McDonalds SWOT Analysis - Case Study Example

IТНА Student’s name Course & code Professor’s name University City Date SWOT analysis Strengths McDonald’s has developed a strong distribution network worldwide. In 2000, the company had opened about 30,000 restaurants in 120 countries. This strong distribution network allows the company to operate at lower prices since the customers are able to get the products from outlets near them (Ghobadian & O’Regan 2014). This saves operational costs for the company widening the profit margins. Besides, the distribution network places the company in a position to beat the competition since the products have been made within reach of the customers (Crawford 2015). In India, the company has set up many outlets, about 80 by 2003, especially in the major cities which has seen the company earn over Rs 10 billion annually (Pangarkar & Subrahmanyan). As such, the company enjoys the geographic diversification in a manner that the revenue received by the company does not originate entirely in the United States but also from the rest of the world. according to the 2015 estimates, the company had only 33.7% of the revenue from the united states and 66.3% from the rest of the world (Crawford 2015). The diversified streams of income allow the company to enjoy increased profits even in regions where the population is formed up of more vegetarians (Ghobadian & O’Regan 2014). As a matter of fact, the company does not rely on one line of production but presents a variety of products at different prices that caters for different people in the society (Jeon et al 2016). Moreover, since the company has set up diversified lines of production, it has further acquired company owned restaurants besides franchise stores like Vikram Bakshi (Pangarkar & Subrahmanyan). This allows the company to source revenue from franchised stores to boost the net revenue compared to the rivals who have fewer or no franchise stores. Since the different franchise stores are not located in one country, the company is rarely affected by the political, social and economic changes and hence remains in the leadership position globally (Ghobadian & O’Regan 2014). McDonalds has developed a strong brand name in the market due to the market leadership. The company has been ranked among the top 10 valuable brands globally with the latest estimates being US$39.5 billion. This market leadership has changed the perception of the brand by the customers for the better which contributes to positive brand reputation (Ghobadian & O’Regan 2014). Consequently, the reputation is known to raise the customer loyalty and brand awareness to the extent of sustaining the market leadership position (Jeon et al 2016). Weaknesses Basing on the statistics and customer views in India, it has been note that the reliance of the company on burgers is considered as an unhealthy option for the customers (New 2015). This implies that customers will be more interested in other restaurants which offer healthier options than the burgers. The company has further demonstrated that they are least concerned with providing organic foods (Pangarkar & Subrahmanyan). For instance, in India the company was compelled to include organic lines of production when it was noticed that the population was more concerned with the kind of meat, curry and other materials that were used in making the final products. This limits the company’s ability to compete with other rivals that concentrate on organic food production (New 2015). Opportunities The company has opened up more joint ventures globally with different retailers. This move ensures that the company earns increased revenue from these joint ventures compared to their rivals (Jeon et al 2016). For instance, in India, the company has formed Maharaja Mac to admit to the sensitive Hindus and Muslims that the company did not provide beef patties with their products ( Pangarkar & Subrahmanyan) Moreover, due to the stiff competition, the company has ventured into beverage choices. This diversification in the production and market allows the company to gain new customers while retaining the existing ones for the benefit of the company (Jeon et al 2016). Threats With the increased cases of obesity in many countries, people are currently more concerned with what they eat at fast food outlets and therefore more people are opting to have balanced meals with fruits and vegetables (New 2015). Since the company cannot provide a full course meal, it is possible to lose more customers in the near future (Pangarkar & Subrahmanyan). In many countries, like India, the economic status of many people does not allow them to eat out to the extent expected. As such, the number of customers is set to reduce amid the stiff competition with other restaurants for the remaining few customers (New 2015). The fast food industry The fast food industry refers to the food that is usually prepared and served within a short time. Tis industry began in early 1860s as fish and chips shops within Britain and late spread to the United States (Dey 2016). However, the fast food is considered as nutritionally less valuable compared to other dishes. The fast food is usually discriminative in a manner that not all kinds of dishes prepared quickly can be termed as fast food but the terminology implies that the food prepared and served in a restaurant and also at stores with precooked ingredients. These products can be given as take out when packaged (Dey 2016; Pangarkar & Subrahmanyan). According to the literature review by Shen & Xiao 2014, the competition in China has stiffened for McDonalds. Besides, the company has faced competition since its inception in India. Notable of the competitors are the KFC, Pizza Hut, and colonel burger (Pangarkar & Subrahmanyan). KFC has it strengths in providing the meals at cheaper prices than McDonalds in order to attract more customers and retain them. However, the company demonstrates weaknesses in the manner in which they fail to understand the Indian culture which includes more vegetarians (Jeon et al 2016). Since more Indians are repelled by chicken skin, KFC stands to repulse more customers than it hopes to gain. Besides, since most of the raw materials for the product preparation was sourced within India, KFC enjoyed reduced cost of production which offered an opportunity for lowering the prices of their products (Shen & Xiao 2014). On