SWOT Analysis for McDonalds - Essay Example

SWOT Analysis for McDonald’s According to Danca (2008, pg. 1), “SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for the development of marketing plans. It accomplishes this by assessing an organizations strengths (what an organization can do) and weaknesses (what an organization cannot do) in addition to opportunities (potential favorable conditions for an organization) and threats (potential unfavorable conditions for an organization). SWOT analysis is an important step in planning and its value is often underestimated despite the simplicity in creation. The role of SWOT analysis is to take the information from the environmental analysis and separate it into internal issues (strengths and weaknesses) and external issues (opportunities and threats).” The purpose of this paper is to perform a SWOT analysis on McDonald’s. In the process of this analysis, the objectives it pursues; the methods by which it has grown in size and the reasons the company might have had for choosing those methods; and the political, economical, socio-cultural, and technological (PEST) factors which are shaping the external environment in which the company is operating will be thoroughly examined. McDonald’s names their vision statement as, “We envision a supply system that profitably yields high-quality, safe food products without supply interruption while creating a net benefit for employees, their communities, biodiversity, and the environment” (McDonald’s, 2008, pg. 1). The company holds a number of principles as well, claiming, “Our work toward a socially responsible supply system is motivated by our commitment to our customers, leadership on sustainability issues, and our desire to ‘do the right thing’” (McDonald’s, 2008, pg. 1). The principles that the company strives to obtain parallel as objectives. First of all, they pledge to find solutions to how their supply chain is affected by both the natural and social worlds through the utilization of a systems-based approach. Second, when they plan their objectives, they set their sights on long-term goals. Third, from a globally operational standpoint, they pledge to focus on the local needs of the area in which a particular restaurant or chain of restaurants is operating. Fourth, they strive to use the best science possible upon which to base their strategies. Fifth, they work to continuously improve through building positive relationships with their suppliers. Finally, they strive to be competitive through balancing their short- and long-term objectives (McDonald’s, 2008, pg. 1). McDonald’s has used several strategies to grow in size since opening their doors. The biggest growth effort has been their international expansion. Their reasoning for doing so was to grow their overall revenues and maximize the value to their shareholders (McDonald’s, 2008). According to Danca (2008, pg. 1), “Relative to market needs and competitors� characteristics, a manager must begin to think in terms of what the firm can do well and where it may have deficiencies. Strengths and weaknesses exist internally within a firm, or in key relationships between the firm and its customers. SWOT analysis must be customer focused to gain maximum benefit, a strength is really meaningful only when it is useful in satisfying the needs of a customer. At this point, the strength becomes a capability.” McDonald’s enjoys a number of strengths. First of all, they have worldwide brand equity. It is difficult to find an area of the world in which the inhabitants have never heard of the company. Second, they comprise a whopping 42% of the market share of the fast-food hamburger industry in the United States. Third, their food is consistent throughout their restaurant chains. Fourth, they have a number of successful food items, including but not limited to the Big Mac, Egg McMuffin, Fries, Happy Meal, and their ongoing promotional efforts. Fifth, they operate successfully in the global marketplace. Finally, they have a solid position with their balance sheet (Wilcox, Brockway, Camerlin, Anzalotti, 2008, pg. 1). Despite its numerous and outstanding strengths, the company also has several significant weaknesses. First of all, their market share is declining overall. Second, their product development efforts are weak as of late. Third, their franchisees have grown disgruntled in recent years. Fourth, the overall taste and quality of their food items has grown stagnant. Fifth, their market share is declining. Finally, their income is growing less and their overall revenue has slowed down (Wilcox, Brockway, Camerlin, Anzalotti, 2008). According to Danca (2008, pg. 1), “Managers who are caught up in developing strengths and capabilities may ignore the external environment. A mistake of this magnitude could lead to an efficient organization that is no longer effective when changes in the external environment prohibit the firm’s ability to deliver value to its targeted customer segments. These changes can occur in the rate of overall market growth and in the