McDonald’s - SWOT analysis

The article is based on McDonald’s SWOT analysis, which can be found in the Library, in CayenneApps SWOT application.

The first McDonald’s restaurant in Poland was opened in 1992. It was only 3 years after the fall of communism. On the opening day at the corner of Marszałkowska street, 45,000 people wanted to see this American restaurant, the symbol of freedom and Western culture. On just this day alone, 13,300 orders were served and the company surpassed its highest ever daily number of transactions.

22 years later, the famous building ‘Sezam’, in which the first McDonald’s was located, was demolished. For many years, Sezam diverged from changing surroundings and eventually the decision to replace it with a new, modern and glass facade office center. It is hard to avoid thinking about the analogy between this building and McDonald’s restaurants. The question is: has McDonald’s adjusted to the changing reality sufficiently to stay on the leaders place?

During recent years, McDonald’s has strengthened its position as global leader and now has more than 36,000 restaurants in 119 countries. During the last 8 years alone, McDonald’s opened 10,000 new restaurants and expanded its operations into new locations in Asia.

Wherever I have traveled abroad, McDonald’s restaurants were always located in the city centers, airports and other characteristic and most often visited places around the world. This might be considered as a huge advantage for tourists when the local cuisine does not offer anything suitable for eating. In this case, and for me, only in this case, McDonald’s seems to be a safe haven with a predictable taste that might be a useful backup during travel.

But why haven’t I ever considered eating regular lunch in McDonald’s? The first association that comes to my mind about McDonald’s is that it serves junk food. Even though McDonald’s has added salads and other lighter items to its menu, I don’t consider this change as a strong shift towards healthier food. For a long time, I thought that my resistance toward McDonald’s was connected with a lack of a true culture of eating burgers in Poland, but, in recent days, I have realized that I was wrong.

Since three years ago, many small burger restaurants, food trucks and slow food restaurants have started to serve healthy and tasty burgers in Warsaw. Eating burgers has become a new trend and gained many followers here (including me). But still very few people would point out McDonald’s as a place to go and eat a burger. Why? Because McDonald’s is most often perceived to serve unhealthy food, due to the high level of calories and large amount of sugar and fat, and it does not offer anything similar in taste and valor to the offerings of local burger restaurants.

Moreover, I was truly surprised when I read that McDonald’s has the largest share of kids’ meal sales in the fast food industry and gets about 10% of its total sales from Happy Meals. I thought that growing health consciousness had already changed parents’ approach to feeding children, but aggressive marketing toward children and free extra toys developed a strong trust and reliance on this brand.

Undoubtedly, the iconic ‘Golden Arches’ logo, Ronald McDonald, and products such as the Big Mac still attract clients; this is proven by its 62 million daily customers. The brand is a huge strength of McDonald’s and is valued at over $85 billion. This highly recognizable brand creates an excellent opportunity to expand operations in related fields - e.g. McCafes, which can be found now as a part of regular McDonald’s restaurants, and avoids the additional cost of promotion.

But when we look at the company’s annual revenues last year of $27 billion and their net income, which dropped 15% to $4.7bn, we can see that 2014 was one of the worst years in the company’s history; we can clearly see that this recognizable brand is not enough. This may be a serious warning sign for the company that, in the long term, tiny little changes in the menu are not enough to stay on the right course. In the strategy received from the SWOT analysis for McDonald’s, we can see that the major disadvantage of the company is its unhealthy food, as well as a lack of diversifying its products, while competitors are innovative and come up with new ideas regularly.

These are the reasons why in Warsaw, the long queues that were characteristic for the McDonald’s restaurants during their first years in Poland can be now seen outside the small veggie burger restaurant and local chains, even though the thermometer shows -10 degrees outside. People agree to stand in the long queues not because of novelty of the idea, but mainly because the food that is served there is delicious, healthy and still affordable.

The same problem might show up in new, exploitable markets in countries where food chains are not yet so popular. The first impression and novelty won’t last for a long time and additional advantages are needed.

 So McDonald’s might need to focus more on addressing the problem of changing food trends by finding a way to decrease the amount of calories in existing meals, paying more attention to the positive and ecological image of the company and continuously adding new healthy food to the menu. The company’s advantage can also be gained by giving clients the possibility of personalizing their meals with locally relevant ingredients and complete customization of the burger ingredients.

But changing the restaurants’ meals alone may not be enough. The ever-changing customer needs to force the old-school large companies to change their habits and shift more towards new innovative technologies. The cases of services such as Airbnb or Uber have shown that, even in fields as traditional as hotels and transportation, the shift to social networks and the mobile market is unavoidable. The same situation applies to the restaurant industry, and the number of 2-star reviews for McDonald’s official application in iTunes Store shows that there is still a room for improvement there.

At the same time, McDonald’s has enormous resources to innovate in the field in which they are famous - automation. Further automation of the entire food-serving process, starting from managing supply chains, through ordering meals to the actual preparation, can help McDonald’s not only to generally lower expenses, but also to reduce the workload of line employees, and eventually clear out the image of so-called ‘McJobs’.

When the first McDonald’s restaurant was opened in Poland, a lot of Polish politicians and famous artists visited the restaurant. McDonald’s was back then a flagship of freedom, capitalism and western culture. Today, it is hard to imagine that the top officials embellished the opening of new McDonald’s restaurant. Today, this huge ship, with its 440,000-strong crew, is undoubtedly harder to manage and not so eager to change its course.

At the same time, the American company still has the enormous potential to grow internationally and they have found their markets in the places like Asia. McDonald’s should use its indisputable strengths to utilize its opportunities, invest in innovation, and gain a competitive advantage where it can. It is important to remember that nothing lasts forever and examples of companies such as Pan Am show that even giants can collapse when not managed carefully.

If you would like to see the full versions of SWOT analyses for McDonald’s and other companies, such as Uber or Airbnb, please use this link and visit our application, CayenneApps, where you can find more examples of SWOTs.