SWOT Analysis of McDonald Australia Limited - Case Study Example

Running header: Marketing Student’s name: Instructor’s name: Subject code: Date of submission: McDonald’s AUSTRALIA HOLDINGS McDonald’s corporation is the largest hamburger fast foods restaurants in the world. It operates in 119 countries in the world with an average daily customer numbers of over 68 million. It has its headquarters based in the United States. It began 1940 as a barbeque restaurant operated by Richard and Maurice McDonald. The founding of the present McDonald’s Company can be back dated to the opening of a franchised restaurant by a Czech American business man known as Ray Kroc. This happened back on April 15 1955 in Des Plaines Illinois. Kroc purchased the brothers equity in the company thereby leading to its world wide expansion. It thereafter went ahead to be listed in the public stocks markets in 1965 (Ebscohost.com, 2014). The McDonald Australia Limited was founded in 1969 in the then ongoing expansion of the company. As a result of the presence of many international markets, the McDonald’s company has become a globalization symbol. It has also been named as a spread of the American way of life to the worldwide markets. The retail chain generally deals with the sale of hamburgers, cheese burgers, French fries, breakfast items, soft drinks, milkshakes and desserts. Due to the increase in demand for some other products, the company has increased its scope to cater for items such as fish, salad, wraps, smoothies and fruits. Most stand alone McDonald’s restaurants offer both drive through and counter services. In some cases, there is either an indoor and sometimes out door seating places. THE SWOT ANALYSIS OF THE McDonald’s COMPANY The SWOT analysis assists organizations to cope with downturns in the economy which normally affects consumer purchases. It is used in decision making situations where a desired end state or objective has been defined. It is also useful in pre-crisis planning and preventive crisis management. It may also be used in creating a recommendation during a viability study or analysis or survey. It aims at identifying the key internal and external factors seen as important to achieving a set or predestined objective. SWOT analysis groups key pieces of information into two main categories/ 1. internal factors- comprises of the strengths and weaknesses internal in the organization e.g. infrastructure available to the organization 2. External factors- is made up of the opportunities and threats presented by the environment external to the organization e.g. competition to the organization. STERNGTHS 1. global market 2. brand recognition 3. cost reduction through economies of scale 4. consistency of food 5. successful items 6. good infrastructure WEAKNESSES 1. declining market share 2. weak product development 3. distance from major markets 4. infrastructure issues 5. lack of proper regulations 6. quality concerns due to franchised operations 7. focus on burgers and grease fried foods and not on healthier options 8. elevated training costs due to high turnover OPPORTUNITIES 1. international expansion 2. only serving 1% of the world population 3. joint ventures 4. advertising capabilities 5. continued venture interest on beverages 6. Entry into new and highly popular product categories. 7. increased size in expanding markets THREATS 1. increased societal focus on health 2. government regulation of food industry with regard to health issues 3. foreign exchange fluctuations 4. commodity price fluctuations 5. security concerns in some markets 6. law suits against the company in relation to health issues 7. reduced eating out ability by the customers due to economy issues ANALYSIS OF THE SWOT TABLE STRENGTHS The McDonald’s company has a large global market spanning to about 119 countries worldwide. By this the company is able to well market itself as a leading global firm which is leading in the field. In the year 2011, the company had 33,510 restaurants in the world. The company and its product have gained worldwide recognition and have emerged as one of the most recognizable brands in the world. The products of the company have had a consistent nature. This is more so because the company has been in the burger serving industry since 1940. There are more chances of development in the future due to the innovative nature of the company. The company also possesses good infrastructure to enable progress and better product development into the future. The company also has a proven track record of paying out and raising its dividends in the share market. There is an average annual dividend pay of 3.50%. This gives the company a massive buying power. WEAKNESSES The market for burgers and fries is declining since some people are viewing them as unhealthy foods. This has in turn led to reduced revenues from the sales. Also, the large size of the business makes growth and changes very difficult to achieve. This can be attributed to the large number of branches worldwide. The company is experiencing difficulties in adapting to the changes in technology which in turn is leading to massive failure of the old generation technologies. The company is also having its focus fixed mostly on burgers and fries and hence resulting to lesser focus on healthier options. Due to high staff and employee turnover, the training costs are high. They are also raised by the high number of employees in the businesses. OPPORTUNITIES The company possesses expansion infrastructure to enable development in the new markets. This has been largely boosted by increase in the number of middle class people in the new markets who can afford the products of the company. The company also has enough resources to advertise to the new markets or in markets where they have ventured interest in. the company also has expansion capabilities based on the fact that they are only serving 1% of the world’s population hence they have a lot of market choices to exploit (James, 2007). With increased development in the 3rd world countries, market opportunities are increasing in the developing cities. The company based on the fact that its interest is on beverages, development is highly assured due to increased tastes of people to the beverages. The company is at times working as joint ventures with supermarket chains hence cost sharing and wider customer base for