Mcdonald Swot

Case Study Report McDonald's

BACKGROUND:

Brothers Richard and Maurice McDonald founders of McDonald's Corporation grew from a single drive-in restaurant in San Bernardino, California in 1948 to the largest food service organization in the world. In 1955 Ray Kroc opened firs McDonald's in Des Plaines, Illinois and became exclusive franchising agent for the company. By 1991 McDonald's owned $13 billion of fast-food industry, operating 12,400 restaurants in 59 countries (Ezine). The company recorded revenues of $21,586 million during the fiscal year ended December 2006 and increase of 8.8% over 2005 (Yahoo Finance, 2007).

SWOT ANALYSIS:

Strengths: The greatest strengths of McDonald was introducing people to the fast food and creating an image in people minds of fast food culture. McDonalds has over 30,000 branches in 120 countries and 80% of its revenues is derives from eight countries like Canada, Brazil, Germany, France, Japan, UK, Australia and US (Ezine). The biggest strength that the case study focused on was strategy Ð'- market leadership and buyer supplier relations. Shamsie stated that "the bigger success came in the form of McGriddles breakfast sandwich which was lunched nationwide in June 2003" (Dess, Lumpkin & Eisner, 2007, p. 692).New breakfast addition gave the firm comparative advantage in the market place and brought about 1 million new customers each day.

Weaknesses: The same factors which are consider strengths are also weakness for the company. After a while people are tired of the same brand, seeing McDonalds every where cause the immigration to a new healthier brands. "This fast-growing segment including several newcomers such as Cosi, a sandwich shop, or Quizno's, where customer find the food healthier and better tasting" (Dess, Lumpkin & Eisner, 2007, p. 692).. Another weakness is target audience, which in the case of McDonalds are kids. Kids grow very fast and quick become health conscious adults.

Opportunities: McDonald's sought to increase sales during parts of the day when its share of total food and snack consumption was low. For example, while McDonald's owns peak meal times in many markets, most people still eat breakfast at home. New products targeting the on-the-go breakfast eater, such as the popular McGriddle product, helped the company grow its share of the breakfast market. McDonald's historic focus on serving portions that are fit for a meal (or two meals, critics might argue) presented another opportunity: snacking occasions. To get at these occasions, the company introduced products such as its chicken Snack Wrap. The product carries a low price point and can easily be consumed with one hand. The Snack Wrap has been a huge hit, with sales exceeding the company's projections by 20% (Christensen).

Threats: Major threat to McDonald is relationship between the management and the franchise dealers. "Franchisees that have seen the chain as stuck in rut have been jumping ship to faster growing rivals"(Dess, Lumpkin & Eisner, 2007, p. 692). Another treats to McDonald's is the lock of growth opportunities domestically. Since the market is soaked it will be difficult for the company to achieve double-digit growth.

STRATEGY USED:

McDonalds used franchises strategy focusing on low-cost leadership. Around 80 percent of McDonald's restaurants are franchises. Investing in opening new stores in 2001 the company reached the low point and ended 2002 with the first quarterly loss since 1954. The franchisees pay McDonald's royalties of 4% to 5% of their top-line revenue (Christensen).

At the stores the company owns, it pushes the higher costs across to the consumer. The menu price increased 3% due to higher commodity prices, he said. However, McDonald's is still a value-based restaurant. Dollar menu and value meals help attract middle- to low-income customers into its stores. The average check paid by a customer is about $5.50 per order. The 3% price increase has benefited comparable sales, while the hike has not hurt traffic trends. As a clear-cut leader in the quick-service segment, McDonald's should continue its momentum into 2008 (Christensen).

COURSES OF ACTION RECOMMENDED:

Fast food giant McDonald's should go for bigger burgers and fancier places. More adult-sized burgers will appear