McDonald's: Is China Lovin' It? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of McDonald's: Is China Lovin' It?
McDonald's, the world-famous American fast food franchisor, entered mainland China in 1990, when Chinese franchise law did not even exist. In this once-closed country whose market only opened up to foreign investors in 1978, McDonald's had to adapt to an unfamiliar and rapidly changing environment. Not only was food culture in China vastly different from that in the West, but food culture, lifestyles and legal structure were altering as a result of surging economic growth and massive urbanization. Competition was also intensifying as local and foreign restaurants sought to capitalize on China's increasing affluence. As the growing middle class demanded higher standards from these companies, McDonald's local business practices in terms of food healthiness, employee welfare and other socio-environmental issues were put under close scrutiny in China. While the nation's booming economy provided environmental conditions suitable for fast-food culture, the environment also posed challenges to the survival of fast-food operators in the country. Would McDonald's be able to sustain its momentum as China transformed into a developed nation?
Swot Analysis of "McDonald's: Is China Lovin' It?" written by Stephen Ko, Claudia H. L. Woo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mcdonald's Food facing as an external strategic factors. Some of the topics covered in McDonald's: Is China Lovin' It? case study are - Strategic Management Strategies, Marketing, Policy and Global Business.
Some of the macro environment factors that can be used to understand the McDonald's: Is China Lovin' It? casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of McDonald's: Is China Lovin' It?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in McDonald's: Is China Lovin' It? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mcdonald's Food, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mcdonald's Food 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: Is China Lovin' It? can be done for the following purposes –
1. Strategic planning using facts provided in McDonald's: Is China Lovin' It? case study
2. Improving business portfolio management of Mcdonald's Food
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Mcdonald's Food
Strengths McDonald's: Is China Lovin' It? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mcdonald's Food in McDonald's: Is China Lovin' It? Harvard Business Review case study are -
High switching costs
– The high switching costs that Mcdonald's Food 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.
Operational resilience
– The operational resilience strategy in the McDonald's: Is China Lovin' It? 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.
Diverse revenue streams
– Mcdonald's Food is present in almost all the verticals within the industry. This has provided firm in McDonald's: Is China Lovin' It? 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.
Highly skilled collaborators
– Mcdonald's Food 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: Is China Lovin' It? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Mcdonald's Food
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Mcdonald's Food does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Mcdonald's Food 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.
High brand equity
– Mcdonald's Food has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mcdonald's Food to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Mcdonald's Food is one of the leading recruiters in the industry. Managers in the McDonald's: Is China Lovin' It? are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Global Business field
– Mcdonald's Food 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 Food in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Mcdonald's Food is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Mcdonald's Food 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: Is China Lovin' It? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Mcdonald's Food has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mcdonald's Food 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.
Weaknesses McDonald's: Is China Lovin' It? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDonald's: Is China Lovin' It? are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Mcdonald's Food is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study McDonald's: Is China Lovin' It? can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study McDonald's: Is China Lovin' It?, in the dynamic environment Mcdonald's Food has struggled to respond to the nimble upstart competition. Mcdonald's Food has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As McDonald's: Is China Lovin' It? HBR case study mentions - Mcdonald's Food 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.
Products dominated business model
– Even though Mcdonald's Food has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - McDonald's: Is China Lovin' It? should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– After analyzing the HBR case study McDonald's: Is China Lovin' It?, it seems that company is thinking about the frontier risks that can impact Global Business 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 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 Food supply chain. Even after few cautionary changes mentioned in the HBR case study - McDonald's: Is China Lovin' It?, 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 Food vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Mcdonald's Food 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.
Increasing silos among functional specialists
– The organizational structure of Mcdonald's Food is dominated by functional specialists. It is not different from other players in the Global Business segment. Mcdonald's Food needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mcdonald's Food to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study McDonald's: Is China Lovin' It? 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 Food 's lucrative customers.
High cash cycle compare to competitors
Mcdonald's Food 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study McDonald's: Is China Lovin' It?, it seems that the employees of Mcdonald's Food 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.
Opportunities McDonald's: Is China Lovin' It? | 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: Is China Lovin' It? are -
Using analytics as competitive advantage
– Mcdonald's Food 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: Is China Lovin' It? - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Mcdonald's Food to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Mcdonald's Food can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Buying journey improvements
– Mcdonald's Food can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. McDonald's: Is China Lovin' It? 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.
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 Food can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Mcdonald's Food can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Mcdonald's Food can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mcdonald's Food is facing challenges because of the dominance of functional experts in the organization. McDonald's: Is China Lovin' It? 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.
Loyalty marketing
– Mcdonald's Food 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.
Better consumer reach
– The expansion of the 5G network will help Mcdonald's Food to increase its market reach. Mcdonald's Food 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.
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 Food 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.
Creating value in data economy
– The success of analytics program of Mcdonald's Food has opened avenues for new revenue streams for the organization in the industry. This can help Mcdonald's Food to build a more holistic ecosystem as suggested in the McDonald's: Is China Lovin' It? case study. Mcdonald's Food can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Mcdonald's Food 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.
Building a culture of innovation
– managers at Mcdonald's Food 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 Global Business segment.
Threats McDonald's: Is China Lovin' It? 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: Is China Lovin' It? are -
Regulatory challenges
– Mcdonald's Food 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 Global Business industry regulations.
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 Food.
Environmental challenges
– Mcdonald's Food 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 Food can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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.
Increasing wage structure of Mcdonald's Food
– 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 Food.
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. Mcdonald's Food needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mcdonald's Food in the Global Business industry. The Global Business 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.
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 Food business can come under increasing regulations regarding data privacy, data security, etc.
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. Mcdonald's Food 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Mcdonald's Food 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: Is China Lovin' It? .
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Mcdonald's Food has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Mcdonald's Food needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Mcdonald's Food can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of McDonald's: Is China Lovin' It? 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: Is China Lovin' It? 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: Is China Lovin' It? 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: Is China Lovin' It? 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: Is China Lovin' It? 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 Food needs to make to build a sustainable competitive advantage.