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McDonald’s is an American fast-food restaurant chain, which operates in 118 countries with 34,000 outlets. Currently, McDonald’s is the world’s largest fast-food restaurant, with a revenue of 21.08 billion as of 2019. The company is best known for its fast and consistent services. McDonald’s is one of the most popularly studied organization in the fast food or quick serve restaurant sector and often is the most commonly chosen company for a college essay. In this article, we have conducted an in-depth SWOT analysis of McDonald’s, highlighting the internal and external factors which influence the business operations of the company. The internal factors are determined by the strengths and weaknesses, whereas the external factors by the opportunities and threats of the company.

McDonalds SWOT Analysis

Strengths Weaknesses
  • High brand equity and global brand awareness
  • Strong financial position with high revenue generation
  • Highly standardized workflow to deliver consistent service quality
  • Combination of standardization and localization of marketing mix
  • Over dependence on franchised outlets reduces the operating control from the company
  • Easily imitable business model and core value offering
  • Over dependence on suppliers for raw materials
Opportunities Threats
  • Steady growth in the fast food restaurant sector
  • Rising popularity in online food ordering habit
  • Rising popularity of social media can be used for aggressive marketing
  • Catering health conscious consumers
  • Potential for diversification into related sectors
  • Steep competition from other well-established market players such as Subway, KFC, Burger King, among others.
  • Threat from political factors, such as changes in business policies in host markets
  • Threat from sudden economic changes
  • Localization challenges in certain international markets

Strengths

The key strength of McDonald’s is its brand image and brand value. McDonald’s is considered to be one of the most popular fast food restaurants. Its popularity is clearly reflected in its brand value, which has been recorded at USD 129 billion. In fact, the company holds the leadership position in the global fast food sector, in terms of brand valuation. This indicates that McDonald’s has a high brand equity, which enables the company to attract more sales and investments. The strong brand image of the company also allows it to create a strong competitive advantage against other market players.

The financial status of the company can also be considered as its strength. The massive popularity of the restaurant has enabled it to generate significantly high sales revenue. As of 2019, the company generated USD 22 billion in revenue, of which USD 11.66 billion came from franchised outlets. The strong financial condition of McDonald’s can help the company to further expand its business, invest in R&D for new product and process development, or adopt aggressive marketing strategies.

The operational practices of McDonald’s are one of its biggest strengths, which plays a major role in its success. The highly efficient workflow and standardized processes of McDonald’s ensure that the quality of service is always consistent across all McDonald’s outlet, thereby giving the customers more confidence to visit their outlet.

Finally, it should be noted that the marketing mix strategy of McDonald’s is also one of its key strengths. McDonald’s has adopted a combination of standardization and localization approach when it comes to developing its marketing strategies. This as a result has enabled the company to cater to the local preferences of the host markets, whereas maintaining the global brand image.

Weaknesses

The most notable weakness of McDonald’s lies in its business model. McDonald’s business operations are largely dependent on its franchising approach. In order to expand rapidly into its target markets, McDonald’s operate with a large number of franchised outlets, along with self-owned ones. These franchised outlets may have allowed the company to expand quickly at a much lower cost, but it has also reduced its control over the service quality in these stores. Since, these stores are owned by third-party clients, there are many instances of poor service quality, unprofessional employee behavior, etc., which eventually deteriorates the brand image of McDonald’s.

It should also be highlighted that the menu items of McDonald’s can be easily imitated by other market players, as most of them are generic items. This as a result can reduce the differentiation of the company, thereby reducing its competitive advantage.

The operational activities of McDonald’s are largely dependent on its suppliers, who provide the raw materials for preparing the food items. Therefore, any disruption in the supply chain due to political or economic factors can have a drastic impact on its business. The over-dependence on the suppliers also indicates that the company faces high bargaining power of the suppliers, which can effect is pricing and profit margin.

Opportunities

The fast food or the quick serve restaurant sector has shown promising growth over the recent years. Consumer spending on fast food restaurants has increased significantly, and is forecasted to increase further in the near future. This trend can prove to be quite beneficial for McDonald’s as the company can leverage the industry growth to earn more revenue.

McDonald’s can also benefit from the rising trend of ordering food online. It has been found that people are increasing becoming fonder of ordering their food online and having them delivered to their door steps. McDonald’s can further improve their home delivery system to cover much larger market areas, in order to cater to a large market area. The company can invest on new technologies such as drone delivery, like Amazon, for faster delivery of food items to its customers. It can further improve its service quality.

The growing health consciousness in the western markets, is encouraging people to consume low calories foods. This can be a potential opportunity for McDonald’s to offer a range of new menu items which are specifically targeted at health-consciousconsumers. As a result, it can help McDonald’s to create a strong brand image in the market, and can help in retaining its customer by offering healthier food items.

McDonald’s can also take advantage of the rising popularity of social media, and emphasize more on its use as a marketing platform. This can enable the company to reach out to a much larger audience base and offer personalized advertising, which have proven to be more effective in creating a strong brand image.

McDonald’s have the financial capacity to expand into other related sectors such as coffee shop. The company has the required expertise, knowledge and technologies to enter into a new hospitality and restaurant sector. It will help in reducing the dependence of the company on one source of revenue. The diversification can also help in strengthening its competitive advantage against other market players.

Threats

McDonald’s face significant threats from other market players such as Subway, KFC, Burger King, and many other fast-food brands. Each of them offers identical value propositions to the customers and poses a strong competition to McDonald’s. The presence of other market players with compelling products and services draw the customers away from McDonald’s thereby reducing its sales volume. These rival brands often adopt aggressive marketing strategies, which can directly impact the brand image of McDonalds.

The company operates in multiple international locations, which exposes it to political threats. Any changes in business policies and regulations in the host countries can have a significant impact on the operations of McDonald’s. It can increase its cost of operations, disrupt its supply chain and even force the company to downsize its business in the market. It should also be noted that the trade relationship between the home and host countries can also determine the ease of doing business for an international company like McDonald’s.

McDonald’s also faces threat from the economic factors, such as affordability and disposable income. During economic recessions, people may choose to be become thrifty and may spend less money on consuming fast food. This as a result can have significant impact on the revenue generation of the company. Furthermore, the global lockdown and quarantine for Covid-19 has also affected the sales of the company, as people are restricted from visiting public places.

The company often faces challenges in operating in international markets, with drastically different cultures and consumption habits. In certain markets, such as in India, McDonalds have faced certain issues regarding the preparation of their food items, especially in relation to the method of meat preparation. Such cultural backlash can have a significant impact on the brand preference among the customers.

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