mcdonalds-swot-analysis

McDonald’s SWOT analysis

McDonald’s was founded in 1940 by Richard and Maurice McDonald, with the first restaurant being a BBQ stall in San Bernardino, California.

This stall was eventually sold to businessman Ray Kroc, who opened the first McDonald’s franchise in 1955 and made the company what it is today.

Indeed, McDonald’s now has close to 39,000 restaurants in 119 countries. While it remains a highly successful franchise, shifting consumer preferences pose the most serious challenge to the company moving forward.

With that in mind, let’s begin the SWOT analysis

Strengths

Strong brand recognition

McDonald’s is synonymous with fast food around the world as a result of the company spending millions on marketing and brand awareness.

Ronald McDonald and the Golden Arches clearly differentiate the chain from competitors and ensure that it remains top-of-mind for consumers.

Consistency

McDonald’s never claims their food is high quality.

However, the consistency of their food is a major strength considering their global presence.

The company works with a range of suppliers to ensure that a Big Mac in Los Angeles tastes the same as one in Paris.

For consumers, this makes McDonald’s a familiar and known quantity.

Technology integration

When Ray Kroc purchased the company, he was impressed by the fast service of the original restaurant and this remains a core characteristic of every restaurant today.

Customers can now order their meals using self-serve kiosks or an app for pickup and delivery.

To engage with younger, mobile consumers, McDonald’s’ has also invested in tech company Plexure to create targeted loyalty programs.

Weaknesses

Franchise model

One of McDonald’s greatest strengths is also a weakness under certain circumstances.

With a complicated mix of franchised and company-operated restaurants, there is a risk of poor financial performance and customer dissatisfaction due to mismanagement.

With little to no influence over daily operations, these franchises have the potential to dilute brand equity.

Low employee satisfaction

This is particularly evident in emerging economies where the rights of employees are rapidly changing.

The company has been subject to several public employee strikes around minimum wage, causing reputational harm.

Dependency on western markets

Despite its global presence, McDonald’s is dependent on western markets for revenue generation.

In fact, the USA accounts for 35% of revenue alone.

The reasons for this dependency are complex, but in part stem from an inability to penetrate lucrative Asian markets such as China, Singapore, Malaysia, and India.

Opportunities

Brand image rebuild

McDonald’s brand equity is a two-edged sword. On the one hand, many associate its restaurants with fast service, dependable food, and child-oriented fun.

To others, the McDonald’s brand represents junk food and poor health. Improving this negative association represents a major opportunity to increase market share.

One successful example is the development of a vegetarian burger for the Finland market.

Investment in McCafe

On average, restaurants featuring a McCafe do 15% more sales than those without.

Incorporating a McCafe in every restaurant is likely to be a worthwhile strategy.

The same could also be said of developing the McCafe menu to be more aligned with successful coffee brands such as Starbucks.

Threats

Health trends and competition

Changing consumer preferences around unhealthy fast food have the potential to erode the competitive advantage of McDonald’s.

While the company has revitalized its menu, it may struggle to compete with established players in the healthy food segment.

Because of this trend, McDonald’s has experienced increased regulatory pressure and associated costs.

Cultural insensitivity

McDonald’s has suffered brand damage in countries where its products are not a good fit.

For example, the company was embroiled in a scandal after it sold food in Muslim countries using non-halal ingredients.

Environmental concerns

The company generates vast amounts of waste as a result of the way it packages food.

Plastic straws have been banned in some countries, but more needs to be done to minimize waste from another packaging – particularly in countries where environmental laws are less stringent.

Read Also: McDonald’s Business Model

Related to McDonald’s

mcdonalds-business-model
McDonald’s is a heavy-franchised business model. In 2021, over 56% of the total revenues came from franchised restaurants. The long-term goal of the company is to transition toward 95% of franchised restaurants (in 2020 franchised restaurants were 93% of the total). The company generated over $23 billion in revenues in 2021, of which $9.78 billion from owned restaurants and $13 billion from franchised restaurants. 
mcdonalds-pestel-analysis
mcdonald-organizational-structure
McDonald’s has a divisional organizational structure where each division – based on geographical location – is assigned operational responsibilities and strategic objectives. The main geographical divisions are the US, internationally operated markets, and international developmental licensed markets. And on the other hand, the hierarchical leadership structure is organized around regional and functional divisions.
franchising
Franchising is a business model where the owner (franchisor) of a product, service, or method utilizes the distribution services of an affiliated dealer (franchisee). Usually, the franchisee pays a royalty to the franchisor to be using the brand, process, and product. And the franchisor instead supports the franchisee in starting up the activity and providing a set of services as part of the franchising agreement. Franchising models can be heavy-franchised, heavy-chained, or hybrid (franchained).

Read Next: SWOT Analysis, Personal SWOT Analysis, TOWS Matrix, PESTEL Analysis, Porter’s Five Forces.

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