SWOT Analysis $10$ Marks

McDonald's $($NYSE: MCD$)$ has been outperforming the market this year and recently set a new all$-$time high. A SWOT analysis $--$ a look at strengths, weaknesses, opportunities, and threats $--$ can help assess whether the fast$-$food giant can keep the growth on a high$-$calorie diet.

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Questions:

a$)$ Write down all the strengths, weaknesses, opportunities and threats you can think in relation to the McDonald's..

b$)$ Give some Solution strategy for McDonald's.

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Strengths:

$$ McDonald's has successfully rolled out new items like coffees, smoothies, etc. 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 one 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\mathrm{.}20$ this year.

$$ Weaknesses:

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.

Opportunities:

$$ There are opportunities for new restaurants outside the United States, and McDonald's has been taking advantage of them. China is a great opportunity for the company, as is much of Asia.

$$ Menu innovations are limited only by imagination.

$$ Low interest rates provide cheap capital for growth. In addition to dollar$-$denominated debt, McDonald's recently became the first foreign company to issue yuandenominated bonds in Hong Kong.

Threats:

$$ Governments are considering regulations targeting fast food.

$$ McDonald's faces competition from strong peers such as recent $11$ O$$clock Stock picks Yum! Brands and Burger King.

$$ New product rollouts often have to go head$-$to$-$head with established players like Starbucks coffee or Jamba smoothies.

$$ Commodity price increases could increase costs while a weak economy limits the ability to pass the price hikes through to consumers.

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Summary: McDonald's is still attractive and deserves to be considered as a core holding for income oriented investors, as my Foolish colleague Jim Royal argues. P$/$E ratios are in line with fastfood competitors, and the company is performing at or near the top of its industry. McDonald's has earned its new highs and is likely to set a few more in the coming months. Plus, the company has a massive $$9$ billion stock buyback ongoing