SWOT Analysis McDonald's Strengths

McDonald's has been a thriving business since 1955 and 20 of the top 50 corporate staff employees started as a restaurant level employee. In addition, 67,000 McDonalds restaurant managers and assistant managers were promoted from restaurant staff. Fortune Magazine 2005 listed McDonald's as the "Best Place to Work for Minorities." McDonalds invests more than $1 billion annually in training its staff, and every year more than 250,000 employees graduate from McDonald's training facility, Hamburger University.

The business is ranked number one in Fortune Magazine's 2008 list of most admired food service companies. One of the world's most recognizable logos (the Golden Arches) and spokes character (Ronald McDonald the clown). According to the Packard Children's Hospital's Center for Healthy Weight children age 3 to 5 were given food in the McDonalds packaging and then given the same food without the packaging, and they preferred the food in the McDonald's packaging every single time. McDonalds is a community oriented, socially responsible company. They run Ronald McDonald House facilities, which provide room and board, food and sibling support at a cost of only $10 a day for families with children needing extensive hospital care. Ronald McDonald Houses are located in more than 259 local communities worldwide, and Ronald McDonald Care Mobile programs offers cost effective medical, dental and education services to children. They also sponsor Olympic athletes. They are a global company operating more than 23,500 restaurants in 109 countries. By being spread out in different regions, this gives them the ability to weather economic fluctuations which are localized by country. They can also operate effectively in an economic downturn due to the social need to seek out comfort foods. They successfully and easily adapt their global restaurants to appeal to the cultural differences. For example, they serve lamb burgers in India and in the Middle East, they provide separate entrances for families and single women. Approximately 85% of McDonald's restaurant businesses world-wide are owned and operated by franchisees. All franchisees are independent, full-time operators and McDonald's was named Entrepreneur's number-one franchise in 1997. They have global locations in all major airports, and cities, along the highways, tourist locations, theme parks and inside Wal-Mart. They have an efficient, assembly line style of food preparation. In addition they have a systemization and duplication of all their food prep processes in every restaurant. McDonald's uses only 100% pure USDA inspected beef, no fillers or additives. Additionally the produce is farm fresh. McDonald's serves 100% farm raised chicken no fillers or additives and only grade-A eggs. McDonald's foods are purchased from only certified and inspected suppliers. McDonalds works closely with ranchers, growers and suppliers to ensure food quality and freshness.

McDonalds only serves name brand processed items such as Dannon Yogurt, Kraft Cheese, Nestle Chocolate, Dasani Water, Newman's Own Salad Dressings, Heinz Ketchup, Minute Maid Juice. McDonald's takes food safety very seriously. More than 2000 inspections checks are performed at every stage of the food process. McDonalds are required to run through 72 safety protocols every day to ensure the food is maintained in a clean contaminate free environment. . McDonald's was the first restaurant of its type to provide consumers with nutrition information. Nutrition information is printed on all packaging and more recently added to the McDonald's Internet site. McDonalds offers salads, fruit, roasted chicken, bottled water and other low fat and calorie conscious alternatives.

Weaknesses

Their test marketing for pizza failed to yield a substantial product. Leaving them much less able to compete with fast food pizza chains. High employee turnover in their restaurants leads to more money being spent on training. They have yet to capitalize on the trend towards organic foods. McDonald's have problems with fluctuations in operating and net profits which ultimately impact investor relations. Operating profit was $3,984 million (2005) $4,433 million (2006) and $3,879 million (2007). Net profits were $2,602 million (2005), $3,544 million (2006) and $2,395 million (2007).

Opportunities

In today's health conscious societies the introduction of a healthy hamburger is a great opportunity. They would be the first QSR (Quick Service Restaurant) to have FDA approval on marketing a low fat low calorie hamburger with low calorie combo alternatives. Currently McDonald's and its competition health choice items do not include hamburgers. They have industrial, Formica restaurant settings; they could provide more upscale restaurant settings, like the one they have in New York City on Broadway, to appeal to a more upscale target market. Provide optional allergen free food items, such as gluten free and peanut free. In 2008 the business directed efforts at the breakfast, chicken, beverage and convenience categories. For example, hot specialist coffees not only secure sales, but also mean that restaurants get increasing numbers of customer visits. In 2009 McDonald's saw the full benefits of a venture into beverages.

