McDonald’s was started by the McDonald brothers in 1940 in San Bernardino, California. McDonald is a fast food retailer that produce Burgers, Drinks, and Fries. McDonald’s owned by Dick and Mc McDonald, with determination to enhance their business Dick and Mac closed their business for three months and re-opened December 1948 as a self-service drive-in restaurant. McDonald’s was growing rapidly regarding locations so does the popularity. In 1954, Ray Kroc joined the McDonald brothers and later on after a year, together they founded McDonald’s Corporation.
In 1961, Ray Kroc take over the brothers by buying the shares. In 1967, after continuing plans for rapid expansion, McDonald’s was finally operated as multinational companies in Canada and Puerto Rico. McDonald started operating in Asia (Japan was the first country in Asia for McDonald’s) and Europe in 1971. In 1984, Ray Kroc passed away which caused McDonald’s to reduce in its pace of growing domestically due to not having leaders to lead. Even though the pace of growing domestically reduce but this problem never affects the McDonald’s company for growth internationally. Over the years, McDonald’s have remained strong and have expanded themselves successfully although they had to compete with KFC, Burger King, Etc.
SWOT ANALYSIS
Strength
There are many advantages of McDonald’s that gained from internal so does the external resources. Regarding internal, the company have shared its fixed costs over many restaurants locations, which makes McDonald’s to be one of the cheapest places to eat at and thus which lead McDonald’s to gain advantages from economies of scale due to reduce in it costs. Another advantage from an internal resource is that McDonald’s can identify better ways of performing tasks, managing restaurants or hiring new employees which lead McDonald’s to gain the advantage of implementation which also lead them to achieve high profits from many restaurants. External resources, McDonald’s are able to generate more of revenue and one of the reasons that they are able to do it because they segment the product with different age, such as small burgers for children as well as toys which makes McDonald’s to achieve successfully in the target market.
Weakness
There are many disadvantages and one of them is McDonald’s create negative publicity by producing demerit goods such as fries, burritos, burgers, soda drink, etc.
This will lead to increase in unhealthy and obesity level in the population. 0-1351 Second weakness is the employee turnover rate is high due to less payment job as well as less skilled job which increase the cost of training and so does the overall cost of McDonald’s. Another weakness is McDonald’s have low differentiation, in other words McDonald’s is no longer able to differentiate itself with other fast food company which led them to compete with the price rather than by additional features.
Opportunities
The opportunities that McDonald’s have to work on it is to produce healthy meal, McDonald’s have an unhealthy meal and the healthy meal is likely to cover almost all of its menus, which is why McDonald’s have to target healthy customer to cover their market also expand their product portfolio to earn more customer loyalty and revenue and they should tend to produce more of healthy food, this is because the world’s trend is now likely to be more of health conscious. Now, this could be done by doing some research on how organic fast food is offering and what’s the ingredients. McDonald’s can also reduce the quantity of burgers or fries to make it look like this product is having less cholesterol as well as they can reduce the price to interact more of customers.
Other opportunities that McDonald’s have to work on, start doing home meal delivery. Home meal delivery can be done by employing more drivers and introduce new apps or features on websites that home meal delivery can be done, although there is going to increase the cost of training employees and cost of transportation but McDonald’s can gain more of customer loyalty and this can make McDonald’s to increase the price where they can cover up all the expenses.
Threats
The threats that McDonald’s are having is, nowadays the trend of the world is towards healthy meal which means the demand for fast food of McDonald’s are reducing and this could be a huge threat for McDonald’s because they can run out of demand in a long-term if they aren’t started producing healthy meal. Nowadays McDonald’s are increasing their chains and so does the competitors, McDonald’s are having many competitors that can take over the market of fast foods and drinks such as Wendy’s, Taco Bell, In and Out, and last but the most effective threats that can take over the McDonald’s is KFC. These competitors can be threats to McDonald’s in many ways for examples the price have to set by McDonald’s according to the competitors as well because what if the competitors are able to gain more of customers by reducing or increasing the price? Then McDonald’s also have to follow this. Not only pricing strategy there could be more competition where McDonald’s are having weakness such KFC produce tuna salad which can reduce demand for McDonald’s because of unhealthy menus or packaging competition with Starbucks.
