McDonald’s CORPORATION

Business Analysis Part One

McDonald’s Corporation

McDonald’s corporation currently is the largest in fast food restaurants chain in the world, mainly selling hamburgers, French fries, cheeseburgers, soft drinks and breakfast. In the recent past the fast food has added on its menu fruit and salad. The business was started in 1940 by Dick and Mac McDonalds in California. The corporation has grown steadily and when it started being a franchise in 1955 it growth become rapid and lead to its worldwide expansion that is being witnessed today. With the current success of the McDonald’s, on the international markets, the company serves as a good example of globalization (McDonald website, 2012). This report is going to take a critical examination of McDonald’s using SWOT analysis to appraise it suitability in whether to invest or not invest in the company.

Company overview

The story of McDonald’s started when two brothers, Dick and Mac McDonald opened a store in San Bernardino, California to sell burgers. Currently, MacDonald’s food chains are located in 119 countries around the world and servers almost 58 million customer per day. McDonald’s company also manages other brands of restaurant for example piles cafe. In 2010 McDonald reported revenue of 20.075 Billion USD and a net income of $4.949 Billion. McDonald has a total workforce of 440,000 employees; this is according to records taken in 2010. McDonald’s have a slogan of “I’m loving’ it” which has made it to be well-known brand (McDonald website, 2012).

SWOT Analysis

Most companies, organizations and institutions today are using SWOT analysis as a strategic method/tool for evaluating their strengths, Weaknesses, Opportunities and Threats with reference to strategic planning. SWOT analysis identifies the internal and external factors that determine the achievements a company has specified in its goals and objectives. First, it specifies the internal factors i.e. strengths and weaknesses of McDonald’s company. Secondly, it categorizes the external factors that have been identified to boost or hinder the achievements of the company especially in terms of growth and expansion (Anthony, 1998). These external factors are the opportunities and threats.

Strengths

Strength of McDonald’s is the image it has, market leadership, financial resources good customer care. McDonald’s is the biggest food chain in the world serving over 58 million customers each day. It has more than 30,000 restaurants located in 120 countries around the world. They driving force has been introducing fast food culture, good service delivery, cleanliness and customer care. Another strength as been Brand image of the company which makes the industry to understand out from the rest (McDonald website, 2012).

Technology: McDonald’s has employed the latest technology in its service delivery, for example the company has the latest cash registers and also have electric timers fixed in their cooking machines. Also the menus are well lit to communicate to the cooks and speakers are placed at strategic places to help in communication (Hoovers.com, 2012)

Location: the company has located its outlets in areas that highly populated, with a lot of traffic, and high visibility. This makes the company to easily make high volume of sales.

Quality products: McDonald’s is currently a powerful fast food restaurant globally. It has a good reputation for value for money going by the quality of food and services it offers, such as, drive thru, wider menu, larger coverage etc. The company has grown substantially in recent years in line with globalization and franchising.

Huge assets: The Company’s assets make it one of the richest companies in the world. Most of these assets which are part of the company’s unique fast food service which has given it a huge market share compared to the others in the sector (Hoovers.com, 2012)

Weakness

Market saturation: the fast food industry has become saturated, and this presents challenge to the company, it has to accept that possibility of being unable to add more outlets. It has been projected that the market will grow at 2% annually. This is also high price competition arising from too many players within the market; this reduces the ability of McDonald’s to increase its earnings.

Lack of innovation: the company has also been criticized of lacking behind in innovation. As noted by Hoovers.com (2012) the last major innovative product the company came up with was Chicken Mcnugget in 1983. Since then, the company has not been able to come with other innovative products. This implies that the company could loss its market share to its competitors with innovative products.

Poor communication in some of its food stores: A key weakness is the issue of maintaining set standards of such a big chain, it is impracticable and if lack of quality in one store will affect the whole chain. For example, it has been noted that leadership and communication is poor in some stores. The communication between the customers and employees is not perfect. Employees are observed not to offer any feedback concerning counter checking of orders or information of any deals which may occur. As concerning communication between employees, it merely consisted of shouting and yelling in the kitchen. Looking at leadership, no manager was observed going around ensuring customer satisfaction.

Opportunities

As globalizations continues to open up new markets and eliminate barriers of doing business McDonalds will continue to have an opportunity of opening up new franchise in other countries or increase their presence in the countries where they have already established. The main opportunities lie in Asia which has continued to witness good economic growth. Especially in expanding consumer markets in countries such as India and China or located new markets. Also there is still market in other continents as the company is serving less than 1% of the total population of the world.

