Swot Analysis of McDonald’s Vs.Burger KingJoin now to read essay Swot Analysis of McDonald’s Vs.Burger KingThe McDonald brothers first restaurant, founded in 1937 in a parking lot just east of Pasadena, Calif., didnt serve hamburgers. It had no playground and no Happy Meals. The most popular item on the menu was the hot dog, and most people ate it sitting on an outdoor stool or in their cherished new autos while being served by teenage carhops.
That model was a smashing success–for about a decade. Then Americas tastes began to change, and the Golden Arches changed with them. As cars lost some of their romance, indoor restaurants took over. When adults became bored with the menu in the 1960s, a new sandwich called the Big Mac wooed them back. As consumers grew weary of beef, McDonalds introduced bite-size chunks of chicken in the early 80s and within four years was the nations second-largest poultry seller.
The changes were vital, but never radical. McDonalds gave us what we wanted before we even knew we wanted it, whether it was movie tie-ins or Egg McMuffins. Along the way, it built one of the worlds best-known corporate icons and its most ubiquitous store. The philosophy was neatly summarized by Ray Krocs brash vow: whatever people ate, McDonalds would be the ones to sell it.
But now, two years shy of Krocs benchmark for the far-off future, that goal seems less assured than ever. Forget for a moment all the recent talk about Burger King Corp. and Wendys International Inc. stealing customers from McDonalds. With a 42% share of the U.S. fast-food burger market, McDonalds still easily outpaces its rivals. Nonetheless, the problems under the famous Golden Arches are far more serious than a failed Arch Deluxe here or a french-fry war there. Quite simply, McDonalds has lost some of its relevance to American culture–a culture that it, as much as any modern corporation, helped to shape. Not even a still booming international division, responsible for half of sales and 60% of profits, can mask the troubles.
The company that once seemed a half-step ahead of pop culture today is unable to construct even an appealing new lunch sandwich. Its last successful new product was the Chicken McNugget, which launched in 1983. In the 90s, the company has careened from tests with pizza and veggie burgers to confusing discount promotions such as last years Campaign 55. Earnings in 1997 inched up 4%, to $1.6 billion, on sales of $11.4 billion, up 7%. Thats well below projections McDonalds itself made just a few years ago.
For a company that enjoyed sizzling growth for five decades based on its ability to read and shape popular trends, the breadth of its problems is astonishing. Since 1987, McDonalds share of fast-food sales in the U.S. has slipped almost two percentage points, to 16.2%. The drop has come even as the company has increased its number of restaurants by 50%, far outpacing the industrys expansion rate. The result: Domestic sales have climbed only 18% since 1989, while operating profits havent even kept pace with inflation. Theyve risen just 2% a year in that period. That trend has slashed U.S. per-store profits by 20% since 1989–or a huge 40% after inflation. Meanwhile, nearly every other top consumer brand, from Disney to Marlboro, has prospered.
MENU TWEAKING. McDonalds has chalked up that dismal record despite the fact that it owns one of the best known brands on the globe. The company has been unable to harness the strength of its brand to grow beyond its basic formula of burgers and fries. During a period when Americans have abandoned their kitchens in droves for food cooked elsewhere, the Golden Arches–easily the worlds largest provider of prepared food–has failed to profit. Its as if hundreds of thousands of people started drinking soda for breakfast and Coca-Cola Co. wasnt benefiting. McDonalds has totally failed to adapt its original concept, says Simon C. Williams, chairman of the Sterling Group, a New York-based brand consultancy that works with food companies.
The McDonalds problem isn’t limited to America. A report by the National Economic Council last year found that the average American spends roughly $4.15 on groceries. McDonalds’ sales are down by 35 percent. That’s not even mentioning the company’s problems with the U.S. food system. Over a decade after McDonald’s first opened, there have been many similar struggles with what consumers will buy based on convenience and cost, says Michael Vigna, president of the National Association of Home Appliances.
Since 1984, McDonalds has been trying to fix its broken image by making it easier for consumers to come by, say, a frozen chicken. It’s a strategy that has worked and a problem that has a potential to cost more than $15 per order per day. The American Consumer Product Commission reported that the company could bring in $22.7 billion by 2020. Vigna’s group estimates that if that happens, by early 2017, the United States will have its first large grocery chain of its kind and the company will be making $2.3 billion in net revenues each. In the meantime, as many as half of American adults are living in poverty or are living in low-income households, according to the U.S. Treasury.
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