McDonald's CorporationCompany ProfilePublication Date: 25 May 2010AmericasEurope, Middle East & AfricaAsia Pacific245 5th Avenue119 Farringdon RoadLevel 46London4th Floor2 Park StreetEC1R 3DASydney, NSW 2000New Y ork, NY 10016United KingdomUSAAustraliat: +1 212 686 7400t: +44 20 7551 9000t: +61 2 8705 6900f: +1 212 686 2626f: +44 20 7551 9090f: +61 2 8088 7405e: euroinfo@e: apinfo@e: usinfo@ABOUT DATAMONITORDatamonitor is a leading business information company specializing in industry analysis.Through its proprietary databases and wealth of expertise, Datamonitor provides clients with unbiased expert analysis and in depth forecasts for six industry sectors: Healthcare, Technology, Automotive, Energy, Consumer Markets, and Financial Services.The company also advises clients on the impact that new technology and eCommerce will have on their businesses. 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Please note that the findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be incorrect. McDonald's Corporation Page 2TABLE OF CONTENTSCompany Overview (4)Key Facts (4)SWOT Analysis (5)McDonald's CorporationPage 3T ABLE OF CONTENTSCOMPANY OVERVIEWMcDonald's Corporation (McDonald's or “the company ”) is one of the world's largest foodserviceretailing chain.The company is primarily known for its burgers and fries which it sells through morethan 32,478 fast-food restaurants in over 100 countries. It primarily operates in Europe, Asia Pacific,and northern America.The company is headquartered in Oak Brook, Illinois and employs 385,000people.The company recorded revenues of $22,744.7 million during the financial year ended December2009 (FY2009), a decrease of 3.3% over 2008.The decrease in revenues was primarily caused bya shift to a greater percentage of franchised restaurants —where McDonald's receives rent and/orroyalties based on a percent of sales. Also, foreign currency translation had a negative impact onconsolidated operating results —primarily driven by the Euro, British Pound, Russian Ruble, AustralianDollar and Canadian Dollar.The operating profit of the company was $6,841 million in FY2009, anincrease of 6.2% over 2008.The net profit was $4,551 million in FY2009, an increase of 5.5% over2008.KEY FACTSMcDonald's CorporationHead Office One McDonald ’s PlazaOak BrookIllinois 60523USA1 630 623 3000Phone 1 630 623 5004Fax Web Address22,744.7Revenue / turnover (USD Mn)December Financial Year End385,000EmployeesMCDNew York StockExchange Ticker McDonald's CorporationPage 4Company OverviewSWOT ANAL YSISMcDonald's Corporation operates fast food restaurants all over the world.The company has over32,478 fast food restaurants in over 100 countries. All McDonald's restaurants offer a standard menu,which comprise food items such as hamburgers, cheeseburgers, chicken sandwiches, French fries,salads, milk shakes, desserts and ice cream sundaes. McDonald's has a well-established brandthat appeals to customers of all age groups and nationalities. Strong brand draws customers to therestaurants of the company and provides it acceptability in new markets. However, a renewed threatof the spread of bird flu across various parts of the globe and growing consumer awareness towards healthy food products could lead to a slowdown in the revenue growth of McDonald's.Weaknesses StrengthsLegal proceedings affect brand image adversely Strong brand value draws customers toMcDonald's restaurantsProduct failures such as Arch Deluxe Diversified geographic presence providesopportunity to gain from economic buoyancyin emerging marketsLarge scale of operation and productcustomizationThreats OpportunitiesConsumer spending adversely impacted by global economic downturn Growth of franchisee operated restaurantsBooming out-of-home eating market canboost top line in long runHealth concerns arising from outbreaks of Avian Flu Growing hot drinks market —anotherfavorable trend to drive topline Intense competition in retail food industryGrowing consumer consciousness forhealthy food productsStrengthsStrong brand value draws customers to McDonald's restaurantsMcDonald's continues to be recognized as a premier franchising company around the world.McDonald's has a well-established brand that appeals to customers of all age groups and nationalities.Around 80% of McDonald's restaurants worldwide are owned and operated by independent localmen and women. It is one of the world's most well-known and valuable brands and holds a leadingshare in the globally branded quick service restaurant segment. In 2009, McDonald's figured at theMcDonald's CorporationPage 5sixth place in the top 100 global brands ranking of Business Week magazine and Interbrand, a branding consultancy. It valued McDonald's brand at $32,275 million in 2009.The brand is well known in the informal eating-out market in almost every country it operates in. Some of the famous products from the company include French Fries, Big Mac, Quarter Pounder, Chicken McNuggets and Egg McMuffin. In order to further increase equity for the brand, McDonald's makes substantial investments in advertising and promotions. Strong brand draws customers to the restaurants of the company and provides it acceptability in new markets.Diversified geographic presence provides opportunity to gain from economic buoyancy in emerging marketsMcDonald's has a diversified geographic presence. In