Threats

Threat of franchising: One main threat of any brand that is franchised is the relationship between the franchise dealer and the management. Organization strength formed is the main strength of the agreement any shaking of the organization will/may lead to the entire system breaking.

Competition and government policies: Since McDonald’s is the biggest food chain in the world, it is subject to harsh competition as almost all food chain companies will be trying to adopt and outweigh it financially. The biggest competitors of McDonald’s are Burger king and the KFC which are posing a threat to its market share Being a global leader in this field, McDonald’s is exposed to threats from government policies in different countries.

Identify the company’s internal and external stakeholders

As explained by Grant (2005), an organization’s stakeholders are those parties that can logically be seen to be affected by decisions reached by the organization. They are seen as representing the organization’s social, economic and environmental aspects. In our case, the internal stakeholders are the managers and employees in the organization and their actions affect the everyday operation of the organization. The second group is connected stakeholders who include customers and suppliers and invest or deal with the company. The external stakeholders are not directly connected to the company but can impact or are impacted by the organization’s activities; these include the local community, government, pressure groups and local councils.

Describe their wants and needs.

Employees and managers require, training, good compensation, motivation, participation and fairness. As for the external shareholders who include local community, government, pressure groups and local councils, their needs are ethical business conduct, environmental protection, employment, and corporate social responsibility.

How McDonald’s is fulfilling these needs

For internal stakeholders

McDonald’s has comprehensive training programs that develop employees’ skills in different areas including customer service, communication, teamwork and leadership. The company understands that the above skills are transferable and can be used in many sections of the company. McDonald’s has also partnered with National College of Ireland to develop a certificate in front line management for the managers. All McDonald’s employees are also encouraged furthering their education.

McDonald’s has been voted as one of the best companies to work for. This is because of its good employment policies that advance fairness and progressive employment practices. The company has a diverse pool of employees and it has formulated contracts that are flexible in recognition of this diversity. The company has formulated an ethical code of conduct for its employees. This ensures that it provides a good working condition that motivates it employees, hence increasing employees’ loyalty and commitment to the company. McDonald’s also applies open communication and participatory approach towards decision making as a way of employee involvement.

The company offer opportunity to nurture talent and skills, develop leadership and reward achievement. The company believes that its employees have to well compensated, and to this end it offers good compensation package. The company also provides a working environment that enhances respect and motivates employees.

External shareholders

The main need for the local communities where the company operates is job creation. Accordingly, McDonald’s has employed thousands of local people in its stores across the world. The company also takes part in local activities as a way of taking part in local social activities.

McDonald’s has taken measures to protect the environment. Thus, in 2007 McDonald’s changed to coffee supplies that have certification from Rainforest Alliance as a way of supporting environment principles. McDonald’s has also gotten Repak membership, and it is presently a leading company in waste management. The company has vehicles that patrol and collect litter in areas it operates.

The company also operates its business in an ethical manner. The company believes that sound ethical practices create good business. Accordingly, the company carries out its business in fairness, honesty and integrity, and upholds high standards. This has allowed the company to attract and keep competent employees.

McDonald’s tries to assist the local community by getting involved in corporate social responsibility. To this end, the company has a strong principle of giving back to the community; this goal has always set McDonald’s apart from its prime competitors. The company has kept that principle to date and it has several charities that the company contributes to including the Ronald McDonald’s children home (McDonald website, 2012).

Conclusion

Market analysis in important in improving and ensuring the success of a company, in this market analysis, we have used SWOT analysis to analysis the performance of McDonald’s. Accordingly, we have established that McDonald’s has continued to succeed because of its strong financial base, good and high quality products and its expansive distribution channels, good location, and good customer orientation are some of the strong points of the company. However, McDonald’s faces challenges in ensuring that all its outlets offer similar high quality services. Government policies in various countries continue to pose as a threat in McDonalds’s globalization efforts. Nevertheless, McDonald’s has continued to do well in its business and it is a good company in which to invest in, because its future remains bright.

References

Anthony C. (1998): SWOT Analysis; An explanation of the S.W.O.T. Analysis process; New

York; Macmillan Press

Grant, R.M. (2005): Contemporary Strategy Analysis; Blackwell Publishing Ltd., Oxford (U.K.)

Hoover’s (2012). McDonald’s. Retrieved on, June, 15, 2012; from www.hoovers.com

McDonald website (2012): Retrieved on June, 15, 2012; from http://www.mcdonalds.com