the company. The entry into new and highly popular product market e.g. coffee is an opportunity for expansion. There is a general increase in demand for some products other than the original products of the company and hence increased chances for operational expansion. THREATS There is increased focus by the society on health. This in turn results to decreased demand for foods with high fat content. This is mostly so because of the effects being encountered of large bodyweights and the danger of heart attacks among other illnesses caused by such. The company is characterized by high prices of commodities. This can lead to reduced margins of profits due to reduced sales volumes. Government regulations about some types of foods have affected the firm. This is because burgers are classified as foods with very high contents of fat. The governments are limiting their amounts due to concerns of health and fat contents of the citizens. The firm has also been affected by concerns of security in some areas where it operates. These areas include in the Middle East regions. The company is largely affected by foreign exchange fluctuations. This is caused mostly by the large number of foreign based branches. For example in 2011, 68% of the total sales were made up of foreign operations. TARGET MARKET The target market of the McDonald’s company is every demographic segment in the world. Segmentation in the consumer markets is categorized as either demographics or geographic. Demographics include age groups (e.g. teens, retirees, and young adults), gender, education level, ethnicity, income level, religion, occupation, social class and marital status among others. Geographies can be categorized into location (e.g. national, regional, urban, sub urban, rural, and international) and climate among others (Striffler, 2005). However; special attention is being paid on the fast springing towns in the 3rd world countries. This is due to the increasing demand for fast foods in these towns. These segments of the demography are family, life-cycles, gender, age, nationality, income, generation and race among others. NEW PRODUCT The company has changed its focus from only fast foods and beverages but to also fast moving high demand products like coffee. Coffee sales have over the recent past sky rocketed. This is because there is a developed taste for coffee emanating fro seasonal weather variations. Coffee is a drink enjoyed as a result of its affordability and fewer complexities involved in the preparation. The marketing variables involved for the new product are the 4ps i.e. product, price, place and promotion 1. McDonald Product- the product should be priced based on its value. It should also be a fast service meal. 2. McDonald Price- the company should offer the best combination of quality and good service at the most fair prices available (Jackie, 2012). 3. Place- there must be a strategic location of the outlet. The main focus of the McDonalds is in the highly populated areas and also in areas which are easily accessible by the customers. These areas include airports, shopping malls, retail areas, busy streets and generally areas where there are large turnovers of people. 4. Promotion- McDonalds has engaged in a broad spectrum of incentives for consumer promotion. They include promotional games in an effort to promote old and new items in the menu and also through limited value menus. The product fits into the market due to the availability of its demand in the market. So as to increase the sales for the new product, the pricing should be fair to the customers. This insinuates that many customers prefer instances where they get quality and value for their money. Generally, high prices push away probable and willing consumers for the products of a company. This therefore highlights the importance of fair pricing. Similarly, very low prices below average create doubts among the customer of the quality of goods and services being offered (Yale, 2005). This is because very low prices are associated with sub standard goods and services. Promotion on its part refers to the use of adverts which the customers can well relate to. They should not be over-exaggerated since this can drive away the customers. The development of the new product will be due to the fact that most similar retail chains do not engage a lot in the sale of the product. This factor signifies increases in profits due to the sale. The product raw materials are also readily available in the market. They are also available in good qualities and prices. This means that lesser resources will be spent in its acquisition and hence suitability. Unlike burgers which have suffered a lot of challenges due to the health concerns raised over their health implications, coffee doe not have any association with weight gains or obesity. It similarly does not have any legal rules and restrictions imposed upon its consumption. During the production process of burgers, many different by products are used ranging from meat to wheat floor and many more. This is unlike the case in coffee where only coffee grains and sugar are required to come up with the best blend of coffee drink (Hugh, 2010). This results to reduction in production costs and hence increases in the eventual profits earned by the company. Despite the fact that McDonald is the largest restaurant chain worldwide, there however exists stiff competition to the Company. Its main competitors include among others; Subway, Wendy’s, Pizza Hut, KFC, Papa John’s, Taco Bell, Arby’s and Burger King. These competitors are mostly in the burger market. They however are not as large as the McDonald’s company. They however reduce the amount of revenues made by the company in the burger industry. REFERENCES Ebscohost.com, 2014, McDonald's Corporation SWOT Analysis, Retrieved on 27th April,2014, from; http://proxy.library.carleton.ca/login?url=http://search.ebscohost.com/direct.asp?db=bth &jid=%22ZGT%22&scope=site&site=bsi. James, B2007, Contemporary issues in marketing, London, Rutledge Striffler, S2005, Chicken: the dangerous transformation of America's favorite food. New Haven, Yale University Press. Jackie, M2012, Principles of marketing, Oxford, Oxford University Press. Yale, B2005, Essentials of marketing, London, Rutledge. Hugh, W2010, Marketing plans: How to prepare them, how to use them, New York John Willey & Sons. Read More