BUSN 5000

Homework 2

Please open this document in Microsoft Word and respond directly in this document without
modification of the text in bold. This way the answer will be in the same place and in the
same format for every student.

You will submit this Word file in Canvas. If you have any trouble, reach out to your instructor
in a timely manner.

Question 1 – Choose a market in which McDonalds currently operates. Provide a thorough

SWOT analysis of McDonalds in that market. For each of the four components, provide one
paragraph outlining your observations. Then in one additional sentence, identify one key
observation. Please use the separate headings for each component to clearly delineate the
four parts.

As of August 2023, Mc Donald’s has a market cap of $48.6 billion making it the world’s 9 th
most valuable company in the world. McDonald’s operates in various market which includes,
fast food and beverage, toys and real estate. Let’s explore the latest dynamics of SWOT
analysis of McDonald’s in the fast food and beverage market with thousands of premium
locations around the globe.

Strengths –
McDonald’s is the 9th most valuable brand in the world, worth $48.6 Billion. With an
incredible brand value, the company rules the restaurant industry regardless of the tough
competition. McDonald’s fries are considered the best tasting fries in the fast-food
industry. McDonald’s fries are best-tasting fries says customer survey. McDonald’s franchise
works slightly differently. McDonald’s not only provides their brand name, recipes, ingredients,
processes to franchisees but also owns the land and operates as a landlord and makes revenue
through rent payments. McDonald’s is taking revolutionary technology initiatives to make their
‘Experience of the Future’ dream come true. Initiatives like implementing self-service
with kiosks, mobile order and payment systems are benefiting McDonald’s image as the
‘restaurant of the future. The company’s latest acquisition of dynamic yield is another step
towards enhanced personalized marketing and customizations. Dynamic Yield is an Israeli
startup that assists brands like McDonald’s to boost their customer experience with brands
personalize offerings. You can debate about the taste and overall customer experience, but
McDonald’s’ quality standard has always been its strong point. The Company enforces
complete food safety and quality protocols before buying the ingredients from third-party
intermediaries. Recently McDonald’s has begun restricting the use of the high-value human
antibiotics. It was established by the World Health Organization (WHO) as “highest priority
critically important antimicrobials” (HPCIA) to human medicine, in its global chicken supply
since 2018. The policy is also appreciated by many public health and consumer group as it is a
great effort to prevent dangerous superbugs. In 2022, McDonald’s was the leading quick-
service restaurant (QSR) chain with revenue of $23.18 billion. About 37% ($8.74 billion) of the
sales revenue is generated by company-operated restaurants and 61% ($14.1 billion)
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by franchised restaurants in the form of fees from franchisees and development licenses. Rest
2% ($ 329 million) of the revenue is attributed to other categories (technology fees, brand
licensing arrangements). The fast-food giant announced that it will be continuing its 20%
discount for National Health Services (NHS) workers for the entirety of 2022 across the entire
UK. Workers can use the discount on McDonald’s entire online menu. The discount was meant
as an initiative for NHS workers to save money on their favorite items on the menu for this
year. However, the primary reason why the fast-food giant offered this amazing discount deal
was to show its appreciation to the frontline workers, appreciating their hard work amidst the
deadly outbreak.

Key Observation –

McDonald’s most potent aspects have ensured the company’s profitability, development and
universal brand image and its brand value is top ten in the world and highest in context of fast-
food brands and owns all its franchises real estate where technology initiatives and acquisition
is a major factor for expanding the business.

Weaknesses –
McDonald’s is the best example of international franchising models. However, having this
complicated web of franchised and company-operated restaurants expose the brand to certain
risks. The risks of financial deterioration, mismanagement, customer dissatisfaction, and low
revenue generation. The company heavily depends on the franchises which works
independently and hence they have no control over their day-to-day performance, but it affects
the brand directly. McDonald’s being one of the busiest food chains often faces issues due to
disruption in the supply chain. Also, it limits the availability of products, which are critical to the
operations. Therefore, when a franchise experiences such interruptions, the operational
expense increases, which there by results in reduce revenue and lower profitability. Recently,
due to employee right revolutions worldwide and increased wage limits, many organizations
have been facing critical dissatisfaction from employees. McDonald’s has faced extreme
backlash from their workforce in recent time. The workers went to several protests and strikes
with a demand to increase their minimum wage to $15 an hour, causing the company
reputational harm. For nearly a decade, McDonald’s breakfast sales remained unbeatable
especially in the US. However, in May 2018, the company CFO accepted that they have been
observing a downfall in McDonald’s breakfast menu consumption and they must do something
to fix it. But with such fierce competition around, it won’t probably be easy to regain the
popularity for breakfast meals. Unfortunately, In Nov 2019, McDonald’s CEO, Steve
Easterbrook, was fired after having a consensual relationship with an employee. It violated
company policy. Also, the company’s board stated that Steve had “demonstrated poor
judgment.” Also in May 2020, five employees sued McDonald’s for failing to adopt government
safety guidance. The lawsuit argues that McDonald endangered the lives of its employees and
their families by failing to provide hand sanitizer, gloves, and masks during the recent health
crisis. Companies are required to nurture a safe working environment for all employees
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Homework 2

