SWOT Analysis McDonalds Strengths

1) Globally recognised Brand Equity : McDonalds operates in 119 countries where it operates over 34000 restaurants and employs nearly 1.7 million people. The Golden Arches which make up the company logo as well as the company mascot Ronald McDonald are globally recognised. The company is commonly known to stand for the American way of life. The company is ranked 11th in 2012 on Fortune Magazines list of the worlds most admired companies worldwide with the magazine listing new menu items and long operating hours as major factors for its rank. 2) Excellent financial performance: The company has ensured profitability and rewarded its shareholders despite turbulent economic times, recession and a growing decrease in fastfood consumption. The company has been listed as one of the S&P Aristocrats, for having declared continuously increasing dividends for the past 25 years. Its operating income has risen by nearly 100% over the past 6 years from $4.4 billion in 2006 to $8.5 billion in 2011 3) Consistently high quality standards despite localisation: McDonalds, like most global brands continuously stresses on maintaining high standards of quality. However wherever required it also ensures that it successfully localises it products to meet requirements. Examples of successful localisation include the McFalafel Burger in Egypt and the McAloo Tikki in India.

Weaknesses
1) Employee Turnover Employee turnover in Mcdonalds is a consistent problem. Although the company does not officially publish figures, the number has been pegged to be as high as 44%. This has led to a derogatory term known as the McJob which is slang for a low paying, low prestige dead-end job. 2) Lack of healthy menu choices As eating choices across the world become healthier, Mcdonalds has missed out due to its focus on high calorie fatty burgers and shakes. This weakness was further highlighted in an acclaimed 2004 documentary, SuperSize Me where a filmmaker gained over 23 pounds on a month long diet of McDonalds.

Opportunities
1) Diversification into newer avenues for revenues McDonalds is gradually focusing on diversification into coffee shops, competing with Starbucks and other specialty restaurants. This would complement their servings especially their breakfast menu. Similar McCafes can be set up inside or adjoining to McDonalds stores. 2) Focus on an image revamp Gradually, McDonalds is revamping its image to project itself as a socially conscious healthy store. It is doing this by various methods which include launching a McDonalds low-calorie menu which focuses on meals of less than 400 calories, a Going Green initiative to help preserve the environment among others.

Threats
1) Dominance on the breakfast time challenged McDonalds has traditionally enjoyed a near monopoly in the early morning breakfast menu for restaurants.This is also one of the major sources of revenue for the firm. However offerings from fellow competitors such as Burger King, as well as coffee shops such as Starbucks have resulted in a drop in their market share. 2) Increase in commodity prices McDonalds has taken two price increases in the past two years on the back of growing commodity costs, especially in the prices of beef and pork over the past year. This has resulted in McDonalds promoting more chicken products to offset the lower margins in their traditional beef products.

BCG Matrix
McDonalds is represented as a star in our evaluation of the BCG Matrix. It has constantly grown fast and enjoys a high market share in nearly every market it operates in. Although it has generated high profits, McDonalds has also invested aggressively in growing markets like India & China, which has put a substantial dent in its cash flow. To remain a globally respected brand, the company needs to pump in a significant amount of money. Hence it fulfils all the requirements of a star.

SPACE Matrix
Competitive Advantage 1 Market Share 2 Quality of Product 3 Brand & Image 4 Customer Loyalty Average : -3.6 X- Axis Average = -0.7 Financial Strength 1 Total Revenues 2 3 Operating Income EPS Rating -4 -3 -5 -2.5 Industry Strength 1 Barriers to Entry 2 Growth Potential 3 Level of Consolidation 4 Financial Stability Average : 2.9 Rating 2 4 3.5 2

3.5 4 2.5

Environmental Stability 1 Legal Environment -2 2 3 4 Effect of Inflation Effect of Technology Demand Elasticity -3.5 -2 -3.5

4 Return on Average Equity 3 5 Return on Average Assets 3.5 Average : 3.1 Y Axis Average 0.35

Average : - 2.75

The SPACE matrix indicates that the company needs to follow a conservative market strategy to conserve market share, rather than expanding aggressively

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