McDonald’s, a multinational American fast-food firm, has multiple strengths that explain its performance and dominance in the food industry. Firstly, the company has a stable income flow from its sales, franchising, and marketing. Over 90% of its 38,000 enterprises are franchising-oriented (“SWOT McDonalds 2020”). Thus, the organization is less concerned with its daily operation on each of its enterprises. Instead, it has smoothed revenue collection. Besides, its franchising helps in softening culture shock in foreign and new markets. Secondly, the company has a strong brand that is internationally recognized. Today, McDonald’s operates in more than 120 nations (Singh). The company’s brand is, therefore, known world-widely. Thirdly, the company sells quality and variety of products. McDonald’s works closely with its global suppliers to ensure consistency in the quality of its fast foods. The strategy has enabled it to serve food that tastes similarly.
The organization also provides different menus that align with the region it serves. Fourthly, it enjoys huge economies of scale. As mentioned earlier, McDonald’s is a multinational firm serving more than 120 countries (Singh). With such an operation scale, the company shares its fixed cost throughout its branches. The massive economies of scale also enable it to sell its product cheaply, thus, attracting more customers. Fifthly, McDonald’s has higher market power over its rivals (Singh). The company’s size and ability to sell fast food at low prices have been a critical competitive advantage that has enabled it to outshine its close competitors. Lastly, it benefits from having operational excellence (Comprehensive Case for Analysis 248). Jim Skinner, the CEO, has been keen on ensuring the company’s operations are run efficiently.
NOTE! If you need someone to help write your SWOT analysis paper from scratch, please visit WriteMyPaperHub.com to get it written by experts!
Although McDonald’s is a commendable, well-operated, and a profitable firm, it has some weaknesses. Firstly, it over dependents on franchisees, which at times crop up (Pratap). While franchisees stabilize branding, organizations that over-rely on them are often at risk of losing close touch as their operations dependent on other firms. Moreover, the original business owner may not make quick changes and respond fast to unexpected customers’ demands and the ever-changing market. Secondly, McDonald’s over-rely on western markets, and hence, has low market penetration in other areas. The company has hugely concentrated in serving the US, the UK, and France (Pratap). The assertion is justifiable, given that the US alone accounts for over 35% of the total brand’s revenue (Pratap).
The organization has made fewer initiatives and establishments in the Asian market, which has limited its penetration in the area. Secondly, its workers are not fully satisfied. McDonald’s employees have held several protests and strike to demand better pay. Such an issue has, in a way, hurt the organization’s reputation. Thirdly, its breakfast menu has, in the past few years, lost its charming power. The organization’s CFO accepted that McDonald’s breakfast menu had a downfall breakfast in May 2018 (Gupta). Fourthly, the company’s dividend growth rate has been declining. Although its revenue has remained at desirable heights, many investors may stop investing in the McDonalds’ flowing the slow growth of dividends (Singh). Lastly, the company has a junk label, which is subject to criticism. The fast-food menus are critiqued for in the sense that they have a negative health impact. Thus, McDonald’s is viewed as a business whose products are not healthy. Such weaknesses hurt the company’s ability to exploit its capacity and generate more profits fully.
McDonald’s’ is expected to have some opportunities, which may favor its operations and revenue generation. Firstly, the global first food industry is anticipated to continue expanding. The world’s population has generally been rising. Thus, the demand for food is likely to continue to heighten more in the future. Such phenomena will primarily benefit the likes of McDonald’s and enable them to continue expanding. Secondly, the company has potential opportunities to grow in the less developed nations where there are no fast-food companies of the same caliber as McDonald’s. Thirdly, the company is expected to expand its operations to new untapped markets. Notably, although McDonald’s has a global footprint, it has not fully ventured in Africa and Asia. Thus, there are more and vast opportunities that are yet to be tapped.
The company is expected to face some threats. For instance, increasing health consciousness in the world is likely to affect its operations in the future. Consumers are now becoming more aware of the side effects of consuming fast food. Thus, they have been shifting from junk meals to more healthy food. The campaigns to eat healthily are also intensifying. Therefore, McDonald’s products may face a severe market problem in the upcoming years. The other threat is competition. Although the company is highly competitive, it is expected to face strong rivals in the future. Markedly, companies like Starbucks, Blue King, and Subway are growing fast and taking a new global turn (Farooq). Moreover, other new market players are expected to venture into the fast-food industry heavily. Such moves will ultimately threaten McDonald’s.
