McDonalds SWOT Analysis - Case Study Example

Strategic Frameworks of McDonald’s Name Institution Strategic Frameworks of McDonald’s Introduction McDonald’s remain one of the leading fast food restaurants in the world. Despite being a big brand, the company has faced stiff competition in its domestic market from KFC, Subway, Burger King and Wendy's among others forcing to review its strategy to remain competitive. Pangarkar and Subrahmanyan (2011, p.126) argued that expansion is one of the strategies which have been pursued by McDonald’s to not only neutralize competition but also to increase its brand awareness and enhance its revenues. Today, McDonald’s now operates in India in pursuance of global opportunities (Pangarkar & Subrahmanyan 2011, p.126). Even though the company has enjoyed success in India it is also faced numerous challenges in trying to adapt to the new market. Therefore, this paper will analyze the McDonald’s SWOT and define the industry through competitor analysis and profitability. Also, the report will also analyze the International Strategy of the company. SWOT analysis Strengths 1. McDonald’s is a strong brand based on the fact that it’s the leading fast food marketer in world. 2. McDonald’s has large global presence with almost 30,000 restaurants in up to 120 nations across the globe. The company also serves 45 million customers on a daily basis. 3. McDonald’s is one of the biggest employers in the world and employs 1.4 million individuals creating a perception that it participates in reduction of unemployment rates. 4. McDonald’s run an efficient supply chain which coordinates its supply network, logistics and distribution across the globe. 5. The company deals in several products including Big Mac, Maharaja Mac, McAloo Burger, McMasala, McChicken kebab sandwich, McImli, sodas, chicken nuggets, fries, milkshakes and fillet fish among others. This is a diversification practice which gives consumers several alternatives to choose from. 6. McDonald’s has drive in serving section which helps the company to target motorists. 7. The company boasts of large financial base of $40.2 billion made through international sales and operating profit of up to $21.7 billion. Weaknesses 1. Sales of the fast food with high fat content that are regarded to be unhealthy. 2. Large network of outlets in India including Mumbai, Bangalore, Delhi, Pune, Delhi-Agra highway, Jaipur and other cities of the world making it difficult to manage. 3. McDonald’s operate a number of franchises which has several disadvantages. Opportunities 1. New markets offer opportunities to McDonald’s to raise its brand awareness and increase revenues. McDonald’s received 6 million visits by customers in its first year in India. 2. Innovation strategy creates an opportunity for McDonald’s to get new clienteles. For example, McDonald’s replaced some of the ingredients used to make Big Mac to get new customer in India. The company replaced beef party with mutton patty upholds Indian culture in their provisions. 3. Consumer are become health conscious hence opportunity lies in developing healthier fast foods. 40 percent of Indian people are vegetarians hence need for fast foods mixed with vegetables. 4. Increase of middle class in Asian countries including India present and opportunity to McDonald’s. Middle class people have high disposable income. Threats 1. Competition threatens the McDonald’s operation and performance in India. The company faces competition from major Pizza Hut, KFC and Wimpy’s. 2. Vocal health activists who opposed the entry of fast-food companies into the India market. 3. Economic volatility. 4. Health concerns among consumer which could lower sales. Definition of the Industry, Competitor Analysis and the Profitability Potential of the Industry Indian fast food industry is defined by different environmental factors including political, economic and technological factors. Indian fast food industry like any other is impacted by the country’s political system (Pangarkar & Subrahmanyan, 2011, p. 123). India is democracy molded on a socialist style and its political system controls entry of multinationals. Similarly, India also has some anti-Western groups and health activities that oppose the entry of foreign companies into the country. On the economic front, Pangarkar and Subrahmanyan (2011, p. 123) claimed that the Indian market has improved significantly in terms of purchasing power parity and in 1999; it was ranked fifth globally based on GDP. India is also regarded as the second largest emerging economy after China, hence income and economic growth. Studies have shown that India now has more than 300 million middle class people; this is advantageous to McDonald’s since middle class population have disposable income to purchase luxury product such as fast foods (Pangarkar & Subrahmanyan, 2011, p.124). India has a large population of almost 950 people which forms a significant customer base for McDonald’s. Studies also shows that India culture does not promote consumption of beef and pork as Hindus and Muslim in the country consider killing cows and pigs as sacrilege. India also has percent people who are vegetarians thus McDonald’s must adjust their menu to include this segment. The research by Pangarkar and Subrahmanyan (2011, p. 126) shows the presence of numerous market players such KFC, Pizza Hut and Wimpy’s has piled pressure on McDonald’s forcing it to review its product and prices. Most of these companies compete on low prices, promotions and differentiation of the menu. McDonald’s had to fight the premium price perception created by customer by lowering its prices. The performance of the company in the last few years of operation in India showed great profitability potential of the industry. Even though the company was yet to post profits, increase in number of customers and 70 percent growth in the first two years showed that industry was promising. Pangarkar and Subrahmanyan (2011, p. 126) contended that McDonald’s had up to 6 million client visits and sold more than 350,000 Maharaja Macs in the first year thus demonstrating growth. International Strategy of the company There are three major types of international strategies used by multinationals. However, McDonald’s used two strategies to operate in India, including multi-domestic and global strategies. Ketchen and Short (2011) a company that applies multi-domestic strategy tailor products to focus on the local requirement rather than what it offers in global markets. Both Hindus and Muslim who do not consume beef and pork respectively reside in India. As such, selling Big Mac which is made from beef and pork would have put McDonald’s at loggerheads with customer. Therefore, Pangarkar and Subrahmanyan (2011, p.125) the company replaced Big Mac, with Maharaja Mac which was made of mutton patty. The practice enabled the company to sell 350,000 Maharaja Macs in the first year of operation. McDonald’s also uses Global strategies. According to Ketchen and Short (2011), means providing similar products in all foreign markets in order to attain economies of scale. McDonald’s offers burger, fillet fish fries, and sandwiches, Coke, Milkshakes and Pepsi in India just as any other market. Conclusion McDonald’s expansion in India is a story of success that demonstrates that foreign markets could have numerous opportunities for a company. In India, McDonald’s increased its customers, sales and brand awareness. However, McDonald’s did not escape challenges in India such as having to produce products which conform to local culture, government controls and opposition from health activities. Therefore, this paper concludes that multinationals ought to conform to local culture and laws to be successful in international markets. References Ketchen, D., & Short¸ J. (2011). Mastering Strategic Management 1st Ed. Boston, Pearson Education Inc. Pangarkar, N., & Subrahmanyan S. (2011). Beefing up the beefless Mac: McDonald’s expansion strategies in India. Thomson Learning, 120-127. Read More