Mcd SWOT

MCD SWOT The SWOT for McDonalds is attached in Appendix A. The company has experienced a lot of growth in the APMEA region (Asia-Pacific, Middle East, Asia), and most of this comes despite weakness in China. The company has good growth in other parts of Asia and the Middle East. This region is growing rapidly economically and that provides further opportunity. Europe also has good growth opportunities, especially in the East. McDonalds can also cut costs to improve profits, and efficiency is actually one of the company's core competencies.

The major threats come from that China weakness, as the company's margins took a huge hit with the 40% price cut. The breakfast market is especially tough on the homefront, with Starbucks taking away potentially billions in business in the morning, in the U.S., Canada and UK especially. Furthermore, the company has been troubled by negative publicity of late, and that hurts sales. McDonalds overall is a strong company.

It has a great brand that is one of the top ten brands in the world, and best in the industry, according to Interbrand (2009). McDonalds also has good pricing power, allowing it to earn a 20% net margin despite being in an industry defined by cost competition. Overall, there are no financial constraints as McDonalds is solvent and liquid. But the brand growth has not been very good -- it seems to be a maturing brand.

The Americas are another weak region, and part of that has to do with translation losses that have dogged the company lately. Exercise 6B. A SPACE matrix is a means of understanding what sort of strategy a company should undertake. It is based on two internal strategic dimensions -- financial strength and competitive advantage -- and two external dimensions. The external dimensions are environmental stability and industry strength. Appendix B highlights the individual factor calculations that went into the SPACE Matrix. The final position on the matrix is x = 1.5, y = 2.25.

This puts the company in the Aggressive quadrant with respect to strategy type. This type is given as the optimal strategy type for a strong company that operates in a strong industry. That is a good description of the competitive situation for McDonalds. The industry itself is growing, especially in a number of international markets, and McDonalds is one of the toughest competitors in the business. Thus, an aggressive strategy is prescribed for McDonalds, with respect to growth in new markets and perhaps even with new product development.

The company only does one thing, so aggressive implies that it should expand geographically, and aggressively fill in good growth opportunities where it currently operates. These strategies are market penetration and market growth, the latter being especially important for McDonalds, since the company operates in a number of major countries in which it has a low market share. In both the short and long-run, McDonalds should therefore focus on an aggressive growth strategy. Such an approach will leverage its advantages in order to capture a greater share of these markets.

The result should be that McDonalds establishes a strong financial position for itself, and does so before many competitors can really even enter these markets. Indeed, if we look at the major Asian markets, McDonalds is only competing with Yum and Starbucks, so there is a lot of opportunity. The SPACE matrix is applied to the entire business, which unfortunately leaves the breakfast question unanswered. McDonalds is essentially working with a defensive approach, but perhaps the aggressive approach is better.

McDonalds has a lot of brand credit with consumers, and is an efficient operator. The problem is that before lunch, Starbucks is just as strong. McDonalds can only win back share by being competitive, which is not the strategy that the matrix recommends but might be better for making short-run gains. Appendix A: McDonalds SWOT analysis Strengths Weaknesses Opportunities Threats Highly profitable (20% net margin Sluggish brand growth (51st overall) APMEA growth (17.5% in FY08) Competition from SBUX.