POWER OF BUYERS: Consumers have more power over buying McDonald’s products
because they can demand what type of products they want to see from them. Today, consumers are
demanding healthier food and beverage choices from fast-food restaurants such as McDonald’s. After the
documentary film “Supersize Me” by Morgan Spurlock came out in 2004, McDonald’s had to reclaim its
name by showing America that their company cares about the health of their customers and cut out their
“supersize” program.
SUBSTITUTE PRODUCTS/SERVICES: In the fast-food industry, including McDonald’s, the threat of
substitutes is greater now more than ever with the convenience food industry growing. More convenience
food stores are offering similar products as the fast-food restaurants. The convenience store / gas station,
Quik Trip, sells many food items such as hot dogs, egg rolls, pizza stuffed breadsticks, and countless
beverage choices. (Siehoyono 2005)
COMPETITIVE RIVALRY: According to Siehoyono (2005), “fast casual” food chains such as Subway are
tougher competition to the fast-food chains in both the U.S. and international industries. Some franchisers
were also complaining that McDonald’s was granting too many franchisees too close to each other and
actually stealing business away from each other.
STRATEGY USED: McDonald’s has tried both cost leadership and differentiation as strategies to outdo
the competition. McDonald’s is known for their low price product line and has been competitive with other
businesses in the industry. A representation of differentiation is their dollar menu. They were one of the
first in the industry to do a very low-cost smaller menu of items on their product line that cost only $1. As
soon as this came out and was advertised, many of the other fast-food businesses started something
similar to compete. There is only so much a business can do with a low-cost strategy before it starts
losing money. This only leaves differentiation or a focus strategy to use. Focus strategies would not work
as well in this industry mainly because their product line is similar in all areas of the world because that is
what they are known for. McDonald’s has to stay true to what it started as and not fly too far away from its
roots. McDonald’s has also tried a differentiation strategy with different products like the McRib or the Big
Mac. (Dess, Case 40)
ISSUES AND CHALLENGES: McDonald’s competitive advantage is their differentiation. Their products’
flavors and names are exclusive to them and the brand of McDonald’s is distinguished by the looks and
tastes of their foods. If somebody set a row of burgers and fries each from a different restaurant, I could
pick out exactly which one is McDonald’s burgers and fries. They have distinguished themselves this way
for years and this will continue, but the tastes of the customers may change. This will be the problem.
McDonald’s will have to answer to the needs and wants of their customers to keep them satisfied and
coming back for more. Right now in the industry life cycle, McDonald’s is a mature company focusing on
competition and their product line’s survival. The culture of McDonald’s is keeping their customers happy
and to do whatever they can to create a wider customer base along with a product line that satisfies any
taste. I think McDonald’s customer service is not consistent. I have personally experienced many different
stores and some have very good customer service and some are not very good at all. The stores’
cleanliness and overall appearance also is not consistent. (Siehoyono 2005)
COURSE OF ACTION RECOMMENDED: If I were in a position to make a decision for this company, first
I would require all management and supervisory positions to go through company training. They would
then be required to test their employees on customer service and sales skills. In doing this kind of training
all branches would have a better chance of happy customers and exceptional customer service.
Employees also need to be treated with respect and importance for them to want to do well in their
position. Some kind of incentives plan needs to be put into action for their employees. Older buildings
need to be updated so customers feel comfortable and clean while dining in.
OPINION: I think reading case studies is already interesting because it teaches you how the company
works and how it became what it is today. Anybody can tell just from reading a case study whether it is a
successful business and what their issues are. I thought that writing a case study analysis helped
understand how a company operates considering all challenges and opportunities.
References
Dess, G., Lumpkin, G. & Eisner, A. (2008). Strategic Management (4e). Boston:McGraw-Hill Irwin.
Siehoyono, L. (2005). The McDonald’s Case: Strategies for Growth.
McDonald’s History. (2007). Available on www.mcdonalds.com. Accessed on September 17th, 2008.