Introduction
McDonald’s Corporation is an American corporation, by 2010, the world’s largest chain of fast-food restaurants. In 2010, the company ranked 2nd in the number of restaurants worldwide after the Subway restaurant chain. The company is headquartered in Oak Brook – a suburb of Chicago, USA. Under the McDonald’s brand, by mid-June 2018, there will be 36,000 restaurants in 119 countries (including about 14,000 in the U.S.). A significant portion of them is operated by franchisees, which is why the range of restaurants and the size and composition of parts can differ significantly from one country to another. The range of restaurants includes hamburgers, Big Macs, sandwiches, fries, desserts, and drinks.
The Company’s General Business Environment
In 1999, McDonald’s led the global food service market with a strong brand and total sales of $35 billion. The firm has grown at an average annual rate of 8 percent over the past ten years, with a 20 percent return on its stock. McDonald’s has developed unified standards for food preparation, equipment technology, marketing strategies, employee training programs, service organization, and methodologies for choosing locations and delivery systems. In the future, the organization imagines itself as the world’s best chain of fast-food restaurants. It intends to surpass the competition in quality, level of service, sanitary conditions, and consumer value.
The Competitive/Industry Environment
The company competes with Wendy’s, Subway, Burger King, and Yum. The organization also rivals Starbucks in the fast-food coffee market. A powerful effect on the competitiveness of the McDonald’s restaurant chain is the confidence in much of the population that there are many chemical food additives among the ingredients. For example, there are flavorings, stabilizers, preservatives, and colorings. However, according to current medical opinion, concentrations below levels pose a danger to humans. Subway is positioning itself as a healthy alternative to standard fast-food restaurant chains, reflected in the company’s slogan, “Eat Fresh!” Thus, it creates a tense, competitive environment for McDonald’s; accordingly, the company is engaged in environmental policies and supports healthy eating. This clearly expresses the competitive influence in the industry on McDonald’s strategy.
Resources and Capabilities
Service in restaurants is at a reasonably high level, focusing primarily on fast service, and the company’s price segment remains attractive to customers. The range of products at McDonald’s is quite broad: different hamburgers, fries, salads, patties with different insides, soups, ice cream with various fillings, cupcakes, milkshakes, and drinks. New potentially popular dishes are quickly introduced, and those that have not gained popularity are removed from production immediately. Another advantage of McDonald’s is the introduction of food labeling, quality, safety, and energy value. Food delivery to restaurants is made by specialized vehicles, where devices are installed to detect the temperature during transportation. Besides, the internal temperature of the product is recorded at the place. As for the organization of the company’s work, the chief disadvantage is a high staff turnover; on the other hand, McDonald’s has possibilities for career growth.
Financial/Performance Trends
McDonald’s relies on two lines of business, branded restaurants, and franchises. In the revenue structure, the franchise sector accounts for almost 34%, while branded establishments account for over 66% (Germar, 2018). Another feature of the company’s business model is the large-scale nature of the primary product. The principal income is generated through a quantitative rather than qualitative approach. This, in particular, is indicated by low labor productivity and profitability of key business indicators. McDonald’s earnings in 2021 were $6.2 billion, an increase of 12.7%, reflecting a positive 9.6% change in U.S. sales (Germar, 2018, p. 61). It was also higher by 13.9% in internationally operated markets and 16.7% in internationally licensed ones (Germar, 2018, p. 62). The primary reason for the growth in revenue in the U.S. is that consumers began to order more meals, which is understandable due to the easing of quarantine restrictions.
A Competitor Analysis
Burger King is a direct competitor to McDonald’s as Whopper’s main component challenges Big Mac in the burger war. Burger King recorded more than $1.65 billion in revenue for the year ending 2018 (Germar, 2018, p. 41). At the end of 2018, Burger King had more than 17,000 locations in more than 100 countries, with approximately 11 million daily visitors worldwide. Wendy’s is a fast-food restaurant chain with more than 6,700 locations worldwide (Germar, 2018, p. 41). Its focus, similar to Burger King and MacDonald’s, Wendy’s, specializes in burgers, fries, and other American classics.
Yum Brands (YUM) operates several major fast-food restaurant chains, including Taco Bell, KFC, and Pizza Hut. The 2019 annual report noted that the company had more than 50,000 restaurants with 287 country-brand combinations; more than 98% were franchisees (Germar, 2018, p. 23). The corporate revenue exceeded $5.6 billion for the full year in 2019. Another competitor is Subway, the largest restaurant chain in the world, with nearly 41,000 locations in almost 100 countries (Germar, 2018, p. 23). All Subway locations are owned by franchisees, of which there are more than 21,000. Starbucks offers coffee, espresso, cappuccino, tea, pastries, sandwiches, and other products. The chain markets itself as a quality option at a high price (Germar, 2018). The company’s menu consists mainly of sandwiches and salads. At the same time, Starbucks is the world’s largest coffee shop chain and is a competitor to McDonald’s.
The Significant Threats and Opportunities
One of the company’s main problems is fluctuating currency exchange rates, as the prices of dishes are standardized. In addition, the ideology of a healthy lifestyle reduces consumer confidence in fast-food restaurants. There is a threat that meals at such restaurants cause health problems; McDonald’s has repeatedly been a defendant in health damage cases. The number of restaurants lowering the price of food, such as Burger King, Starbucks, and KFC, is increasing. Mcdonald’s high investment in advertising is also reducing the company’s revenues (Boyar & Davis-Friday, 2019). Although, a critical opportunity for the business is that McDonald’s can research to make its food healthier and more diverse. The company can develop new advertising channels, such as music streaming services. Moreover, integration with delivery services allows McDonald’s to generate higher profits.
The Key Weaknesses and Strengths
It is essential to note that the restaurant menu is available to all population categories. Meanwhile, under the influence of healthy lifestyle trends, standards, and protocols for more nutritious food are constantly being committed. An efficient and economical food processing system has also been developed, and the company continuously enhances the quality of ingredients (Boyar & Davis-Friday, 2019). A strength is that McDonald’s is adopting cutting-edge technology, specifically self-service kiosks, ordering, and paying through mobile applications (Boyar & Davis-Friday, 2019). The weakness of the Corporation is that advertising is directed mainly at children. In addition, corporate staff turnover is high, which negatively affects the quality of service.
Conclusion
Thus, McDonald’s remains one of the most popular fast-food restaurants. The strategic analysis demonstrates the company’s significant threats and opportunities. McDonald’s responds quickly to the emergence of competitors and the growing popularity of healthy lifestyles. However, high investment in advertising reduces profits, and the advertising focus on children does not allow it to expand its audience. Nevertheless, the use of new technologies and adjustment to market conditions enable the Corporation to remain a leader.
References
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Germar, D. (2018). Critical Analysis of McDonald’s Internationalisation Process. Competitors, Challenges, International Markets. GRIN Verlag.
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