Services Marketing Industry Overview Mcdonalds Essay

S. recession -- the ability to make up for such downturns with growth elsewhere is highly valuable. The internal systems allow for two things critical to McDonalds -- efficiency and consistency. The McDonalds experience is the same in every restaurant in every country, something that is essential to brand development.

There are few weaknesses at McDonalds. The company does not have a good reputation among certain segments of the market because its food is perceived as being unhealthy. The company has had a few product missteps in trying to explore opportunities in other business -- pizza being one such failure. These weaknesses have not proven to harm the company in the long run but there are times when such instances will have an adverse effect on the company's revenue streams or cost structure.

There remain opportunities for McDonalds. The company sees coffee as an opportunity and is pursuing market share from Starbucks. The company still has room for international expansion as key markets like China and India are still not saturated to the degree that Western markets are. The growth prospects for the company are not tremendous, but there is definitely still room for slow, incremental growth in established markets while pursuing slightly better growth opportunities in markets not yet saturated.

That said, the competition remains a strong threat for McDonalds, especially in the company's non-core businesses like breakfast. McDonalds also faces threat in terms of its public image, and has been the target of a number of campaigns in the past. Additionally, McDonalds may face challenges as a result of economic conditions. Eating out -- even at fast food restaurants -- constitutes discretionary spending. It is known that discretionary spending declines in periods of economic downturn.

Profitability

Currently, McDonalds is a highly profitable company, with net income of $4.9 billion on revenues of $24 billion, for a net margin of 20.5%. This is a very high net margin and illustrates the strength of the company's differentiation. Last year was a record high for both revenues and profits, and signaled a recovery from the economic downturn. The stock market has given McDonalds a moderate valuation, with a price/earnings ratio of 18.76 times, given earnings of $5.10 per share. This implies moderate profit growth in the coming years, and that is a reasonable assumption. Although McDonald's is a consistently excellent performer, the company has saturated many key markets, meaning that its growth opportunities are becoming somewhat limited. Unless the company can find ways to unlike more growth it will continue to have only moderate growth potential, while still remaining with very strong profitability.

Outlook

McDonalds is going to continue to be the number quick service restaurant in the world for the foreseeable future. Its brand equity in particular seems unassailable, and the company rebounds quickly from any setback. McDonalds is an especially well-run firm, and this shows in its ability to deliver a consistent experience, and one that customers love, no matter what the country and who the franchise owner might be.

Thus, the long-range outlook is very good for McDonalds. Whether it is a company worth investing in depends on what one thinks of the current stock market valuation. Clearly, McDonalds is a good company with great fundamentals and rock solid performance. But its growth opportunities are limited and the stock price is fairly high. However, there is no reason to believe that McDonalds will not continue to enjoy at least incremental growth in…