McDonalds SWOT Analysis in a Simplified Way

McDonalds is one of the largest food chain Restaurant in the world with over thousands of franchises around the world.

Let us look into the Overview of McDonalds and then we can move on to the McDonalds SWOT Analysis.

Overview of McDonalds

McDonalds is an American fast food company founded in 1940 as a restaurant by Richard and Maurice McDonald in San Bernardino, California, United States. They renamed their business Hamburger Stand and later converted the business into a franchise.The Golden Arches logo was introduced in 1953 at a location in Phoenix, Arizona. In 1955, businessman Ray Kroc joined the company as a franchise representative and purchased the chain from the McDonald’s brothers. McDonald’s was formerly headquartered in Oak Brook, Illinois, but moved its global headquarters to Chicago in June 2018.

McDonald’s is the largest restaurant chain in the world by sales, serving more than 69 million customers daily in over 100 countries through 37,855 stores as of 2018. Although McDonald’s is best known for its hamburgers, cheeseburgers, and fries, the company also offers chicken products, breakfast products, soft drinks, milkshakes, wraps, and desserts.

In response to changing consumer tastes and negative response to unhealthy foods, the company has expanded its menu to include salads, fish, smoothies, and fruit. McDonald’s Corporation’s revenue comes from rents, royalties, and fees paid by franchisees, as well as sales at company-operated restaurants. According to two reports published in 2018, McDonald’s is the second largest private employer in the world (behind Walmart with 2.3 million employees) with 1.7 million employees. As of 2020, McDonald’s has the ninth highest global brand value

Did You Know?

The Caesar Salad is More Fattening than their Hamburger.

McDonalds SWOT Analysis

The McDonalds SWOT Analysis includes its strengths, weaknesses, opportunities, and threats. And in this reading of the McDonalds SWOT Analysis, we will examine this beauty and wellness company in terms of its internal and external factors.

S Stands For Strengths ( Internal Factor )

• Most valuable brands: McDonald’s is the ninth most valuable brand in the world. With an incredible brand value, the company dominates the restaurant industry regardless of the tough competition.
• Delicious Food: McDonald’s fries are considered the best tasting fries in the fast food industry. McDonald’s fries taste the best, according to a customer survey. McDonald’s fries taste the best, according to customer survey
• McDonald’s – A Real Estate Company: Few people know that McDonald’s not only sells burgers and fries, but also owns a billion-dollar real estate empire. Imagine having thousands of prime locations around the globe. As of April 2020, there were 21,837 franchised restaurants out of 38,695 McDonald’s restaurants in 120 countries. The rest are company-operated restaurants.McDonald’s franchise system works a little differently. McDonald’s not only provides franchisees with the brand name, recipes, ingredients, and processes, but also owns the property and acts as a landlord, generating revenue through rent payments.
• Innovation in Tech: McDonald’s is taking revolutionary technological initiatives to make its dream of ‘Experience of the Future’ come true. Initiatives such as the introduction of self-service kiosks, mobile ordering and payment systems are benefiting McDonald’s image as the ‘Restaurant of the Future’.
• Acquisitions: The recent acquisition of ‘Dynamic Yield’ is another step towards personalized marketing and customization. Dynamic Yield is an Israeli startup that helps brands like McDonald’s improve their customer experience with personalized offers.
• Highest brand equity among fast food brands: McDonald’s enjoys the privilege of being the most valuable fast food brand in the world. In 2019, McDonald’s brand value increased to $130.37 billion from $126.04 billion in 2018. No other fast food brand even came close to McDonald’s value. The brand value of second-place Starbucks was just over $44 billion.
• Improved quality control and health protocols: one can argue about taste and overall customer experience, but McDonald’s quality standards have always been its strong suit. The company enforces full food safety and quality protocols before purchasing ingredients from third-party middlemen.Recently, McDonald’s has begun limiting the use of high-grade antibiotics for humans. These have been classified by the World Health Organization (WHO) as “highest priority critically important antimicrobials” (HPCIA) for human medicine and have been included in the global chicken supply since 2018. This policy is also welcomed by many health and consumer groups as it represents a major effort to prevent dangerous superbugs.
• Leading Quick Service Restaurant: In 2019, McDonald’s was the leading quick service restaurant (QSR) chain in the United States with sales of $40.41 billion. This puts McDonald’s well ahead of second-place Starbucks, which generated $21.38 billion in revenue in FY 2019, nearly half of what the market leader generated during the same period.
• Also, Read SWOT Analysis of Zomato in a Simplified Way.

