Running head: MCDONALD’S SITUATIONAL ANALYSIS

McDonald’s Situational Analysis

Samuel A. Sample

BUS 330 Principles of Marketing

Avisha Sadeghinejad

February 16, 2016

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McDonald’s is the world’s largest fast food chain with over $25B in annual sales and more

than 35,000 retail locations in more than 100 countries (McDonald’s Corporation, 2015).

Core Products or Services

Beyond the burgers, French fries and milkshakes that they have, they have been selling

since its founding, McDonald’s sells a variety of wraps, salads, sandwiches and beverages – more

than 200 items in all (The Economist, 2015). McDonald’s locations are typically open for

breakfast, lunch, dinner and late night dining and many feature drive-thru service.

A Brief History

The first McDonald’s restaurant was opened in 1948 by Richard and Maurice McDonald.

It brought production line techniques to the burger business and challenged the dominant carhop

drive-in business model. Ray Kroc was one of the earliest franchisees and the key figure in the

rapid expansion of the business after he bought out the McDonald brothers 1961. McDonald’s

became a public company in 1965 and opened its first international location in 1967. Sales and

locations have continued to grow every year since (Comoletti, 2014)

Key current competitors

Historically, McDonald’s primary competitors were identified to be the large fast food

burger chains like Burger King and Wendy’s. But given McDonald’s size and the expansion of

their menu, the competitive set must be viewed more broadly to include sandwich shops like

Subway, other fast food concepts like Chick-fil-A, more upscale fast casual restaurants like

Panera and Chipotle, as well as coffee shop chains like Starbucks and Dunkin’ Donuts.

SWOT Analysis

A SWOT analysis is a strategic planning tool used to assess the strengths, weaknesses,

opportunities, threats, and trend of an organization, company, project, plan, or venture

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Strengths

• Anytime, anywhere convenience

With over 14,000 locations in the U.S. alone, there is a McDonald’s within a short drive of

almost everyone and most are open from 6am to 11pm. The number of locations also means that

McDonald’s can purchase media nationally which is more cost efficient than buyinglocally.

• Brand equity

Because of its many locations, consistent brand experiences and hundreds of millions of

dollars spent on marketing each year-- McDonald’s has developed a very strong brand. For

example, they ranked 5th on BrandZ’s 2014 most valuable global brand list (Rooney, 2014).

• The Best French Fries

McDonald’s french fries are universally loved -- even by people who don’t otherwise like

McDonald’s food. McDonald’s fries were voted #1 in a 2015 YouGov study (Peterson, 2015).

• Kid appeal

McDonald’s is a popular destination amongst younger kids. Many locations have indoor

playgrounds and there are menu items such as Happy Meals which combine several kid friendly

food offerings in a fun box that includes a toy. The brand does a lot of advertising on kid

targeted programs and Ronald McDonald is a highly recognizable spokesperson.

• Inexpensive

With its well- known dollar menu, McDonald’s is perceived by most consumers as an

inexpensive place to go for breakfast, lunch or dinner -- or a between meal snack.

Weaknesses

• Menu bloat

In their attempt to compete with a wide range of competitors, McDonald’s menu has

swollen to more than 200 items. This is driving down operational efficiency as it takes longer for

consumers to order and longer for the food to be prepared (Walton, 2015). Franchisees also have

to invest in additional kitchen equipment and training.

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• Dining environment appeal

Many McDonald’s locations are outdated relative to chains like Starbucks or Panera which

offer comfortable seating, amenities like fireplaces and greater cleanliness (Walton, 2015).

• Low customer satisfaction

In a 2014 ACSI survey, McDonald’s ranked last with a rating of 71%, some 7 points below

competitors like Wendy’s and Subway (Comoletti, 2014). The rating reflects factors such as

order accuracy, food quality, staff courtesy and menu variety.

• Low employee wages

McDonald’s does not pay its restaurant workers what most would consider to be a “living wage”.

As a result, McDonald’s does not always attract the highest quality employees and turnover can

be high, resulting in a constant need for re-hiring and re-training.

