McDonald’s SWOT analysis
|Founded||May 15, 1940|
|Geographic areas served||Worldwide (37,241 restaurants in 120 countries)|
|Headquarters||Oak Brook, Illinois, United States|
|Current CEO||Stephen J. Easterbrook|
|Revenue (US$)||22.820 billion (2017) 7.3% decrease over 24.622 billion (2016)|
|Profit (US$)||5.192 billion (2017) 10.8% increase 4.687 billion (2016)|
|Main Competitors||Burger King Worldwide, Inc., Darden Restaurants, Inc., Doctor’s Associates, Inc. (Subway), Domino’s, Inc., Dunkin’ Brands Group, Inc., Yum! Brands, Inc. (KFC), Starbucks Corporation, Wendy’s Company and many other restaurant chains.|
McDonald’s Corporation’s business overview from the company’s financial report:
The Company operates and franchises McDonald’s restaurants, which serve a locally-relevant menu of quality food and beverages sold at various price points in more than 100 countries. McDonald’s global system is comprised of both Company-owned and franchised restaurants.
McDonald’s franchised restaurants are owned and operated under one of the following structures – conventional franchise, developmental license or affiliate. The business relationship between McDonald’s and its independent franchisees is of fundamental importance to overall performance and to the McDonald’s Brand.
This business relationship is supported by an agreement that requires adherence to standards and policies essential to protecting our brand.
The Company is primarily a franchisor, with more than 90% of McDonald’s restaurants currently owned and operated by independent franchisees.
Franchising enables an individual to be their own employer and maintain control over all employment related matters, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources.
The Company’s typical franchise term is 20 years. The Company requires franchisees to meet rigorous standards and generally does not work with passive investors. The business relationship with franchisees is designed to ensure consistency and high quality at all McDonald’s restaurants.
Conventional franchisees contribute to the Company’s revenue through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise.
McDonald’s restaurants offer a substantially uniform menu, although there are geographic variations to suit local consumer preferences and tastes. In addition, McDonald’s tests new products on an ongoing basis.
McDonald’s menu includes hamburgers and cheeseburgers, chicken sandwiches, wraps, french fries, salads, oatmeal, shakes, desserts, sundaes, soft serve cones, pies, soft drinks, coffee and other beverages. In addition, the restaurants sell a variety of other products during limited-time promotions.
McDonald’s restaurants in the U.S. and many international markets offer a full or limited breakfast menu. Breakfast offerings may include Egg McMuffin, Sausage McMuffin with Egg, McGriddles, biscuit and bagel sandwiches and hotcakes.
Quality, choice and nutrition are increasingly important to our customers and we are continuously evolving our menu to meet our customers’ needs.”
You can find more information about the business in McDonald’s official website or Wikipedia’s article .
McDonald’s SWOT analysis
1. The second-largest restaurant network serving customers in over 120 countries
As of 2018, McDonald’s operates the second-largest restaurant network in the world. In total, the company and its franchisees operate 37,241 restaurants in 120 countries.
Source: The respective Companies’ financial reports and official websites 
In terms of sales, McDonald’s outrivals any other QSR chain in the world with US$22.820 billion in sales in 2017 alone (earning slightly more than Starbucks). The sheer size of the company’s restaurant network is a strength that provides many advantages over competitors, including:
Economies of scale. The company can share its fixed costs over many restaurants locations, which makes McDonald’s one of the cheapest places to eat at.
Huge gains from implementing best practices. The company can identify better ways of performing tasks, managing restaurants or hiring new employees and can achieve huge gains by implementing these best practices in its vast network of restaurants.
Market power over suppliers and competitors. Due to its size, McDonald’s can exercise its market power over suppliers by requiring lower prices from them. The company clearly demonstrates this with The Coca Cola Company.
Because of McDonald’s and The Coca Cola Company’s agreement, no other restaurant chain can sell Coca Cola drinks for lower prices than McDonald’s, even if it means losing the business to PepsiCo.
The Coca Cola Company could easily get out of such agreement if McDonald’s wouldn’t be so huge and would generate less income for The Coca Cola Company . McDonald’s can also use its size to affect the competition by underpricing some of its items or driving them out of the best locations.
Wide audience reach. McDonald’s restaurant network allows the chain to reach more customers than most of its rivals could reach. According to the Company’s CEO, in five of its largest markets, 75% of population lives within 3 miles of McDonald’s restaurants.
Wide audience reach does not only help the company to target more customers and increase brand awareness, but also to introduce new services, such as home delivery.
2. The most recognizable brand in restaurant industry
McDonald’s opened its first restaurant in 1940. Since then, the company has become the world’s largest restaurant chain in terms of revenue with the most recognizable brand in the market.
According to Forbes and Interbrand, McDonald’s brand is 9th and 12th most valuable brand in the world, worth US$40.3 billion and US$41.533 billion, respectively. No other restaurant brand, except Starbucks, is included in the list of the top 50 most valuable brands.
