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 - – talent flight as more people leaving formal jobs, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
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.
High brand equity
– Coffee Mcdonald's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Coffee Mcdonald's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Highly skilled collaborators
– Coffee Mcdonald's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in McDonald's and the McCafe Coffee Initiative HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Coffee Mcdonald's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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 -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Coffee Mcdonald's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study McDonald's and the McCafe Coffee Initiative can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the McDonald's and the McCafe Coffee Initiative HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Coffee Mcdonald's has relatively successful track record of launching new products.
Lack of clear differentiation of Coffee Mcdonald's products
– To increase the profitability and margins on the products, Coffee Mcdonald's needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study McDonald's and the McCafe Coffee Initiative, it seems that the employees of Coffee Mcdonald's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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 bargaining power of channel partners
– Because of the regulatory requirements, Pratima Bansal, Lindsay Sgro suggests that, Coffee Mcdonald's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study McDonald's and the McCafe Coffee Initiative, in the dynamic environment Coffee Mcdonald's has struggled to respond to the nimble upstart competition. Coffee Mcdonald's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Coffee Mcdonald's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Coffee Mcdonald's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Developing new processes and practices
– Coffee Mcdonald's can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Coffee Mcdonald's to increase its market reach. Coffee Mcdonald's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Coffee Mcdonald's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. McDonald's and the McCafe Coffee Initiative suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
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.
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.
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.
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.
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 -
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.
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 .
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.
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.
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.
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Coffee Mcdonald's.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Coffee Mcdonald's needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Coffee Mcdonald's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Coffee Mcdonald's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Coffee Mcdonald's can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.