regardless of gender. In a lawsuit filed by over 100 female employees in April 2020, McDonald’s
is accused of creating a hostile work environment and subjecting them to sexual harassment.
The lawsuit erodes trust and taints its reputation further. In June 2020, McDonald’s was
accused of firing and employee for suing the company over its failure to protect employees
during the recent health crisis. The termination is unethical because it seeks to discourage
other employees from exercising their right to legal redress against their employer. McDonald’s
in Japan are suffering from a shortage of its famous fries. The Japanese stores are forced to cut
their fries in shorter slices to fulfill demand. Customers will have to face the shortage, which has
largely been impacted by global supply complications and food shortages. However, the fast-
food giant announced that it will resolve the issue shortly. McDonald’s also stated that it has
been facing supply issues at the port of Vancouver due to flood damages, which has also been
an integral cause of the delays.

Key Observation –
The shortcomings of McDonald’s strategy and structured composition affects its overall growth
as the franchise business model often suffers inconsistency in services and supply chain and
lack of employee satisfaction, zero progress in their breakfast menu and bad reputation
because of recent CEO’s criminal act who has been fired are some weaknesses for McDonald’s
growth.

Opportunities –
In 2018, McDonald’s launched its “$1, $2, $3” menu and “2 for $5 Mix and match deal”
proposed toward its value-conscious consumers. The menu was a successful addition, resulting
in increased sales. McDonald’s must put efforts to introduce new, innovative items on their
menu to make customers choose them instead of the new fast-food outlets. In 2018, the
company started to serve an exclusive beverage–MIX by Sprite Tropic Berry MIX by sprite
Tropic Berry in their New York outlets. It became an instant hit and is likely to be served in all
the US. Launching more items like this according to the geographical conditions and culture can
help McDonald’s maintain their charm for a longer period. McDonald’s rules over the US, but it
is often that it struggles in the international market. However, the company has high potential
to continue its global expansion by focusing more on international markets rather than
different states of America. While fast-food restaurants are struggling to fight the image of
‘junk producing centers’, McDonald’s can play it smartly by continuing its aggressive initiatives
towards, healthy and customized offerings. These developments have begun to show progress,
with positive comparable sales leading to a growth in profits. The re- franchising mission have
surely pushed the sales back, but in the long run, the healthy image of McDonald’s can continue
to make bigger differences. McDonalds has initiated a partnership with UberEATS and Door
dash for US food delivery. These mobile order and delivery initiatives help McDonald’s to reach
and fulfil customer’s ever-changing needs. More consumers are seeking healthier options. Even
though McDonald’s offers healthy options like salads and 1% Low Fat Milk jug, the options are
very limited. The company can increase the number of healthy options to attract more health-
conscious consumers and grow. McDonald’s prioritization of creating the best in-premise dining
experience became a major weakness during the recent health crisis. This strategy contributed
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to a 17% decline in earnings as more consumers opted for pick-ups and deliveries to be
consumed at home. McDonald’s can increase deliveries, curb-side pick-ups, self-order kiosks,
and drive-thru options to attract more customers during this trying time. Vegans in Ireland can
now rejoice as McDonalds launches its first-ever plant-based burger called the
‘McPlant’. The “vegan burger” will be offered to both Irish and British patrons. The fast-food
giant partnered with Beyond Meat (a rising vegan organization), to bring the restaurant’s vegan
burgers to the UK and Ireland. The vegan patty was made via a collaboration between both
McDonalds and Beyond Meat – and the burger was tested by Beyond Meat at over 200
restaurants in 2021.

Key Observation –
The opportunity section for McDonald’s emphasizes the emerging chances of growth and it has
to focus on serving best value meals and other innovative products and global expansion of the
company can be more productive by learning the sophisticated cuisine beforehand and it can
provide food from around the world in one place which is tasty and cheap, available and
accessible to all which can help rebuild the brand image.

