Golden Arch Hotel: McDonald's Adventure in the Hotel Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Technology & Operations
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Golden Arch Hotel: McDonald's Adventure in the Hotel Industry
This is a Thunderbird Case Study.In 2001, McDonald's launched a new venture by opening two hotels in Switzerland (Zurich and Lully) under the name "Golden Arch Hotel." The hotels were positioned as four-star accommodations with cutting-edge in-room technology and unique, modern interior design. Testimonials of guests were mixed following their stays in the Golden Arch Hotels. Most seemed to agree, however, that the four-star rating didn't seem to match with McDonald's image. Given the saturated world hamburger market, McDonald's headquarters in Chicago had decided to launch a "diversification" strategy to foster new ideas and concepts worldwide. Urs Hammer, McDonald's Switzerland long-time CEO, proposed a foray into the hotel business building on McDonald's image of cleanliness and fast, friendly service. With McDonald's strong global brand recognition and the transferable competencies from restaurant to hospitality, Hammer was convinced the project would be a success. The hotel market in Zurich was booming with multiple building projects under way. The growth was happening so rapidly, in fact, that analysts predicted overcapacity in the very near future. In a fiercely competitive hotel market, Golden Arch Hotels was faced with the challenge of how to profitably target the key customer segments: travel groups, business travelers, and frequent travelers (FITs). With only two locations in one highly competitive country, how well is Golden Arch positioned in Switzerland, and how can the model be expanded and launched throughout the world? The case addresses: global marketing, positioning, segmenting, service marketing and profit model.
Swot Analysis of "Golden Arch Hotel: McDonald's Adventure in the Hotel Industry" written by Stefan Michel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mcdonald's Arch facing as an external strategic factors. Some of the topics covered in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry case study are - Strategic Management Strategies, and Technology & Operations.
Some of the macro environment factors that can be used to understand the Golden Arch Hotel: McDonald's Adventure in the Hotel Industry casestudy better are - – increasing government debt because of Covid-19 spendings, increasing energy prices, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%,
technology disruption, there is backlash against globalization, etc
Introduction to SWOT Analysis of Golden Arch Hotel: McDonald's Adventure in the Hotel Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mcdonald's Arch, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mcdonald's Arch 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry can be done for the following purposes –
1. Strategic planning using facts provided in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry case study
2. Improving business portfolio management of Mcdonald's Arch
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Mcdonald's Arch
Strengths Golden Arch Hotel: McDonald's Adventure in the Hotel Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mcdonald's Arch in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry Harvard Business Review case study are -
Learning organization
- Mcdonald's Arch 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 Mcdonald's Arch is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Mcdonald's Arch is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Technology & Operations field
– Mcdonald's Arch 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 Mcdonald's Arch in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Mcdonald's Arch is present in almost all the verticals within the industry. This has provided firm in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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.
Innovation driven organization
– Mcdonald's Arch is one of the most innovative firm in sector. Manager in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Arch has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Mcdonald's Arch in the sector have low bargaining power. Golden Arch Hotel: McDonald's Adventure in the Hotel Industry has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mcdonald's Arch to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Mcdonald's Arch has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mcdonald's Arch 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.
Effective Research and Development (R&D)
– Mcdonald's Arch 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Mcdonald's Arch 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 Stefan Michel 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.
Sustainable margins compare to other players in Technology & Operations industry
– Golden Arch Hotel: McDonald's Adventure in the Hotel Industry firm has clearly differentiated products in the market place. This has enabled Mcdonald's Arch to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Mcdonald's Arch to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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.
Weaknesses Golden Arch Hotel: McDonald's Adventure in the Hotel Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Golden Arch Hotel: McDonald's Adventure in the Hotel Industry are -
Workers concerns about automation
– As automation is fast increasing in the segment, Mcdonald's Arch 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.
Low market penetration in new markets
– Outside its home market of Mcdonald's Arch, firm in the HBR case study Golden Arch Hotel: McDonald's Adventure in the Hotel Industry needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Golden Arch Hotel: McDonald's Adventure in the Hotel Industry, it seems that the employees of Mcdonald's Arch 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.
Need for greater diversity
– Mcdonald's Arch 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.
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 Arch supply chain. Even after few cautionary changes mentioned in the HBR case study - Golden Arch Hotel: McDonald's Adventure in the Hotel Industry, 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 Arch vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Mcdonald's Arch is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Mcdonald's Arch needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mcdonald's Arch to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Mcdonald's Arch 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Arch 's lucrative customers.
No frontier risks strategy
– After analyzing the HBR case study Golden Arch Hotel: McDonald's Adventure in the Hotel Industry, it seems that company is thinking about the frontier risks that can impact Technology & Operations 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.
Interest costs
– Compare to the competition, Mcdonald's Arch 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, Mcdonald's Arch 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. Mcdonald's Arch 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.
Opportunities Golden Arch Hotel: McDonald's Adventure in the Hotel Industry | 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry are -
Creating value in data economy
– The success of analytics program of Mcdonald's Arch has opened avenues for new revenue streams for the organization in the industry. This can help Mcdonald's Arch to build a more holistic ecosystem as suggested in the Golden Arch Hotel: McDonald's Adventure in the Hotel Industry case study. Mcdonald's Arch can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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 Arch 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 Arch 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, Golden Arch Hotel: McDonald's Adventure in the Hotel Industry, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Mcdonald's Arch 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.
Loyalty marketing
– Mcdonald's Arch 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mcdonald's Arch in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
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 Arch can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Mcdonald's Arch in the consumer business. Now Mcdonald's Arch can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Mcdonald's Arch to increase its market reach. Mcdonald's Arch 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.
Learning at scale
– Online learning technologies has now opened space for Mcdonald's Arch 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mcdonald's Arch 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 Mcdonald's Arch to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mcdonald's Arch 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.
Using analytics as competitive advantage
– Mcdonald's Arch 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mcdonald's Arch to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Golden Arch Hotel: McDonald's Adventure in the Hotel Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Golden Arch Hotel: McDonald's Adventure in the Hotel Industry are -
High dependence on third party suppliers
– Mcdonald's Arch 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Golden Arch Hotel: McDonald's Adventure in the Hotel Industry, Mcdonald's Arch may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Increasing wage structure of Mcdonald's Arch
– 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 Mcdonald's Arch.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Mcdonald's Arch can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Mcdonald's Arch 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 Technology & Operations industry regulations.
Technology acceleration in Forth Industrial Revolution
– Mcdonald's Arch has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Mcdonald's Arch needs to keep up with the evolution of technology in the Technology & Operations 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.
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 Mcdonald's Arch.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mcdonald's Arch 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, Mcdonald's Arch 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry .
Shortening product life cycle
– it is one of the major threat that Mcdonald's Arch is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Mcdonald's Arch 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 Arch can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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 Arch in the Technology & Operations sector and impact the bottomline of the organization.
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.
Weighted SWOT Analysis of Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Golden Arch Hotel: McDonald's Adventure in the Hotel Industry 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 Arch needs to make to build a sustainable competitive advantage.