Mcdonald’s Case Study Analysis

OPPORTUNITIES

• Expansion Plans: McDonald’s is always on the look out to expand into more profitable markets. While the markets in North America and Europe are fairly saturated, there are opportunities in other developed nations.  McDonald’s also recently announced that it was going to franchise 3500 restaurants by the end of 2018, accelerating the pace of franchising and increasing the global franchised percentage from the current 81% to 90%. This should pave way for a more streamlined, lower cost and more stable organization.

 

• Diversification: McDonald’s can diversify into other food niches like pizza, tacos, and many more. It can also go into related businesses like the soft drink industry with its mccafe subsidiary and sell sodas in-house or give away complementary McDonald’s branded sodas with a specific minimum order price. It can enter into this market opportunities either by starting from scratch or through acquisition or better still through strategic alliance.  Diversification may also be achieved by selling DIY (do it yourself) food stuffs whereby all the materials required to make a meal are already packed and stored in the supermarkets with instructions to make similar McDonald’s meals.

 

• Upgraded menu: McDonald’s plans to offer premium products at some of its locations. The restaurant recently introduced artisan chicken and sirloin burgers to its menu in parts of the US.

 

• Healthy food options: McDonald’s can create a healthier version of the hamburger to cater for today’s health conscious society. It can do it by replacing the ingredient with those that are organic. It will then be the first in the fast food industry to have an organic hamburger.

 

• Allergy free food: McDonald’s can provide allergen free food items such as gluten free and peanut free foods

 

THREATS

• Intense competition: McDonald’s faces intense market competition, that is, the Informal eating out (IEO) market. The IEO segments have remained stagnant in recent periods, and have experienced only modest growths with some even declining. As a result, McDonald’s is facing intense competition from both traditional competitors and other competitors, which include many non traditional market participants like convenience stores and coffee shops. McDonald’s may be impacted by new actions of their competitors and this impact may be a short or long term impact.

 

• Evolving customer preferences: To continue being successful, McDonald’s has to anticipate and respond effectively to continuous and constantly shifting consumer demographics, trends in food sourcing, food preparation and consumer preferences in the IEO segment.

 

• There has been a continuous trend in customers’ clamor for healthy food options, and McDonald’s must react so as not to lose customers. It can initiate a strategy or strategies to explore delicious healthy food options to satisfy consumers’ yearnings.

 

 

• Supply chain interruptions: McDonald’s depends largely on suppliers of raw materials. They buy in bulk so as to have large cost savings and discount. The products they sell are sourced from a wide variety of suppliers, and price increases can adversely affect them, ; the suppliers and the franchisees who are also part of the system and whose performance has a significant impact on McDonald’s result.

 

• Franchise business model presents a number of risks: McDonald’s success relies on the financial success and cooperation of their franchisees, though the franchisees have limited influence over their operations. McDonald’s receives about 33.79% of its revenues from franchisees, and the revenues realized from the franchisees are largely dependent on the ability of the franchisees to grow their business. Where McDonald’s franchisees do not experience sales growth McDonald’s revenues and margins may be adversely affected.

 

• Changes in commodity and other operating costs: McDonald’s needs commodities such as beef and chicken among others that are found in volatile markets and which are subject to price fluctuations due to some factors like seasonal shifts, climate conditions, industry demand, international commodity markets, food safety concern, product recalls, government regulation and other factors all of which are beyond McDonald’s control.

 

• Interruption of operation by information technology system factors or by network security breaches. Despite McDonald’s implementation of security measures, their technology systems could become vulnerable to damage, disability or failure due to theft, fire, power loss, telecommunications failure or other catastrophic events.

 

• Exposure to increased complex regulatory compliance as a global business : As a global business, McDonald’s is exposed to complex regulatory compliance and other business risks which may affect their operations and result in material losses.

 

• Exposure to complex and various legal actions: McDonald’s is subject to legal proceedings that may adversely affect their business, this may include administrative proceedings, government investigations, employment and personal injury claims, landlords/ tenant disputes, dispute with current or former suppliers,  claims by current or former franchises and intellectual property claims

 

• Host countries’ changes in tax laws; Changes in tax laws and unanticipated tax liabilities could adversely affect McDonald’s tax liabilities and their ultimate profitability.