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SWOT Analysis McDonald's

Strengths

McDonald's has been a thriving business since 1955 and 20 of the top 50 corporate staff employees started as a restaurant level employee. In addition, 67,000 McDonalds restaurant managers and assistant managers were promoted from restaurant staff. Fortune Magazine 2005 listed McDonald's as the "Best Place to Work for Minorities." McDonalds invests more than $1 billion annually in training its staff, and every year more than 250,000 employees graduate from McDonald's training facility, Hamburger University. The business is ranked number one in Fortune Magazine's 2008 list of most admired food service companies. One of the world's most recognizable logos (the Golden Arches) and spokes character (Ronald McDonald the clown). According to the Packard Children's Hospital's Center for Healthy Weight children age 3 to 5 were given food in the McDonalds packaging and then given the same food without the packaging, and they preferred the food in the McDonald's packaging every single time. McDonalds is a community oriented, socially responsible company. They run Ronald McDonald House facilities, which provide room and board, food and sibling support at a cost of only $10 a day for families with children needing extensive hospital care. Ronald McDonald Houses are located in more than 259 local communities worldwide, and Ronald McDonald Care Mobile programs offers cost effective medical, dental and education services to children. They also sponsor Olympic athletes.

They are a global company operating more than 23,500 restaurants in 109 countries. By being spread out in different regions, this gives them the ability to weather economic fluctuations which are localized by country. They can also operate effectively in an economic downturn due to the social need to seek out comfort foods.

They successfully and easily adapt their global restaurants to appeal to the cultural differences. For example, they serve lamb burgers in India and in the Middle East, they provide separate entrances for families and single women. Approximately 85% of McDonald's restaurant businesses world-wide are owned and operated by franchisees. All franchisees are independent, full-time operators and McDonald's was named Entrepreneur's number-one franchise in 1997. They have global locations in all major airports, and cities, along the highways, tourist locations, theme parks and inside Wal-Mart.

They have an efficient, assembly line style of food preparation. In addition they have a systemization and duplication of all their food prep processes in every restaurant. McDonald's uses only 100% pure USDA inspected beef, no fillers or additives. Additionally the produce is farm fresh. McDonald's serves 100% farm raised chicken no fillers or additives and only grade-A eggs. McDonald's foods are purchased from only certified and inspected suppliers. McDonalds works closely with ranchers, growers and suppliers to ensure food quality and freshness. McDonalds only serves name brand processed items such as Dannon Yogurt, Kraft Cheese, Nestle Chocolate, Dasani Water, Newman's Own Salad Dressings, Heinz Ketchup, Minute Maid Juice. McDonald's takes food safety very seriously. More than 2000 inspections checks are performed at every stage of the food process. McDonalds are required to run through 72 safety protocols every day to ensure the food is maintained in a clean contaminate free environment. . McDonald's was the first restaurant of its type to provide consumers with nutrition information. Nutrition information is printed on all packaging and more recently added to the McDonald's Internet site. McDonalds offers salads, fruit, roasted chicken, bottled water and other low fat and calorie conscious alternatives.

Weaknesses

Their test marketing for pizza failed to yield a substantial product. Leaving them much less able to compete with fast food pizza chains. High employee turnover in their restaurants leads to more money being spent on training. They have yet to capitalize on the trend towards organic foods. McDonald's have problems with fluctuations in operating and net profits which ultimately impact investor relations. Operating profit was $3,984 million (2005) $4,433 million (2006) and $3,879 million (2007). Net profits were $2,602 million (2005), $3,544 million (2006) and $2,395 million (2007).

Opportunities

In today's health conscious societies the introduction of a healthy hamburger is a great opportunity. They would be the first QSR (Quick Service Restaurant) to have FDA approval on marketing a low fat low calorie hamburger with low calorie combo

alternatives. Currently McDonald's and its competition health choice items do not include hamburgers.

They have industrial, Formica restaurant settings; they could provide more upscale restaurant settings, like the one they have in New York City on Broadway, to appeal to a more upscale target market.