Threats

They are a benchmark for creating "cradle to grave" marketing. They entice children as young as one year old into their restaurants with special meals, toys, playgrounds and popular movie character tie-ins. Children grow up eating and enjoying McDonalds and then continue into adulthood. They have been criticized by many parent advocate groups for their marketing practices towards children which are seen as marginally ethical. They have been sued multiple times for having "unhealthy" food, allegedly with addictive additives, contributing to the obesity epidemic in America. In 2004, Michael Spulock filmed the documentary Super Size Me, where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. This documentary was a direct attack on the QSR industry as a whole and blamed them for America's obesity epidemic. Due in part to the documentary, McDonalds no longer pushes the super size option at the dive thru window. Any contamination of the food supply, especially e-coli. Major competitors, like Burger King, Starbucks, Taco Bell, Wendy's, KFC and any midrange sit-down restaurants.

McDonald's is the leading global foodservice retailer with more than 31,000 local restaurants serving more than 58 million people in 118 countries each day. More than 75% of McDonald's restaurants worldwide are owned and operated by independent local men and women.

McDonald's Corporation Common S (MCD) 99.20 0.06(0.06%) Competitors

Direct Competitor Comparison MCD Market Cap: Employees: Qtrly Rev Growth (yoy): Revenue (ttm): Gross Margin (ttm): EBITDA (ttm): Operating Margin (ttm): Net Income (ttm): EPS (ttm): P/E (ttm): 100.91B 420,000 9.80% 27.01B 39.57% 9.71B 30.71% 5.50B 5.27 18.80 PVT1 N/A 38,8841 N/A 2.50B1 N/A N/A N/A 186.80M1 N/A N/A PVT2 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A YUM 30.45B 60,580 15.40% 12.63B 26.46% 2.62B 15.76% 1.32B 2.74 24.14 Industry 465.62M 6.00K 8.00% 414.52M 30.75% 76.55M 7.78% N/A 0.43 20.89

PEG (5 yr expected): P/S (ttm):

1.77 3.74

N/A N/A

N/A N/A

1.50 2.41

1.22 0.95

Pvt1 = Burger King Holdings, Inc. (privately held) Pvt2 = Doctor's Associates Inc. (privately held) YUM = Yum! Brands, Inc. Industry = Restaurants 1 = As of 2010 Restaurant Companies Ranked By Sales Company McDonald's Corp. Yum! Brands, Inc. Darden Restaurants, Inc. Starbucks Corporation Autogrill S.p.A. Brinker International Inc. Wendy's International, Inc. KFC Corporation Whitbread PLC OSI Restaurant Partners, LLC Symbol MCD YUM DRI SBUX EAT Price 99.07 66.13 49.93 48.75 27.24 Change -0.18% -0.17% -0.42% 0.08% -0.29% Market Cap 100.91B 30.45B 6.41B 36.73B 2.14B P/E 18.80 24.14 15.28 29.19 16.38

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YUM China Won't Rival American Wealth For Decades at Forbes Fri 12:00pm YUM Y! Are There So Many Y!s? at The Wall Street Journal Fri 11:57am YUM Early Glance: Restaurant companies AP Fri 10:32am YUM China's Missing Ingredients at Motley Fool Fri 9:59am YUM Impressive Q4 from Wendy's Zacks Fri 8:00am YUM Apple, Google, Amazon lead Fortune's 'most admired' list at bizjournals.com Fri 6:55am

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SWOT Analysis PepsiCo Strengths

Branding - One of PepsiCos top brands is of course Pepsi, one of the most recognized brands of the world, ranked according to Interbrand. As of 2008 it ranked 26th amongst top 100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lays Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavored Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and Sierra Mist. The strength of these brands is evident in PepsiCos presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. Such brand dominance insures loyalty and repetitive sales which contributes to over $15 million in annual sales for the company Diversification - PepsiCos diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCos arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes.This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates. Distribution - The company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services.