Threats –
We might think that burger giants like ‘Burger King’ are McDonald’s only competitors, but the
table is beginning to turn. Recently, Restaurant Business revealed that Chick-fil-A is now
McDonald’s biggest competitor in the wildly competitive Quick Serve Restaurant (QSR) area.
Being a global fast-food chain, McDonald’s has often faced multiple cultural threats in different
parts of the world, causing harm to the image of the brand. Also, it gets challenging to adapt
and operate differently as per the location of the franchise. For example, a few years ago,
McDonald’s faced quite a big scandal for using ingredients which were not ‘halaal’ in Muslim’s
countries. Such controversies make it difficult for McDonald’s to meet customer expectations
with inherited risks in the international operating environment, deteriorating the brand image.
McDonald’s often for millennial is considered an old school with its traditional menu and taste.
In this situation, food chains like shake shack and Wendy’s take full advantage with their often-
experimented menu and recipes to include variety. For example, McDonald’s failed to compete
with Wendy’s “Signature-Crafted Burgers.” and hence had to stick with its conventional Quarter
Pounders to save face. According to a new study, it was revealed that popular fast-food brands
such as McDonald’s is targeting their social ad campaigns on underprivileged or low-income
communities across the world. McDonald’s is using popular, mainstream social media networks
such as, Instagram, Snapchat, Twitter and Facebook to propel their marketing, reaching millions
of youths throughout the world. However, the report has also mentioned that its marketing is
beginning to have a bad impact on consumer health, leading to dangerous repercussion later in
life. In the 2022, McDonald’s missed profits for the full year due to economic uncertainty. This
led to an 18% drop in its net income and can drop even more if economic uncertainties persist
for longer. More consumers are adopting healthy lifestyles and switching to healthier
alternatives like salads and organic shakes. Unfortunately, most of the items on McDonald’s
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menu are unhealthy and it can lose health-conscious customers to competitors with healthier
options. The rise in lifestyle diseases is burdening for many countries. Some countries have
enacted laws to limit the use of specific ingredients that are unhealthy or banned fast-food
companies. Nine countries have banned McDonald’s like Iceland, Macedonia, Montenegro,
Bermuda, and Bolivia. Like every other food giant, McDonald’s face immense pressure to
improve its practices to minimize the waste products, which causes environmental pollution.
The growing ecological concerns demand McDonald’s to take initiatives in this regard and set
an example for other food outlets, but it is not that simple. In March 2018, environmental
activists proposed the board of directors of McDonald’s to abandon the use of plastic straws in
its over 40,000 restaurants worldwide due to explosion of plastic pollution.

Key Observation –
Although the innovative changes done by McDonald’s have a positive outlook, the investment
in technology is still risky and the public pace of adapting new technologies may slow down the
return on investment, and the results of enhancing customer experience may not generate the
expected returns.

Reference:

Record), (Image: Reach PLC/Daily. (2022, January 10). McDonald’s extends 20% discount for
NHS staff - how to claim. Daily Record. [Link]
drink/mcdonalds-extends-20-discount-nhs-25869098

Kelso, A. (2018, July 27). McDonald’s looks for a morning pick-me-up as it loses breakfast
market share. Forbes. [Link]
continues-to-search-for-breakfast-solutions/?sh=1b3eb48919c4

Pierson, B. (2020a, April 13). McDonald’s faces new class action over “pervasive sexual
harassment.” Reuters.
[Link]
action-over-pervasive-sexual-harassment-idUSL2N2C10UE

McDonald’s launches exclusive sprite tropic Berry Drink. QSR magazine. (n.d.).
[Link]

Kelso, A. (2018b, December 20). Chick-fil-A is now McDonald’s biggest threat. Forbes.
[Link]
be-mcdonalds-biggest-threat/?sh=7db8a2651ae7

Mourdoukoutas, P. (2019, April 27). McDonald’s cannot beat shake shack and Wendy’s on
Gourmet Burgers. Forbes.
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Homework 2

[Link]
shake-shack-and-wendys-on-gourmet-burgers/?sh=2f6ba1e914ed

 
Question 2 – Based on your SWOT analysis, provide an executive summary of your findings as
well as a recommendation for ten-year strategy to improves McDonalds competitive position
in this market. Do not quote directly from any source including ChatGPT. Rely on your own
reasoning. Limit 300 words.

Executive ‘Summary (SWOT Analysis)

As of August 2023, McDonald’s has a market cap of $48.6 Billion making it the world’s 9 th
most valuable company in the world. McDonald’s operates in various market which includes,
fast food and beverage, toys, and real estate. McDonald’s brand value is top ten in the world
and highest in context of fast-food brands. The food is tasty and consistent through-out the
franchises around the world. McDonald’s owns all its franchises’ real estate which makes rent
one of the main income sources of the company.
The franchise business model often suffers inconsistency in services and interruption in
supply chain. Although the innovative changes in technology done by McDonald’s have a
positive outlook, the public pace of adapting to new technologies can slow down the return
on investment, and the results of enhancing customer experience may not generate the
expected returns.
Recommendation (Ten-Year Strategy)
Implementing technology in the business can strengthen its service and keep up with the
increasing demand of affordable food for all. Technology initiatives and acquisition can help
the company improve its business performance, management structure, and strategic growth
and other aspects. McDonald’s needs to focus on serving best value meals and other
innovative products since there are several different customers, some being vegetarian,
vegan, foreigner and so on. Global expansion of the company can be more productive by
learning the sophisticated cuisine beforehand. The best way to learn these cuisines isn’t by
studying the market, but by making the desired dishes. Food from around the world in one
place is often a big star hotel which is for the few only, but McDonald’s can provide food from
around the world in one place which is tasty and cheap, available and accessible to all. The
diverse menu can help, rebuild the brand image.