Rivalry among existing firms
Numerous or balanced competitors. Even as the brand is a well-known fast-food chain globally, it still surfaced from the surrounding competition. McDonald’s’ competitive environment is composed of the most privately owned Burger King, Wendy’s, Taco Bell, KFC, and Subway. They all operate on the contexts of balanced activities to ensure that all their operations overlap McDonald’s (Shabbir 31). They all engage in the burger wars and rivalries that seemingly appear difficult to overpower due to the varying levels of demand from the target market.
The threat of New Entrants
High Capital Requirements. Even as the company engages in more production systems from marketing its sales, it experiences high capital requirements to enhance the operational activities. The new product development entails the Big Mac and French Fries that are anticipated to increase of over 35% in the brand’s stock revenue at all costs. As the entire development procedures continue, it requires massive investment purposes through the capital reserves that may be difficult to attain (Mujtaba 67). Therefore, the new entrants may bring in high capital requirements that increase the overall expenses in reducing the Big Macs and the French Fries for future customers through a challenging factor.
Bargaining Power of Buyers
Buyer purchases large volumes. In the marketing strategies used by McDonald’s, it requires them to sell their stock in bulk to help them attain the needed economies of scale. Therefore, they encourage the need for the buyers who visit one of their 37,855 global stores to buy in bulk to increase the overall sales made by the company and large profit margins. When the customers tend to request a reduction in prices, it becomes easier to grant them a discount regarding the bulk sales they have purchased. Even though it’s still a loss, it still portrays the right image for the buyers who remain loyal to the brand and enjoy the McDonald’s company’s free services.
Bargaining Power of Suppliers
Supply is an essential input to the industry or other industries. In the McDonald’s company, the concept of supply is a valuable input in the company’s overall outlay. It helps the company enhance its market sales and monitor the flow of food chain orders that operate faster. Therefore, the company values every sale made. Consequently, they encourage the key suppliers to engage in balanced bargaining power that will maintain the buyers’ interests and the company’s average sales (Mujtaba 71). Thus, the fundamental factor helps to foresee and monitor the company’s progress through the supplies made in both external and internal views.
Threat of Substitutes
Many substitutes. McDonald’s Corporation has enhanced the international platforms’ expansions through proper marketing strategies that have improved its industrial performance. There are many substitutes, such as those from artisan food products and certain local bakeries. They bring about specific threats since the people tend to easily switch towards the substitutes due to the low switching costs adopted, therefore appear more competitive and satisfactory (Shabbir 45). The entire switching scenario from McDonald’s entails minimal disadvantages that contain high costs per meal in the company and additional time spent on preparing by the company.
Works Cited Comprehensive Case for Analysis- MacDonald Corporation. Farooq, Umar. "McDonald's SWOT Analysis." Marketing Tutor, 8 Dec. 2019, www.marketingtutor.net/mcdonalds-swot-analysis/. Accessed 28 Sept. 2020. Gupta, S. K. "McDonald’s SWOT Analysis(2019)." Business Strategy Hub, 29 Feb. 2020, bstrategyhub.com/mcdonalds-swot-analysis/. Accessed 28 Sept. 2020. McDonald's. "History: The McDonald's Story." Accessed April 24, 2020. Mujtaba, Bahaudin G.. (2007). McDonald's Success Strategy And Global Expansion Through Customer And Brand Loyalty. Journal of Business Case Studies – Third Quarter. 3. 10.19030/jbcs.v3i3.4857. Pratap, Abhijeet. "McDonald's SWOT Analysis 2019." Notesmatic, 29 Aug. 2019, notesmatic.com/2019/08/mcdonalds-swot-analysis-2019/. Accessed 28 Sept. 2020. Singh, Karandeep. "McDonald’s SWOT Analysis - SWOT Analysis of Mcdonald’s 2019." Marketing Ark, 21 Oct. 2019, www.marketingark.com/mcdonalds-swot-analysis.html. Accessed 28 Sept. 2020. Shabbir, Malik. (2018). Innovation Strategy of McDonald Business from Historical perspectives. 12. "SWOT Analysis of Mcdonalds 2020: Detailed Overview." SWOT 2020, 2020, www.swotanalysistemplate.com/swot-analysis-of-mcdonalds/. Accessed 28 Sept. 2020.