McDonald’s SWOT Analysis

McDonald’s is one of the most recognizable fast-food chains in the world. This restaurant specializing in American cuisine was created 75 years ago, in 1940, by two brothers, Richard and Maurice.

McDonald’s initial location was a BBQ establishment in San Bernardino, California.

Since the 1940s, Mcdonald’s has been offering the greatest burgers to Americans. 

McDonald’s was founded in San Bernardino, California, by Richard and Maurice McDonald. They began by selling hamburgers at the concession stand. 

When Ray Kroc witnessed their systematic method of burger production in 1955, he joined them as a franchise seller and acquired the business from the McDonald brothers after a few years.

After eight years, it was converted into a fast-food restaurant and was eventually owned by Multimixer salesman Ray Kroc. He opened his first franchise in Des Plaines, Illinois, in 1955, gradually converting it into a proper firm.

In 2014, it operated 36,528 restaurants in 119 countries, employing about 4,20,000 people and serving locally relevant food and beverages at a low price. 

The food menu features a range of burgers (vegetarian and non-vegetarian), appetizers (chicken McNuggets, French fries, sandwiches, and more), as well as ice cream and shakes. 

McDonald’s has qualified independent vendors who supply the franchise with basic materials. Vendors must adhere to the policies to qualify for hygiene and taste.

McDonald’s operates on a franchise basis. It earns revenue on three levels. In 2014, 81 percent of McDonald’s restaurants were franchised. 

McDonald’s owns or rents the space. First, for each product sold, McDonald’s receives a royalty share. Second, they charge a franchise fee to the owner, who receives equipment and decor items for the interior and exterior. 

The owner is merely an employee of the restaurant; he is often in charge of staffing. The prices of things are set at the corporate level.

McDonald’s Corporation is now one of the world’s top ten international brands, with hundreds of franchise locations in nearly every country.

McDonald’s SWOT Analysis

CompanyMcDonald’s
Year foundedApril 15, 1955
Industriesfast-food company, Real Estate Company
CEORichard McDonald, Maurice McDonald
HeadquarterChicago, IL, U.S.
TypePublic
Areas servedWorldwide
Market Cap$178.97 Billion (August 2021)
Websitehttps://www.mcdonalds.com

Let us examine the most recent dynamics of McDonald’s SWOT analysis. It demonstrates how the world’s most successful food chain firm leverages its competitive advantages to maintain its dominance in the fast-food industry.

Strengths of McDonald’s 

The company’s strength is its targeted approach to market penetration and breadth of product development. That is unquestionably the primary reason contributing to its success and positioning it as a market leader in this industry. McDonald’s SWOT Analysis identifies the following strengths:

McDonald’s SWOT Analysis

1. A strong reputation, brand name, and image

McDonald’s ranks tenth in the world’s most valuable brands. A high brand value has helped the company consistently dominate the industry, despite strong competition.

A huge amount of brand equity has been built by McDonald’s. The fast-food giant operates more than 31,000 restaurants in more than 120 countries, making it the world’s largest revenue. 

The McDonald’s logo is instantly recognizable. There are the ten most powerful brands globally, including Coca-Cola, Nokia, and General Motors.

2. Stable income

McDonald’s franchisees own more than 90% of its locations rather than operating them themselves, so the organization is less concerned with each venue’s functioning day today. 

It is better to collect royalties and rent calculated as a percentage of sales to smooth revenue than to collect that. 

The corporation is currently transitioning its restaurants to franchise sites due to the predictable revenue and cash flow, reduced resource requirements, and lower capital requirements. 

Additionally, worldwide expansion through franchising would mitigate the culture shock associated with operating in a new country and make adaptation to local tastes easier.

3. Delicious meals

Fast food industry experts claim McDonald’s French fries to be the best tasting. McDonald’s collaborates with both domestic and international vendors to ensure consistent, high-quality products. 

A Big Mac bought in Pittsburgh will taste exactly like one in Tokyo because the company’s multinational franchise network is closely supervised. This option has a significant advantage for travelers who are hesitant to try local cuisine in a new place.

4. Technology developments

McDonald’s takes innovative steps to realize its ‘Experience of the Future’ vision through digital initiatives. 

The concept of McDonald’s as a ‘restaurant of the future relies on innovations like kiosks, mobile order and payment systems, and self-service.

5. McDonald’s – a real estate firm

McDonald’s is more than just a hamburger and fries manufacturer with a multibillion-dollar real estate empire. Imagine having thousands of premium locations around the world.

There are 37,855 restaurants in 120 countries operated by the company, 35,085 franchises, and company-owned.

McDonald’s franchisees operate in a somewhat different manner. McDonald’s licenses their brand name, recipes, ingredients, and processes to franchisees, owns the land, and acts as a landlord, collecting rent.

