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SWOT and PEST Analysis of McDonald's

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Harris has a social science education in economics at the graduate level and holds a master's degree in Applied Accounting.

SWOT and PEST analysis of McDonald's

SWOT and PEST analysis of McDonald's

Target Audience of McDonald's

Formed in 1954, McDonald's 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.

McDonald's targets all three: a family, an urban customer on the move, and teenagers. 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 McDonald's

Strengths

  • McDonald's is a well-established and growing business. It has been efficiently handled to end up with huge amounts of earnings every year. Therefore, it has an adequate number of investors who invest largely and help McDonald's maintain its competitive advantage. McDonald's is a well-funded company that has the capability to put extremely low prices on its products and end up with a higher benefit. Other companies that are restricted on resources cannot charge low, as they have to fulfill their costs.
  • McDonald's has a reputed name amongst competitors in the food industry because of the quality of food and service.
  • The McDonald’s logo is one of the most recognized logos in various countries, especially amongst children.
  • McDonald's has kept the quality of its services standardized, and certain quality measures are followed to keep its food products hygienic and service quality at high standards.
  • McDonald's was one of the first food outlets that provided its customers with nutritional facts on their menus.
  • McDonald's engages in many projects to help people and is therefore considered a socially responsible firm.
  • McDonald's, 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 and achieve customer satisfaction.
  • McDonald's gives importance to cultural and regional barriers when deciding the food menus. Therefore, it has been successful in most of its countries.

Weaknesses

  • Selling junk food at low prices has pulled McDonald's into negative press over the years.
  • McDonald's advertisements focus mainly on targeting kids. Other target groups are ignored in their advertisements.
  • McDonald's has outlets worldwide, and due to the adequate franchising agreements, they face quality issues at times.
  • McDonald's has a high initial cost.
  • McDonald's' sales largely depend on people’s disposable income. When the economy fluctuates, people's disposable income and spending patterns change, hence McDonald's' drop in revenue.
  • McDonald's often gets a lot of complaints because they provide only inorganic and processed food products.
  • McDonald's, every year, fires many employees from their restaurants and has a high employee turnover.
  • McDonald's spends a lot on training employees, which results in high costs and often reduces the total profit.

Opportunities

  • McDonald's can expand by providing an organic food line for people who are health conscious.
  • McDonald's could expand by offering a menu that caters to all individuals.
  • McDonald's could offer various discount deals, such as promotions and seasonal discounts, to attract more customers and beat its competitors.
  • McDonald's could attract attention by arranging or sponsoring various events for children and adults.
  • McDonald's could provide additional services, such as free internet, to attract and maintain its customers.
  • McDonald's, in order to become environmentally friendly, can use packaging material that can be recycled later.
  • McDonald's, in order to maintain its image as a socially responsible firm, can do more to help people.
  • McDonald's could further expand by opening outlets to cover untapped areas.

Threats

  • McDonald's' sales are largely dependent on the economy of a country. Therefore, if a country’s economy faces a recession, it also tends to have a bad impact on McDonald's' sales volume.
  • McDonald's is facing huge competition from the new emerging restaurants and organic food outlets.
  • If corrective measures are not taken, the negative press could have a significant impact on McDonald's.
  • As more people become health conscious, they do not go for junk food once they know its adverse effects.
  • McDonald's also faces competition in various countries from local food outlets.

By looking at the SWOT analysis of McDonald's, competitors can clearly comprehend what they 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, the competitors even have the opportunity to overcome multinationals like PepsiCo.

Also, a PEST analysis is done to understand the 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 McDonald's

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, Mcdonald's 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.

In countries where consumer laws are that strong, Mcdonald's enjoys an added advantage there but in countries like the U.S., McDonald's has to face high costs in the form of lawsuits and litigations for a breach of quality of service.

Environmental Factors

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

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

Social Factors

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

Mcdonald's has various outlets in different countries. Each country has its own culture, and Mcdonald's makes sure that the cultural and religious barriers are kept in mind while deciding on the food menus at these different outlets. For instance, the existence of meat on 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, Mcdonald's has the image of a socially responsible firm because of their involvement 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, Mcdonald's sales have been affected because of people boycotting American goods.

Technological Factors

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

Another advertising strategy that Mcdonald's use is employing popular celebrities to promote their products. Like the Mcdonald's 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 Mcdonald's 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 a 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 the business to explore new areas.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Comments

Jayani on August 24, 2018:

Please, mention the Ecological & Legal factor....

Emmanuel on November 25, 2015:

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