In this article we discuss the SWOT analysis of McDonalds which is a world of delicious high-quality food that is the largest food chain company in the United States. It is an ideal place for affordable and fast food. This world-famous American food restaurant was established almost 75 years ago by two brothers Maurice and Richard during the year 1940. A BBQ joint was the first McDonalds stall that was initiated in California.
Over a period of eight years, McDonalds turned out to be a fast-food restaurant that was later purchased by Ray Kroc, a multimixer salesman. During the year 1955, he initiated the first franchise in Illinois and then later gradually transformed into a perfect corporation.
Currently, McDonalds corporation stands in the top 10 global brands that have almost thousands of franchises worldwide that include Canada, Australia, Germany, France, the United Kingdom, Korea, Italy, China, Spain, Poland, Russia, Netherlands, Switzerland, and many more.
Through this article, let us discover the latest dynamics of McDonalds SWOT. It highlights the fact that the most flourishing food chain business makes use of its competitive advantages to possess the fast-food industry ruling power.
The SWOT analysis of McDonalds segregates all the main strengths, weakness, opportunities, and threats that gives a direction to the company to increase its growth. This article would give you an insight into where McDonalds stands.
Before we analyze the SWOT analysis of McDonalds, let us recognize a bit of the company background of McDonalds.
The following points provide you a bit of McDonalds’s background:
- The company is known with the name McDonalds Corporation
- McDonalds was established during the year 1940 and is headquartered in Illinois, United States.
- The company logo is shown in Image 1.
- During the year 2018, the company is estimated to have an employee force of about 235,000.
- Few of its competitors are:
- Burger King
- Darden Restaurant
- Doctor’s Association
- Dunkin Brand
- Yum Brand
- Starbucks Corporation
- Wendy’s Company, and many other chains of restaurant
The various franchise of McDonalds is owned and executed under the following structures:
- Conventional franchise
- Developmental license or affiliate
The business relationship that exists between the independent franchise and McDonalds is very important for the company’s overall performance and it impacts the McDonalds brand. The business relationship maintained by an agreement that involves loyalty to the brand’s standards and policies.
The SWOT analysis of McDonalds tells us about the strengths that the company makes use of to sidestep its weakness. It also mentions about its threat that the business can encounter so that the company can be ready for whatever comes it is. Also, it mentions the maximum benefit from the various opportunities in the international market.
For McDonalds to meet its long-term competitive advantage it must address the various concerns highlighted in the SWOT analysis of McDonalds.
Let us discuss on the SWOT analysis of McDonalds.
Strengths in the SWOT Analysis of McDonalds
- Most Valuable Brand – This is the main strength of the brand. McDonald is the tenth most valued brand in the whole world. Having an unbelievable brand value worth, the company has strong competition, yet rules over the restaurant industry. McDonalds is a popular one and available in many places. Owing to its excellent service and products, it is indeed the most valuable brand in the restaurant industry.
- International Network – Having an international presence is one of the brand’s strength. The company has an immense presence in about 100 countries, and it has both kinds of stores like a company maintained and licensed store in its international network. During the year 2018, the total number of restaurants in the McDonalds system went up to 37,855. Based on the number of restaurants stores, this brand is the second-largest store in food brand in the world after Subway. Its leading market is from the United States. Its sales from the global market are also inspiring. The company has its focus on high growth markets aside from its established markets. McDonald’s established markets lie in the US, UK, Canada, Australia, France, and Germany. The high growth markets hold more expansion potential in areas like Italy, China, Poland, Korea, Switzerland, Netherlands, and Russia. These countries are McDonalds leading markets. McDonalds is making plans through franchise to enter into other markets.
- Delicious Food – This is yet another strength of McDonalds. Its food is liked by all and very tasty. It is known for its French fries and is the best tasting French fries amongst the food industry. People having food in its outlet would not come out without eating its French fries.