FY2009, the company operated in over 100 countries in the following geographic segments: the US; Europe; Asia Pacific, Middle East, and Africa (APMEA); Latin America and Canada.Revenues from outside the US accounted for about 65% of the company’s total revenues whereas the US accounted for around 35% of the company’s total revenues.The aforementioned figures signify that McDonald’s does not depend on particular economies to generate it revenues. Also, large scale geographic diversification partially insulates the company from the effect of downturn in particular market. Moreover, this factor also gives the company the opportunity to gain from economic buoyancy in emerging markets.This is visible from the fact that the company’s revenues fromAsia/Pacific, Middle East and Africa region increased 2.5% in FY2009 as compared to FY2008. Diversified geographic presence reduces the McDonald's business risk and presence in emerging markets would enable the company to stabilize its revenue growth.Large scale of operation and product customizationWith revenue in excess of $22,700 million, McDonald's has large scale of operation.The company is the world's largest food service retailing chain, preparing and serving a wide range of food products. The company operates its restaurants in more than 100 countries around the world. McDonald's generates revenues through company operated restaurants and franchisee restaurants. Of total 32,478 McDonald's restaurants, over 6,200 are operated by the company and over 26,000 are operated by franchisees and affiliates.The company as a part of restaurant development strategy, selectively picks locations within the marketplace to expand its target audience. For example, the company operates restaurants in local neighborhoods as well as at airports, malls, toll ways, and colleges. Moreover, McDonald's has bigger economies of scale in terms of revenues to compete with other players in the market. McDonald's generated total revenues of $22,744.7 million in FY2009, which is significantly higher than that of its competitors like Wendy's/Arby's Group (WEN) and Burger King Corporation (BKC).WEN and BKC generated revenues of $3,580.8 million and $2,537.8 million, respectively, in FY2009. Also, the company customizes its product to suit tastes and preference of consumers in local markets. For example, the company’s product line in India comprise of non-beef based burgers.The company's large scale of operation and ability to customize its products allows it to penetrate upcoming markets with relative ease and enhances its revenue generation capacity. McDonald's Corporation Page 6WeaknessesLegal proceedings affect brand image adverselyMcDonald's is party to several litigations across the world.The complaints filed against McDonald's include claims for violation of state consumer fraud acts, unfair competition or deceptive trade practices acts, strict liability, failure to warn, negligence, breach of express and implied warranties, fraud and fraudulent concealment, negligent misrepresentation and concealment, unjust enrichment, and false advertising. Such claims tend to affect the company’s brand image and ultimately its profitability.Product failures such as Arch DeluxeMcDonald’s has had a number of product failures in recent years, few of which include Arch Deluxe, McLibel, McLean Deluxe, McSoup and McPizza. However, the failure of Arch Deluxe was a major setback for the company as the product was marketed as the burger for grown up consumer, and the idea was to have a burger which wasn’t associated with children. McDonald’s also advertised the product with images of kids shunning the so called sophisticated product. However, the company has built its reputation and value proposition on convenience rather than sophistication. Moreover, one of the key aspects of the company’s brand identity is its child-friendly approach. Hence, the company launched a product which was in complete contrast to its brand identity. Hence, such kind of product failures could hamper McDonald’s brand image and ultimately its profitability. OpportunitiesGrowth of franchisee operated restaurantsIn future, McDonald's is planning to significantly increase its count of franchisee operated restaurants. In FY2009, the company made significant progress enhancing the mix of franchised and company-operated restaurants, wherein the number of franchised restaurants increased by 600 on a year on year basis. As a result of its developmental license strategy and franchising initiatives, the percentage of franchised and affiliated restaurants worldwide increased from 79.6% in FY2008 to 80% in FY2009.Under a developmental license, a local entrepreneur owns the business, including control of the real estate, and uses their capital and local knowledge to build the McDonald's Brand and optimize long-term sales and profitability.The company collects a royalty, which varies by market, based on a percentage of sales, but does not invest any capital for new restaurants or reinvestments.The company has successfully used this structure for more than 15 years.The transition of company-operated restaurants to franchisees and developmental license structure is likely to increase the overall profitability of McDonald's.McDonald's Corporation Page 7Booming out-of-home eating market can boost top line in long