McDonald’s SWOT Analysis

The primary model of the McDonald’s business is the operation of the McDonald’s restaurants, as well as franchising the same in the United States and internationally. The restaurant serves locally relevant menus, in addition to serving internationally recognized menus. Due to the global brand that the company enjoys, it can attract many franchisees who acquire the rights to run their restaurants under the McDonald’s brand. Individual franchisees independently run a majority of McDonald’s restaurants. Franchisees agree to run their restaurants in compliance with the McDonald’s model and best practices. This enables the uniformity of operations and practices internationally, which enables it to run a unified global brand. The products that the company deals in include: cheeseburgers, hamburgers, shakes, salads, chicken sandwiches, soft drinks, and coffee, among others. This paper elaborates on the SWOT analysis of the company.

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Strengths

McDonald’s boasts of a wide array of strengths that enables it to command a strong presence in the service industry. One of the biggest strengths is that the company has substantial economies of scale. This enables it to share its fixed costs over the many various restaurants. The sharing of the expenses in this kind of manner allows McDonald outlets to be one of the most affordable places to eat at. The company is also big, which enables it to have an advantageous power over its suppliers, which, in turn, enables it to acquire supplies at relatively lower prices (Wu, 2018).

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McDonald’s enjoys a broad reach of audience due to its widespread existence in many parts of the world. This enables the company to have increased access to more customers. In addition to this, the company is able to such secondary services as home delivery of food. This clearly demonstrates the significance of the company being close to many of its customers, which is facilitated by its huge presence in many areas across the world. The fact that the company operates in different countries it exposes it to different currencies. This is significant in protecting the business when some currencies fall in value.

Weaknesses

With the expansion of the food service industry in the United States, many companies have come up that do the same service as McDonald’s. There are multiple companies in various regions of the United States that run the restaurant business in the same model that McDonald’s does it. This means that it has become more difficult for the company to find new locations in the country to set up new outlets. This, therefore, means that if the company is to expand further, it has to look for new locations in other countries. This poses the challenge where the company might have to embrace different cultural models in its operations. The annual dividends that the company offers have been slowing down. Even though the dividend growth rate has been experiencing positive hikes, they have progressively been slowing down. This has the potential of reducing the company’s bargaining power among potential investors.

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Opportunities

Many opportunities for setting up new restaurants outside the United States exist. The Asian market has been receptive to many businesses that center on the food service industry. This, therefore, means that the company has a huge opportunity for expanding itself in the Asian market. China is a promising destination in the Asian market due to its uniform and single market. Another significant advantage of the China market is that it has a huge population. These factors make China a primary target as far as expansion destinations are concerned.

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The increased purchasing power of different sets of the population is another area of opportunity that McDonald’s can exploit. Many women and youth continue to find job opportunities at an increasing rate. This has been due to an increase in education levels, which has made them more employable, as well as enabling them to also venture into self-employment. This increase in purchasing power is a factor that contributes to people eating in affluent restaurants such as the McDonald’s. The company should, therefore, focus on advertising themselves to these sets of people (Bragg et al., 2018).

The fact that menu innovations are unlimited, the company should focus on expanding its menu to cover many local and international tastes. Innovations regarding the menu in a restaurant are only limited by imaginations, and, thus, the company should come up with increased varieties that can be tested for reception by different people. Those that attract a wide audience can then be optimized and marketed internationally. 

Threats

The main threats that the company faces have to do with its main competitors. The company faces stiff competition from such companies as the Burger King, Brands, Stock Pick, and 11 O’clock among others. This calls for the company to always review its activities and practices to be able to remain competitive and relevant in the industry.

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Slowing rates of economic growth in different countries that the company operates in limit the company’s operational capacity. Increases in the prices of commodities mean that the costs of the company go up as well. However, it becomes difficult for the company to pass these costs to consumers in cases where the economy of a country is struggling (Mialon et al., 2016). In cases where a country’s economy slows down, the purchasing power of the entire population in general declines.

Possible expansion areas

The company can expand into the soft drinks industry, as well as new markets where the company still has an insignificant presence. At present, the company has a deal with the Coca Cola company which provides it with Coca Cola products such as soda that customers can use as accompaniments to their products. Although Coca Cola provides these drinks at a significantly reduced price, it is possible that McDonald’s could be thinking of coming up with their own soft drinks line which can enable them to eliminate their partnership with Coca Cola. Africa remains mostly unexploited by the company, and this remains an area where the company could be looking to venture into at an increased rate.

Recommendations

Invest in new markets – Asia holds the key to future corporations, and therefore, McDonald’s should look into expanding extensively in this market. Africa is also a huge potential area that the company can expand into.

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Come up with a line of soft drinks – Starting a new line of soft drinks will enable the company to liberate itself from the deal it is in with Coca Cola. This will help the company have a new source of revenue as the drink can replace soda from Coca Cola in its restaurants. This can also grow and take a life of its own, where the company can release the product into the market.

Conclusion

In conclusion, the SWOT analysis of McDonald’s reveals that the company is in a strong position in the market currently.  The company enjoys enviable brand awareness globally, and this is essential to the company’s business. Competition from major companies like King Burger is a major threat that the company faces. However, considering the Asian and the African market remain largely unexploited by the company, this offers a huge opportunity for expansion.

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