Weaknesses

Overdependence on Wal-Mart - Sales to Wal-Mart represent approximately 12% of PepsiCos total net revenue. Wal-Mart is PepsiCos largest customer. As a result PepsiCos fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Marts low price themes put pressure on PepsiCo to hold down prices. Overdependence on US Markets - Despite its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labor strikes. Large US customers could exploit PepsiCos lack of bargaining power and negatively impact its revenues. Low Productivity - In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower that its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees. Image Damage Due to Product Recall - Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products.

Opportunities

Broadening of Product Base - PepsiCo is seeking to address one of its potential weaknesses; dependency on US markets by acquiring Russias leading Juice Company, Lebedyansky, and V Wwater in the United Kingdom. It continues to broaden its product base by introducing TrueNorth Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers. International Expansion - PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico. Growing Savory Snack and Bottled Water market in US - PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012. Products such as Aquafina, and Propel are well established products and in a position to ride the upward crest.PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million.

Threats
Decline in Carbonated Drink Sales - Soft drink sales are projected to decline by as much as 2.7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline. Potential Negative Impact of Government Regulations - It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acrylamide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo. Intense Competition - The Coca-Cola Company is PepsiCos primary competitors. But others include Nestl, Groupe Danone and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Resently Coca-Cola passed PepsiCo in Juice sales. Potential Disruption Due to Labor Unrest - Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down production for nearly an entire month. This disrupted both manufacturing and distribution. PepsiCo is a world leader in convenient snacks, foods and beverages with revenues of more than $43 billion and over 198,000 employees. Take a journey through our past and see the key milestones that define PepsiCo.

Pepsico, Inc. Common Stock (PEP) 62.66 0.11(0.18%) Competitors

Direct Competitor Comparison PEP Market Cap: Employees: Qtrly Rev Growth (yoy): Revenue (ttm): Gross Margin (ttm): EBITDA (ttm): Operating Margin (ttm): Net Income (ttm): EPS (ttm): P/E (ttm): PEG (5 yr expected): P/S (ttm): 98.29B N/A 11.00% 66.50B 52.56% 13.11B 15.60% 6.44B 4.03 15.51 2.49 1.48 KO 156.25B N/A 5.20% 46.54B 60.89% 12.85B 23.41% 8.57B 3.69 18.71 2.68 3.38 DPS 8.01B 19,000 3.50% 5.90B 57.90% 1.24B 17.35% 606.00M 2.74 13.78 1.55 1.37 KFT 67.54B N/A 6.60% 54.36B 34.98% 8.66B 13.19% 3.53B 1.99 19.19 1.59 1.24 Industry 628.70M 1.02K 14.30% 1.29B 41.13% 173.50M 10.39% N/A 0.78 17.94 1.58
1.39

KO = The Coca-Cola Company DPS = Dr Pepper Snapple Group, Inc. KFT = Kraft Foods Inc. Industry = Beverages - Soft Drinks

Nonalcoholic Beverage Makers Ranked by Beverage Sales

Company The Coca-Cola Company Pepsico, Inc. Dr Pepper Snapple Group, Inc. Groupe Danone Water Division Nestl Waters ITO EN, LTD. Red Bull GmbH Cott Corporation Britvic Plc Ocean Spray Cranberries, Inc. Nestl Diageo plc Heineken NV SABMiller plc Anheuser-Busch InBev Suntory International Corp. Kraft Foods Inc. Pernod Ricard SA Molson Coors Brewing Company Grupo Modelo, S.A.B. de C.V. Constellation Brands Inc.

Symbol KO PEP DPS

Price 69.04 62.58 37.76

Change -0.80% 0.05% -0.82%

Market Cap 156.25B 98.29B 8.01B

P/E 18.71 15.51 13.78

Private - View Profile Private - View Profile Private - View Profile Private - View Profile COT BTVCF.PK NSRGF.PK DEO HINKY.PK SBMRY.PK BUD KFT TAP GPMCF.PK STZ 6.60 5.50 60.89 95.32 26.01 41.13 66.90 38.20 43.69 6.61 22.32 -0.30% 0.00% -0.52% -1.36% -1.92% -0.56% -2.22% 0.49% -0.07% 0.00% -0.84% 623.04M 1.33B 196.14B 59.54B 30.11B 65.03B 106.65B 67.54B 7.89B 2.14B 4.46B 16.50 14.59 5.39 22.57 16.00 24.51 21.69 19.19 12.03 2.30
7.57

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