W Stands For Weaknesses ( Internal Factor )

• The franchise business model: McDonald’s is the best example of international franchising models. However, this complicated web of franchised and company-owned restaurants exposes the brand to certain risks.The risks are financial deterioration, mismanagement, customer dissatisfaction, and low revenue. The company is highly dependent on the franchisees who operate independently and therefore have no control over their day-to-day performance, but this has a direct impact on the brand.
• Supply chain disruptions: McDonald’s is one of the largest food chains in terms of sales and often faces problems due to disruptions in the supply chain. It also limits the availability of products that are critical to the business.When a franchise is affected by such disruptions, operating costs increase, which in turn leads to lower revenue and profitability.
• Lack of Employee Satisfaction: Due to the recent global revolutions in employee rights and increase in wage limits, many businesses are facing employee dissatisfaction.Recently, McDonald’s faced extreme backlash from its workforce. Workers demanded an increase in the minimum wage to $15 per hour in several protests and strikes, inflicting damage to the company’s image.
• McDonald’s Breakfast: For nearly a decade, McDonald’s breakfast sales were unbeatable, especially in the United States. However, in May 2018, the company’s chief financial officer admitted that McDonald’s breakfast menu consumption was declining and that something needed to be done to change that.But with competition so fierce, it’s unlikely to be easy to restore the popularity of its breakfast dishes.
• The CEO was fired for violating company policies: In November 2019, McDonald’s CEO Steve Easterbrook was fired after having a consensual relationship with a female employee. This violated company policies. In addition, the company’s board of directors stated that Steve had “demonstrated poor judgment.”
• Poor Employee Safety: In May 2020, five employees sued McDonald’s for failing to implement government safety guidelines. The lawsuit argues that McDonald’s endangered the lives of its employees and their families by failing to provide hand sanitizers, gloves and masks during the recent health crisis.
• Sexual Harassment: Companies are required to provide a safe work environment for all employees, regardless of gender. In a lawsuit filed in April 2020 by over 100 female employees, McDonald’s is accused of creating a hostile work environment and sexually harassing them. The lawsuit undermines trust and further damages the company’s reputation.
• Negative Publicity: In June 2020, McDonald’s is accused of firing an employee for suing the company over its failure to protect employees during the recent health crisis. The termination is unethical because it is intended to discourage other employees from exercising their right to seek redress against their employer.

Also, Read Rules That McDonalds Employees Have to Follow.

O Stands For Opportunities ( External Factor )

• Value Meals: In 2018, McDonald’s introduced its “$1, $2, $3” menu and “2 for $5 mix and match deal” aimed at budget-conscious consumers. The menu was a successful addition that led to an increase in sales.
• Innovative Products: McDonald’s needs to make an effort to add new, innovative products to the menu to get customers to choose McDonald’s over the new fast food places.In 2018, the company began serving an exclusive drink – MIX by Sprite Tropic Berry – in its New York City stores. The drink became an instant hit and will likely be offered across the U.S.

  Introducing more products of this kind, adapted to the geography and culture, can help McDonald’s maintain its charm for a longer period of time.

• Global Expansion: McDonald’s dominates the US but often struggles in the international market. However, the company has a high potential to continue its global expansion by focusing more on international markets rather than the different states of America.
• Rebuilding brand image: While fast food restaurants are battling the image of “junk food centers”, McDonald’s can do it smartly by continuing its aggressive initiatives towards healthy and customized offerings.These developments are beginning to show progress as positive comparable sales have led to profit growth. The re-franchising mission has certainly pushed sales back, but in the long run, McDonald’s healthy image can continue to make a bigger difference.
• Mobile ordering and McDelivery: McDonalds has initiated a partnership with UberEats and Door dash for food delivery in the US. These mobile ordering and delivery initiatives help McDonald’s reach and meet the ever-changing needs of customers.
• Offering healthier options: More and more consumers are looking for healthier options. Although McDonald’s offers healthy options such as salads and 1% low-fat milk jugs, the options are very limited. The company can increase the number of healthy options to attract and grow more health conscious customers.
• Expand drive-ins, pick-ups and self-order kiosks: McDonald’s priority of creating the best on-site dining experience became a major weakness during the recent health crisis. This strategy contributed to a 17% drop in profits as more consumers opted for pickup and delivery to eat at home. McDonald’s can increase the number of deliveries, curbside pickups, self-order kiosks, and drive-thru options to attract more customers during this difficult time.

T Stands For Threats ( External Factor ) 

• Risky investments in Technology: Even though McDonald’s innovative changes are positive, investing in technology is still risky.The public pace of adapting new technologies can slow down the return on investment, and the results of improving the customer experience may not yield the expected returns.
• Fierce competition: You might think that burger giants like ‘Burger King’ are McDonald’s only competitors, but the tide is starting to turn.Recently, Restaurant Business revealed that Chick-fil-A is now McDonald’s biggest competitor in the highly competitive quick service restaurant (QSR) space.

