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 - – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China,
increasing energy prices, geopolitical disruptions, 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 -
Low bargaining power of suppliers
– Suppliers of Mcdonald's Food in the sector have low bargaining power. McDonald's: Is China Lovin' It? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mcdonald's Food to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
Learning organization
- Mcdonald's Food 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 Food is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in McDonald's: Is China Lovin' It? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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.
Sustainable margins compare to other players in Global Business industry
– McDonald's: Is China Lovin' It? firm has clearly differentiated products in the market place. This has enabled Mcdonald's Food to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Mcdonald's Food to invest into research and development (R&D) and innovation.
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.
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.
Superior customer experience
– The customer experience strategy of Mcdonald's Food in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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 -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study McDonald's: Is China Lovin' It?, is just above the industry average. Mcdonald's Food 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.
Slow decision making process
– As mentioned earlier in the report, Mcdonald's Food 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 Food 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.
Skills based hiring
– The stress on hiring functional specialists at Mcdonald's Food 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 bargaining power of channel partners
– Because of the regulatory requirements, Stephen Ko, Claudia H. L. Woo suggests that, Mcdonald's Food is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Need for greater diversity
– Mcdonald's Food 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.
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.
Interest costs
– Compare to the competition, Mcdonald's Food 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.
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.
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 dependence on star products
– The top 2 products and services of the firm as mentioned in the McDonald's: Is China Lovin' It? 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 Food has relatively successful track record of launching new products.
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 -
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mcdonald's Food 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Mcdonald's Food in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Mcdonald's Food 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 Food 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.
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.
Learning at scale
– Online learning technologies has now opened space for Mcdonald's Food 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mcdonald's Food 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: Is China Lovin' It?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
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 -
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.
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.
Consumer confidence and its impact on Mcdonald's Food 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.
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.
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.
Stagnating economy with rate increase
– Mcdonald's Food 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.
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 Food in the Global Business sector and impact the bottomline of the organization.
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? .
Shortening product life cycle
– it is one of the major threat that Mcdonald's Food is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
