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SWOT and PEST Analysis of McDonalds

Formed in 1954, McDonalds is one of the leading global food service retailers with greater than 33,000 local restaurants that serve about 67 million customers in more than 120 countries every day. It aims to provide a quick and friendly service experience to customers.

McDonalds targets all three: a family including children, an urban customer on the move and teenagers and it means different things for all: a treat to the children as well as a fun place to be, a place that provides great taste and quick service without affecting the work schedule and a hang-out spot with friends where affordability is the highlight, respectively.

SWOT Analysis of McDonalds

Strengths

• McDonalds is a well established and growing business. It has efficiently handled to end up huge amount of earnings every year therefore it has adequate number of investors. The adequate number of investors, invest largely and help McDonalds maintain its competitive advantage. McDonalds is a well and great funded company that has the capability to cost extremely low on its products and end up a higher benefit. Other companies that are restricted on resources cannot charge low, as they have to fulfill their costs.

• McDonalds has a reputed name amongst competitors in the food industry because of the quality of food and service.

• The McDonalds’s logo is one of the most recognized logo in various countries, specially amongst children.

• McDonalds has kept the quality of its services standardized and the certain quality measures are followed to keep its food products hygienic and service quality of high standards.

• McDonalds was the one first food outlet that provided its customers with nutritional facts on their menus

• McDonalds engages in many projects to help people and therefore considered as a socially responsible firm

• McDonalds along with its focus on continuously improving its food quality, also focuses on training its employees and improving their skills, by training their staff they better cater to their customers achieve customer satisfaction.

• McDonalds gives importance to cultural and regional barriers while deciding the food menus. Therefore, has been successful in most of the countries.

Weakness:

• Selling junk food at low price has pulled McDonalds into negative press over the years.

McDonalds’s advertisements focus mainly on targeting kids. Other target groups are ignored in their advertisements.

•McDonalds has outlets worldwide and due to the adequate franchising agreements they face quality issues at times.

• McDonalds has a high initial cost.

• McDonalds’s sales largely depend on people’s disposable income. When the economy fluctuates, people disposable income and also their spending pattern

Changes, hence McDonalds drop out on revenue.

• McDonalds often gets a lot of complaints because they provide only inorganic and processed food products.

• McDonalds every year fire many employees from their restaurants and has a high employee turnover.

• McDonalds spend a lot on training of employees which results in high cost and often reduces the total profit.

Opportunities

• McDonalds can expand by providing organic food line for the people who are health conscious.

• McDonalds could expand by offering menu which caters to all the individuals.

• McDonalds could offer various discount deals to attract more customers such as promotions and seasons discount to beat its competitors.

• McDonalds could attract attention by arranging or sponsoring various events for children and adults.

• McDonalds’ could provide additional services, such as free internet to attract and maintain its customers.

• McDonalds in order to become environmental friendly can use packaging material that can be recycled later.

• McDonalds in order to maintain its image of socially responsible firm can do more to help people around

• McDonalds could further expand by opening outlets to cover untapped areas.

THREATS

• McDonalds’ sales largely dependent on the economy of a country. Therefore, if a country’s economy faces recession, it also tends to have a bad impact on McDonalds sales volume.

• McDonalds is facing huge competition from the new emerging restraints and organic food outlets

• If corrective measures are not taken, then the negative press could have a significant impact on McDonalds.

• As more people are becoming health conscious they people would not want to go for junk food, once they know its adverse effects.

• McDonalds also faces competition in various countries by the local food outlets there.

By looking at the SWOT Analysis of McDonald competitors can clearly comprehend what you are up against. Competitors should use the analysis wisely to realize their weak areas, enhance their own strengths accordingly, understand how to handle the threats and use the opportunities. If the SWOT analysis is successfully done then the competitors even have the opportunity over come obtain multinationals like PepsiCo.

Also, PEST Analysis is done to understand impact of external factors on your business. It is an analytical tool for strategic business planning. It covers Political, Environmental, Social and Technological factors that affect your business.

Pest analysis of McDonalds

Political Factors

In general political factors do not affect companies as much .Only the companies are obliged to pay taxes like sales tax or payroll tax to the government. Like any other business, McDonalds is also obliged to pay these taxes .These tax obligations are different in each country. But in countries where there are strict consumer protection laws, companies have to make sure that the quality is maintained and they deliver what they claim.

On countries where consumers laws are that strong McDonalds enjoys an added advantage there but in countries like US, McDonalds has to face high cost in forms of lawsuits and litigations with a breach of quality of a service.

Environmental Factors

Economic factors play an important role in operations of a company. If an economy of a country is doing well, the business will flourish specially those producing luxury goods but if an economy faces recession these business will face negative impact on their sales.

McDonalds falls in the same category. Their sale is largely dependent on economy of country. If the economy does well, people will have more disposable income and will spend more in consuming food items from McDonalds. Also, McDonalds imports much of its raw material from other countries. Exchange rate fluctuations will also affect the operations of the company.

Social Factors

Social factors are very important while making strategic business decisions. Culture, values, norms and the living style of people all affects the operations of a company.

McDonalds has various outlets in different countries. Each country has its own culture and McDonalds makes sure that the cultural and religious barriers are kept in mind while deciding the food menus at these different outlets. For instance the existence of meat in food menus is considered offensive in India by some Hindu religious groups. McDonald’s has launched special vegetarian meals to cater to that market.

Also McDonalds has the image of a socially responsible firm because of their involvements in projects to help people like they announced backing to the rainforest Alliance. But in some countries where there is anti American feeling among the people, McDonalds sales has been affected because of people boycotting American goods.

Technological Factors

McDonalds mainly markets its products through television advertisements and billboards. There are claims that McDonalds only targets children in their advertisements. This is apparent in the TV commercials and the play spots and toys, further proves this actuality. McDonalds also uses animated depictions of their character like Hamburglar and Grimace and to attract children.

Other advertising strategy that McDonalds use is employing popular celebrities to promote their products. Like the McDonalds worldwide loving it campaign is endorsed by the Like .Moreover, the operations of McDonald's have altogether been mixed with new technology. Management of value chain and inventory system of the organization takes into account simple installments for their suppliers and different merchants which the distinctive stores in different markets. The infusion of technology in the operations of McDonalds adds quality to their items. The improved inventory system as well as the supply chain enables the organization to work in a global context.

By conducting PEST Analysis; by evaluating the political, environmental, social and technological factors, the business or its competitors can explore new opportunities and can spot the advanced warning of threats. It reveals the possible threats that can be caused by change in business environment which helps the business to shape accordingly rather than going against it. Furthermore, it gives you an objective view of the new market that the business enters in and helps you explore new areas according to the demand of the market.

Lastly, it helps the business to avoid projects that have chances to fail, for reasons beyond control and lastly it helps business to explore new areas.

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1 comment

Emmanuel 12 months ago

Insightful article.However there is no mention of the Environmental/Ecological and Legal factors which I believe have an impact on McDonalds.

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