McDonalds

SWOT and PESTLE analysis

Contents
Introduction................................................................................................................ 4
SWOT Analysis............................................................................................................ 4
Strengths................................................................................................................. 4
Weaknesses............................................................................................................. 5
Opportunities.......................................................................................................... 6
Threats.................................................................................................................... 6
PESTLE Analysis.......................................................................................................... 6
Political.................................................................................................................... 6
Economical.............................................................................................................. 7
SocioCultural........................................................................................................... 7
Technological........................................................................................................... 7
Legal........................................................................................................................ 8
Ecological................................................................................................................ 8

Introduction

Hailed as one of the largest and globally one of the most well known brands,

McDonalds Corporation serves more than 60 million customers. It operates in more

than 36,000 locations in over 118 countries. McDonalds has adopted franchising

model where-in majority of the restaurants, almost 80 percent, is owned by

independent business men and women and only a few are ran by the corporation.

McDonalds finds its largest market in the United States with reference to the

number of restaurants, operating income and revenue. In-fact it revamped its

organizational structure in July 1, 2015 and the entire organization is divided under

four broad pillars: U.S Market; International Lead markets; High growth markets;
Foundation markets. The international markets are the ones that are quite

established with strong and robust economies and present comparable growth and

competitive dynamics just as in the U.S. It has positioned McCafe as a premium

coffee shop in these markets. High growth markets are those where McDonalds see

a substantial growth potential in terms of number of restaurant expansion and

franchising. It has identified eight markets under this belt that includes Asia, Europe

and Africa etc. Finally the foundation markets are large markets with approximately

80 markets under its umbrella that acutely focus on expanding the franchisee

model.

SWOT Analysis

Strengths

Undoubtedly this is a brand this is recognized by all age groups. Hence one of the

key strengths of McDonalds would be its brand name. It is hailed as one of the most

fundamental brand when it comes to service and value in the sector of fast food.

Secondly, McDonalds has been able to achieve a huge economy of scale. It is miles

ahead of its immediate competitors such as BurgerKing earning revenues nearly 8

times than that of the later. Given its reputation its a readily accepted brand in

almost all parts of the world and thus has a benchmark defining advantage over

others in entering new market and handpicking locations for its restaurants. It is a

staple brand that can be located anywhere be it a mall or airport or college

premises etc. Given its size and expansion and large scale acceptance by the

customers, McDonalds also gets an upper-hand when it comes to negotiating with

suppliers and pricing.

Its organizational structure can also be referred to as one of its key strengths thanks

to its presence over diversified geographic locations. If seen carefully it has

strategized its positioning differently in different locations. While in some large

markets, it has reimaged McCafe as one of the most premium coffee outlets, in the

emerging economies, it largely looks at expanding the restaurants and hence a

franchisee model. It has greatly benefitted by this careful organizational

restructuring in not just reducing its risk but also being able to penetrate deeper

into unchartered markets and capitalize on the strength of each markets and

generate attractive revenues.

Also, McDonalds has a strong real estate portfolio. It strategically locates its outlets

in areas that has good traffic, visibility and also ease of access.

Weaknesses

For a long time McDonalds has been dragged into several lawsuits such as sate

consumer fraud acts, deceptive trade, negligence, implied warranties, false

advertisements etc. and thus these litigations in not just one or two geographies but

around the world is one of its weaknesses. It becomes an unaccounted cost for the

company.

Additionally with this industry being saturated, McDonalds is susceptible to market

saturation and face difficulties in outlet expansion. Another major weakness of the

franchisee is the lack of innovation in its menu and products. Post its burger and

McNuggets, it has seldom come with any addition that could have captured the

attention of the buyers.

Opportunities

Entering into large markets with the franchisee model and choosing a diversified

market in the emerging economies can be hailed as on e of the key opportunities for

McDonalds. It has witnessed dramatic growth in business and increase in revenue

over the years thanks to the franchisee model and hence it would want to capitalize

on the same in the future. It has entered into a 20 year franchise agreement with

more than 2000 franchisees in America. McD has also been able to identify the

potential in hot beverage market and view it as a promising opportunity. This is a

market that has witnessed a significant growth rate over the years with coffee

accounting more than half of the total market. To capitalize on the same, MCD has

begun selling hot coffee beverages and even cold coffee.

Threats

McD has undoubtedly expanded itself vigorously globally however that also leaves

the company vulnerable to the economic performance, foreign currency fluctuations

and slowdowns in those countries. Also fast food industry in itself has become

highly competitive with low barriers to entry and low switching costs for the

customers. There is no dearth of fast food and coffee chains and a lot of them are

coming up with differentiated products. McD big time needs to revamp its menu and

try newer formats. Also with a increase concern towards health, there has been a

increasing demand for healthy foods by the health conscious customers. McD

should look at targeting this market as well. In some countries like UK,

advertisement of junk food for children itself is being curbed.

PESTLE Analysis

Political

Some of the political aspects prevalent in global countries could be looked as an

opportunity by McD while some as a threat. For example the increasing international

trade agreements are certainly a boon for the company and provide it an

opportunity to enhance its global supply chain mechanism. Also the various tax

reforms being introduced serves as an opportunity for the company in reforming its

practices to reduce taxation impacts. However the revisions in health policies

definitely strike as a threat to the current format of its menu.

Economical

As a global company it is susceptible to the economic conditions of the countries it

operates in. For example the gradual but stable growth of the U.S economy has

definitely benefitted the company largely but the slowdown of economies such as

China and Europe in recent times has affected its growth.

SocioCultural

There are certain aspects that pose as opportunities and others that pose as a

threat to the company. For example, the improving economy and thus the improved

spending power and widening wealth gap is good news for the company. McDs

target customers itself are people from medium household incomes. With improving

purchase power, it can be viewed as an opportunity. Also customers are more open

to cultural diversity and hence it provides an opportunity for McD to accordingly

improve its product mix to cater to its target market. However the increasing shift
towards a healthy lifestyle surely poses threat to McD if it is thinking to stick to the

current menu.

Technological

With the huge internet penetration and royal expansion and acceptance of e-

businesses, McD should look into e-commerce as a standalone channel just as

Dominos and Subways. Presently it does cater to this market but through Zomato,

Foodpanda etc. Also it can look at investing more money to apply further

automation to its system to enhance productivity and faster delivery.

Legal

At U.S there is a norm for higher minimum wages now and similarly this policy is

being revised in other nations also and thus this surely affects McD negatively. Also

there are health regulations being made especially for the children and thus could

impact its presence in schools and colleges. UK for example has discouraged

advertisement of junk foods for children.

Ecological

There is an ever increasing pressure on abiding by different environmental

regulations in different countries. These regulations do affect McDs supply chain as

most of the climate regulations impose restrictions on certain operations that may

seem to increase carbon footprints and negatively affect farms.