Provide optional allergen free food items, such as gluten free and peanut free. In 2008 the business directed efforts at the breakfast, chicken, beverage and convenience categories. For example, hot specialist coffees not only secure sales, but also mean that restaurants get increasing numbers of customer visits. In 2009 McDonald's saw the full benefits of a venture into beverages.

Threats

They are a benchmark for creating "cradle to grave" marketing. They entice children as young as one year old into their restaurants with special meals, toys, playgrounds and popular movie character tie-ins. Children grow up eating and enjoying McDonalds and then continue into adulthood. They have been criticized by many parent advocate groups for their marketing practices towards children which are seen as marginally ethical. They have been sued multiple times for having "unhealthy" food, allegedly with addictive additives, contributing to the obesity epidemic in America. In 2004, Michael Spulock filmed the documentary Super Size Me, where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. This documentary was a direct attack on the QSR industry as a whole and blamed them for America's obesity epidemic. Due in part to the documentary, McDonalds no longer pushes the super size option at the dive thru window. Any contamination of the food supply, especially e-coli. Major competitors, like Burger King, Starbucks, Taco Bell, Wendy's, KFC and any midrange sit-down restaurants. McDonald's is the leading global foodservice retailer with more than 31,000 local restaurants serving more than 58 million people in 118 countries each day. More than 75% of McDonald's restaurants worldwide are owned and operated by independent local men and women.

McDonald's SWOT analysis and recommendations


SWOT Analysis: 1. Strengths: - Strong brand name, image and reputation McDonalds has built up huge brand equity. It is the no 1 fast food company by sales, with more than 31,000 restaurants serving burgers and fries in almost 120 countries. The image of McDonalds is recognized everywhere. This brand is in top ten of the most powerful brand names in the world with Coca-Cola, Nokia or GM. - Large market share McDonalds is considered as the largest player in size and global reach. When Wendys or Burgers King are losing market share in 2006, McDonalds still increases its market share. Market share of McDonalds in the recent time is about 19% while Yum!Brands is 9% and both Wendys and Burger King is 2%. - Specialized training for managers McDonalds is very serious on training managers. This company has its own program to train managers the most professionally, which is called Hamburger University. As a result, McDonalds has many good managers who can help company development well. - McDonalds Plan to Win McDonalds customer focused Plan to Win provide a common framework for its global business yet allows for local adaptation. Through the execution of initiatives surrounding the five elements of its Plan to Win People, Products, Place, Price and Promotion McDonalds has enhanced the restaurant experience for customers worldwide and grown comparable sales and customer visits in each of the last eight years. This Plan, combined with financial discipline, has delivered strong results for companys shareholders. - Introduction of new production McDonalds is considered the first one enter to fast food industry. It initiates to other brand to enter this industry. As a result, when think about fast food, customers always remember McDonalds first. In fact, in some big countries, especially in US, McDonalds is the first choice of a large number of customers. - Technology Innovative: McDonalds is keeping at the forefront of technology around the globe. For example, In Brazil McDonalds is currently studying the installation of Internet access terminals in some outlets as well

