• Written on 10 Mar 2013

SWOT analysis of McDonalds

McDonald's logo

This is a McDonalds Corporation SWOT analysis for 2013. For more information on how to do SWOT analysis please refer to our article.

Company background

Name McDonald's Corporation
Industries served Restaurants, Food
Geographic areas served Worldwide
Headquarters U.S.
Current CEO Don Thompson
Revenue $ 27.56 billion (2012)
Profit $ 5.46 billion (2012)
Employees 1,800,000 (2013)
Main Competitors Burger King Worldwide,Inc., Yum! Brand Inc., Subway, Wendy’s Company.

McDonald’s is the world’s leading fast food restaurant chain with more than 34,000 local restaurants serving approximately 69 million people in 119 countries each day. More than 80% of McDonald’s restaurants worldwide are owned and operated by independent local franchisees.
You can find more information about the business in its official website or Wikipedia’s article.

SWOT

McDonalds SWOT analysis 2013

Strengths

Weaknesses

  1. Largest fast food market share in the world
  2. Brand recognition valued at $40 billion
  3. $2 billion advertising budget
  4. Locally adapted food menus
  5. Partnerships with best brands
  6. More than 80% of restaurants are owned by independent franchisees
  7. Children targeting
  1. Negative publicity
  2. Unhealthy food menu
  3. Mac Job and high employee turnover
  4. Low differentiation

Opportunities

Threats

  1. Increasing demand for healthier food
  2. Home meal delivery
  3. Full adaptation of its new practices
  4. Changing customer habits and new customer groups
  1. Saturated fast food markets in the developed economies
  2. Trend towards healthy eating
  3. Local fast food restaurant chains
  4. Currency fluctuations
  5. Lawsuits against McDonald’s

Strengths

  1. Largest fast food market share in the world. McDonald’s is the largest fast food restaurant chain in terms of total world sales (8%). It is the second largest outlet operator with more than 34,000 outlets, serving 69 million consumers every day in 119 countries.
  2. Brand recognition valued at $40 million. Company’s brand is the most recognized brand in fast food industry and is valued at $40 billion. McDonald’s is also famous by the Ronald McDonald clown.
  3. $2 billion advertising budget. McDonald’s spends on advertising more than the next 4 fast food restaurant chains combined.
  4. Locally adapted food menus. The fast food chain is operating in many diverse cultures where tastes in food are extremely different than those of US or European consumers. Thus ability to adapt to local tastes is one of McDonald’s strengths.
  5. Partnership with best brands. McDonald’s offers only most popular brands in its restaurants, such as: Coca Cola, Dannon Yogurt, Heinz ketchup and others.
  6. More than 80% of restaurants are owned by independent franchisees. Therefore, McDonald’s can focus more on perfecting its serving system and marketing campaigns.
  7. Children targeting. The business successfully targets very young children through offering playgrounds, toys with its meals and advertisements.

Weaknesses

  1. Negative publicity. McDonald’s is heavily criticized for offering unhealthy food to its customers, stimulating obesity and strong marketing focus on very young children.
  2. Unhealthy food menu. Although McDonald’s tries to introduce healthier choices in its menu, the menu is largely formed of unhealthy meals and drinks. Such menu offering prompts protests by organizations that fight obesity and hence, decreases McDonald’s popularity.
  3. Mac Job and high employee turnover. Mac Job is a low paid and a low skilled job, which is often seen negatively by its employees. This results in lower performance and high employee turnover, which increases training costs and add to overall costs of McDonald’s.
  4. Low differentiation. McDonald’s is no longer able to substantially differentiate itself from other fast food chains (at least not enough to gain some market share) and opts to compete by price rather than by additional features.

Opportunities

  1. Increasing demand for healthier food. While demand for healthier food increases, McDonald’s could introduce more healthy food choices in its menu and reverse its weakness into strength. McDonald’s is trying to seize such an opportunity and soon plans to open only vegetarian restaurant in India.
  2. Home meal delivery. McDonald’s could exploit an opportunity of delivering food to home and increase its reach to customers.
  3. Full adaptation of its new practices. McDonald’s has redesigned its logo and restaurant design in 2006. In addition, it has introduced some new practices. In a result, remodeled restaurants have seen 8-9% higher than average market growth. McDonald’s should finish remodeling all of the restaurants and adapt the best practices in them as soon as possible.
  4. Changing customer habits and new customer groups. Changing customer habits represent new needs that must be met by businesses. So far, the company has been successful in introducing its McCafé, McExpress and McStop restaurants to meet the changing customer habits and the needs of previously untapped customer groups.

Threats

  1. Saturated fast food markets in the developed economies. The fast food market in the developed countries is already overcrowded by so many fast food restaurant chains and this already proves to be a threat to McDonald’s as it barely grew through 2012.
  2. Trend towards healthy eating. Due to government and various organizations attempts to fight obesity, people are becoming more conscious of eating healthy food rather than what McDonald’s has to offer in its menu.
  3. Local fast food restaurant chains. Local fast food restaurants can often offer a more local approach to serving food and menu that exactly represents local tastes. Although McDonald’s does a great job in adapting its own menu to local tastes, the rising number of local fast food chains and their lower meal prices is a threat to McDonald’s.
  4. Currency fluctuations. The business receives a part of its income from foreign operations. The profits that are sent back to US have to be converted into dollars and may be affected by the exchange rates, especially when the dollar is appreciating against other currencies. In 2012, McDonald’s profit was largely affected by appreciating dollar.
  5. Lawsuits against McDonald’s. McDonald’s has already been sued for many times and lost quite a few lawsuits. Lawsuits are expensive as they require time and money. And as McDonald’s continues to operate more or less the same way, there is high probability for more expensive lawsuits to come.

Related topics

Coca Cola SWOT

KFC SWOT

Nestle SWOT

PepsiCo SWOT

Starbucks SWOT

Subway SWOT

Walmart SWOT

Walt Disney SWOT

Sources

  1. The New York Times (2012). How McDonald’s Came Back Bigger Than Ever. Available at: http://www.nytimes.com/2012/05/06/magazine/how-mcdonalds-came-back-bigger-than-ever.html?pagewanted=2&_r=0&ref=mcdonaldscorporation
  2. McDonald’s Investors (2013). Company profile. Available at: http://www.aboutmcdonalds.com/mcd/investors/company_profile.html
  3. Wikipedia (2013). McDonald’s. Available at: http://en.wikipedia.org/wiki/McDonald's
  4. United States Securities and Exchange Commission (2012). 10-K Form McDonald’s Corporation. Available at: http://sec.gov/Archives/edgar/data/63908/000119312511046701/d10k.htm
  5. Interbrand (2013). Best Global Brands 2012. Available at: http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-2012.aspx

Written by Ovidijus Jurevicius

Connect on Google+

If you're interested in strategic management, business strategy or any other business related topic, connect with me on Google+ Ovidijus Jurevicius