SWOT analysis is a tool for auditing an organization and its environment. It is the first stage of planning and helps marketers to focus on key issues. SWOT stands for strengths, weaknesses, opportunities, and threats.
McDonald’s is the largest and best-known fast food brand in the world. The company has been incredibly successful. Today, McDonald's is the world's largest restaurant chain, serving approximately 68 million customers daily in 120 countries across approximately 36,900 outlets.
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McDonald’s business model is a simple one. It offers a consistent dining experience, quality food and fast service in its locations. A McDonald's restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The McDonald's Corporation revenues come from the rent, royalties, and fees paid by the franchisees, as well as sales in company-operated restaurants. Around 80% of the restaurants are franchised - which means that they are owned by an entrepreneur that purchases the right to use McDonald’s brand and sell its products. Franchise owners also gain access to McDonald’s system of cooking and selling food and its extensive advertising and marketing resources.
Even though it operates globally, McDonald’s is heavily dependent upon the American market. Around 40% of its operating income is generated by its locations in the United States. Another 40% comes from a few other countries, including Australia, Canada, the United Kingdom, Germany and France. According to a BBC report published in 2012, McDonald's is the world's second largest private employer (behind Walmart with 1.9 million employees), 1.5 million of whom work for franchises.
Here is a detailed SWOT analysis of McDonald’s:
McDonald’s is a strong brand which shows in its extensive global presence and financial strength. It’s a well-known brand name in the fast food industry which has enjoyed a high level of popularity. Its position might have grown weak in the recent years but the brand has performed better in the past. Globally, the brand runs more than 36,900 restaurants. Out of these, more than 80% are franchisee owned. McDonalds’ position both domestically and globally has remained strong. Even in the US market, the brand holds a larger market share as compared to the other fast food brands. In the US, it holds nearly a 17% market share followed by the Yum Brands! (Yum owns the KFC, Taco Bell, and Pizza Hut). Forbes suggests that McDonald’s is the 9th most valuable brands in the world.
The company maintains a business model that can be sustainable for a long-term perspective. About 80% of McDonald’s restaurants are owned and operated by independent franchisees. McDonald’s Corporation only has to ensure that high standards are adhered to in the preparation and service of foods, along with formulating and applying effective marketing strategy. Moreover, about 20% of McDonald’s restaurants in various countries are owned and operated by McDonald’s Corporation, thus enabling the company to keep in touch with changes in the consumer behavior. This pattern of the business model has proved to be highly successful and there are grounds to believe that the model can prove to be sustainable for the long-term perspective.
One of McDonald’s greatest strengths is the number of countries it operates in. The company generates around 60% of its revenue outside the United States. That means it can survive declining business in the U.S. market, unlike some of its rivals, such as Burger King, which gets 98% of its income from U.S. sources.
Also read Burger King SWOT Analysis
The fast food market continues to grow every year with new entrants offering a range of different tasty products to rival McDonald’s. Take Wahaca for example, a new Mexican chain offering delicious quick and easy street food that prides itself on healthy eating and a balanced diet. The value for money lunch options provides a genuine alternative for consumers. Other challenges in this particular industry include the rapid change in consumer tastes. McDonald’s is now competing with a huge range of different options including the likes of Burger King, Wagamama, Yo! Sushi, Subway, Nandos, Five Guys and much more. There has never been more choice for hungry consumers.
An abundance of unhealthy food on the menu is also one of the main weaknesses of the company. Although McDonald’s offers a vast range of burgers, the majority of the items in its menu are considered as unhealthy. Increasing media coverage of negative heath implications associated with fast food consumption and as a result, increasing consumer awareness about negative effects of fast food on their health is enhancing the potential negative impact of this particular weakness on long-term growth prospects of McDonald’s.
Fast food industry now is developing significantly. The change of lifestyle leads to the change in people eating habit. In the past, if just workers, drivers or someone who had to work busily and didn’t have enough time for a home meal choose fast food; nowadays, most people eat fast food and a major of them like fast food very much. It is a huge chance for fast food brand to increase their revenues, especially McDonald’s.
With low-cost menu, McDonald’s can attract customers who just have low income. This segment makes up a fairly remarkable part, especially in the recent time, when the global economy is struggling. It is not difficult for McDonald’s to apply low-cost menu on all restaurants.
Considering its dependence on Western markets, McDonald’s has the opportunity to grow and expand in developing countries, such as Asian economies. The company can also use a market development strategy to establish operations in Middle Eastern countries that it has not yet entered.
The main threat for McDonald’s comes from the intensifying competition. There are a large number of brands in the fast food industry. McDonald’s has continued to lose its customers to the competitors during the last several years. If the brand has to reverse this trend, it will need to focus on quality and customers’ taste. Yum! is a close follower of McDonald’s in the US market. Even Chipotle and other fast-casual contenders have continued to eat into McDonald’s customer base. Lawsuits and food quality scandals are another threat to the brand’s reputation and sales. All of these threats are important and require attention.
Obesity cases in the UK and US continue to rise and often businesses such as McDonald’s will feature in the press. The business will forever be overshadowed by previous consumer offerings such as the ‘Supersized Meal’, a long duration of no fruit or yogurt and a slim salad selection, of which many contain high-calorie dressings. Obesity research continues to grow and this is having an impact on consumer decisions. Many consumers demand to require nutritious and healthy food as well as lifestyle. Read also McCafe Swot Analysis
McDonald’s remains the world’s leading global foodservice retailer, and posts big profits each year. However, as we mentioned above, there are some concerns. The company continues to face fierce competition and faces a challenging subset of the population that is focused on healthy eating. A new CEO and strategy should help to provide more stability at the company, but this will likely take some time to materialize.
- 2016 McDonald’s Annual Report [http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/2016%20Annual%20Report.pdf]
- The World's Most Valuable Brands [https://www.forbes.com/companies/mcdonalds/]
- The Third Strength Of McDonald’s Marketing Essay [https://www.ukessays.com/essays/marketing/the-third-strength-of-mcdonald-marketing-essay.php]
- McDonald’s Corp.: A Short SWOT Analysis [http://www.valueline.com/Stocks/Highlights/McDonalds_Corp___A_Short_SWOT_Analysis.aspx#.WUPeKmiLTIU]
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