Fast food giant McDonald’s Corporation (NYSE:MCD) is one of the world’s most recognizable companies. But with an unhealthy food menu, in a crowded fast food market, will McDonald’s be able to stay on top? Let’s examine the company’s strengths, weaknesses, opportunities, and threats to see how the big picture for McDonald’s looks.
McDonald’s Corporation (NYSE:MCD) is the largest fast-food chain in terms of world sales, bringing in around 8% of total fast-food sales. It serves around 69 million customers every day from over 100 different countries.
Interbrand named McDonald’s Corporation (NYSE:MCD) the seventh most valuable brand in the world, valued at $40 billion. This makes McDonald’s the most valuable fast-food chain brand, and the most recognizable fast-food chain, with reported spending of almost $2 billion in advertisements yearly.
Around 80% of McDonald’s Corporation (NYSE:MCD) restaurants are owned by independent franchisees. This lets McDonald’s focus on improving its advertising and service systems, while letting individually managed restaurants bring in the money.
McDonald’s is one of the largest retail stores, with 33,500 restaurants in 119 countries. McDonald’s Corporation (NYSE:MCD) ranks third in total retail stores behind two of its competitors: Yum! Brands, Inc. (NYSE:YUM), with more than 39,000 stores, and Subway, with 39,200 stores. This enormous amount of retail locations has helped McDonald’s reach almost every corner of the world, and bring in an average of $2.7 million in sales per store.
McDonald’s has been an example of a successful company that was one of the first of its kind and has set a precedent for its industry. In consequence, many other companies have now found success based on the same model. McDonald’s is no longer differentiated in the food it offers, so it has to stand out through low prices to keep gaining market share.
McDonald’s Corporation (NYSE:MCD) is no stranger to controversy. It faces constant negative press from various organizations that champion health, workers’ rights, the environment, and animal rights. All of this negative press costs McDonald’s potential customers.
McDonald’s also draws heavy criticism for its unhealthy menu. With organizations constantly trying to deter people from eating McDonald’s, and increasing health food movements, the company is at risk of seeing its customers decrease.
McDonald’s already far-reaching reign gives it an opportunity to expand its menu and cash in on the growing health-food market. Currently, this is one of McDonald’s most glaring weaknesses, and it’ll be difficult to shed the stigma of being an unhealthy fast food chain.
One of McDonald’s competitors, Burger King Holdings, Inc. (NYSE:BKC), has recently introduced new delivery services from its restaurants. McDonald’s could also cash in on a home delivery service. While Burger King Holdings, Inc. (NYSE:BKC)’s offering hasn’t been around long enough to see whether it’ll make money, the same idea sure did work out for pizza restaurants.
McDonald’s has been successful in introducing coffee and smoothies under the McCafe brand. It needs to keep introducing new menu items for potentially untapped markets.
Health-conscious restaurants have become increasingly popular — but McDonald’s current menu doesn’t appeal to healthy eaters. Unless it can come up with more nutritious alternatives, we may very well see healthy fast-food chains eat into McDonald’s profit.
The fast-food market is already overcrowded in developed countries. For a company as big as McDonald’s, achieving double-digit growth will be very difficult in this oversaturated market.
What does all this mean?
McDonald’s strengths show how ingrained the company is, not only into the fast food market, but also into American culture. With the third-most retail stores of any company, it is hard to imagine that the company could not keep its large share of the fast-food market.
Its most obvious weakness, unhealthy menus, is also one of its largest opportunities. If management can effectively change McDonald’s fat- and calorie-laden culture, it could still have plenty of room to grow. And even if it can’t shed that stigma, McDonald’s has still been and will be around for years to come, and should be a safe, consistent moneymaker for investors.
Howard Cranford has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide (NYSE:BKW) and McDonald’s. The Motley Fool owns shares of McDonald’s. Howard is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article A SWOT Analysis of McDonald’s originally appeared on Fool.com is written by Howard Cranford.
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