Business, Management

McDonald’s SWOT Analysis & Recommendations

Updated on Updated on by Roberta Greenspan
McDonald’s SWOT analysis, strengths, weaknesses, opportunities, threats, internal and external strategic factors restaurant business case study
A McDonald’s in Helsinki, Finland. This SWOT analysis of McDonald’s Corporation highlights business growth through product development and market penetration in the global fast-food restaurant industry. (Photo: Public Domain)

This SWOT analysis of McDonald’s Corporation illustrates the benefits of having a leading industry position and a dominant presence in the global market. However, the fast-food company needs to account for the combined effect of its strengths, weaknesses, opportunities, and threats (SWOT) on its strategies, to optimize success in the face of cutthroat competition. McDonald’s generic strategy for competitive advantage and intensive strategies for growth align with the SWOT factors. Considering the restaurant company’s leading market position, these strategies are suited to the issues raised in the internal analysis (strengths and weaknesses) and external analysis (opportunities and threats) components of this SWOT analysis. Also, these strategies contribute to the fulfillment of business goals based on McDonald’s mission statement and vision statement. The company serves as an example of how a foodservice business can succeed by developing operations while resolving the issues brought to light through a SWOT analysis.

Insights from this SWOT analysis explain McDonald’s current strategic decisions. The internal factors examined in this case influence the company’s capabilities and growth in its target markets for food and beverage products and for food service. On the other hand, the external factors determine limits and challenges that McDonald’s must overcome to succeed in these markets. Thus, this SWOT analysis describes the business condition and external environment significant to the restaurant company’s strategic management.

McDonald’s Strengths (Internal Factors)

McDonald’s strengths make the fast-food restaurant chain a leading contender in the market. This aspect of the SWOT analysis shows the internal strategic factors that contribute to the fast-food company’s organizational viability. McDonald’s strengths are as follows:

  1. Internationally recognized brand and name
  2. High consistency of food, beverages, and services based on standardized processes
  3. Large network of business locations

McDonald’s brand and name are easily recognized internationally. This internal strategic factor is a strength in this SWOT analysis, indicating the benefits of the brand and name in supporting the company’s success, such as in introducing new food products. McDonald’s also has the strength of high consistency in its products. For example, the ordering process and most of the company’s food and beverage products, like burgers, fries, and carbonated drinks, are highly similar across different regions. McDonald’s corporate culture (business culture) contributes to such consistency, especially in terms of quality. Another strength noted in this SWOT analysis is the company’s large network of locations for its restaurants and kiosks. This internal factor strengthens the foodservice business in terms of revenues, as well as visibility and brand recall among target consumers. In relation to the network of locations pertinent to this SWOT analysis, McDonald’s applies marketing strategies that maximize the utility of available technologies and third-party services. For example, the company’s mobile apps enhance consumers’ convenience in accessing the company’s fast-food products. Technological efforts are a strategy for strengthening the network of business locations considered in this SWOT analysis of McDonald’s.

Weaknesses (Internal Factors)

McDonald’s weaknesses are linked to market focus, products, and business processes. This aspect of the SWOT analysis indicates the internal strategic factors that limit the restaurant company’s performance and success. McDonald’s weaknesses are as follows:

  1. Insignificant degree of vertical integration
  2. Imitable characteristics of processes and food and beverage products
  3. Limited product design flexibility that comes with standardization

McDonald’s operations and business strategies revolve around the preparation and serving of food and drinks. In this SWOT analysis, such focus comes with the weakness of the insignificant degree of vertical integration. For instance, the company does not produce its own raw ingredients. The SWOT analysis model considers this internal strategic factor as a weakness because it enables suppliers’ leverage over McDonald’s. On the other hand, competitors can imitate the company’s products and business processes, including hamburger meals and drinks, employee training programs, and the food preparation processes at restaurants. This internal factor contributes to competitive pressure on the fast-food chain business. In addition, McDonald’s has the weakness of limited product design flexibility because of standardization, which is one of the strengths noted in this SWOT analysis. For example, the standardized recipes of many of the company’s food products weaken the ability to satisfy regional food preferences. This weakness stands, even though the company has customized its menu for some countries, like India. Addressing this weakness requires corresponding adjustments to McDonald’s operations management programs and approaches for standardization.

