McDonald’s SWOT Analysis

McDonald’s SWOT Analysis

McDonald’s corporation was founded in 1955 in Illinois. The founders of the company were two brothers, Richard and Maurice McDonald. They have been working in the restaurant business since the 1930s. McDonald’s brothers started from an average carhop drive-in, but they managed to establish a brand new level of quality there. They paid much attention to the staff members’ kitchen arrangement and discipline. The restaurant workers developed an impressive efficiency that allowed the company to lower the prices. At this point, Ray Kroc, a seller of milkshake machines, suggested brothers franchise the restaurants all over the country.

Furthermore, Kroc volunteered to do it himself, and in 1955, he established the first restaurant in Des Plaines near Chicago (Pederson & Gant, 2004). In four years, Kroc opened above 100 restaurants across the country. In 1962, McDonald’s famous logo, the Golden Arches, was created. During the 1960s-1970s, the restaurant business flourished. The secret to their success was skilled marketing and flexible response to customer demand. In the 1980s, McDonald’s competitors Burger King and Wendy’s grew stronger. Yet, McDonald’s enhanced its menu and continued to attract customers preserving the service and food quality on an identical level. At that time, the company opened its restaurants in 58 countries such as Australia, Germany, Great Britain, Japan, and France. As a result, “much of the growth of the 1990s came outside the United States” (Pederson & Gant, 2004). In the 2000s, McDonald’s image underwent a drastic change. Customers started accusing the fast food restaurant chain of promoting unhealthy food. McDonald’s responded with more healthy cooking and introducing products lower in calories. It still follows the strategy of making its products healthier and lower in fats. The mission statement of McDonald’s is to be its “customers’ favorite place and way to eat and drink” (McDonald’s mission and values, 2014). Its goal is “quality, service, cleanliness, and value for every customer, every time” (McDonald’s mission and values, 2014). At the same time, the business model of McDonald’s consists of balancing the interests of its owners, suppliers, and company employees.

McDonald’s Strengths and Weaknesses

The first organizational strength of McDonald’s is its strong brand name and image. McDonald’s, as an organization, can boast about huge brand equity. The company’s brand is one of the most recognized in the world, owing to its famous logo of Golden Arches and Ronald McDonald clown. People recognize McDonald’s everywhere, and the company’s brand is worth approximately $40 billion (Pederson & Gant, 2004). McDonald’s is among the ten most powerful brand names in the world, together with such brands as Coca-Cola, Nokia, and GM (Forster, 2002). This strength is a distinctive competence because few fast-food restaurant chains can boast of owning such a strong brand name. McDonald’s has developed enormous brand equity. It is the leading fast-food chain, with over 31,000 restaurants operating in nearly 120 countries (Forster, 2002).

The second organizational strength of McDonald’s is locally adapted food menus. It is a strength as flexibility brings positive results in a global business today. As a rule, global corporations adjust to the local markets, and McDonald’s follows this strategy. This food restaurant chain works in diverse cultures, trying to correspond to different tastes in food in every location.

Fortunately, McDonald’s is aware that food preferences in Asia may differ from those in the United States or European countries. Hence, its ability to adapt to local food preferences is one of the company’s strengths. This strength is a distinctive competence because other fast food chains do not adapt to the local markets and therefore cannot appeal to local customers. Meanwhile, many customers prefer traditional food to fast food, and they would choose in favor of McDonald’s, where this kind of food is served.

The first organizational weakness of McDonald’s is the unhealthy food menu. It is known that McDonald’s uses trans-fat and beef oil in its meal preparation. In 2001, McDonald’s was sued for adding the beef extract to vegetable oil for flavoring purposes (Gogoi & Arndt, 2003). No legal enforcements prohibit these substances, but they have an extremely negative influence on one’s health. Researches indicate that trans-fat may lead to cancer (Grainger, 2003). As a result, those customers who care about their health cease eating at McDonald’s. Thus, the company loses considerable sums of money. The organization can minimize this weakness by introducing healthier choices to its menu. It can add organic foods to the menu and shift the stress from burgers and fried food to salads and baked food.

The second organizational weakness is low differentiation. Unfortunately, McDonald’s has lost its capacity to differentiate itself from other similar companies. This fast food chain now chooses to compete by price instead of additional features. The absence of characteristic features worsens the general impression of McDonald’s as a unique restaurant chain. The organization can minimize this weakness by solely introducing new attributes that customers would associate with McDonald’s. The organization’s management should implement a strategy related to this fast food restaurant’s unique image.

Organizational Opportunities and Threats

A low-cost menu is the first opportunity for McDonald’s. This opportunity arises from the economic dimension, which plays an important role in the general environment. Unemployment is the force coming from that dimension as it affects the number of customers. The reason is that many unemployed people and those with low incomes prefer low-cost menus. Adjustment of prices may attract a significant market segment. Taking advantage of this opportunity is appropriate today more than ever as the global economy is unstable. McDonald’s can put a low-cost menu into practice in all restaurants, and the number of customers will increase.

The second organizational opportunity of McDonald’s is meal delivery. This opportunity comes from the technological dimension of the general environment. The technological environment relates to the invention of new methods and the implementation of the production of services or goods. In the case of McDonald’s, the technological force is the change in service distribution. Home meal delivery is an opportunity for McDonald’s because food delivery can increase its customer reach. As a result, food delivery would benefit the company. Besides, this opportunity can become the company’s strength in the future as few McDonald’s competitors provide this service.

The first organizational threat is local fast-food restaurant chains. This threat comes from the external environment and relates to the task environment. At the same time, one can notice sociocultural forces related to this dimension. It is so because it deals with customers’ consciousness and preferences. While McDonald’s has loyal customers worldwide, many customers still prefer other restaurants, including local fast food restaurant chains that have been opened long before McDonald’s and know the local mentality better. Additionally, they attract their customers through menus that correspond to local tastes, larger burgers, and lower prices. The increasing quantity of local fast food chains and their cheap meals threaten the company because it loses its customers.

The second organizational threat is a healthy eating trend. This threat comes from the sociocultural dimension of the general environment. The socio-cultural dimension covers a particular society’s lifestyle and consumer culture. The driving force, in this case, consists of customers’ preferences. In particular, the preference for healthier eating may affect the company. The trend toward healthy eating is a treat to the company because people who prefer eating healthy food would not eat at McDonald’s. The reason is that McDonald’s has few healthy options on its menu. Disregarding this consumer trend, McDonald’s would lose its customers and decrease revenue.

McDonald’s SWOT Analysis Summary

To sum up, McDonald’s is a strong brand name. People all around the world recognize McDonald’s golden arches. McDonald’s has to use this advantage to attract more customers. A strong brand name would help the company take advantage of both opportunities. These opportunities are the implementation of the low-cost menu and home meal delivery. Adjusting prices based on customers’ income may attract a significant market segment, including those with low income. Hence, putting a low-cost menu into practice in all restaurants will increase the number of customers. Another strategy to attract more customers is food delivery, as it can increase McDonald’s customer reach.

Both organization threats come from the sociocultural dimension of the general environment. McDonald’s can neutralize the threat of local fast-food restaurant chains by adapting its menu to local tastes. Besides, McDonald’s should invest in market research to recognize local peculiarities in every given instance. The company can neutralize the threat of healthy eating trends by introducing healthier food choices on its menu. It can diversify the menu and introduce food delivery to meet the customers’ demands. Flexible response to customer demand has always been the distinctive mark of McDonald’s business, and the company should invest in it.