McDonald’s (MCD) SWOT Analysis / TOWS Matrix / MBA Resources
Restaurants
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for McDonald’s (United States)
Based on various researches at Oak Spring University , McDonald’s is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies,
digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that McDonald’s can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the McDonald’s, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which McDonald’s operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of McDonald’s can be done for the following purposes –
1. Strategic planning of McDonald’s
2. Improving business portfolio management of McDonald’s
3. Assessing feasibility of the new initiative in United States
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of McDonald’s
Strengths of McDonald’s | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of McDonald’s are -
High brand equity
– McDonald’s has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled McDonald’s to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the McDonald’s are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management in the Restaurants industry
– McDonald’s is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Restaurants industry
- digital transformation varies from industry to industry. For McDonald’s digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. McDonald’s 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.
Ability to recruit top talent
– McDonald’s is one of the leading players in the Restaurants industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– McDonald’s 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 Restaurants industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy of McDonald’s comprises – understanding the underlying the factors in the Restaurants 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.
Superior customer experience
– The customer experience strategy of McDonald’s in Restaurants industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– McDonald’s has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – McDonald’s staying ahead in the Restaurants 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 Restaurants
– McDonald’s is one of the leading players in the Restaurants industry in United States. Over the years it has not only transformed the business landscape in the Restaurants industry in United States but also across the existing markets. The ability to lead change has enabled McDonald’s in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of McDonald’s in the Services sector have low bargaining power. McDonald’s has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps McDonald’s to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– McDonald’s has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses of McDonald’s | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDonald’s are -
Products dominated business model
– Even though McDonald’s has some of the most successful models in the Restaurants industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. McDonald’s should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Restaurants industry, McDonald’s 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.
Lack of clear differentiation of McDonald’s products
– To increase the profitability and margins on the products, McDonald’s needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, McDonald’s has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Restaurants industry over the last five years. McDonald’s even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners in Restaurants industry
– because of the regulatory requirements in United States, McDonald’s 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 Restaurants industry.
High operating costs
– Compare to the competitors, McDonald’s has high operating costs in the Restaurants industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract McDonald’s lucrative customers.
Slow to strategic competitive environment developments
– As McDonald’s is one of the leading players in the Restaurants industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Restaurants industry in last five years.
Aligning sales with marketing
– From the outside it seems that McDonald’s needs to have more collaboration between its sales team and marketing team. Sales professionals in the Restaurants industry have deep experience in developing customer relationships. Marketing department at McDonald’s can leverage the sales team experience to cultivate customer relationships as McDonald’s is planning to shift buying processes online.
Employees’ less understanding of McDonald’s strategy
– From the outside it seems that the employees of McDonald’s 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.
Compensation and incentives
– The revenue per employee of McDonald’s is just above the Restaurants industry average. It 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.
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 supply chain. Even after few cautionary changes, McDonald’s is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left McDonald’s vulnerable to further global disruptions in South East Asia.
McDonald’s Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of McDonald’s are -
Building a culture of innovation
– managers at McDonald’s can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Restaurants industry.
Leveraging digital technologies
– McDonald’s can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Restaurants industry, but it has also influenced the consumer preferences. McDonald’s can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 can use these opportunities to build new business models that can help the communities that McDonald’s operates in. Secondly it can use opportunities from government spending in Restaurants sector.
Using analytics as competitive advantage
– McDonald’s has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Restaurants sector. This continuous investment in analytics has enabled McDonald’s to build a competitive advantage using analytics. The analytics driven competitive advantage can help McDonald’s to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, McDonald’s can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Restaurants industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. McDonald’s 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 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.
Learning at scale
– Online learning technologies has now opened space for McDonald’s to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, McDonald’s is facing challenges because of the dominance of functional experts in the organization. McDonald’s can utilize new technology in the field of Restaurants industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for McDonald’s in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Restaurants industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects McDonald’s can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions in Restaurants industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for McDonald’s in the Restaurants industry. Now McDonald’s 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 to increase its market reach. McDonald’s will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats McDonald’s External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of McDonald’s are -
High dependence on third party suppliers
– McDonald’s high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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 business can come under increasing regulations regarding data privacy, data security, etc.
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.
Regulatory challenges
– McDonald’s needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Restaurants industry regulations.
Stagnating economy with rate increase
– McDonald’s 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 Restaurants industry.
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 needs to understand the core reasons impacting the Restaurants industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, McDonald’s can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate McDonald’s prominent markets.
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.
Environmental challenges
– McDonald’s needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. McDonald’s can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
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 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, McDonald’s may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Restaurants sector.
Consumer confidence and its impact on McDonald’s demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Restaurants industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– McDonald’s has witnessed rapid integration of technology during Covid-19 in the Restaurants industry. As one of the leading players in the industry, McDonald’s needs to keep up with the evolution of technology in the Restaurants 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.
Weighted SWOT Analysis of McDonald’s Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at McDonald’s 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 McDonald’s 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 McDonald’s 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 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 needs to make to build a sustainable competitive advantage.