Mcdonalds_Existing_Objectives_and_Strategies

Assignment 2: Preparing a Comprehensive Case Study, Part 2 McDonalds Existing Objectives and Strategies Mark Farley Professor Belay Business 490 Business Policy 10/17/2013 McDonalds SWOT ANALYSIS Strengths McDonald’s has a strong global presence with its nearest domestic competitor being only half its size, McDonald’s is the market leader in both the domestic and international markets. MacDonald’s benefit from cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries. With respect to nternational markets, MacDonald’s is well placed to expand and take advantage of long-termeconomic growth. MacDonald’s also has a strong real estate portfolio. The company’s outlets are located in areas that are highly known for visibility, traffic volume and ease of access. McDonald’s also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company. MacDonald’s is able to generate more sales because of its brand recognition. Through aggressive market planning, MacDonald’s has been able to recapture its youth market once again. Weaknesses The food industry is really saturated. As a result of this, MacDonald’s has to deal with the prospect of looming market saturation, which could make it difficult to add new outlets. The market is forecast togrow by around 2% per year. There is also an increasing price competition driven by too manycompetitors, which reduces the company’s ability to increase revenue. Nevertheless, the swift of thecompany’s focus from a value menu to a more diverse one has recently limited the negative effect of the intense price competition that was traditionally taking place among the industry leaders. Lack of product innovation is another weakness of McDonalds. The last break-through for McDonald’s was theChicken McNugget in 1983, but again the company’s new strategy seems to have successfully dealtwith the problem through the popularity of its new salads and other new products. Opportunities MacDonald’s sold its Donatos Pizzeria back to its founder in 2003 and discontinued Boston market operations outside of the US. The company will instead focus on Chipotle Grill which is the company’s most successful non MacDonald’s branded chain of restaurants. Also to increase profitability the company has slowed its expansion of McDonald’s restaurants so as to refurbish and change the image of current restaurants and adding new features such as Internet access. McDonald’s still has plans for more international expansion. Many countries in Europe, Asia, and Latin America still need to be penetrated. Changing trends in eating habits toward more healthy eating, seen as a threat to McDonalds can also be seen as an opportunity. McDonalds introduced new premium salads and Fruit n’ Yogurt Parfaits in the US which lead to growth in 2004 and the same products will probably bring some more growth in foreign markets. Threats McDonald’s is exposed to changes in the global economy. The company’s aggressive international expansion has left it extremely vulnerable to other countries economic slowdown. Foreign currency fluctuation is also another problem global companies like McDonalds. The Fast food industry is becoming an increasingly competitive sector. MacDonald’s keeps up with competitors throughexpensive promotional campaigns which leads to limited margins to gain market share. McDonald’s is attempting to differentiate itself, with new formats and new menu items, but other fast food industry are doing the same too. McDonald’s, just like other fast food industry, often receives bad press because of its link obesity. Increased concern such as this has led the Food Standards Agency and the Department of Health in the UK to review the advertising of ’junk’ foods such as McDonalds to children. Top Competitors for MacDonald’s include: Yum! Brands, Inc, Wendy’s International, Inc. Jack in the Box, Inc, and Burger King Corporation.