Question

McDonalds in the early Kroc years. What was the value proposition offered by McDonalds? What brought customers (repeatedly) in the door? What did the SWOT analysis look like at this time? McDonalds in the Skinner years (c, 2003) Had the value proposition changed? How does a SWOT analysis look different? What do those changes suggest about the need to adapt? McDonalds (2017) How does a SWOT analysis look different? What do those changes suggest about the needing to constantly challenge your value propositions for your targeted markets?

Answer 1

McDonalds in the early Kroc years, serving up barbecue slow-cooked for hours in a pit stocked with hickory chips imported from Arkansas. The feature item at McDonald’s Famous Bar-B-Q was a barbecued beef, ham or pork sandwich with french fries for 35 cents. The eclectic 25-item menu included everything from tamales and chili to peanut butter and jelly sandwiches to ham and beaked beans,The 25-cent “aristocratic hamburger”.

After World War II, the McDonalds discovered something surprising about their barbecue restaurant—80 percent of their sales came from hamburgers. “The more we hammered away at the barbecue business, the more hamburgers we sold”. The brothers closed their doors for three months and overhauled their business as a self-service restaurant where customers placed their orders at the windows. They fired their 20 carhops and ditched their silverware and plates for paper wrappings and cups so that they no longer needed a dishwasher. they simplified their menu to just nine items—hamburgers, cheeseburgers, three soft drink flavors in one 12-ounce size, milk, coffee, potato chips and pie.

The whole concept was based on speed, lower prices and volume. Taking a cue from Henry Ford’s assembly line production of automobiles, the McDonald brothers developed the “Speedee Service System” and mechanized the kitchen of their roadside burger shack. Each of its 12-person crew specialized in specific tasks, and much of the food was preassembled. This allowed McDonald’s to prepare its food quickly and even ahead of the time when an order was placed. All hamburgers were served with ketchup, mustard, onions and two pickles, and any customers who wanted food prepared their way would have to wait.

Early SWOT analysis:

Strength:

Provide good quality of Hamburgers, know the market demand as early as possible, good responsiveness, adopted better machines for quick deliveries

Weakness: less market penetration, easy for competitors to enter into the market, lesser product variety

Opportunity: increase product portfolio, lesser competitors, easy to penetrate in other market

Threat: their aggressive international expansion, foreign currency fluctuations, notices from different food safety agencies.

In 2003, McDonald’s brand became one of the ten most popular brands worldwide. Continuous marketing, promotional and public relations activities promote McDonald’s brand image in order to differentiate the Company from its many competitors.

SWOT Analysis

Strengths: strong global presence with its nearest domestic competitor being only half its size, market leader in both the domestic and international markets, cost reduction through economies of scale because of its enormous size and its huge global presence allows it to diversify risk involved with the economic performance of specific countries. In international markets, MacDonald’s is well placed to expand and take advantage of long-term economic growth.The company’s outlets are located in areas that are highly known for visibility, traffic volume and ease of access. MacDonald’s also has exceptional brand recognition. This strong brand recognition creates significant opportunities for the company.

Weaknesses: Due to saturation in food industry, MacDonald’s has to deal with the prospect of looming market saturation, which could make it difficult to add new outlets. The market is forecast to grow by around 2% per year. There is also an increasing price competition driven by too many competitors, which reduces the company’s ability to increase revenue.

Opportunities: MacDonald’s sold its Donatos Pizzeria back to its founder in 2003 and discontinued Boston market operations outside of the US. The company will instead focus on Chipotle Grill which is the company’s most successful non MacDonald’s branded chain of restaurants. Also to increase profitability the company has slowed its expansion of McDonald’s restaurants so as to refurbish and change the image of current restaurants and adding new features such as Internet access. McDonald’s still has plans for more international expansion. McDonald’s still needs to penetrate in many countries especially in Europe, Asia and Latin America. Changing trends in eating habits toward more healthy eating, seen as a threat to McDonalds can also be seen as an opportunity.

Threats: McDonald’s is exposed to changes in the global economy. The company’s aggressive international expansion has left it extremely vulnerable to other countries economic slowdown. The Fast food industry is becoming an increasingly competitive sector. MacDonald’s keeps up with competitors through expensive promotional campaigns which leads to limited margins to gain market share. McDonald’s is attempting to differentiate itself, with new formats and new menu items.

McDonald’s is famous for its value proposition:  food of a constant quality that is served quickly and consistently across the globe. So, their value proposition is not changed till now.

The main customer segments are families, youngsters, the elderly and business people. McDonald’s main strategic partners are its franchise holders.

2017 SWOT Analysis

Strength: Strong brand image, Moderate market diversification, Standardized processes

McDonald’s has a brand image that makes the business competitively strong. Another major strength is market diversification based on the firm’s presence in most regions around the world. This factor reduces market-based risks. In addition, McDonald’s has a comprehensive system of standardized processes, which is a strength that contributes to business efficiency and product consistency.

Weakness: Limited process flexibility, Low product diversification, Vulnerability to Western market decline

McDonald’s standardization ensures consistency but also reduces the company’s flexibility in responding to market variations. Low product diversification corresponds to the firm’s focus on food and beverage products, which is a weakness that makes the business highly vulnerable to slowdowns in the restaurant industry. In addition, majority of McDonald’s revenues are from the U.S. and other Western economies.

Opportunity: Expansion in developing countries, Market development in the Middle East, Product diversification, Healthy lifestyles trend

McDonald’s has the opportunity to grow and expand in developing countries, such as Asian economies. The company can also use a market development strategy to establish operations in Middle Eastern countries that it has not yet entered. In addition, to address market-based risks, McDonald’s has the opportunity to develop new products or enter new industries. the healthy lifestyles trend is a threat because it discourages consumers from eating at McDonald’s, which is often criticized for unhealthful products.

This SWOT analysis shows that McDonald’s can improve its business viability through continued global expansion, especially in high-growth markets. Also, the company can reduce risks by developing new products or entering new industries related to the fast food restaurant industry. These are the most relevant actions McDonald’s can take based on its SWOT analysis.