McDonald’s SWOT Analysis

SWOT is an acronym for strengths, weaknesses, opportunities and threats related to organizations. The following table  illustrates McDonald’s SWOT analysis:

McDonald’s SWOT analysis

Strengths in McDonald’s SWOT Analysis

1. McDonald’s is an undisputed market leader with more than 40000 restaurants worldwide. The fast food giant has a global market share of about 43,8% and its closest competitor Yum Brands that comprises KFC, Pizza Hut, Taco Bell and The Habit Burger Grill has a market share of only 30,9% in the global fast food industry.[1] Market leadership is a considerable strength for McDonald’s in terms of generating cash flow and profits for medium and long-term perspectives.

2. McDonald’s is one of the most valuable brands in the world. According to Forbes McDonald’s is No. 10 most valuable brand in the world with the brand value of USD 46,1 billion[2]. Similarly, Interbrand considers McDonald’s No.9 most valuable brand in the world with the brand value USD 45,87 billion.[3] Brand value and brand awareness are proved sources of competitive advantage. Specifically, brand value is an indicator of a high level of consumer loyalty and it offers a wide range of advantages that include negotiating power with customers and suppliers, as well as, global expansion opportunities.

3. The fast food chain maintains a business model that can be profitably sustained for long-term perspective. The majority 93% of McDonald’s restaurants are owned and operated by independent franchisees[4]. McDonald’s Corporation only has to ensure that high standards are adhered to in the preparation and service of foods, along with formulating and applying effective marketing strategy. The remaining approximately 7% of McDonald’s restaurants in various countries are owned and operated by McDonald’s Corporation, thus enabling the company to keep in touch with changes in the consumer behaviour. This pattern of the business model has proved to be highly successful and there are grounds to believe that the model can prove to be sustainable for the long-term perspective.

4. Despite a set of issues the company has to deal with as discussed below in more details, the company enjoys a high level of profitability. Although gross profit declined by 12,77% in 2020 due COVID-19 pandemic, McDonald’s recovered the profits quicker compared most of its direct and indirect competitors. Specifically, in 2021 the fast food chain generated gross profit of USD 12,58 billion an increase of 29% compared to 2020 and increase of 12,5% compared to pre-pandemic year of 2019. In 2021 the company generated a net income of USD 7,545 billion an increase of a massive 59,5% compared to 2020. High level of profitability is associated with business strengths in terms of withstanding the periods of economic slowdown and making investments in research and development initiatives.

5. The fast food giant has effectively utilized technological innovations in general and digital technologies in particular into various business processes. These include the development of mobile application, use of data and artificial intelligence (AI) to optimize the supply-chain, acquisition of personalization technology provider Dynamic Yield, Mobile Order and Pay and other initiatives. Technology integration has played an instrumental role of the company in terms of dealing with pandemic issue in an effective manner.

Weaknesses in McDonald’s SWOT Analysis

1. An abundance of unhealthy food on the menu is the main weakness of the company. As it is illustrated in figure  below, although McDonald’s offers a vast range of burgers, the majority of items in its menu are considered as unhealthy. Increasing media coverage of negative heath implications associated with fast food consumption and as a result, increasing consumer awareness about negative effects of fast food on their health is enhancing the potential negative impact of this particular weakness on long-term growth prospects of McDonald’s.

A typical McDonald’s menu

2. McDonald’s brand image has been declining for the past few years. It can be argued that fast food giant has difficulty in attracting millenials customer segment. This is especially true with millenials and generation Z customer segments. New CEO Chris Kempczinski has initiated celebrity endorsement campaigns involving Travis Scott, J. Balvin, BTS, Saweetie and others to keep McDonald’s relevant to the needs and aspirations of young generation consumers.

McDonald’s Corporation Report contains a full version of McDonald’s SWOT Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as PESTEL, Porter’s Five Forces, Value Chain analysis, Ansoff Matrix and McKinsey 7S Model on McDonald’s. Moreover, the report contains analyses of McDonald’s leadership, organizational structure, business strategy and organizational culture. The report also comprises discussions of McDonald’s marketing strategy, ecosystem and addresses issues of corporate social responsibility.

[1] McDonald’s: King Of Fast Food Is Here To Stay (2022) Seeking Alpha, Available at: https://seekingalpha.com/article/4499843-mcdonalds-king-of-fast-food-is-here-to-stay

[2] The World’s Most Valuable Brands (2022) Forbes, Available at: https://www.forbes.com/powerful-brands/list

[3] Source: Interbrand. Available at: https://interbrand.com/best-global-brands/mcdonalds/

[4] Annual Report (2021) McDonald’s Corporation