as enabling customers to order online. This will create a more efficient process that will reduce the amount of lag time between a customers orders and pick up of the order. - Good marketing strategies: No matter the continent, children and adults know the face of Ronald McDonald is synonymous with the colossus restaurant chain. This results in wonderful marketing strategies among management which conducts a very thorough market analysis, resulting in much success around the globe. 2. Weaknesses: - Unhealthy food image McDonald's has been impacted by negative press like the documentary "Supersize Me" by Morgan Spurlock in which he contributed our societys obesity to McDonald's and other fast food chains. In fact, each McDonalds dishes provides large amount of calories but not too much nutrition. - Customer looses due to fierce competition McDonalds has to compete with many strong brand name in fast food industry such as Wendys, Burger King or Yum!Brands. This fierce competition makes McDonalds loose a large number of customers who prefer favor of other brands. - Problem related to health issue McDonalds use Trans - fat and beef oil in their food. Although it is not illegal, it affects badly on customers health because Trans fat is causes of some kind of cancer. Consequently, a number of customers who care about their health stop eating at McDonalds restaurants. It makes revenue of company decrease. - Legal action: McDonalds has been involved in a number of lawsuits and other legal cases in the course. For example, there are many case which involved with trademark issue. McDonalds force many others restaurant, company of just a coffee shop to change their brand name because of keeping Mc letters. - Unbalance meals: Although McDonalds tries to update its menu by healthy criteria, McDonalds meals are still unbalance. For example, there are many dishes with chicken (both grilled and fried), bacon, beef, rib or egg. Besides, just several dishes are salad with vegetable and fruit. Moreover, amount of fruit or vegetable is not much. - High employee turnover rate Although McDonalds has many good managers as well as skillful employees, the turnover rate is still high. Every year many of their employees are fired out of the restaurants. Moreover, many others

quit their jobs, especially part time employees because of low salary as well as too high working pressure. - Action related to environmental issue McDonalds uses HCFC 22 to make polystyrene that is contributing to ozone depletion. The company has to repair this weakness if doesnt want to be criticized. - Dissatisfied Franchisees: Franchisees are beginning to become very dissatisfied with the fees that McDonalds are forcing them to pay. As the company continues to expand, they are also increasing the amount of fees franchisees have to pay for the use of the notorious fast-food brand. Many people are not very happy about this and as a result many franchisees are selling their businesses. 3. Opportunities: - Growth of the fast food industry 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 didnt have enough time for a home meal choose fast food; nowadays, almost 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 McDonalds. - Conservation: McDonald should research green energies and green packaging solutions and incorporate these finding as a part of their marketing strategies and advertisements. - Globalization, expansion in other countries McDonalds has more than 31,000 restaurants serving in almost 120 countries. Of the 31,000 restaurants, at least 14,000 are in US. However, now, because the care of McDonalds about favors and cultures in each countries it enters, McDonalds can open more restaurant in new areas such as China or India the countries which culture influences on people lifestyle deeply. They are very potential markets. The expansion of these areas is big opportunities For McDonalds. - Low cost menu is preferred by large number of customers With low cost menu, McDonalds can attract customers who just have low income. This segment makes up a fairly remarkable part, especially in the recent time, when global economic is struggling. It is not difficult for McDonalds to apply low cost menu on all restaurants. - Appearance of freebies and discounts

Discounts given on every food item may help them gain more customers. Moreover, a new trend is rising among customers that they like freebies and discounts, even when they dont need it or dont use these freebies after. - Diverse tastes and needs of customers Customers tastes now become more diverse. As a result, they require new format of service in order to satisfy them. McDonalds, with new format of business such as McCafe, it can attract new segment of customer; for instance civil service, who prefer coffee as well as want to use Wi-Fi to work when drink coffee. - Growing health trend among the customers: Although people concern about how McDonalds influence badly on their health, it is also a chance for McDonalds. This company can develop new products, specifically fresh burger or healthy dessert. 4. Threats: - Intensity competitors Along with the development of fast food industry, there are many new fast food brand enter to the market. It is nothing to say if there is no strong brand which can compete with McDonalds. However, in fact, there are some and they are stronger gradually, for example Yum!Brands, Wendys or Burger King. Although market share of these brand are lower than McDonalds, they try to gain more customers from McDonalds. Moreover, more casual dining restaurants increase their burger offering and decrease the price. If we are not really hurry, we may choose this kind of restaurant instead of fast food restaurants. They also become the competitors of McDonalds. - Public health crisis With a growing number of obesity cases among Americans, fast food chains like McDonalds will continued to be overshadowed by their previous products offerings, for example Supersized Meal, no fruit or yogurt, slim salad selection. Besides, people nowadays are facing heart problem more seriously. As a result, they require nutritious and healthy food as well as lifestyle. - Economic recession The company's revenue streams are diversified, but depending on the length of this "recession", they will inevitably be negatively impacted by the trickledown effect. Recession or down turn in economy may affect the retailer sales, as household budgets tighten reducing spend and number of visitors. - Serious environmental issue:

