Steve Easterbrook became CEO in March 2015 after it became clear that his predecessor's turnaround strategy was not working. Financially, McDonald's is struggling with declining sales growth, a 15 percent decrease in net income, and stock prices below their 2012 price point, while the overall market is on the rise. The company is not benefitting from the economic recovery, as consumer preferences (and especially millennials) are shifting toward healthier options for dining out. Meanwhile, competition is fierce, with several direct competitors (e.g., Wendy's), higher-end burger joints (e.g., In-and-Out Burger), and fast casual chains (e.g., Panera) all outperforming the burger giant. Internally, the company is struggling with defining its strategic identity. Menu diversification has increased operational complexity which has slowed service times. Efforts to attract new customers by adding higher-end items have shifted McDonald's price points upward, while customer perceptions of quality (and willingness to pay) are at an all-time low. McDonald's size makes it an easy target for labor activists and health advocates, further compounding its public perception issues. By trying to be all things to all people, McDonald's finds itself in a classic "stuck-in-the-middle" strategic dilemma. Easterbrook must find a way to be a strategic leader who is willing to make tough decisions and transform McDonald's into a "modern, progressive burger company."
Authors :: Marne L. Arthaud-Day, Frank T. Rothaermel
Swot Analysis of "McDonald's Corporation" written by Marne L. Arthaud-Day, Frank T. Rothaermel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mcdonald's Burger facing as an external strategic factors. Some of the topics covered in McDonald's Corporation case study are - Strategic Management Strategies, Globalization and Strategy & Execution.
Some of the macro environment factors that can be used to understand the McDonald's Corporation casestudy better are - – wage bills are increasing, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, there is increasing trade war between United States & China, increasing energy prices, digital marketing is dominated by two big players Facebook and Google,
banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of McDonald's Corporation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McDonald's Corporation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mcdonald's Burger, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mcdonald's Burger 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 Corporation can be done for the following purposes –
1. Strategic planning using facts provided in McDonald's Corporation case study
2. Improving business portfolio management of Mcdonald's Burger
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 Mcdonald's Burger
Strengths McDonald's Corporation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mcdonald's Burger in McDonald's Corporation Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the McDonald's Corporation 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.
Organizational Resilience of Mcdonald's Burger
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Mcdonald's Burger does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Mcdonald's Burger is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Mcdonald's Burger is present in almost all the verticals within the industry. This has provided firm in McDonald's Corporation 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Mcdonald's Burger digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Mcdonald's Burger 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.
Effective Research and Development (R&D)
– Mcdonald's Burger 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 Corporation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Strategy & Execution industry
– McDonald's Corporation firm has clearly differentiated products in the market place. This has enabled Mcdonald's Burger to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Mcdonald's Burger to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Mcdonald's Burger in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Mcdonald's Burger is one of the most innovative firm in sector. Manager in McDonald's Corporation Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Mcdonald's Burger has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in McDonald's Corporation 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.
Highly skilled collaborators
– Mcdonald's Burger 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 Corporation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Mcdonald's Burger is one of the leading recruiters in the industry. Managers in the McDonald's Corporation 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 Corporation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDonald's Corporation are -
Slow to strategic competitive environment developments
– As McDonald's Corporation HBR case study mentions - Mcdonald's Burger 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.
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 Mcdonald's Burger supply chain. Even after few cautionary changes mentioned in the HBR case study - McDonald's Corporation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mcdonald's Burger vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the McDonald's Corporation 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 Mcdonald's Burger has relatively successful track record of launching new products.
Need for greater diversity
– Mcdonald's Burger 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.
Skills based hiring
– The stress on hiring functional specialists at Mcdonald's Burger 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.
High operating costs
– Compare to the competitors, firm in the HBR case study McDonald's Corporation 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 Mcdonald's Burger 's lucrative customers.
Low market penetration in new markets
– Outside its home market of Mcdonald's Burger, firm in the HBR case study McDonald's Corporation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study McDonald's Corporation, is just above the industry average. Mcdonald's Burger needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study McDonald's Corporation, in the dynamic environment Mcdonald's Burger has struggled to respond to the nimble upstart competition. Mcdonald's Burger has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Mcdonald's Burger 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.
No frontier risks strategy
– After analyzing the HBR case study McDonald's Corporation, 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.
Opportunities McDonald's Corporation | 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 Corporation 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. Mcdonald's Burger can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Mcdonald's Burger to increase its market reach. Mcdonald's Burger 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.
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. Mcdonald's Burger 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. Mcdonald's Burger 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 Mcdonald's Burger 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mcdonald's Burger can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, McDonald's Corporation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Mcdonald's Burger has opened avenues for new revenue streams for the organization in the industry. This can help Mcdonald's Burger to build a more holistic ecosystem as suggested in the McDonald's Corporation case study. Mcdonald's Burger can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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, Mcdonald's Burger can use these opportunities to build new business models that can help the communities that Mcdonald's Burger operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Leveraging digital technologies
– Mcdonald's Burger 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mcdonald's Burger 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mcdonald's Burger 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.
Loyalty marketing
– Mcdonald's Burger 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mcdonald's Burger is facing challenges because of the dominance of functional experts in the organization. McDonald's Corporation 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.
Building a culture of innovation
– managers at Mcdonald's Burger 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.
Threats McDonald's Corporation 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 Corporation are -
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 Mcdonald's Burger in the Strategy & Execution sector and impact the bottomline of the organization.
Regulatory challenges
– Mcdonald's Burger 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
– Mcdonald's Burger 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. Mcdonald's Burger can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mcdonald's Burger 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.
Stagnating economy with rate increase
– Mcdonald's Burger 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.
Shortening product life cycle
– it is one of the major threat that Mcdonald's Burger is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mcdonald's Burger 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 Corporation .
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 Corporation, Mcdonald's Burger 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 Mcdonald's Burger business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Mcdonald's Burger 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.
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.
Technology acceleration in Forth Industrial Revolution
– Mcdonald's Burger has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Mcdonald's Burger 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.
High dependence on third party suppliers
– Mcdonald's Burger 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.
Weighted SWOT Analysis of McDonald's Corporation 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 Corporation 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 Corporation 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 Corporation 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 Corporation 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 Mcdonald's Burger needs to make to build a sustainable competitive advantage.