- McDonald is a Real Estate Company – Most of us are not aware that apart from the burger and French fries McDonalds owns a multi-billion empire for real estate. You can think of the brand owning many fine locations worldwide. This is indeed a big strength of the brand. During the year 2018, the brand is supposed to have about 37, 855 restaurants in about 120 countries, in this about 35,085 are franchises and the rest of the restaurants are company operated. The franchises of McDonalds work differently. It not only provides the brand recipes, name, ingredients, and the various processes to franchises, it also possesses the land and functions as a landlord. It generates revenue through the payment of rent.
- Brand Awareness – Yet another strength of the brand, McDonald being a fast-good brand, enjoys a great brand awareness worldwide. Having its global presence is a vital factor that supports its brand awareness. Its focus on customer service and marketing has driven the brand recognition of the brand to a great level. McDonalds has initiated various digital initiatives to enhance its brand awareness in the leading market areas. The brand and its logo are easily recognizable in all the markets. Customers can easily find McDonalds restaurants in the main locations using its logo. Also, there are many things that make McDonalds vary from other existing fast food companies. The brand has executed many successful campaigns and advertising to increase its brand awareness and get more customers to their brand. The brand’s promotional campaigns promote distinct products and the entire brand as well. The brand also spends a lot of money on its advertising. To increase its brand awareness, it makes use of many digital channels that includes paid promotions and social media to increase its brand awareness. The physical store of McDonalds plays a vital role in its brand awareness. The main drivers for brand recognition are the word of mouth and media publicity.
- Technology Initiative and Acquisition – McDonalds tunes itself with the changing technology initiatives to make their experience an amazing one. The various initiatives that McDonalds take are self- service using kiosks, mobile orders, payment systems that benefit McDonalds. The brand has always taken an extra step to be technology-oriented with various acquisitions that would enhance customizations and personalized marketing. McDonalds makes use of Dynamic Yield; an Israeli startup that is used to assist the brand to increase its customer experience with the brands personalize contributions.
- Better-quality Control and various Health Protocols – McDonalds has its high-quality standard with the taste and its overall customer experience. The brand applies full food safety and quality protocols are set in place. It checks all these before purchasing the ingredients from others. The entire food processing has its protocols in place before the outcome is produced. So, this is indeed a strength for the brand.
- Supply Chain Management – McDonald’s has a large, supportable, and responsible supply chain. Its supply chain includes many independent suppliers. The brand along with its franchisee’s source equipment, food, and other necessary things from their suppliers. To make sure that the quality is maintained, the company has imposed great quality standards and various food safety measures. The quality centers of McDonalds across the world take the utmost care of the quality and make sure that the quality standards are steadily taken care of and followed across the system. The various steps in quality assurance include product reviews and site supplier visits. The company has a perfect Food Safety Advisory Council that takes care of the food safety aspects. McDonalds has patched with its suppliers to make sure that their prices are feasible. They have many independent distribution centers that distribute food supplies to the restaurants. The logistics networks are in place and are being managed well.
- More dependent on Franchise – The business model of McDonalds is designed in a way that is more dependent on its franchises, which mainly operates about 90% of McDonalds business. The business of McDonalds is stable so far, the issues of franchisee keeps popping up again and again. Moreover, the business plan in the long term is trying to include more franchisees. When the entire business model is based on franchisee, the main limitation would be the cooperation and dependency on each franchise unit. Also, there would be extra control in the franchisee’s hands. In case the franchise does not cooperate and if their financial performance is not too good, then it would be tough for the company. At times, the main campaign implementation or an essential strategic choice would be tough when there is no acknowledgment from any franchise. Hence, in general, the franchisee’s overall role becomes crucial and important for the company to execute its franchisee well.
- More dependent on Western Markets – Being a top fast-food brand, McDonalds is being more dependent on the Western markets. The leading markets that McDonald’s focus is UK, US, France, Canada and forms a large part of its revenue. Out of these, the United States alone accounted for about 35% of the brand’s revenue during the year 2018. The brand’s market in areas like Malaysia, China, Singapore, and India is low which shows low penetration of the market. As such, the brand is more dependent on the western markets for its major revenue part.