6. Large market share

McDonald’s is often regarded as the market leader in terms of size and global reach. While Wendy’s and Burger King were losing market share in 2006, McDonald’s continues to grow. 

McDonald’s has recently held a market share of approximately 19 percent, while Yum! Brands account for 9%, while Wendy’s and Burger King each account for 2%.

McDonald’s is the world’s most valuable fast-food brand, with a brand value of $126.04 billion in 2018. No other fast-food brand came close to McDonald’s value, as Starbucks, the second most valuable brand, was only worth $44.5 billion.

7. Leader in quick-service restaurants

McDonald’s is the largest quick-service restaurant (QSR) chain in the United States in 2018, according to Statista. McDonald’s accounting for transactions topped the list in 2018 with $38.52 billion.

8. Health and Quality Control Protocol Improvements

You might argue about the taste and overall customer experience, but McDonald’s has long been known for its high-quality standards. The Company strictly monitors the food safety and quality of ingredients it purchases from third-party intermediaries.

McDonald’s has just begun limiting the usage of high-value human antibiotics. Since 2018, the World Health Organization (WHO) has included it in its global chicken supply as a “highest priority critically important antimicrobial” (HPCIA) for human medicine.

Numerous public health and consumer advocacy organizations applaud the policy as a significant step toward preventing hazardous superbugs.

9. Technology Acquisitions

The company’s most recent ‘Dynamic Yield’ acquisition represents another step toward increased personalization and customization. 

Dynamic Yield is an Israeli firm that supports brands such as McDonald’s in personalizing their services.

10. Effective marketing strategies

The iconic face of Ronald McDonald is known the world over as synonymous with McDonald’s. This leads to extraordinary marketing strategies among management, which conduct thorough market research and reap wide success.

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McDonald’s decline is a result of internal strategic issues and market rivalry. They are manageable, provided the business approaches them strategically. McDonald’s SWOT Analysis identifies the following Weaknesses:

1. Unhealthy food image

The fast-food giant has been negatively impacted by the unfavorable press, such as Morgan Spurlock’s documentary “Supersize Me,” where he blames McDonald’s and other fast-food companies for our society’s obesity. McDonald’s foods contain substantial amounts of calories but are nutritionally devoid.

2. Franchise business model

McDonald’s set the standard for international franchising. There are some risks associated with this convoluted network of franchisees and company-run stores.

The company faces financial decline, poor management, unsatisfied customers, and insufficient revenue generation. A majority of the corporation’s revenue is generated by franchisees, which operate independently and hence have little impact on their daily performance but directly impact the brand.

3. Supply chain disruptions

McDonald’s, as one of the busiest food franchises, frequently encounters supply chain disruptions. Additionally, it reduces the availability of crucial products for operations.

As a result, operating expenses increase when a franchisee suffers such interruptions, resulting in decreased revenue and profitability.

4. Customers lose due to intense competition

McDonald’s is against many powerful fast-food brand names, including Wendy’s, Burger King, and Yum! Brands. McDonald’s loses a significant number of customers to other brands as a result of this strong competition.

5. Unbalance meals

Despite McDonald’s attempts to update its menu according to nutritional standards, McDonald’s meals remain unbalanced. Numerous recipes call for chicken (grilled or fried), bacon, beef, ribs, or eggs. 

Furthermore, only a few dishes are salads with vegetables and fruit. Furthermore, the quantity of fruit or vegetables is quite small.

6. Employee Dissatisfaction

Many firms have suffered serious dissatisfaction from employees due to recent employee rights revolutions worldwide and higher wage limitations.

McDonald’s has recently experienced criticism from its employees. The workers staged many rallies and strikes in support of their demand for a $15 minimum wage, jeopardizing its reputation.

7. McDonald’s breakfast menu is no longer appealing

McDonald’s breakfast sales were unrivaled for nearly a decade, particularly in the United States. 

Yet the company’s chief financial officer admitted in May 2018 that the breakfast menu usage had declined, and they needed to do something about it.

The rapid growth of competition, on the other hand, is unlikely to restore breakfast meals’ popularity.

8. Dissatisfied Franchisees

McDonald’s franchisees are becoming increasingly disgruntled with their costs. Corporations are increasing the fee franchisees have to pay to use the infamous fast-food name as they expand. 

Franchisees are considering selling their businesses as a result of consumer dissatisfaction.

Opportunities For McDonald’s

McDonald’s has a plethora of market opportunities that it can leverage in order to achieve long-term sustainability. McDonald’s opportunities are as follows:

McDonald’s SWOT Analysis

1. Innovative Products

McDonald’s needs to develop fresh menu items that will lure customers away from new fast-food restaurants.