Opportunities for McDonald’s (External Factors)

McDonald’s opportunities are linked to its product mix, multinational operations, and connections with other businesses. This aspect of the SWOT analysis points to the external strategic factors that support the foodservice company’s business growth. McDonald’s opportunities are as follows:

  1. New programs for suppliers to stabilize supply chains
  2. Acquisition of firms for vertical integration to include production of materials, especially ingredients
  3. Growth in consumer goods operations

McDonald’s has the opportunity to implement new programs to ensure the stability of its supply chains. This external strategic factor addresses supply disruption, which is included as a threat in this SWOT analysis of the fast-food business. Also, McDonald’s can gradually achieve vertical integration by acquiring firms related to its current business. For example, the company can acquire firms that process flour or manufacture bread. In this way, the company can increase its control of the supply chain, while reducing risks involving unpredictability in the supply of raw materials or ingredients. This opportunity addresses the weakness of insignificant vertical integration and the threat of supply chain disruption, which are issues identified in this SWOT analysis of McDonald’s Corporation.

Consumer goods represent only a small portion of McDonald’s business, considering that the company focuses mainly on food service. However, growth in consumer goods operations is considered an opportunity in this SWOT analysis. McCafé home-use coffee products are performing well in the market, indicating that the company can further grow its consumer goods business. McDonald’s marketing mix or 4Ps can support consumer goods operations along with product design and development. Also based on such an external factor, this SWOT analysis points to the benefit of strategic partnerships to boost the sales of McCafé at Home coffee products through retailers and e-commerce platforms, like Walmart, Costco, Target, and Amazon. These sellers and platforms currently offer McCafé at Home products and can facilitate the sales of new consumer goods from McDonald’s. The resulting growth in the consumer goods business can increase the company’s revenues while capitalizing on the brand strength identified in this SWOT analysis. The design of McDonald’s business structure (organizational structure) affects the direction of new consumer goods operations.

Threats (External Factors)

The threats to McDonald’s are based on competitive rivalry, sociocultural trends, and economic or ecological conditions. This aspect of the SWOT analysis deals with the external strategic factors that limit the fast-food company’s business development. The main threats to McDonald’s business are as follows:

  1. Aggressive competition in the market for fast food and consumer goods
  2. Healthy lifestyle trends
  3. Food supply disruptions

Aggressive foodservice competitors threaten McDonald’s and impose a major strategic challenge relevant to this SWOT analysis. The company competes with other fast-food firms, such as Burger King, Wendy’s, and Subway. McDonald’s food and coffee business, McCafé, also competes with Starbucks, Dunkin’, and Tim Hortons. These foodservice companies maintain the strong external force of competition. Furthermore, PepsiCo’s caffeinated beverages and Unilever’s Bru coffee products, which can be bought online in various countries, intensify the competition with McCafé merchandise. The Five Forces analysis of McDonald’s Corporation determines that this competitive force strongly affects the company.

Healthy lifestyle trends are also a threat relevant to this SWOT analysis. This external strategic factor refers to sociocultural movements that discourage consumers from eating fast food, such as McDonald’s. This trend emphasizes the importance of product development to satisfy evolving food preferences. The PESTEL/PESTLE analysis of McDonald’s Corporation reflects such a social trend affecting the foodservice industry. The company already has some programs testing the business potential of vegetarian burgers, but this SWOT analysis views the external factor as a threat because such programs have a limited rollout scope. Additional efforts for addressing this threat can contribute to the success of McDonald’s CSR and ESG strategies for satisfying stakeholders, including consumers.

This SWOT analysis also includes food supply disruptions as a threat to the fast-food restaurant chain. McDonald’s stability depends on the stability of food supply, which relates to the stability of the agricultural sector. Pandemics and other crises can weaken food supply and, as a result, threaten the foodservice business. Thus, this SWOT analysis highlights the importance of strategies for ensuring the reliability of McDonald’s supply chain and its access to input materials for the restaurant business.

Recommendations – SWOT Analysis of McDonald’s

The threats and opportunities shown in this SWOT analysis point to potential improvements to McDonald’s business. The company suffers from the weakness of low or insignificant vertical integration, and faces threats, such as healthy lifestyle trends and supply chain disruptions. However, these issues come with opportunities for improving McDonald’s. For example, this SWOT analysis shows the business opportunity for vertical integration, which can support the stability of the supply of food and raw ingredients. Also, the company can offer improved products, such as better burgers, to satisfy consumers’ concerns about the health effects of fast food. Moreover, this SWOT analysis indicates the recommendation for increasing McDonald’s consumer goods operations with support from the competitive advantage of brand popularity to encourage customers to buy McCafé and new consumer goods from the company.

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