McDonalds SWOT Analysis

Case Study Report McDonald’s

BACKGROUND: Brothers Richard and Maurice McDonald founders of McDonald’s Corporation grew from a single drive-in restaurant in San Bernardino, California in 1948 to the largest food service organization in the world. In 1955 Ray Kroc opened firs McDonald’s in Des Plaines, Illinois and became exclusive franchising agent for the company. By 1991 McDonald’s owned $13 billion of fast-food industry, operating 12,400 restaurants in 59 countries (Ezine). The company recorded revenues of $21,586 million during the fiscal year ended December 2006 and increase of 8.8% over 2005 (Yahoo Finance, 2007).
SWOT ANALYSIS: Strengths: The greatest strengths of McDonald was introducing people to the fast food and creating an image in people minds of fast food culture. McDonalds has over 30,000 branches in 120 countries and 80% of its revenues is derives from eight countries like Canada, Brazil, Germany, France, Japan, UK, Australia and US (Ezine). The biggest strength that the case study focused on was strategy – market leadership and buyer supplier relations. Shamsie stated that “the bigger success came in the form of McGriddles breakfast sandwich which was lunched nationwide in June 2003” (Dess, Lumpkin & Eisner, 2007, p. 692).New breakfast addition gave the firm comparative advantage in the market place and brought about 1 million new customers each day. Weaknesses: The same factors which are consider strengths are also weakness for the company. After a while people are tired of the same brand, seeing McDonalds everywhere cause the immigration to new healthier brands. “This fast-growing segment including several newcomers such as Cosi, a sandwich shop, or Quizno’s, where customer find the food healthier and better tasting” (Dess, Lumpkin & Eisner, 2007, p. 692).. Another weakness is target audience, which in the case of McDonalds are kids. Kids grow very fast and quick become health conscious adults. Opportunities: McDonald's sought to increase sales during parts of the day when its share of total food and snack consumption was low. For example, while McDonald's owns peak meal times in many markets, most people still eat breakfast at home. New products targeting the on-the-go breakfast eater, such as the popular McGriddle product, helped the company grow its share of the breakfast market. McDonald's historic focus on serving portions that are fit for a meal (or two meals, critics might argue) presented another opportunity: snacking occasions. To get at these occasions, the company introduced products such as its chicken Snack Wrap. The product carries a low price point and can easily be consumed with one hand. The Snack Wrap has been a huge hit, with sales exceeding the company's projections by 20% (Christensen). Threats: Major threat to McDonald is relationship between the management and the franchise dealers. “Franchisees that have seen the chain as stuck in rut have been jumping ship to faster growing rivals”(Dess, Lumpkin & Eisner, 2007, p. 692). Another treats to McDonald’s is the lock of growth opportunities domestically. Since the market is soaked it will be difficult for the company to achieve double-digit growth.
STRATEGY USED: McDonalds used franchises strategy focusing on low-cost leadership. Around 80 percent of McDonald’s restaurants are franchises. Investing in opening new stores in 2001 the company reached the low point and ended 2002 with the first quarterly loss since 1954. The franchisees pay McDonald's royalties of 4% to 5% of their top-line revenue (Christensen).
At the stores the company owns, it pushes the higher costs across to the consumer. The menu price increased 3% due to higher commodity prices, he said. However, McDonald's is still a value-based restaurant. Dollar menu and value meals help attract middle- to low-income customers into its stores. The average check paid by a customer is about $5.50 per order. The 3% price increase has benefited comparable sales, while the hike has not hurt traffic trends. As a clear-cut leader in the quick-service segment, McDonald's should continue its momentum into 2008 (Christensen).
COURSES OF ACTION RECOMMENDED: Fast food giant McDonald's should go for bigger burgers and fancier places. More adult-sized burgers will appear on menus and the stores will stay open longer. Although they are larger than the traditional Big Mac they do not pack on as many calories - while Big Mac has 540 calories, the Big Tasty with Cheese has 510 and the Big Tasty 460, Although McDonald's has had some recent success, there is still room for improvement (Christensen).Specifically, the company has struggled to move beyond its namesake franchise. For example, last year it divested its ownership of Chipotle Mexican to focus on its core business. It is a bit perplexing that McDonald's hasn't been able to leverage its acumen managing complicated logistics and producing good food at reasonable prices to create other vibrant food brands. As it finds its innovation stride in its core business, McDonald's should revisit the concept of moving into adjacent markets.
OPINION:
Now playing at its new flagship restaurant: Digital-media kiosks for burning CDs, Downloading cell-phone ring tones, and printing photos. Dozens of plasma-screen TVs. Wi-Fi Internet access. New chicken sandwiches. Double-lane drive-thru. And an adjoining McCafe with gourmet coffees, fancy pastries and a fireplace. Coming soon: Other menu items and concepts not yet released to a general audience. Inside, repairs to the digital-media centers reduced geeks to gawkers as the restaurant filled at lunchtime on a recent day. When working, the BlazeNet machines allow customers to search a library of 40,000 songs and create a custom CD for 99 cents per song. Other kiosks let them surf the Web, print out photos in six seconds or get ring tones instantly. The machines' high cost may preclude them becoming a regular sight at McDonald's. Less certain is the fate of the McCafe the gourmet-coffee lounge concept which Bell introduced in Australia in 1993. Currently there are more than 300 McCafes internationally but only five in the United States — four in Raleigh, N.C., and the one in Oak Brook. Morningstar Inc. analyst Carl Sibilski said all the new concepts reflect McDonald's stepped-up effort to please young adults — particularly 18- to 24-year-old men, the demographic "gold mine" for fast-food purveyors.

References
Dess, G., Lumpkin, G., & Eisner, A. (2007) Strategic Management (3rd Ed.). Boston: McGraw-Hill Irwin.
Clayton, Christensen & Innosight. Forbes Online. Innovation: a happy meal for McDonald’s. Retrieved January 17, 2012 from http://www.forbes.com/claytonchristensen/2007/08/31/christensen-innovation-mcdonalds-pf-guru_in_cc_0904christensen_inl.html
Ezine Articles Online. McDonald’s Business Analysis. Retrieved January 16, 2012 from http://ezinearticles.com/?McDonalds-Business-Analysis&id=687438
Yahoo Finance, Edgar Online, McDonald. (MCD). Retrieved January 17, 2012, from http://finance.yahoo.com