The company introduced an exclusive beverage in its New York locations in 2018 – MIX by Sprite Tropic Berry. There are plans to serve it throughout the United States, and it was a big hit.

McDonald’s can retain their allure for an extended period by adding more items of this type based on local conditions and culture.

2. Rebuilding Brand Image

It may be smart for McDonald’s to pursue aggressive steps towards healthier and more individualized options even as fast-food businesses combat the stigma of being junk-generation hubs.

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A rise in comparable sales has increased profitability thanks to these advances. McDonald’s healthy image can continue to make a difference in the long run, despite franchising undoubtedly slowing sales.

3. Freebies and discounts offer

A discount on every item in the store may draw in additional clients. Customers also report enjoying freebies and discounts even when they do not need them or cannot make use of them.

4. Increasing demand for healthy products

McDonald’s is concerned about the negative impact on its customers’ health, but this is also an opportunity for the company. There is potential for this company to develop new products, like fresh burgers or nutritious desserts.

5. McDelivery and Mobile Order

McDonald’s has partnered with UberEats and Door Dash to offer food delivery in the United States. 

McDonald’s uses these mobile ordering and delivery initiatives to connect with and meet the ever-changing demands of its customers.

6. Global Expansion

McDonald’s may be king in the United States, but it frequently struggles in the overseas market. 

However, it is more likely for the corporation to continue expanding worldwide if it focuses on expanding into international markets rather than on the states of the United States.

Threats For McDonald’s

Threats are events that prevent a firm from fully utilizing existing resources, thus denying it the benefits that could be derived. These are, therefore, McDonald’s few threats.

1. Risky investments in technology

The outlook for McDonald’s innovative initiatives is favorable, but investing in technology is risky.

The rapid adoption of new technologies may reduce the return on investment, while the benefits of improving the customer experience may not be as great as expected.

2. High-intensity competitors

Numerous fast-food brands have entered the market as a result of the growth of the fast-food sector. The lack of strong competition for McDonald’s does not matter. 

However, some companies are gaining strength gradually, such as Yum! Brands, Wendy’s, or Burger King. McDonald’s customers are actively sought after by these brands even though they have a smaller market share. 

Additionally, more casual eating establishments are expanding their burger offerings and lowering their prices. If we are not in a hurry, we may opt for this restaurant rather than fast food. They also become McDonald’s competitors.

3. Operational Threat due to Cultural Differences

The brand’s reputation has been tarnished repeatedly by cultural obstacles in various parts of the world that McDonald’s has encountered as a global fast-food franchise.

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A franchise’s location further complicates the matter of adapting to different operating requirements. The use of McDonald’s products that aren’t considered halaal in Muslim countries led to a major scandal a few years ago.

This further erodes McDonald’s reputation in a world operating environment, where the brand faces inherent risks and customer expectations.

4. Epidemic of public health

Fast food restaurants like McDonald’s will continue to be overshadowed by their past product offerings, such as the Supersized Meal that does not include fruit or yogurt or a limited salad selection despite the rise of obesity among Americans. 

Moreover, people today are increasingly worried about heart problems. Thus, they want a healthy diet as well as a healthy lifestyle.

McDonald’s is frequently regarded as old-fashioned by millennials due to its traditional menu and taste. 

Restaurant companies like Shake Shack and Wendy’s take advantage of this by frequently experimenting with their menus and recipes.

McDonald’s, for example, was unable to compete with Wendy’s “Signature-Crafted Burgers” and was forced to revert to its traditional Quarter Pounders to save face.

6. Economic recession

The trickledown effect will negatively impact the company’s revenue streams despite its diverse revenue streams, depending on the duration of this “recession.” 

Consumer spending and visitor traffic may decline during economic downturns as household budgets tighten, affecting retailer sales.

7. Concerns regarding the environment

McDonald’s is similarly under pressure to improve its waste management processes to reduce environmental contamination.

McDonald’s needs to lead by example and give an example to other fast-food dining establishments due to growing ecological concerns, but it is not that straightforward.

McDonald’s board of directors was requested by environmental groups in March 2018 to stop using plastic straws in its more than 37,000 outlets worldwide in response to the growing use of plastic.

Key Takeaways From McDonald’s SWOT Analysis

McDonald’s is one of the world’s most powerful food brands, with unparalleled globalization and consumer loyalty. However, despite the company’s long history, it must monitor potential sources of conflict.

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McDonald’s will continue to grow as a fast-food retailer as long as they maximize their strengths and seize possibilities presented by their operating environment.

We highlighted each of McDonald’s strengths, weaknesses, opportunities, and threats in this SWOT analysis.

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