Environment is one of the hottest topics all over the world. Any action which influence on the earth and human life is criticized strongly. Consequently, if McDonalds keep using HCFC -22, it may lose customers, especially who really care about the earth. Recommendation: McDonalds is a powerful brand name. Thus, its strategies seem so good. However, in my opinion, I still have several recommendations for this company. Besides, looking at the grand matrix and SWOT matrix, there is something McDonalds should do with its strategies: The first, although saturated in the United States, McDonalds has great expansion capabilities abroad. According to the grand matrix, market development is one strategy that McDonalds should implement. Company should prepare an international strategy which focus on big cities along with high populated areas, especially in Asia. There are not many McDonald restaurants in this potential market. Japan is the only Asian country which has a lot of McDonalds fast food restaurants. In contrast, China is considered as one of the biggest market in the world because of this countrys population. Nevertheless, according to the recent figures, China is just in ninth position among the countries which have McDonalds restaurants with about 1000 restaurant while this number in US is about 14000. If McDonalds can develop more and more in Asia, it is a huge advantage for company to gain market share. The second is about the name recognition. Everywhere, millions of people are familiar with the Golden Arches that are on top of every McDonalds restaurants. McDonalds should use this advantage to gain more attraction from customers. It does not mean that this company should become involved into many areas of the food industry. In fact, soft drink and fast food bring large profit for McDonalds. However, if keep involving in other areas, it would increase the potential for liability to the company because of many intensity competitors. McDonalds has built the McDonald Hotel in Zurich, Switzerland. Needless to say it is a very unique hotel. A lot of customers in other countries want McDonald open the same hotel in their countries. As a result, McDonalds should care about this chance more than developing new kind of food business which the company is not sure about this success. In addition, aside from exploiting brand name, company can exploit its sources of food and drink in McDonalds fast-food restaurants for the hotel, as well as service skills of employees. In addition, McDonalds strength as I told above is that introduction to new production. Company should focus on this strength to develop stronger. However, the company seems not diversify its products regularly while competitors are stronger and have new products gradually. Because of this reason, McDonalds should spend more money on Research and Development to create new products and services as well as increase the efficiency of operations. First, one thing McDonald should focus on is that the play place for kids. McDonalds has play place but not in every restaurants. If you eat in McDonalds restaurant, you can be free to party while your children play at the place for kids. Customers love this service. Thus, if it is popularized in all restaurant of company, customers will be more satisfy and of course they want to comeback regularly. Moreover, toys have

to be cared much more with many new interesting toys as well as safety. Jolly Bee is one brand which applies this strategy very successful. McDonalds can learn from Jolly Bee developing this service to improve its market position. Next, even if the companys menu is still relatively inexpensive compare to that of its competitors, it is not totally enough. Because apart from price, customers also make decision rely on menu. After bring a fresh menu with tuna sandwich and salad in some restaurants, especially in Britain and get support from a lot of customers, there is no new one like that. McDonalds focus too much on cheese,beef or chicken menu, more than vegetable. For instance, McDonalds has fruit slice in menu. However, it is served once a week. In the recent time, with the change in eating habit of a large part of customers, McDonalds also should change. Company should bring new vegetarian products to restaurants menu. An organic menu is very necessary. This would give customers an alternative while allowing McDonalds to maintain its market share globally. The last one is also about customer service. Managers of McDonalds are trained professionally. As a result, they can train employees well. McDonalds employees are evaluated high by customers because of their behaviors as well as attitude. However, customers are not pleased at the idea of waiting in long lines and insufficient employees to handle the volume of customers. Just the minority, but sometimes the employees are rude forcing the customers to go to a competitors restaurant next time. At the market which has high market share and very huge number of customers such as USA, Canada or United Kingdom, this issue occurs more frequently. McDonalds should find a way to solve it. For example, the company has to rent more employees and increase their salary in order to keep them working for a long time. This time is just enough for them to get skills to service customers well. Besides, it is necessary to increase the number of employees at the weekend or in the lunch time. More employees means that pressures are shared and avoid the bad attitudes. Conclusion: McDonalds has undergone several changes since its inception in San Bernardino, California. The fast food chain has conquered the US and it now focusing on the rest of the world. McDonalds, along with this trend, continues to strive toward customer satisfaction while still enhancing its international market position. The company is doing very well and keeps trying in Africa, China, and the Middle East, which will be continued source of revenue for many coming years. If McDonalds can overcome all of its challenges, makes use of advantages and has right strategies, it will win the market again and hold fast to first position in fast food industry.

