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 - – technology disruption, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , increasing commodity prices, talent flight as more people leaving formal jobs,
there is backlash against globalization, challanges to central banks by blockchain based private 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 -
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Coffee Mcdonald's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Operational resilience
– The operational resilience strategy in the McDonald's and the McCafe Coffee Initiative Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– Coffee Mcdonald's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Coffee Mcdonald's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Coffee Mcdonald's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
Ability to recruit top talent
– Coffee Mcdonald's is one of the leading recruiters in the industry. Managers in the McDonald's and the McCafe Coffee Initiative are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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 -
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.
No frontier risks strategy
– After analyzing the HBR case study McDonald's and the McCafe Coffee Initiative, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Interest costs
– Compare to the competition, Coffee Mcdonald's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Coffee Mcdonald's supply chain. Even after few cautionary changes mentioned in the HBR case study - McDonald's and the McCafe Coffee Initiative, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Coffee Mcdonald's vulnerable to further global disruptions in South East Asia.
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.
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 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.
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.
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 -
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Coffee Mcdonald's is facing challenges because of the dominance of functional experts in the organization. McDonald's and the McCafe Coffee Initiative case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
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.
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.
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.
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.
Building a culture of innovation
– managers at Coffee Mcdonald's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
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.
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 -
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.
Consumer confidence and its impact on Coffee Mcdonald's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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 .
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Coffee Mcdonald's business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
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.
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.
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.
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 .
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.
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.