McDonald's and the McCafe Coffee Initiative SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of McDonald's and the McCafe Coffee Initiative
Although McDonald's breakfast and snack sales increased, they have not kept pace with industry growth. The primary barrier to this sales growth in the Canadian market, according to a franchise owner, is the quality of the coffee. McDonald's in Canada has tried to build its coffee brand equity for many years. It had switched to the Higgins and Burke coffee but had little success changing negative customer perceptions. To change customer perceptions, McDonald's needed to revolutionize its coffee program. McCafe was introduced in response to this coffee issue: a full-service coffee bar located in a McDonald's restaurant as an extension to the front counter or located as a stand-alone restaurant. Over 300 McCafes existed worldwide. Although McDonald's would like to get a piece of the lucrative coffee market, McCafe's main objective was to eliminate coffee as a barrier to breakfast and snack sales. The question for one franchise owner is whether McCafe's strong initial sales can be sustained.
Swot Analysis of "McDonald's and the McCafe Coffee Initiative" written by Pratima Bansal, Lindsay Sgro includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Coffee Mcdonald's facing as an external strategic factors. Some of the topics covered in McDonald's and the McCafe Coffee Initiative case study are - Strategic Management Strategies, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the McDonald's and the McCafe Coffee Initiative casestudy better are - – there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing commodity prices, cloud computing is disrupting traditional business models,
increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of McDonald's and the McCafe Coffee Initiative
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McDonald's and the McCafe Coffee Initiative case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Coffee Mcdonald's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Coffee Mcdonald's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of McDonald's and the McCafe Coffee Initiative can be done for the following purposes –
1. Strategic planning using facts provided in McDonald's and the McCafe Coffee Initiative case study
2. Improving business portfolio management of Coffee Mcdonald's
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Coffee Mcdonald's
Strengths McDonald's and the McCafe Coffee Initiative | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Coffee Mcdonald's in McDonald's and the McCafe Coffee Initiative Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Coffee Mcdonald's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Coffee Mcdonald's is one of the most innovative firm in sector. Manager in McDonald's and the McCafe Coffee Initiative Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Coffee Mcdonald's in the sector have low bargaining power. McDonald's and the McCafe Coffee Initiative has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Coffee Mcdonald's to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Coffee Mcdonald's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in McDonald's and the McCafe Coffee Initiative Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Strategy & Execution industry
– McDonald's and the McCafe Coffee Initiative firm has clearly differentiated products in the market place. This has enabled Coffee Mcdonald's to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Coffee Mcdonald's to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Coffee Mcdonald's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study McDonald's and the McCafe Coffee Initiative - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Coffee Mcdonald's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Coffee Mcdonald's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Coffee Mcdonald's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Coffee Mcdonald's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Learning organization
- Coffee Mcdonald's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Coffee Mcdonald's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in McDonald's and the McCafe Coffee Initiative Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Coffee Mcdonald's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Pratima Bansal, Lindsay Sgro can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Strategy & Execution field
– Coffee Mcdonald's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Coffee Mcdonald's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Coffee Mcdonald's is present in almost all the verticals within the industry. This has provided firm in McDonald's and the McCafe Coffee Initiative case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses McDonald's and the McCafe Coffee Initiative | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDonald's and the McCafe Coffee Initiative are -
Aligning sales with marketing
– It come across in the case study McDonald's and the McCafe Coffee Initiative that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case McDonald's and the McCafe Coffee Initiative can leverage the sales team experience to cultivate customer relationships as Coffee Mcdonald's is planning to shift buying processes online.
High cash cycle compare to competitors
Coffee Mcdonald's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow decision making process
– As mentioned earlier in the report, Coffee Mcdonald's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Coffee Mcdonald's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring
– The stress on hiring functional specialists at Coffee Mcdonald's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Coffee Mcdonald's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to strategic competitive environment developments
– As McDonald's and the McCafe Coffee Initiative HBR case study mentions - Coffee Mcdonald's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Coffee Mcdonald's needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Capital Spending Reduction
– Even during the low interest decade, Coffee Mcdonald's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Low market penetration in new markets
– Outside its home market of Coffee Mcdonald's, firm in the HBR case study McDonald's and the McCafe Coffee Initiative needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Coffee Mcdonald's is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Coffee Mcdonald's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Coffee Mcdonald's to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study McDonald's and the McCafe Coffee Initiative has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Coffee Mcdonald's 's lucrative customers.
Opportunities McDonald's and the McCafe Coffee Initiative | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study McDonald's and the McCafe Coffee Initiative are -
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Coffee Mcdonald's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Coffee Mcdonald's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Coffee Mcdonald's to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Coffee Mcdonald's can use these opportunities to build new business models that can help the communities that Coffee Mcdonald's operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Using analytics as competitive advantage
– Coffee Mcdonald's has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study McDonald's and the McCafe Coffee Initiative - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Coffee Mcdonald's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Coffee Mcdonald's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Coffee Mcdonald's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Creating value in data economy
– The success of analytics program of Coffee Mcdonald's has opened avenues for new revenue streams for the organization in the industry. This can help Coffee Mcdonald's to build a more holistic ecosystem as suggested in the McDonald's and the McCafe Coffee Initiative case study. Coffee Mcdonald's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Coffee Mcdonald's can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Coffee Mcdonald's can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Coffee Mcdonald's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Low interest rates
– Even though inflation is raising its head in most developed economies, Coffee Mcdonald's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Learning at scale
– Online learning technologies has now opened space for Coffee Mcdonald's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Coffee Mcdonald's in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Coffee Mcdonald's in the consumer business. Now Coffee Mcdonald's can target international markets with far fewer capital restrictions requirements than the existing system.
Threats McDonald's and the McCafe Coffee Initiative External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study McDonald's and the McCafe Coffee Initiative are -
Increasing wage structure of Coffee Mcdonald's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Coffee Mcdonald's.
Shortening product life cycle
– it is one of the major threat that Coffee Mcdonald's is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Coffee Mcdonald's has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Coffee Mcdonald's needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Coffee Mcdonald's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Coffee Mcdonald's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Coffee Mcdonald's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Coffee Mcdonald's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study McDonald's and the McCafe Coffee Initiative .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Coffee Mcdonald's in the Strategy & Execution sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Coffee Mcdonald's in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study McDonald's and the McCafe Coffee Initiative, Coffee Mcdonald's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Coffee Mcdonald's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Coffee Mcdonald's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Weighted SWOT Analysis of McDonald's and the McCafe Coffee Initiative Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study McDonald's and the McCafe Coffee Initiative needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study McDonald's and the McCafe Coffee Initiative is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study McDonald's and the McCafe Coffee Initiative is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of McDonald's and the McCafe Coffee Initiative is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Coffee Mcdonald's needs to make to build a sustainable competitive advantage.