competitive, economic, political/legal, technological, or sociocultural environments.” McDonald’s has several opportunities upon which they can choose to capitalize in the near future. First of all, they can continue their international expansion into new countries and territories. Second, as of the present time, they are only reaching 1% of the population of the world, so that leaves plenty of room for growth. Third, they can choose to expand their growing dining-out market (Wilcox, Brockway, Camerlin, Anzalotti, 2008). The company also faces a number of threats in the global marketplace. First of all, the industry in which they operate is mature and overstored. Second, their competitors are quite strong. Third, in today’s world, the general public is becoming more and more health-conscious and concerned about weight issues. Fourth, the demographics of the world are changing continuously. Fifth, world economies and foreign exchange rates are continuously fluctuating (Wilcox, Brockway, Camerlin, Anzalotti, 2008). According to Danca (2008, pg. 1), “McDonald’s has recently been feeling increased competitive pressure from Wendy’s and Burger King. In order to increase market share, McDonald’s created new marketing campaigns and new sandwiches. However, McDonald’s failed to get the cooperation of all its franchisees. When store sales began to fall, individual franchisees started to band together to gain power to protect their investments. The increased power of the franchisees forced McDonald’s to pull several advertisement campaigns due to lack of support. Prior to this McDonald’s was used to getting their way with franchisees. Now, the shift in power from McDonald’s to its franchisees has created an internal weakness that the company must address as it develops and implements new marketing strategies.” According to Danca (2008, pg. 1), “Regulatory actions by government agencies often restrict the activities of companies in affected industries. The American Disabilities Act of 1990 placed restrictions on the way firms construct their places of business and design jobs. Companies with significant investment facilities that did not comply with the law viewed its implementation as a major threat. On the other hand, companies that market products designed to assist disabled shoppers and employees saw the act as a key opportunity.” The number of small and independently-owned business has sharply declined over the past decade. This is one of the biggest trends in the United States. Since McDonald’s is a large corporate chain, they are on the good side of this trend (Danca, 2008). According to Danca (2008, pg. 1), “Social and cultural influences cause changes in attitudes, beliefs, norms, customs, and lifestyles. A firm’s ability to foresee changes in these areas can prove beneficial while failure to react to these changes can be devastating. The trend went unnoticed by major food producers for a long time.” Market opportunities can often be capitalized upon by making product modifications. McDonald’s has attempted to do this; for example, they offered to modify the oil they used to fry their French fries in to appeal to the health-conscious crowd (McDonald’s, 2008). Technological innovations have rocked the entire world over the past decade. New technology allows companies like McDonald’s to communicate globally and to run their restaurants more efficiently. For example, the cash register systems that are now in the restaurants allow food to be made very quickly from the time it is ordered (McDonald’s, 2008). According to MindTools (2008, pg. 1), “SWOT Analysis is a powerful technique for understanding your Strengths and Weaknesses, and for looking at the Opportunities and Threats you face. Used in a business context, it helps you carve a sustainable niche in your market. Used in a personal context, it helps you develop your career in a way that takes best advantage of your talents, abilities and opportunities.” The SWOT analysis of McDonald’s that was discussed in this paper does just that. It allows one to see where the company is strong and where it could use help, as well as how it could grow and where it is threatened. This information is vital to a company’s management team (NetMBA, 2008). References Danca, A.C. (2008). SWOT analysis. St. Francis University. Retrieved July 13, 2008, from http://www.stfrancis.edu/ba/ghkickul/stuwebs/btopics/works/swot.htm McDonald’s. (2008). McDonald’s. Retrieved July 13, 2008, from http://www.mcdonalds.com/home.html McDonald’s announces strong revenue and earnings growth for first quarter 2007. (2008). McDonald’s. Retrieved July 13, 2008, from http://www.mcdonalds.com/corp/news/fnpr/2007/fpr_042007.html SWOT analysis. (2008). MindTools. Retrieved July 13, 2008, from http://www.mindtools.com/pages/article/newTMC_05.htm SWOT analysis. (2008). NetMBA. Retrieved July 13, 2008, from http://www.netmba.com/strategy/swot/ Vision and principles. (2008). McDonald’s. Retrieved July 13, 2008, from http://www.mcdonalds.com/corp/values/purchasing/supply_initiative/vision___principles.html Read More