The brand value is closely related to the brand recognition and reputation. Usually, the more valuable a brand is the better it is recognized worldwide. McDonald’s, which operates in 120 countries, where billions of people live, enjoys some of the greatest brand awareness among all global corporations.
Only KFC operates in more countries (131) than McDonald’s and can compare in brand awareness with it. Brand awareness also helps to introduce new products or sell the current ones faster as the company needs to spend less money on advertising.
While, McDonald’s reputation has suffered a lot during the years, the company is still recognized for its innovations in fast-food industry and the American business values it brings to other countries.
Figure 2. McDonald’s brand value 2000-2017
Source: Interbrand 
Few direct competitors have such a valuable and recognizable brand, which strengthens the company.
Coca Cola SWOT
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McDonalds SWOT Analysis
McDonalds is the world’s largest fast food restaurant chain and is ranked as ninth on the world’s most valuable brands (as at May 2017) (Forbes 2017). McDonalds is currently undergoing a comeback after a decline in sales (McDonalds 2017a). McDonald’s currently operates both company owned and franchised stores with the strategic goal to increase its franchised outlets to 95% from the current rate of 85% (McDonalds 2017a).
McDonalds is the second largest restaurant chain in the world with 36,899 restaurants in 120 countries giving it a strong market share and financial strength. It is a worldwide brand and is a sponsor of international sporting events, such as the football World Cup and the Olympics, which has made its brand highly recognisable and valuable in terms of its coverage (McDonalds 2017a). Whilst there are some national and regional differences in its menu, McDonalds has high levels of standardisation which seek to ensure that the product and service are of the same levels wherever a customer is in the world. This is assisted by strict standards for food preparation which is part of the staff training and development for both company owned and franchised stores (McDonalds 2017a; BBC News 2016).
McDonald’s menu is quite complex and covers a wide range of products, including some with a very high fat content. Despite introducing a lower fat range, McDonalds have been criticised for continuing to serve high fat, high calorie products and enabling customers to increase the size of a meal (McDonalds 2017b). The franchise scheme can also mean that there are differing levels of service at McDonalds’ outlets, which may impact on the brand. In addition to this, the equipment maintenance at the older restaurants have impacted on operations, which has slowed down service. McDonalds is also lagging behind other fast food restaurants by not providing a national delivery service (McDonalds 2017c).
McDonalds needs to make better use of technology to improve its service delivery and connections with customers, particularly in the face of growing demand for greater convenience in terms of the food-to-go market (McDonalds 2017a). There are also opportunities for McDonalds to increase its sustainability through providing appropriate recycling facilities which may assist with its attempts to become a more responsible business. This would also help demonstrate its commitment to sustainability to stakeholders, such as the government and its customers.
The continued concerns regarding obesity levels may lead to higher levels of taxation on fast food which would squeeze profit margins. This would impact on consumers as this tax may be passed on to them through price increases if McDonalds is unable or slow to change the fat content in its food. Economic threats to the organisation also need to consider the risk of slowing growth in the world economy which may also be seen in the fast food sector (IBIS World 2017). This may mean that the ability to convert the remaining McDonalds’ owned stores to franchises may be difficult in certain contexts if growth is slow. In addition to this, the lack of a franchise friendly framework in certain national contexts will also prevent this strategic objective from happening. However, the ability to franchise McDonalds stores which are currently owned in markets such as China could raise as much as $3bn (BBC News 2016).
- Angwin, D, Cummings, S and Smith, C (2011) The Strategy Pathfinder: Core Concepts and Live Cases, (2nd ed), Chichester: John Wiley and Sons Ltd, Chichester
- BBC News (2016) ‘First bid for McDonald’s China franchises confirmed’ BBC News, June 23 [online] Available from http://www.bbc.co.uk/news/business-36603779
- Forbes (2017) ‘The World’s Most Valuable Brands #9 McDonalds’ [online] Available from https://www.forbes.com/companies/mcdonalds/
- IBIS World (2017) ‘Takeaway and fast food restaurant in the UK: market research report’ [online] Available from https://www.ibisworld.co.uk/market-research/takeaway-fast-food-restaurants.html/
- Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Regnér, P. (2014) Exploring Strategy, Text and Cases (10th ed.) Harlow: Pearson Education Ltd
- McDonalds Corporation (2017a) ‘Annual Report 2016’ [online] Available from http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/2016%20Annual%20Report.pdf
- McDonalds (2017b) ‘Our company’ [online] Available from http://corporate.mcdonalds.com/mcd/our_company/our-ambition.html
- McDonalds (2017c) ‘Click and Collect’ [online] Available from https://www.mcdonalds.com/gb/en-gb.html
- Ruddick, G. (2016) ‘McDonald’s offer staff the chance to get off zero-hours contracts’ Guardian, April 15 [online] Available from https://www.theguardian.com/business/2016/apr/15/mcdonalds-offer-staff-the-chance-to-get-off-zero-hours-contracts
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