CASE ANALYSIS McDonalds, Inc. COMPANY NAME: McDonalds, Inc. INDUSTRY: Food Service COMPANY WEBSITE: www.mcdonalds.com COMPANY BACKGROUND: As a company, McDonalds was first introduced in Des Plaines, Illinois in 1955. This was the very first McDonalds restaurant, which all started in San Bernardino, California in 1954 when Ray K roc approached the McDonald brothers with a business proposition to start a new company. In 1965 McDonalds went public and was later, in 1985 added to the Dow Jones Industrial Average. (www.mcdonalds.com) The company has gone through quite a few changes with its changing CEOs over the years, but the company seems to be on track with CEO Jim Skinner, named in 2004. Skinner was named the new CEO just in time to clean up after McDonalds first ever quarterly loss. He succeeded by showing that McDonalds revenue had climbed 11% during 2006 and net profits had climbed 36%. (Dess, Case 40 Pg. 1) SWOT ANALYSIS: STRENGTHS: Jim Skinner had to clean up a big mess after the 2003 slump, and did so by coming up with a strategy to turn everything around. His strategy had to consist of staying competitive with the numerous other fast-food restaurants popping up all over the world. In order to maintain this, they had to reorganize the way they presented themselves to the community. Jim Skinner did so by cleaning up the customer service, cleaning up and modernizing the physical buildings, and changing the menu to the changing tastes of their customers. McDonalds also introduced their slogan Im Loving It to reach out to the younger customers. The advertising is very much targeted toward teens and young adults. (Dess, Case 40) WEAKNESSES: The first weakness was the changing of three different CEOs in only one year. These were unexpected changes, but all had to be dealt with by the newest CEO Jim Skinner, and directly after McDonalds first ever quarterly loss in 2003. The second weakness is an issue with trying to find new and exciting things to put on the menu to bring in new customers. Many of todays fast -food customers are making different kinds of foods, like Chinese and Mexican food, normal to the everyday menu. OPPORTUNITIES: McDonalds has many opportunities to change its look, menu, and customer service. McDonalds started building newer building incorporating the arch, along with more modern furnishings. The menu has changed by adding more breakfast items and introducing the McCafe in certain areas. It has also added more health concerned items such as the Asian salad and Premium white chicken. (Dess, Case 40) THREATS: McDonalds biggest threat is competition. Wherever there is a McDonalds, there are at least 3 other fast-food restaurants near it. It constantly has to advertise what makes them unique to other fastfood places, which means there always has to be something different about them than anybody else. Just the fact that McDonalds was the first company to go big with their burgers does not necessarily help them today. Every customer is looking for a new experience and new products to keep them excited with what they are eating and where they are going to eat, and with so many choices, it is hard for McDonalds to compete with. (McDonalds 2007) ANALYSIS VIA PORTERS FIVE FORCES MODEL: THREAT OF NEW ENTRANTS: The threat of new entrants for McDonalds and the fast -food industry is low. With so many different kinds of fast-food restaurants already in the industry, entering at this point would cause struggle for the new entrant. (McDonalds 2007) BARGAINING POWER OF SUPPLIERS: According to Siehoyono (2005), there are 3,700 new outlets being built each year in the U.S., meaning the power of suppliers is not an issue for McDonalds. BARGAINING POWER OF BUYERS: Consumers have more power over buying McDonalds products

