A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is an excellent way to gain a detailed and thorough perspective on a company and its future. Fresh of a disastrous third quarter earnings report, I would like to pinpoint on the golden arches, McDonald’s Corporation (NYSE: MCD).
* Stability and Predictability: McDonald’s has been serving burgers since 1940, and will continue this success into the future because of their innovative nature and massive value and power * Brand Recognition and Loyalty: The golden arches logo represents one of the most recognizable brands in the world, and nearly everyone knows what McDonald’s is * Consistent Top-Line Growth: The company has consistently grown revenues in the mid-single digits range for the past years, and should continue this trend into the future * Dividend: McDonald’s has a long and proven track record of paying out and raising its dividend, and currently pays out quarterly installments of $0.77, which when annualized puts the dividend as yielding 3.50% * Global Presence: As of the end of 2011, the company possesses 33,510 restaurants in 119 countries, with a strong presence in every major country in the world * McDonald's has successfully rolled out new items like coffees, smoothies, and Angus burgers, expanding the range of menu choices. * With a strong product offering, the company has grown income throughout the recession, notching strong increases in same-store sales. * Operations are spread around the world, meaning the company is not exposed to just once currency or economy. * Even trading near its highs, McDonald's serves up sizzling dividend yields that top the 10-year Treasury. The yield comes with a side order of annual dividend hikes dating back to 1976. The annual dividend payment has gone from 55 cents per share in 2005 to $2.20 this year. * • Intangible assets – Positive company social-image (Ronald McDonald House), Name recognition, brand-loyalty
• Market leader in mature market : possesses three times thee sales volume of nearest competitor and 7% of market sales.
• Increases in assets, shareholder equity and numbers of restaurants with decrease in number of shares outstanding
• Accessible locations
• Strategic marketing alliances – movie tie-ins, McDonald’s brand toys
• Scalable product marketing and pricing – uses company owned locations to test market product and price
Weaknesses: * Saturated Nature of Business: The company has a presence in nearly every nook and cranny the world has to offer, so there is not much more room to run * Low Barrier to Entry: All a person has to possess to compete with McDonald’s is food, and it is an under-exaggeration to say that there is fierce completion in the industry McDonald’s operates in * Vulnerability to Rising Input Costs: The historic drought this year has already caused food prices to soar, and this will cause McDonald’s to face a situation in which they raise prices for their customers or allow their margins to be squeezed, a lose-lose situation * Recent Disappointment: Recently the company has reported declining revenues and a great strain on their same-store growth rate; however in the long-term view of things these short-term issues should not prove significant * It will be harder and harder to find prime locations to build a set of golden arches. The U.S. is saturated with its restaurants, so growth will have to occur internationally, posing potential cultural challenges. * While the annual dividend hikes are likely to continue, the dividend growth rate has been slowing and will probably continue to slow or level off. * • 2001 income shrunk 17%, significant decline in affiliated sales
• Market share grew more slowly than that of competitors
• Debt increases in 2000 & 2001 not producing asset gains shown in previous three-years
• Operating income, EBT, free…