MCDONALD’S CORPORATION

SWOT ANALYSIS 2018

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ABOUT MCDONALD’S

Name McDonald’s Corporation

Logo

Industries served Restaurants (McDonald’s, McCafé, McExpress, McStop)

Geographic areas served Worldwide (36,899 restaurants in 120 countries)

Headquarters Oak Brook, Illinois, United States

Current CEO Steve Easterbrook

Revenue (US$) 24.622 billion (2016) 3.1% 25.413 billion (2015)

Profit (US$) 4.687 billion (2016) 3.5% 4.529 billion (2015)

Employees 375,000 (2017)

Main Competitors

Burger King Worldwide, Inc., Darden Restaurants, Inc., Doctor's Associates, Inc.

(Subway), Domino’s, Inc., Dunkin' Brands Group, Inc., Yum! Brands, Inc. (KFC),

Starbucks Corporation, Wendy’s Company and many other restaurant chains.

McDonald’s Corporation business overview from the company’s financial report:

“The Company operates and franchises McDonald’s restaurants, which serve a locally-relevant menu of quality food and drinks sold at various affordable price points in more than 100 countries.

Types of franchises:

• conventional franchise

• developmental license

• affiliate

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BUSINESS DESCRIPTION (1/3) “ ”

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BUSINESS DESCRIPTION (2/3)

“ ” • The Company views itself primarily as a franchisor, with the vast majority

of McDonald’s restaurants (approximately 85%) owned and operated by independent franchisees.

• Franchising enables an individual to own a restaurant business and maintain control over personnel, purchasing, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources.

McDonald’s restaurants offer a substantially uniform menu, although there are geographic variations to suit local consumer preferences and tastes. In addition, McDonald’s tests new products on an ongoing basis.

McDonald’s menu includes:

• Burgers

• Chicken & Sandwiches

• Salads & Wraps

• Snacks & French Fries

• Desserts & Shakes

• Beverages

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BUSINESS DESCRIPTION (3/3) “ ”

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STRENGTHS

1. The second-largest restaurant network serving customers in more countries than

any other competitor in fast-food industry

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In total, McDonald’s and its franchisees

operate 36,899 restaurants in 120

countries.

Figure 1. Largest quick service restaurant (QSR) chains by number of locations in 2017

Source: Companies’ financial reports and official websites [1][2][3][4][5]

Rank Brand name Locations

1. Subway 44,717

2. McDonald’s 36,899

3. Starbucks 25,085

4. KFC 20,604

5. Burger King 15,738

The sheer size of the company’s restaurant network is a strength that provides many advantages over competitors, including:

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STRENGTHS

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• Economies of scale;

• Huge gains from implementing best practices;

• Market power over suppliers and competitors;

• Wide audience reach.

1. The reputation of a cheap place to eat at

• McDonald’s positions itself as a cheap place to eat at with US$2 menu.

• Nonetheless, most meals cost more than US$5.

• Image of being a cheap place to eat at, doesn’t help in promoting premium McCafé restaurants.

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WEAKNESSES

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1. Further expansion of home delivery in the U.S. and other major international markets

• According to Gallup’s research, U.S. home delivery market for QSR restaurants was US$26 billion in 2016.

• The company estimates that the home delivery for QSR will grow on average by 36.5% annually to US$38 billion by 2020.[27]

• Delivery has generated sales of nearly $1 billion for McDonald’s in 2016 alone.[14]

• By the end of June 2017, the company expects to launch delivery service to 3,500 locations across the country. [26]

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OPPORTUNITIES

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1. Intensifying competition

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THREATS

McDonald’s Key Rivals

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THREATS

In the U.S., fast-food industry is expected to grow

only by 2-3% on average over the next few years.

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• Burger King and Wendy’s are constantly introducing new meals to directly compete with

McDonald’s offerings.

• Starbucks is moving away from only selling coffee to becoming a destination for breakfast

and lunch.

