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SWOT analysis of McDonalds Essay

Having one of the most favorite burgers in the world, McDonalds is a brand which will hardly be missed by anyone. The SWOT of Mcdonalds discusses the reasons that the firm has been able to achieve this height of fame, and why, be it breakfast, lunch or dinner, people may prefer the local McDonalds

Consolidation of retailers likely, so better locations for franchisees. Respond to social changes – by innovation within healthier lifestyle foods. Its move into hot baguettes and healthier snacks (fruit) has supported its new positioning. Use of CRM, database marketing to more accurately market to its consumer target groups. It could identify likely customers (based on modelling and profiles of shoppers) and prevent brand switching. Strengthen its value proposition and offering, to encourage customers who visit coffee shops into McDonalds. The new “formats”, McCafe, having Wi-Fi internet links should help in attracting segments. Also installing children’s play-parks and its focus on educating consumers about health, fitness. Continued focus on corporate social responsibility, reducing the impact on the environment and community linkages. International expansion into emerging markets of China and India.

THREATS

Mature/overstored industry
Strength of competition
More health-conscious consumers
Changing demographics
Fluctuation of foreign exchange rates;
Economies
Recession or down turn in economy may affect the retailer sales
Company background.

Industries served
Restaurants (McDonald’s, McCafé, McExpress, McStop)
Geographic areas served
Worldwide (36,258 restaurants in 119 countries)[1]
Headquarters
Oak Brook, Illinois, United States
Current CEO
Steve Easterbrook
Revenue
$27.441 billion (2014) 2.4% decrease over $28,106 billion (2013)[1] Profit
$4.758 billion (2014) 14.8% decrease over $5,586 billion (2013)[1] Employees
420,000 (2015)
Main Competitors

Burger King Worldwide, Inc., Darden Restaurants, Inc., Doctor’s Associates, Inc., Domino’s, Inc., Yum! Brands, Inc., Starbucks Corporation, Wendy’s Company and many other companies in the fast food industry.

Business description

This is McDonald’s Corporation business description taken from the company’s financial report: “General The Company franchises and operates McDonald’s restaurants in the global restaurant industry. These restaurants serve a broad menu at various price points in more than 100 countries around the world. All restaurants are operated either by the Company or by franchisees. The Company’s operations are designed to assure consistency and high quality at every restaurant. Under the conventional franchise arrangement, franchisees provide a portion of the capital required by initially investing in the equipment, signs, seating and décor of their restaurant businesses, and by reinvesting in the business over time.

The Company owns the land and building or secures long-term leases. Conventional franchisees contribute to the Company’s revenue stream through the payment of rent and royalties based upon a percent of sales. The conventional franchise arrangement typically lasts 20 years, and franchising practices are generally consistent throughout the world. Over 70% of franchised restaurants operate under conventional franchise arrangements. The Company and its franchisees purchase food, packaging, equipment and other goods from numerous independent suppliers. The Company has established and strictly enforces high quality standards and product specifications.

Customers

The Company’s business is not dependent upon either a single customer or small group of customers.
Number of employees
The Company’s number of employees worldwide, including Company-operated restaurant employees, was approximately 420,000 as of year-end 2014.”[1] McDonald’s SWOT 2015
Factors
Strengths
1. Diversified income. One of the main McDonald’s strengths is its diversified income. The fast food chain’s revenues come from various countries, regions and products. It doesn’t rely on one key source of income, unlike some of its rivals. McDonald’s sales from the company-owned restaurants were $18,169 billion or 66.21% of the total revenues and the revenues from the franchisees were $9.272 billion or 33.79% of the total revenues in 2014.[1] Few other rivals receive as much revenue from its franchisees as does McDonald’s. Figure 1. Percentage of income from the franchisees

2014
McDonald’s
Yum! Brands
Burger King
Wendy’s
Percentage of income from the franchisees
33.79%
14.7%
86%
19%

Source: Companies’ Financial Reports [1][2][3][4]

The numbers indicate that Yum! Brands and Wendy’s has to rely on their directly owned restaurants to generate most of the income, while Burger King (and Subway) has to rely on the franchisees for its income. Both situations, when a company has to rely on one source of income, aren’t favorable to McDonald’s competitors. McDonald’s income is also much more geographically diversified than its rivals’.


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