  Cultural threat when operating in different countries: As a global fast food chain, McDonald’s has often faced numerous cultural threats in different parts of the world that have damaged the brand’s image.

  It is also challenging to adapt and operate differently depending on the location of the franchise. For example, McDonald’s faced a major scandal a few years ago for using ingredients that were not “halaal” in Muslim countries.

  Such controversies make it difficult for McDonald’s to meet customers’ expectations and create risks in the international environment, which deteriorate the brand’s image.

• New Age Fast Food Trends: McDonald’s is often considered old school by Millennials with its traditional menu and taste. In this situation, food chains like Shake Shack and Wendy’s benefit with their often experimental menus and recipes that provide variety.McDonald’s, for example, has failed to compete with Wendy’s “signature-crafted burgers” and has had to stick with its traditional Quarter Pounders to save face.
• Constant environmental concerns: Like any other food giant, McDonald’s is under tremendous pressure to improve its practices to minimize the waste that pollutes the environment.The growing environmental concern demands McDonald’s to take initiatives in this regard and set an example for other grocery stores, but it is not that easy.

  In March 2018, environmental activists proposed to McDonald’s board to stop using plastic straws in its over 37,000 restaurants worldwide.

McDonalds SWOT Analysis Key Takeaways

The McDonalds SWOT Analysis highlights where the brand currently stands and its threats in this era. Following the detailed McDonalds SWOT Analysis Here are a Few Important Key Points.

• Strong Brand Image
• Wins Till Selfie Lifestyle
• Quality Products

Suggestions:

Following the detailed McDonalds SWOT Analysis, we have a few suggestions from Business Mavericks:

• Environmental Problems
• Food Regulations

McDonalds STP & USP

• Segment: People who are willing to eat a hygienic and delicious meal at a restaurant

• Target Group: Middle and upper class children and teenagers

• Positioning: McDonald’s is a fast food restaurant where the whole family can have fun

McDonalds USP

McDonald’s offers excellent food quality, especially burgers, and great quick service

McDonalds Competitors

1. KFC (also known as Kentucky Fried Chicken) is an American fast food restaurant chain headquartered in Louisville, Kentucky that specializes in fried chicken. It is the second largest restaurant chain in the world ( by sales) after McDonald’s and has 22,621 locations in 150 countries as of December 2019. The chain is a subsidiary of Yum! Brands, a restaurant company that also owns the Pizza Hut, Taco Bell, and WingStreet chains.
2. Burger King (BK) is an American multinational chain of hamburger fast food restaurants. Headquartered in Miami-Dade County, Florida, the company was founded in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain. After Insta-Burger King ran into financial difficulties in 1954, Miami-based franchisees David Edgerton and James McLamore bought the company and renamed it Burger King. Over the next half century, the company changed hands four times. The third owner, a partnership of TPG Capital, Bain Capital and Goldman Sachs Capital Partners, took it public in 2002.In late 2010, 3G Capital of Brazil acquired a majority stake in the company valued at $3.26 billion. The new owners immediately initiated a restructuring of the company to turn around its fortunes. 3G and its partner Berkshire Hathaway eventually merged the company with Canadian-based doughnut chain Tim Hortons under the auspices of a new Canadian parent company called Restaurant Brands International.
3. Subway is an American multinational fast-food restaurant franchise that primarily sells Submarine sandwiches (subs), wraps, salads, and beverages.Subway was founded in 1965 as Pete’s Super Submarines in Bridgeport, Connecticut, by 17-year-old Fred DeLuca and financed by Peter Buck. Two years later, the restaurant was renamed Subway, and in 1974, it was franchised with a second restaurant in Wallingford, Connecticut. Since then, the company has grown into a global franchise.
4. Taco Bell is an American chain of quick-service restaurants founded in 1962 in Irvine, California by its founder Glen Bell. Taco Bell is a subsidiary of Yum! Brands, Inc. restaurants offering a variety of Mexican-inspired dishes, including tacos, burritos, quesadillas, nachos, novelties and specialties, as well as a variety of value-priced dishes. In 2018, Taco Bell serves more than two billion customers each year at 7,072 restaurants, more than 93 percent of which are operated by independent franchisees and licensees.
5. Domino’s Pizza, Inc. is an American multinational pizza restaurant chain founded in 1960 and led by CEO Richard Allison. The company is based in Delaware and headquartered at Domino’s Farms Office Park in Ann Arbor, Michigan. As of 2018, Domino’s had approximately 15,000 stores, including 5,649 in the United States, 1,232 in India, and 1,094 in the United Kingdom. Domino’s has stores in over 83 countries and 5,701 cities worldwide.