- Supply Chain Interruptions – This is a strong weak point for McDonalds. Being one of the fullest food chains of the world it mostly faces disturbance with regards to the supply chain. Also, it reduces the product availability that is critical to the operations. When any raw materials are not delivered on the time, the entire production would hit. When a franchisee faces such supply chain interruptions, there would be an increase in the operational expense that would reduce profits and revenue.
- Lack of Employee Satisfaction – As the current employee’s right revolutions across the world and the wages increased, McDonalds have faced dissatisfaction from its employees. It faced criticism from its employees. The workers went to protest and there were strikes to increase their wages, thereby hitting the company’s reputation.
Opportunities in the SWOT Analysis of McDonalds
- Digital Marketing – The current world talks about digital marketing and it had guided many leading brands worldwide to increase its market share and revenue. McDonald’s also increases its competitive advantage by devoting to digitalization. McDonalds already is making use of the top digital channels for marketing purposes. Aside from the various social media platforms, other channels for digital marketing include the company’s websites, blogs used for customer engagement and marketing. Digital marketing can guide the brand to be reachable to many. McDonald’s makes use of digital technology for employee engagement, customer engagement, supply chain management, and franchise management.
- Innovation in Food Menu – There has been a lot of demand from the customer and market. The current generation is conscious of their health and prefers healthy food and a low-calorie diet. Of course, the company services a balanced menu with competitively priced food items, there is always a chance for menu innovation. It helps the company to increase its customers who are conscious of their health and diet. So, McDonald’s should include a menu that would best suit the current generation that would increase the customer base and retain the current customers as well.
- Focus on Asian Markets – There are huge opportunities for business in the Asian market. Countries like China, Singapore, Malaysia, and other Asian nations, there is a huge demand for fast food in the current generation. Many people prefer a quick bite. The Asian countries have flourished during recent years and have increased the buying power of the middle-class customers. McDonald’s should find out various strategies that guide it to grow its entry into the Asian markets. This would increase the brand’s customer base and its revenue.
- Brand Image Rebuild – There is a notion among people that fast food is junk food. The brand is struggling itself to come over that image. McDonald’s should figure out ways and continue to initiate aggressively the customized and healthy offerings to get back the brand value. These developments started to show a few signs of progress with positive sales that reflected in the profit.
Threats in the SWOT Analysis of McDonald’s
- Competitors – The fast food industry is growing at a rapid rate and there are many companies that are strong competitors for McDonald’s. A few of the competitors are Burger King, Subway, Wendy’s, etc. There are many local brands also that is growing at a fast pace. For McDonald’s to maintain its leading position it should grow its marketing investment and redefine its menu every time. This would bring more customers and they would stick to them largely. When the competition is at its rise, the company should give more focus on being more customer-centric and invest in more product and market research.
- Regulatory pressure – The industry regulatory pressure is increasing and the fast-food industry faces government control. As the government oversight keeps growing, the operations cost also increases. There are many other issues that come out of higher regulatory pressures. The brands see a threat when it is trying to expand to international markets.
- Economic Fluctuation – This is a big threat for the McDonalds. Economic fluctuation in the main market can cause losses and impacts the bottom line. The core markets are McDonald’s economic area are Canada, the US, France, and other Western countries. Where there is an economic crisis in these markets, it affects the financial situation of McDonald’s as well. Economic fluctuations in the economy also hit the business profit.
- Cultural Threat of Other Countries – Being a fast-food chain, McDonalds sees a threat in various parts of the world that would harm the brand image. It becomes a challenge for the brand to operate in different locations and the food taste should fit into people as per the different geographical locations.
- COVID 19 – The recent global issue COVID 19 has made McDonalds close outlets. As this is a global issue, it does impact the brand’s financial condition.
The SWOT analysis of McDonalds mentioned in this article has highlighted the main strengths of the brand that comes up from its brand image, tasty food, its French fries, unique features incorporated in its business model.
The major weakness is its supply chain management and its more dependent on the franchisee. McDonalds sees a huge opportunity in introducing variations in its menu and various economic fluctuations are its threat.