PESTLE ANALYSIS
Political Factors
There are various political factors that leave an impact on the McDonald’s fast food company. Mainly, McDonald’s are dealing with the issue that government are closing down McDonald’s chains in some countries because McDonald’s are producing unhealthy fast food as well as government are more concern about merit good in population to reduce the death rate from consuming the unhealthy meal. If McDonald’s continue to produce healthy meal then this might lead consumers to have the heart attack from an increase in obesity level also stroke could occur. One of the main problems that every country’s government are facing with and also highly concerned about is to increase the level of employment and to reduce the unemployment level, government highly concern about how McDonald’s are treating employees in many countries, government is highly concern about this because McDonald’s aren’t paying the wages to the level that they have worked, or to the level that employees deserved. This issue increases the level of labour turn over so does the level of unemployment. This is threats to McDonald’s in many ways, for example, they don’t want to pay more wages which will lead to increase in overall costs and don’t want to be removed by the government from the country also don’t want to increase the price to the level where there is less demand.
There could be opportunities for McDonald’s if McDonald’s are opening in the country that there is low corporation tax where McDonald’s can gain a lot of advantages from economies of scale also can invest on research and development which will create more brand awareness. However if McDonald’s started producing a healthy meal such as fruit smoothies also more salad in burgers instead of putting a lot of meat where McDonald’s can remain in the country without being kicked out by government also McDonald’s can gain more of customers through producing healthy meal and with this their market is successfully covered with healthy and unhealthy meal.
Economic Factors
It’s not only the United States’ economy that creates an impact on McDonald’s success. Every country’s economy that McDonald’s operate in, does create some kind of impact on McDonald’s success and revenue, it could be huge or less impact but it does. Where McDonald’s must decide to take decisions smartly in all aspect, whether to purchase raw material from that country and if it’s expensive then import would be better, however McDonald’s need to be highly concern about what’s the tariffs or tax on import because it create direct impact on numerical results of McDonald’s. To be successful in every country, McDonald’s need to examine the basic economic factors of the particular country that McDonald’s are going to operate in, for examples there will be no businesses to take risk if the country is dealing with high recession or inflation rate because if both of this factors is high then there will be less purchasing powers which likely to lead McDonald’s to earn less revenue, another example is the interest rate and exchange rate , interest rates are like to have to affect the businesses that rely on loans and depreciate or appreciate in exchange rate both are going to impact the McDonald’s exports and imports.
So McDonald’s have to work on this examples to have a high revenue from every country. Right now the trends of U.S economy is bouncing back from 2008-2009 regarding economics recession. Additionally, McDonald’s should analyse the unemployment rate of each location there are operating in. This is highly crucial because McDonald’s itself dealing with high labour turnover rate due to fewer wages are given to workers and this might lead McDonald’s to deal with serious consequences with the government. In 2015, the unemployment rate is reducing from 10% to 5.1% which create both negative and positive impact on McDonald’s fast food industry. On the first hand, there’ll be more worker willing to work and on the other hand customers with disposable income are likely to “trade up” to higher quality and higher priced food options.
Social Factors
The society and cultures are now towards healthier foods, there are many customers switching from McDonald’s to Subway because the quantity food that customers’ orders in Subway can be customized, wherein McDonald’s customers’ can’t and not only the quantity, price also. If the customers’ are taking less quantity of food then they have to pay less wherein McDonald’s both quantity and price is fixed. To reduce the concern about the health issues, McDonald’s has start the changes in menus by adding the antibiotics to meat which increase the weight of the animals by 3%, however, this method of producing healthy meals increase in death rate of humans about 23,000( Americans die from antibiotics-resistance bacterial infections each year). This move likely reverberates throughout the poultry industry.
Technology Factors
It seems like McDonald’s use less of technologies, however, McDonald’s have the greater impact. Amazon, Google, Acer, these companies make use of internet and technologies more, whereas McDonald’s technologies are required to improve the staffs’ productivity, communication with the teams and to produce the food as fast as possible to the customers’. McDonald’s have made use of technologies in many ways and one of them is advertising on hanging TV behind their cashiers, another one is McDonald’s use their websites to show the nutrition facts and the home delivery through online which make customers’ lifestyle more easier.
