McDonalds Swot Analysis

Strengths

Global brand

McDonald's has a well-established brand that appeals to customers of all age groups and nationalities. More than 70% of McDonald's restaurants worldwide are owned and operated by independent local men and women. It is one of the world's most well-known and valuable brands and holds a leading share in the globally branded quick service restaurant segment of the informal eating-out market in virtually every country in which it does business. Some of the famous products from the company include French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin. These products have become brands in their own right. McDonald's has risen from its second rank in FY2007 to the first in Fortune magazine's 2008 list of most admired food service companies. The annual Fortune most admired list is a widely recognized report card on corporate reputation. In FY2006, McDonald's figured at the ninth place in the top 100 global brands ranking of Business Week magazine and Interbrand, a branding consultancy. McDonald's makes substantial investments in advertising and promotions to improve its brand image. McDonald's continues to be recognized as a premier franchising company around the world. Strong brand draws customers to the restaurants of the company and provides it acceptability in new markets.

Diversified geographic presence

McDonald's has a diversified geographic presence. McDonald's operations are backed by strong supply chain capabilities. In FY2007, the company operated 31,370 fast food restaurants in over 118 countries in the following geographic segments: the US; Europe; Asia Pacific, Middle East and Africa (APMEA); Latin America; and Canada.

Europe, McDonald's largest geographical market, accounted for 39.2% of the total revenues in FY2007.The company's second largest market, the US, accounted for 34.7% of revenues in FY2007. In the same period, Asia Pacific, Middle East and Africa (APMEA) accounted for 15.8% of the total revenues.While other countries and corporate, which includes Canada and Latin America accounted for 10.3% of revenues in the same period. Diversified geographic presence reduces the McDonald's business risk and leads to stable revenue growth. 多元化的结果和好处！

Strong supply chain capabilities

The company and its partners purchase food and related items from an approved group of suppliers. The company's quality assurance process not only involves ongoing product reviews, but also on-site inspections of suppliers' facilities. Further, a quality assurance board, composed of the company's technical, safety and supply chain specialists, provides strategic global leadership for all aspects of food quality and safety. In addition, the company works closely with suppliers to encourage innovation, ensure best practices and drive continuous improvement.

McDonald's has specified quality standards to be met by the suppliers. The company enforces these quality standards through quality assurance labs around the world. Strong supply chain capabilities enable the company to serve food of consistent quality across the globe.

Large scale of operation

With revenue in excess of $22.7 billion, McDonald's has large scale of operation. The company is the world's largest food service retailing chain, preparing and serving a range of foods.The company operates its restaurants in more than 118 countries around the world. McDonald's generates revenues through company operated restaurants and franchisee restaurants. Of the company's total restaurants, over 6,900 are operated by the company and another 20,500 are operated by franchisees. The remaining 3,960 restaurants are operated by affiliates. The company as a part of restaurant development selects the best locations within the marketplace to provide its customers with convenience. The company builds restaurants in neighborhoods as well as at airports, malls, tollways, and colleges at a value for its customers.

Moreover, McDonald's has bigger scale, in terms of revenues, to compete with other players in the market. McDonald's generated total revenues of $22,787 million in FY2007, which is significantly higher than that of its competitors like Wendy's International Inc. (WII) and Burger King Corporation

(BKC). WII and BKC generated revenues of $2,450.2 million and $2,234 million, respectively, in FY2007. The company's large scale of operation allows it to feed upcoming markets with relative ease and enhances its revenue generation capacity.

Weaknesses 经营利润下降

Fluctuating operating and net profits

The company has reported fluctuating operating and net profits during 2005-2007 period. The operating and net profit has registered decline in every alternate year. Operating and net profits of the company increased from $3,984 million and $2,602 million in 2005 to $4,433 million and $3,544 million in 2006. Again in 2007, operating and net profit declined to reach $3,879 million and $2,395 million. Fluctuating operating profits and declining net profits would negatively impact the investor confidence.

Opportunities

Growth of franchisee operated restaurants

In future, McDonald's is planning to significantly increase its count of franchisee operated restaurants. In FY2007, the company made significant progress enhancing the mix of franchised and company-operated restaurants, including executing developmental license strategy, to maximize long-term brand performance and returns.

Under a developmental license, a local entrepreneur owns the business, including control of the real estate, and uses their capital and local knowledge to build the McDonald's Brand and optimize long-term sales and profitability. The company collects a royalty, which varies by market, based on a percent of sales, but does not invest any capital for new restaurants or reinvestments. The company has successfully used this structure for more than 15 years and had it in place in 59 countries at FY2007.

In August 2007, the company completed the transition of 1,571 restaurants in Brazil, Argentina, Mexico, Puerto Rico, Venezuela, and 13 other countries in Latin America and the Caribbean to a developmental license