runThe out-of-home eating market is witnessing significant boom phase. As per, National Restaurant Association (NRA) 2008 Restaurant Industry Forecast, consumers in North America will spend more than $592 billion at restaurants in 2009-10. Presently almost 40% of the consumer food and beverages spend is out-of-home in North America, Brazil, Russia. India and China are also showcasing similar trends, and many Western European countries are not far behind.McDonald’s operates over 32,000 restaurants worldwide and has invested significantly in marketing campaigns and elevated customer experience by renovating restaurants, offering extended hours and providing services such as free wireless Internet access in its restaurants. Moreover, McDonald’s also focuses on product innovation. It recently launched three new premium products such as Angus Third Pounder hamburger and the McCafe specialty coffee menu. Such investments and product innovation leads to increased restaurant traffic and McDonald’s can leverage the growing opportunity in the out-of-home market to boost its top line in long run.Growing hot drinks market—another favorable trend to drive toplineThe global hot drinks market grew by 2.4% in 2008 to reach a value of $61,700 million. In 2013, the global hot drinks market is forecast to have a value of $70,300 million, an increase of 13.9% since 2008. Coffee accounts for 53.9% of the global hot drinks market's value.As part of its multi-year strategy to take advantage of the significant and growing hot drinks category, McDonald's began rolling-out espresso-based hot and cold specialty coffees. In FY2009, the company added about 290 McCafes—an upscale area with coffeehouse style ambiance inside an existing McDonald’s restaurant.The expected growth in hot drinks category will offer the company opportunities for expanding its revenue base.ThreatsConsumer spending adversely impacted by global economic downturnAs a retailer dependent upon consumer discretionary spending, McDonald's will face a challenging FY2010. All major western including the US, the UK, Germany, France, Italy, Spain, Japan and Australia are still reeling under the affect of recession.This is evident from the fact that in early 2010, Greece declared a sovereign debt crisis.The global economic downturn has led to a severe decline in consumer confidence. Consumers also have less money for discretionary purchases as a result of job losses, foreclosures, bankruptcies and reduced access to credit. A decrease in consumer confidence and the resultant curbed consumer spending would result in decreases in customer traffic and average value per transaction. McDonald's business is highly sensitive to changes in customer traffic, and the current economic downturn would put downward pressure on the company's margins.McDonald's Corporation Page 8Health concerns arising from outbreaks of Avian FluAsian and European countries have experienced outbreaks of Avian Flu. Future outbreaks could adversely affect the price and availability of poultry and cause customers to eat less chicken. In addition, outbreaks on a widespread basis could also affect its ability to attract and retain employees.Chicken products such as Chicken McNuggets are a central part of McDonald's offerings. More importantly, Chicken products have become strategically important to McDonald's in market such as India where a majority of population do not consumer beef products. If this disease assume epidemic proportion then the revenue growth of the company is likely to slow down.Intense competition in retail food industryMcDonald's operate in a highly competitive retail food industry.The retail food industry is highly competitive with respect to price and quality of food products, new product development, price, advertising levels and promotional initiatives, customer service, reputation, restaurant location, and attractiveness and maintenance of properties.A decline in franchise sales could alter McDonald's intrinsic value. Also, the volatile cost of food, energy, and labor could affect profitability. Moreover, credit lending firms have become more cautious after the recession of FY2008-09 and a tighter credit market could impede franchisees' ability to add new restaurants, perform renovations, or purchase equipment. Such factors could affect McDonald's business and expansion plans adversely.Growing consumer consciousness for healthy food productsThe fast spreading consciousness for healthy, sugar and salt free meals might influence McDonald’s growth plans and profitability. More people are switching to healthier options such as salads, fat-free sandwiches, and home cooked food. In this aspect, McDonald’s faces stiff competition from companies such as Subway who promote and market themselves over fresh and healthy food products company. Subway is also one of the fastest growing franchises in the world with approximately 31,949 restaurants in 91 countries as of November 2009 and its is estimated that the company would overtake McDonald’s in terms of number of restaurants by the end of 2010.Therefore, a change in consumer preferences would have a significant impact on McDonald’s profitability.McDonald's Corporation Page 9Copyright of McDonald's Corporation SWOT Analysis is the property of Datamonitor Plc and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.。