Threats

• Healthier eating trends

While McDonald’s menu does feature some healthier items like salads and wraps, they

are still primarily associated with burgers, french fries, mass production and processed food. As

such, healthier eating trends represent a threat to McDonald’s business.

• Aging of the population

The percent of population in the United States over the age of 65 is growing. From 10%

in 1970 to a projected 20% by 2030 (Ortman, Velkoff, & Hogan, 2014). The aging of the

population is a threat for a business whose core consumer franchise has historically been families

with younger children.

• Rising social consciousness

While McDonald’s business or environmental practices have likely improved over time,

the level of scrutiny surrounding the triple-bottom line and associated negative publicity has

increased in recent years. Popular documentaries like Super Size Me and Fast Food Nation have

not portrayed McDonald’s food or its business practices in a positive light.

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Opportunities

• Positive childhood associations

Regardless of people’s current perceptions or level of satisfaction, most McDonald’s

consumers have fond childhood memories associated with the brand that can be potentially

activated with the right messaging or product offerings. This creates an opportunity with the

next generation of parents.

• The prolonged U.S. economic recession

The more people’s budgets are pinched, the more they are apt to “trade down” to

less expensive options like fast food. With its well known dollar menu, McDonald’s has

the opportunity to benefit from a prolonged economic downturn.

• Growth in specialty coffee

The percentage of Americans drinking specialty coffee in the US has more than

doubled since 2009 (Ward, 2004) and teenagers are a particularly high growth segment.

McDonald’s McCabe specialty coffee product line should continue to benefit from this trend.

Marketing Plan Focus

There is an opportunity to significantly grow the after-dinner snacking business

(i.e., french fries and McCabe beverages) amongst teenagers and young adults. This is

also a way to showcase updated facilities and amenities like Wi-Fi to customers who may

not have visited McDonald’s recently. It is important to re-establish brand liking with this

age group prior to them having kids of their own. This will be the focus of the marketing

plan.

Conclusion

The Frie-day night with Redbox marketing plan should be approved for funding because it will succeed

in leveraging America’s favorite french fries to drive increased trial of McCafe beverages by

teens and young adults. It will also increase consideration of McDonald’s as an evening snack destination

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and help cement the brand’s association with Friday night movie get-togethers. It will also help build

brand affinity amongst this future generation of parents.

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References Comoletti, J. (2014, June 19). America’s favorite fast food chains. Retrieved from

http://www.businessinsider.com/mcdonalds-last-in-customer-satisfaction-2014-6

McDonalds Prices. (n.d.). Retrieved from

https://www.fastfoodmenuprices.com/mcdonalds-prices

McDonald’s: When the chips are down. (2015, January 8). Retrieved from

https://www.economist.com/news/business/21638115-after-long-run-success-worlds-

largest-fast-food-chain-flounderingand-activist

McDonald’s Corporation. (2015). 2014 Annual Report.. Retrieved from

http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/McDonal

ds2014AnnualReport.PDF

Ortman, J. M., Velkoff, V. A., & Hogan, H. (2014, May). An aging nation: The older

population in the United States. Retrieved from

https://www.census.gov/prod/2014pubs/p25-1140.pdf

Peterson, H. (2015, July 13). The best fast food french fries in America. Retrieved from

http://www.businessinsider.com/the-best-french-fries-in-america-2015-7

Rooney, J. (2014, May 20). Google beats Apple as BrandZ most valuable global brand. Retrieved

from https://www.forbes.com/sites/jenniferrooney/2014/05/20/google-beats-apple-as-

brandz-most-valuable-global-brand/#471a3c2a268d

Walton. (2015). McDonald marketing plan 1 [Infogram]. Retrieved from

https://infogram.com/marketing-plan-tutorialoutlet-dot-com-1gqo2qnlo48w278

Ward, H. (2014, December 10). Specialty coffee consumption: A look at the numbers.

Retrieved from http://www.scanews.coffee/2014/12/10/specialty-coffee-

consumption-a-look-at-the-numbers/n