• U.S. fast food industry grows very slowly, yet some chains expand rapidly, taking market

share from McDonald’s.

1. McDonald’s Corporation (2017). Form 10-K for the Fiscal Year Ended December 31, 2016. Available at: http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/2016%20Annual%20Report.pdf Accessed January 20, 2018

2. Subway (2017). Explore Our World. Available at: http://www.subway.com/en-us/exploreourworld Accessed January 20, 2018

3. Starbucks Corporation (2016). Form 10-K for the Fiscal Year Ended October 2, 2016. Available at: http://s21.q4cdn.com/369030626/files/doc_financials/2016/Annual/FY16-Annual-Report-on-Form-10-K.pdf Accessed January 20, 2018

4. Yum! Brands (2016). Annual Report 2016. Available at: http://www.yum.com/annualreport/pdf/2016-Yum-AR.pdf Accessed January 20, 2018

5. Restaurant Brands International Limited Partnership (2017). Form 10-K for the Fiscal Year Ended December 31, 2016. Available at: http://www.rbi.com/Cache/1500096188.PDF?O=PDF&T=&Y=&D=&FID=1500096188&iid=4591210 Accessed January 20, 2018

6. QSR (2017). McDonald’s Delivery Plan: 3,500 Restaurants by July. Available at: https://www.qsrmagazine.com/news/delivery-plan-3500-restaurants-july. Accessed January 20, 2018

7. McDonald’s Corporation (2017). McDonald’s history. Available at: http://corporate.mcdonalds.com/mcd/our_company/mcdonalds-history.html Accessed January 20, 2018

8. Forbes (2017). The World’s Most Valuable Brands. Available at: https://www.forbes.com/powerful-brands/list Accessed January 20, 2018

9. Interbrand (2017). Best Global Brands 2016. Available at: http://interbrand.com/best-brands/best-global-brands/2016/ranking/ Accessed January 20, 2018

10. Interbrand (2001). Best Global Brands 2000. Available at: http://interbrand.com/best-brands/best-global-brands/2010/ranking/ Accessed January 20, 2018

11. Interbrand (2006). Best Global Brands 2005. Available at: http://interbrand.com/best-brands/best-global-brands/2005/ranking/ Accessed January 20, 2018

12. Interbrand (2011). Best Global Brands 2010. Available at: http://interbrand.com/best-brands/best-global-brands/2010/ranking/ Accessed January 20, 2018

13. Interbrand (2016). Best Global Brands 2015. Available at: http://interbrand.com/best-brands/best-global-brands/2015/ranking/ Accessed January 20, 2018

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SOURCES (1/3)

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SOURCES (2/3)14.McDonald’s (2017). McDonald’s Unveils New Global Growth Plan. Available at: http://news.mcdonalds.com/Corporate/news-stories/McDonald-

s-Unveils-New-Global-Growth-Plan Accessed January 20, 2018

15.Motley Fool (2014). Once Cheap, Always Cheap: Why McDonald's Can't Raise Its Prices. Available at: http://www.fool.com/investing/general/2014/10/19/once-cheap-always-cheap-why-mcdonalds-cant-raise-i.aspx Accessed January 20, 2018

16.Myers, D. (2016). What Was On McDonald’s Original Menu? Available at: https://www.thedailymeal.com/eat/what-was-mcdonalds-original-menu Accessed January 20, 2018

17.Seeking Alpha (2017). McDonald’s learning from mistakes. Available at: https://seekingalpha.com/article/4075963-mcdonalds-learning-mistakes?page=2 Accessed January 20, 2018

18.QSR (2011). 2011 Drive-Thru Study: Average Service Time. Available at: https://www.qsrmagazine.com/content/2011-drive-thru-study-average-service-time?sort=avg_seconds&dir=asc Accessed January 20, 2018

19.QSR (2012). 2012 QSR Drive-Thru Study: Average Service Time. Available at: https://www.qsrmagazine.com/content/2012-qsr-drive-thru-study-average-service-time Accessed January 20, 2018