Legal Factors
Health regulations imposed by governments to McDonald’s fast food industry which limits on producing the fast food such as burgers and fries and in some countries McDonald where banned from opening their branches in that particular country such as Iceland, Iran, Italia etc.
Iran and Italia are having a high population which means McDonald’s are losing their customers’ and this will lead McDonald’s to gain less revenue. McDonald’s does not band for an only unhealthy meal but also increase in animal welfare which means the customers in that particular area or countries want to vegetables. This factors doe’s effect the revenue of McDonald’s because McDonald’s are mostly producing the non-veg food, however, McDonald’s are now started producing veg burgers which can lead to increase in demand but the results of revenue are still not to the level that they expected to be. Another issue that McDonald’s are dealing with is the rate of labour turnover, of course, McDonald’s is having high labour turn over because the workers are paid to the level they should be which lead to create more unemployment rate and this is the unemployment rate that governments of every country is trying to reduce. Because of this reason McDonald’s have been banned from some country that already tackling with the unemployment rate.
Environment factors
McDonald’s is every day by increasing the number of fast food restaurants. Everyday McDonald’s is using a huge amount of napkins, carryout bag, clamshells, tray lines, which is harmful to the natures because plastics is non-biodegradable and they take centuries to decay. Also, plastics are harmful to the animals, because after the consumption of plastic, the animals are going to die. McDonald’s use oil to produce their burgers, fries and burritos which is also harmful for oceans or river also because oil can’t be mixed with water which is going to make ocean and river worsen both in visualization as well as the taste, because when poor people can’t afford for water obviously there will need to drink water from the sea or ocean or river which will destroy their conditions. So, McDonald’s have to be aware with what they are doing with oils and plastics.
Based View 4.1The tangible resources of McDonald’s
McDonald’s financial resources -1016011557000 In 2011, McDonald’s had outperform due to economy recession and this lead McDonald’s to make 34.7% of total shareholder return. In 2012, McDonald’s dropped to the number 30th in the Dow with a -10.75 percent return. The company went from first to last 12 brief months. Sales continue to decline over the next two year.326707519304000 Net income in 2014 fell almost 15% to 4.76 billion, McDonald’s shares had dropped below their 2012 price point, while the overall market was up by 50 percent.
Physical resources
McDonald’s is currently operate in 119 countries and over the 34,480 restaurants. McDonald’s have is grills, ovens, fryers to cook the meat for the burgers and fries. Other physical resources is facilities such as ketchup sauce bottles, tables, chairs, and other infrastructures. McDonald’s also have drive through for the customers that don’t want to eat in restaurants and they can just order the menu by speaking the menus order to McDonald’s staff’s. McDonald’s also have the security to protect the restaurants from the under circumstances situations such as CCTV cameras. McDonald’s also have fire exist way for customers during crisis situations for emergencies.
Technology resources
McDonald’s are success in customer satisfaction because McDonald’s is having a technology that control the order lines and it’s visible to every customers in restaurants. Talking about McDonald’s technology there is one more reason why customers tend to buy fast food from McDonald’s and it’s because they are having drive through which make customers easier to order their food form the car itself and instead of enjoying the food in restaurants they can enjoy it in car or at home if the customers are rushing for something.
Innovation
The innovation of McDonald’s is to make healthier menus with more attractions of customers as well as quicker services to customers and of course the better taste. Innovations are done to attract the customers and this is packaging, McDonald’s already have gained market that comes under 12 age of kids because of the packaging as well as the toys they gift in the product to attract the children’s.
VRIO framework for McDonald’s Capabilities and Resources Rare Valuable Inimitable?
References
- Strength:-www.strategicmanagementinsight.com Weakness & Opportunities: Saqib Ahmad (2013).
- McDonald Comparative Analysis. https://www.slideshare.net/Expertppt/ummeeWeakness: Businessinsider.com
- Economic factors: Pestleanalysis.com Social factors:-Masaryk University (https://is.muni.cz/el/1433/jaro2015/PV240/um/mcdonaldcase study1-121216101857-phpapp01.pdf) Legal factors: http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations
