SWOT Analysis of McDonalds | Business Teacher
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