Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis for

McDonald with a Focus on Digital Transformation

Mariam R. Urgel and Kimberly D. Peralta

Abstract: This research study focuses on the digital transformation activities of

McDonald's, a global fast-food industry leader, through a comprehensive SWOT
analysis. By systematically evaluating the company's internal strengths and weaknesses,
as well as external opportunities and threats in the context of digitalization, the study
hopes to provide strategic insights that will help McDonald's navigate the complexities
of the digital landscape and optimize its operations for long-term growth.

Keywords: Digital, Transformation, Growth, Strategy

Introduction

In an era of rapid technology breakthroughs, businesses across industries are

forced to go on digital transformation journeys to remain competitive. McDonald's, as
the fast-food industry leader, is no exception. This study digs into the specifics of
McDonald's digital transition using a SWOT analysis. The examination focuses on
internal elements such as the company's current digital infrastructure, adaptability to
change, and the external factors of a dynamic market driven by technological
improvements. The goal of this examination is to uncover crucial insights that can help
McDonald's leverage digital benefits and handle potential difficulties.

Strengths

1. Early Market Presence: McDonald's is an early mover in the fast-food industry,

with a global footprint and extensive brand recognition [1].

2. Global Scale: The company has a large network of business locations and is
recognized as one of the most valuable brands in the world [2][3].

3. Digital Innovation: McDonald's has made significant strides in digital

transformation, including self-service kiosks, mobile ordering, and AI-driven customer
engagement [1].

4. Established Supply Chain: McDonald's is well known for serving fast, consistent,
and high-quality meals, which are made possible by a well-managed and efficient
supply chain. McDonald's supply chain efficiency has improved because of the use of
digital technology such as mobile ordering, data analytics, digital menu boards, and
automated kitchen equipment to monitor and streamline operations [4].

5. Strong Financial Performance: The company reported revenues of $6,692.2

million for the quarter ended September 30, 2023, up 14% from the same period in
2022. Operating income was $3,208.3 million, a 16% increase over the prior year. Net
income was $2,317.1 million, up 17% from the previous year. Earnings per share
diluted were $3.17, an 18% increase over the prior year [5].

These results demonstrate the company's outstanding operating performance and

capacity to drive sales growth and increase shareholder value [5]. Furthermore, it
enables it to make investments in digital transformation without compromising its
operational capabilities.

Weaknesses

1. Overdependence on Franchise Business Model: McDonald's is facing issues due

to its overreliance on the franchise business model [1]. Franchising provides certain
significant advantages. It has helped McDonald's finance its fast expansion. However,
franchising requires corporations to relinquish some control over restaurant operations,
making it difficult to respond swiftly to market developments [6]. Because individual
franchisees' levels of technology engagement differ, it is difficult to establish uniform
digital strategy across all sites.

2. Legacy Systems: McDonalds may have difficulties in effortlessly incorporating

digital technology because of existing legacy systems and infrastructure, which may
necessitate significant investments in renovations. A legacy system is an old method,
technology, computer system, or application software that is "of, relating to, or being a
previous or outdated computer system" but is still in use [7]. Many firms, such as
McDonalds, who want to integrate digital technologies may struggle to deal with legacy
systems.

3. Perception Challenges: The fast-food industry has become extremely competitive,

with numerous multinational and local restaurants opening daily that provide identical
items. Competition is fierce since every company is investing more in innovation,
advertising, and launching new franchises to increase access to new customers [8].
When a corporation is as old as McDonald's, it may be perceived as traditional and less
tech-savvy than its newer, digitally native competitors.

Opportunities
1. Digital Ordering and Delivery: Embracing digital ordering platforms and
expanding delivery services can enhance customer convenience and tap into the
growing trend of online food delivery.

2. Data Analytics for Personalization: McDonald's can leverage data analytics to

understand customer preferences and behaviors, enabling personalized marketing
strategies, menu recommendations, and promotions.

3. Mobile Apps and Loyalty Programs: Developing and enhancing mobile

applications with integrated loyalty programs can attract and retain customers while
providing valuable data for further customization.

4. Automation and AI: Implementing automation and artificial intelligence in

operations can improve efficiency, reduce costs, and enhance the overall customer
experience.

Threats

1. Competition from Tech-Centric Brands: Increased competition from tech-centric

fast-food brands and delivery platforms may challenge McDonald's market share and
profitability.

2. Cybersecurity Risks: As McDonald's relies more on digital technologies, the risk of

cyber threats, data breaches, and other cybersecurity issues becomes more
pronounced.

3. Regulatory Challenges: Evolving regulations related to data privacy and food

delivery services may pose challenges to McDonald's digital transformation initiatives.