the contrary, with McDonalds offering diverse products within the same market, KFC is threatened for failing to provide varieties of products for the customers. Profitability potential. Having been in existence in the market as long as McDonalds has been, the company has streamline the supply chain globally. In India, the company is said to have spent about RS 50 million in setting up the supply chain, logistics support and distribution centers. The reliance on local suppliers has had a reputation in facilitating for low costs on sourcing of raw materials (Sachdeva 2015). For example, the company has identified key local suppliers for lettuce besides providing the technology to the suppliers in order to ensure production of quality lettuce. This has created a chain of local suppliers in India for chicken, cheese, pickles and lettuce from both southern and northern India (Pangarkar & Subrahmanyan). A discussion by Sachdeva 2015 reveals that, considering the fact that the supply chain has been streamlined, the costs of the raw materials and delivery allows the company to enjoy a wider profit margin that contributes to the growth potential of the company. The International Strategy of the company The company, according to Sachdeva 2015, since its inception, has targeted other markets other than the home market in the United States. McDonalds has set up outlets in more than 120 countries to serve people in all age sets. As a marketing strategy, the company has designed the set-up of international outlets to target larger cities with more populations and high income earners. The targeting of high income earners is a means to gaining the larger market shares since high income earners have the tendency to eat out frequently for the benefit of the company (Rodrigues, Nikhil & Jacob 2016). In addition, the company has focused on diversifying the culture and products that are provided at the company. For instance, the case for India demonstrates that not all cultures are meat lovers and therefore in order to conduct business in such regions, the restaurant has to provide what the people want (Thornton et al 2016) As a result, McDonalds has set up new lines of production to include non-beef patties so that it can penetrate more Indian cultures and societies (Rodrigues, Nikhil & Jacob 2016). As a move to increase. international revenue, the company has strategized to create more outlets in Mumbai and Delhi with more seating capacities to allow more customers to be served in these cities (Pangarkar & Subrahmanyan). Besides, McDonalds has strategized to penetrate new cities through collaboration with airports and railway stations. The creation of new markets in other cities is further facilitated by the fact that McDonalds has formed joint ventures with different companies in the same industry (Paul & Roy 2014). This increases brand awareness besides reducing the costs that would be used in setting up new outlets in such regions. According to the 2015 estimates, only 15% of the restaurants for McDonalds were owned by the company while 85% were being operated by franchises (Rodrigues, Nikhil & Jacob 2016). Since the company ensures that there is quality cleanliness, value propositions and service to customers, there has been consistency in the products offered by the company (Pangarkar & Subrahmanyan) . Conclusion As posited by Paul & Roy 2014, the success of the strategy is experienced in the way the products and services are offered to the customers. For instance, the company has been recorded to be among the top 1 valuable brands globally with high revenue returns annually. As discussed by Thornton et al 2016, given the situation in India, the company has strategically positioned itself in the market by providing the locals with the original flavors in the products provided (Pangarkar & Subrahmanyan). Having inculcated the vegetarian culture in the products provided in the Indian menu, it can be noted that more Indians are now eating out at the restaurants compared to earlier instances where the food provided was meat based (Thornton et al 2016). Moreover, penetrating new cities has been successful considering that McDonalds has set up more outlets in the airports in different countries. Since more people have become aware of the brand, it has become easy to create new markets for the company other than the united states. As a matter of fact, franchising of the company like including Maharaja and Vikram Bakshi has seen the company raise the number of the restaurants franchised to 85% of the total number restaurants operated by the company. This implies that international strategy for the company has been effective in many aspects and will contribute to the success of the company in general (Paul & Roy 2014). References Crawford, A 2015, ‘McDonald's: A Case Study in Glocalization’, Journal of Global Business Issues, vol. 9 no. 1, p.11. Dey, K 2016, ‘The fast food industry in the UK’, Analysis of McDonalds with PESTEL, VRIN and Porter's Five Forces. Ghobadian, A & O’Regan, N 2014, ‘A case study and interview with Jill McDonald CEO and President of McDonald's Northern Europe Division’, Journal of Strategy and Management, vol. 7 no. 1, pp.87-100. Jeon, HJJ, Meiseberg, B, Dant, RP & Grünhagen, M 2016, ‘Cultural Convergence in Emerging Markets: The Case of McDonald's in China and India’, Journal of Small Business Management, vol. 54 no. 2, pp.732-749. New, S 2015, ‘McDonald’s and the challenges of a modern supply chain’, Harvard Business Review. Pub, 4. Pangarkar, N. and Subrahmanyan, S., Beefing up the beefless Mac. Paul, R & Roy, SK 2014, ‘Case Study 11: Marketing of Services: The McDonald’s Way’, In Marketing Cases from Emerging Markets, Springer Berlin Heidelberg, pp. 99-112. Rodrigues, J, Nikhil, S & Jacob, S 2016, ‘Promotional Strategies of McDonalds and Market Effects’, Journal of Management Research and Analysis, vol. 3 no. 1, pp.53-55. Sachdeva, A 2015, ‘Evaluation and selection of differentiation as a strategy for McDonald’s’. Shen, Q & Xiao, P 2014, ‘McDonald's and KFC in China: Competitors or Companions?’ Marketing Science, vol. 33 no. 2, pp.287-307. Thornton, LE, Ball, K, Lamb, KE, McCann, J, Parker, K & Crawford, DA 2016, ‘The impact of a new McDonald's restaurant on eating behaviors and perceptions of local residents: A natural experiment using repeated cross-sectional data’, Health & place, vol. 39, pp.86-91. Read More