because they can demand what type of products they want to see from them. Today, consumers are demanding healthier food and beverage choices from fast-food restaurants such as McDonalds. After the documentary film Supersize Me by Morgan Spurlock came out in 2004, McDonalds had to reclaim its name by showing America that their company cares about the health of their customers and cut out their supersize program. SUBSTITUTE PRODUCTS/SERVICES: In the fast-food industry, including McDonalds, the threat of substitutes is greater now more than ever with the convenience food industry growing. More convenience food stores are offering similar products as the fast-food restaurants. The convenience store / gas station, Quik Trip, sells many food items such as hot dogs, egg rolls, pizza stuffed breadsticks, and countless beverage choices. (Siehoyono 2005) COMPETITIVE RIVALRY: According to Siehoyono (2005), fast casual food chains such as Subway are tougher competition to the fast-food chains in both the U.S. and international industries. Some franchisers were also complaining that McDonalds was granting too many franchisees too close to each other and actually stealing business away from each other. STRATEGY USED: McDonalds has tried both cost leadership and differentiation as strategies to outdo the competition. McDonalds is known for their low price product line and has been competitive with other businesses in the industry. A representation of differentiation is their dollar menu. They were one of the first in the industry to do a very low-cost smaller menu of items on their product line that cost only $1. As soon as this came out and was advertised, many of the other fast-food businesses started something similar to compete. There is only so much a business can do with a low-cost strategy before it starts losing money. This only leaves differentiation or a focus strategy to use. Focus strategies would not work as well in this industry mainly because their product line is similar in all areas of the world because that is what they are known for. McDonalds has to stay true to what it started as and not fly to o far away from its roots. McDonalds has also tried a differentiation strategy with different products like the McRib or the Big Mac. (Dess, Case 40) ISSUES AND CHALLENGES: McDonalds competitive advantage is their differentiation. Their products flavors and names are exclusive to them and the brand of McDonalds is distinguished by the looks and tastes of their foods. If somebody set a row of burgers and fries each from a different restaurant, I could pick out exactly which one is McDonalds burgers and fries. They have distinguished themselves this way for years and this will continue, but the tastes of the customers may change. This will be the problem. McDonalds will have to answer to the needs and wants of their customers to keep them satisfied and coming back for more. Right now in the industry life cycle, McDonalds is a mature company focusing on competition and their product lines survival. The culture of McDonalds is keeping their customers happy and to do whatever they can to create a wider customer base along with a product line that satisfies any taste. I think McDonalds customer service is not consistent. I have personally experienced many different stores and some have very good customer service and some are not very good at all. The store s cleanliness and overall appearance also is not consistent. (Siehoyono 2005) COURSE OF ACTION RECOMMENDED: If I were in a position to make a decision for this company, first I would require all management and supervisory positions to go through company training. They would then be required to test their employees on customer service and sales skills. In doing this kind of training all branches would have a better chance of happy customers and exceptional customer service. Employees also need to be treated with respect and importance for them to want to do well in their position. Some kind of incentives plan needs to be put into action for their employees. Older buildings need to be updated so customers feel comfortable and clean while dining in. OPINION: I think reading case studies is already interesting because it teaches you how the company works and how it became what it is today. Anybody can tell just from reading a case study whether it is a successful business and what their issues are. I thought that writing a case study analysis helped understand how a company operates considering all challenges and opportunities.

References Dess, G., Lumpkin, G. & Eisner, A. (2008). Strategic Management (4e). Boston:McGraw-Hill Irwin. Siehoyono, L. (2005). The McDonalds Case: Strategies for Growth. McDonalds History. (2007). Available on www.mcdonalds.com. Accessed on September 17th, 2008.