4. Consumer Resistance to Change: Some consumers may resist digital changes,

and McDonald's needs to manage this transition carefully to ensure a positive customer
experience.

Based on the above SWOT analysis, results shown in table below for further
analysis and provides a basis for creating a strategy:

Strengths Weaknesses
1. Early Market Presence 1. Overdependence on Franchise
2. Global Scale Business Model
3. Digital Innovation 2. Legacy Systems
4. Established Supply Chain 3. Perception Challenges
5. Strong Financial Performance
Opportunities Threats
1. Digital Ordering and Delivery 1. Competition from Tech-Centric
 2. Data Analytics for Personalization Brands
3. Mobile Apps and Loyalty Programs 2. Cybersecurity Risks
4. Automation and AI 3. Regulatory Challenges
4. Consumer Resistance to Change

Strength-Opportunity (SO) Strategy

1. Leverage Global Brand Recognition: Utilize the strong global brand to promote
digital initiatives such as online ordering, emphasizing the convenience and reliability of
McDonald's services.

2. Integrate Data Analytics in Supply Chain: Data analytics converts raw data into
meaningful information. It uses a variety of tools and approaches to identify patterns
and solve problems using data. Data analytics enables organizations to make better
decisions and grow [9]. McDonald's may leverage data analytics in its existing supply
chain to optimize inventories, minimize waste, improve planning, and increase overall
efficiency.

3. Develop Comprehensive Mobile App: McDonalds may use its financial resources
to create a comprehensive mobile app with loyalty programs, targeted promotions, and
seamless digital experiences. Ordering through the mobile app can also ensure more
efficient service while reducing the possibility of people leaving a restaurant owing to
excessive waits. Furthermore, fast food firms have discovered that mobile app ordering
leads to greater orders [10].

Strength-Threats (ST) Strategy

1. Strategic Partnerships with Tech-Centric Brands: Form partnerships with tech-

centric brands to improve McDonald's digital capabilities and remain competitive.
Additionally, this partnership can assist McDonald's in leveraging scale and unlocking
greater speed and efficiency for customers, restaurant teams, and employees [11].

2. Invest in Cybersecurity Measures: McDonald's has a strong financial

performance, allowing them to invest resources to increase their cybersecurity
measures, such as preserving consumer data and guaranteeing the security of digital
platforms to prevent data breaches.

3. Investment in digital technology: An implementation of self-service kiosks to

enhance the customer experience and satisfaction. On the other hand, it connotes
threats that need to be addressed, such as the cost of digital transformation and
concerns about data privacy and security.
Weaknesses-Opportunity (WO) Strategy

1. Upgrade Legacy Systems: McDonald's must capitalize on current technology by

investing in updating outdated systems to speed up digital integration and ensure a
consistent digital experience across all franchise locations.

2. Franchisee Training and Collaboration: Provide franchisees with training and

incentives to stimulate the adoption of digital technologies, resulting in a cohesive
digital strategy across the McDonald's network.

3. Labor practices and sustainability: McDonald’s digital transformation provides an

opportunity to address concerns to improve the company's reputation through
increased transparency and accountability.

Weaknesses-Threats (WT) Strategy

1. Address Consumer Resistance through Education: Create marketing

campaigns and efforts to educate consumers about the advantages of digital
transformation while addressing concerns and opposition.

2. Proactive Regulatory Compliance: Keep up with changing rules by taking

proactive steps to ensure data privacy and food delivery service compliance.

3. Innovation and phased Adaptation: terms marketing strategy to be more agile

adaptation to current consumer trends and continuous further innovation with a unique
approach to remain competitive in the market.

Conclusion

In conclusion, the strength-opportunity (SO) strategy includes leveraging global

brand recognition, integrating data analytics in the supply chain, and developing
comprehensive mobile apps. The strength-threats (ST) strategy includes strategic
partnerships with tech-centric brands, investment in cybersecurity measures, and
investment in digital technology. The weaknesses-opportunity (WO) strategy includes
upgrading legacy systems, franchisee training and collaboration, and labor practices and
sustainability. The weaknesses-threats (WT) strategy includes addressing consumer
resistance through education, proactive regulatory compliance, innovation, and phased
adaptation. McDonald's digital transformation journey involves challenges and
opportunities.

The SWOT analysis identifies areas where the organization can take advantage
of its strengths, address weaknesses, capitalize on opportunities, and minimize threats
in the digital world. McDonald's can position itself as an industry leader by strategically
aligning its digital initiatives with market trends and consumer preferences, employing
technology to improve operational efficiency while also providing an unrivaled customer
experience in the developing digital age.

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