20.QSR (2014). The Drive-Thru Performance Study: Average Service Time. Available at: https://www.qsrmagazine.com/content/drive-thru-performance-study-average-service-time Accessed January 20, 2018

21.QSR (2016). The 2016 QSR Drive-Thru Study. Available at: https://www.qsrmagazine.com/reports/2016-qsr-drive-thru-study Accessed January 20, 2018

22.Consumer Reports (2017). Fast-food restaurant ratings. Available at: http://www.consumerreports.org/products/fast-food-restaurant/ratings-overview/ Accessed January 20, 2018

23.Calderone, J. (2016). More Fast-Food Restaurants Are Serving 'No Antibiotic' Meat. Available at: http://www.consumerreports.org/food-safety/more-fast-food-restaurants-serving-no-antibiotic-meat/ Accessed January 20, 2018

24.The New York Times (1993). Company News. McDonalds’s Is Trying Out Home Delivery in Virginia. Available at: http://www.nytimes.com/1993/11/24/business/company-news-mcdonald-s-is-trying-out-home-delivery-in-virginia.html Accessed January 20, 2018

25.Peterson, H. (2016). McDonald's will now deliver food to your door — but there's a catch. Available at: http://www.businessinsider.com/mcdonalds-launches-delivery-test-2016-12 Accessed January 20, 2018

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SOURCES (3/3)26.Purdy, C. (2017). In a win for sheer unhealthiness, most people are using McDonald’s new delivery service late at night. Available at:

https://qz.com/996246/most-people-are-using-mcdonalds-mcd-new-delivery-service-powered-by-uber-and-inspired-by-amazon-amzn-late-at-night/ Accessed January 20, 2018

27.Gallup (2017). Can McDonald's Win in $100 Billion Food Delivery Market? Available at: http://www.gallup.com/businessjournal/210026/mcdonald-win-100-billion-food-delivery-market.aspx Accessed January 20, 2018

28.McDonald’s (2017). McDonald’s Systemwide Restaurants. Available at: http://corporate.mcdonalds.com/content/dam/AboutMcDonalds/Investors/2016%20Restaurants%20by%20Country.pdf Accessed January 20, 2018

29.Business Insider (2017). McDonalds joins the mobile order-ahead craze. Available at: http://www.businessinsider.com/mcdonalds-joins-the-mobile-order-ahead-craze-2017-3 Accessed January 20, 2018

30.Pascual, K. (2017). Did Anyone Notice McDonald’s Ditching Artificial Ingredients in Its Ice Cream Treats? Available at: http://www.techtimes.com/articles/207687/20170519/did-anyone-notice-mcdonald-s-ditching-artificial-ingredients-in-its-ice-cream-treats.htm Accessed January 20, 2018

31.Restaurant Business (2017). The Future 50. Available at: http://www.restaurantbusinessonline.com/special-reports/future-fifty Accessed January 20, 2018

32. Iskyan, K. (2017). These industries will explode along with China's middle class. Available at: http://www.businessinsider.com/industries-will-explode-with-chinese-middle-class-2017-6 Accessed January 20, 2018

33.Wei, H. (2017). McDonald's, Yum rework plans in China as market turns tough. Available at: http://www.chinadaily.com.cn/business/2017-04/17/content_28952891.htm Accessed January 20, 2018

34. IBIS World (2017). Fast Food Restaurants in the US: Market Research Report. Available at: https://www.ibisworld.com/industry-trends/market-research-reports/accommodation-food-services/fast-food-restaurants.html Accessed January 20, 2018

35.Statista (2015). Revenue growth of the quick service restaurant (QSR) industry in the United States from 2003 to 2020. Available at: https://www.statista.com/statistics/512723/quick-service-restaurants-us-revenue-growth/ Accessed January 20, 2018

36.Black Box Intelligence (2017). Restaurant Industry Snapshot. Available at: http://tdn2k.com/snapshot Accessed January 20, 2018

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