Swot Analysis of McDonald’s Vs.Burger King

The McDonald brothers' first restaurant, founded in 1937 in a parking lot just east of Pasadena, Calif., didn't 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 America's 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, McDonald's introduced bite-size chunks of chicken in the early '80s and within four years was the nation's second-largest poultry seller.

The changes were vital, but never radical. McDonald's 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 world's best-known corporate icons and its most ubiquitous store. The philosophy was neatly summarized by Ray Kroc's brash vow: whatever people ate, McDonald's would be the ones to sell it.

But now, two years shy of Kroc's 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 Wendy's International Inc. stealing customers from McDonald's. With a 42% share of the U.S. fast-food burger market, McDonald's 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, McDonald's 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 year's Campaign 55. Earnings in 1997 inched up 4%, to $1.6 billion, on sales of $11.4 billion, up 7%. That's well below projections McDonald's 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, McDonald's 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 industry's expansion rate. The result: Domestic sales have climbed only 18% since 1989, while operating profits haven't even kept pace with inflation. They've 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.'' McDonald's 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 world's largest provider of prepared food--has failed to profit. It's as if hundreds of thousands of people started drinking soda for breakfast and Coca-Cola Co. wasn't benefiting. ''McDonald's 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.

Now, McDonald's is embarking on an effort at reform. Last year, Chief Executive Michael R. Quinlan shuffled his U.S. management team. He says the decentralized structure will rekindle the company's entrepreneurial flair. A new cooking system set for 2000 should make it easier to customize sandwiches, improve quality, and expand the menu. Fundamentally, however, tomorrow's McDonald's won't be much different. ''Do we have to change?'' asks Quinlan. ''No, we don't have to change. We have the most successful brand in the world.''

McDonald's, though, is doing some tinkering. The new head of the domestic division--Jack M. Greenberg, a pleasant 54-year-old lawyer who has been with the company 16 years--has