The McDonald Company has been in operation since 1955. A SWOT analysis of the operations of the company reveals that the company has several strengths and weaknesses. It has opportunities to take advantage of to make more profit. However it also faces several threats that it has to deal with. A SWOT analysis is the critical review of a firm’s external environment. Strategic companies carry out the analysis in order to come up with the best strategies that will assist in gaining a competitive edge.
Operational SWOT Analysis
The company is great in terms of service quality. In 2008, the company was ranked number 1 by the Fortune magazine as the most admired food service industry. To invest in global markets, a company needs to adopt the cultural eating customs of the land in order to be successful and create customer brand and loyalty (Risner, 2001). The McDonald Company has not been rigid in foreign markets by offering standardized meals. The company offers lamb and vegetarian burgers in India since the country considers a cow as a sacred animal (Petrun, 2007). Offering beef burgers would be offensive. In the Middle East McDonald restaurants, the company has different entrance doors for families and the single families. The company has realized the impact of customer’s culture, values and customs on their purchasing behavior (Subramanian, 2001). The McDonald Company has expanded throughout the world by the use of franchises (Cui & Ting, 2009). Over 80% of the McDonald restaurants have been opened as franchises. These franchises are independent from the company. The owners operate the restaurants full-time. In the year 1997, the McDonald Company was named as the leading entrepreneur franchise in the country. This method of expansion has assisted the company to set up outlets in many areas such as major airports, theme parks and tourist locations. Another strength the company has is in the way it prepares food. The assembly line is highly efficient. Furthermore, they have a standard method of food preparation in all restaurants. This ensures that the same quality of the food served is maintained. The quality of food is also high because the company only uses Grade A eggs in their food. They also use fresh farm animals. The chicken is 100% raised in the farm. They do not use filters or additives in their chicken or their 100% pure USDA inspected beef.
The company only partners with suppliers that have been certified and inspected as they want to protect and maintain their reputation in the industry. The company works closely with the farmers to maintain the high standards in freshness and food quality. In ensuring quality in all processes, the company is following the principles of total quality management. This is where focus moves from the quantity of products produced to the quality of products produced (Powell, 1995). It works to the company advantage since as customers get quality products they begin to display high levels of loyalty to the company products (Sivadass and Baker-Prewitt, 2000)
The company maintains a high level of food safety in the company. The management has put in a system where there are more than 2000 inspections performed on the food processes. The company has safety protocols that the company must adhere to. The company in satisfying changing customer needs as people tries to provide healthier food options such salads, fruits and low fat food alternatives.
Their pizza product failed to secure a substantial market share in the food industry (Turpin, 2005). Other pizza fast food chains are proving to be quite a competition. The company also lacks innovative and new products in the healthy food and organic categories offered by other food companies. It has also been engaging in price competition instead of product differentiation which has led to low revenues.
The company can introduce a healthy hamburger in their food menu. It can take steps to provide a hamburger that has low levels of calories. In doing this they would be the first company to get approvals to market healthy hamburgers. The company should also invest more in the beverages sector to increase profits. The main profits currently come from chicken and beef products. In 2008, when the company started offering hot specialist coffees, the company got high sales and the high number of customers who were coming to the restaurants ended up buying other products (Crown, 2008).
The company has been accused of contributing to unhealthy eating practices in children and adults that may lead to obesity and further health complications (Poulter, 2010). It is perceived as unethical. McDonald has been seen to be contributing to the aspect of “fat America”. This was brought in sharp focus when Michael Spulock filmed a documentary in 2004. He ate McDonald food alone for a period of 30days. He ended up getting liver cirrhosis. This influenced the McDonald Company to remove the supersize option in their services.
Strategies that McDonald should adopt in its Operations
The company should adopt two strategies in its production operations. The company should diversify its products. Secondly it should differentiate its products. The company has been engaging in price competition with its competitors.
It has been offering low prices leading to lower revenue. The company should instead adopt the strategy of product differentiation. They should offer different kind of pizza food in order to deal with the competitors such as Burger King and Starbucks.
For McDonald to cope with the high levels of competition in the market place, the company will have to offer products that are different in the industry. When the company offers differentiated products they can charge a higher price for their products than the selling price structure they currently have. Customers will only pay a higher premium for products that are different (Holcombe, 2009). This requires the company to research on the customer needs and preferences which usually keep on changing in the market place. The differentiation in a product goes to satisfy or meet specific customer needs (Kim and Mauborgne, 1999). Customers are willing to pay a higher price for a product to have their needs and preferences met. A company that is driven by customer needs and wants is highly successful (Day, 1984)
A lot of costs will be incurred to achieve success in product differentiation. The company will have to be innovative and creative in coming up with differentiated products in the market place (Porter, 1985, p 120). Product differentiation has been found to offer a more sustainable competitive advantage than other strategies in the market including the low cost strategy (Grant, 2004, p 276). Offering unique or innovative products is better than offering the same low cost products.
The company should diversify its products. With the recent uproar on their fatty foods, the company has to diversify its menu even more and offer healthy food alternatives. The food that the company sells should have different calorie level options. The low-fat options should be more. With the recent bad publicity, where it has been accused of enticing children to eat unhealthy food, the company should come up with different innovative products for the children to eat which are not high calorie foods. The company has the opportunity of providing allergen free food items in their menus such as gluten free or peanut free products. This is an area the company has not tapped into. In the market, people now prefer organic foods and the company is yet to fully delve in capturing and serving this market population. In business, the companies that stick to their traditional goods over a long period of time rarely grow (Ansoff, 1957). Diversification of the products will cause the company to have new technologies, new skills and new facilities. The company will incur several costs but in the long run it will be worth it. When a company engages in product diversification regularly to fulfill changing customer needs, it grows to new heights in its growth.
I believe the company should embrace product diversification over other strategies. In fulfilling the customer’s needs for diverse products, the company will always have a growing market share in the company. Customers’ preference and perception has an impact on their purchasing choices. It also impacts on their company loyalty. They will be pleased that the company is going to great lengths in retaining them as their customers since they are offering other kinds of food which they prefer.
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