Introduction
McDonald’s and Pfizer are leaders in the fast-food and pharmaceutical industries, respectively. McDonald’s is a global fast-food company with restaurants in over 100 countries and is renowned for its diverse range of menus (Dudovskiy, 2022; Rajawat et al., 2020). On the other hand, Pfizer is a giant pharmaceutical corporation known for innovating, researching, and developing life-saving medications.
This paper will analyze the two companies’ business strategies and performances to understand their market dominance and identify critical factors contributing to their success. We intend to achieve this objective by analyzing the two companies’ profiles, financial performances, market dynamics, strategies, and future outlooks.
Company Background
Over the years, McDonald’s has continued to expand into different geographical locations and the products it offers. Today, it has over 39,000 restaurants in over 100 countries, while Pfizer has over 78,000 employees working across 175 countries globally (Hamza & Karabulut, 2021; Marriott & Maitland, 2021). In terms of global reach, Pfizer has more reach than McDonald’s. Both companies operate in a monopolistic competition market. Still, the products sold by McDonald’s are more elastic when compared to those sold by Pfizer. The inelasticity of Pfizer makes it a better investment option since there are few substitutes.
The two companies under analysis, McDonald’s and Pfizer, have established themselves as market leaders in their respective industries. McDonald’s has leveraged its firm brand name to expand geographically and in the products offered (McDonald’s, 2021). Through the company’s franchising model, it has established itself as a worldwide symbol of the fast-food industry.
Pfizer has achieved the same brand recognition as McDonald’s. Still, the pharmaceutical company has leveraged its expertise in research and development to position itself above its competition. In market leadership, it would be more advisable for an investor to go for Pfizer since McDonald’s leadership could be influenced by changes in customer preferences.
McDonald’s and Pfizer operate in industries with intense competition and rivalry. The main competitors for McDonald’s are Yum and Burger King, with the rivalry differing based on locations. Globally, Yum is McDonald’s’ main competitor, known for its various business chains, such as KFC and Taco Bell (Emerson & Trautman, 2020).
In the US, McDonald’s’ main competitor is Burger King, which is renowned for its revolving burgers. The competition faced by Pfizer in the pharmaceutical industry is just as intense, with the main rivals being Johnson & Johnson and Roche. For McDonald’s, the elasticity of the products sold will affect the demand negatively when economic conditions are in a recession, unlike for Pfizer, thus making Pfizer’s returns likely higher in the future. Additionally, the health concerns about McDonald’s products may cause the organization to lose its market leadership position, thus making it a riskier investment option compared to Pfizer.
Financial Analysis
Stock Performance
McDonald’s stock price has increased for the past twenty years, showing the company has had gradual and consistent financial growth. The company’s stock price was close to $300 in May 2023. The stock price has a 52-week high of $298.86 and a 52-week low of $228.34. The average stock price of McDonald’s for the last 52 weeks is $262.82 (Macrotrends, n.d.).
Pfizer’s stock price has increased dramatically over the past ten years. It ranged from $10 to $20 per stack during the 2000s; the 52-week high stock price was $54.93, and the 52-week low was $38.31 (Aja Kindelan et al., 2019). For the past 52 weeks, the average stock price of Pfizer is $46.80, which has more than doubled from ten years ago. As of the first day of May 2023, the closing price for Pfizer stock is $39.21 (Macrotrends, n.d.). Based on the stock performances of the two companies, it would be recommendable for an investor to go for Pfizer as its stock growth in the last ten years is more promising.
Earning Ratio
The price-earnings ratio for both McDonald’s and Pfizer has been positive in the last ten years, leading up to 2022, apart from three years for both companies. McDonald’s has been generating positive changes to its P/E ratio, except for the years 2021, 2018, and 2016 (CompaniesMarketCap, 2023). The increasing and positive trend has demonstrated that the global food franchise is welcomed and highly valued by investors worldwide.
As for Pfizer, the earnings ratio has varied over the past ten years, but it was generally over ten (Alkhyeli et al., 2021). There has been an increase and a decline, but the fluctuations remain small. The P/E ratio for Pfizer declined in 2012 and 2013, suggesting the company was becoming more valued and appraised by investors (CompaniesMarketCap, 2023).
The same decline also happened in 2016 and 2017, showing the growing optimism in Pfizer (Alkhyeli et al., 2021). The P/E ratio in 2021 fell to 15.1, possibly reflecting increased uncertainty or changing expectations for the company (CompaniesMarketCap, 2023). The P/E ratio shows that McDonald’s is a more stable company to invest in than Pfizer.
Revenue Growth and Profit Trends
McDonald’s and Pfizer have enjoyed positive revenue trajectories in the years leading up to 2022. However, McDonald’s experienced a drop in revenue in 2022 from 6,009.1 million to 5,926.5 million (McDonald’s, n.d.). Despite the slight decline in revenue in 2022, McDonald’s has generally experienced stable revenue growth over the past decade. The company has achieved this through various factors, including menu innovation, digitalization, strategic partnerships, and a focus on sustainability initiatives.
Pfizer has demonstrated strong financial performance over the past few years and is considered a financial growth company. Especially in 2021, the company’s revenue rose by 6% due to the new addition of COVID-related medicine, Paxlovid, and Comirnaty. The company’s revenue reached $44.4 billion, an all-time high for Pfizer (Priyan, 2022).
The 2022 figures have yet to come out, but the intensity and prolonged COVID-19 pandemic effect will only increase Pfizer’s revenue growth. It is known that pharmaceutical companies incur significant expenses in research and development. Since Pfizer has already successfully developed COVID-19-related vaccines and medications, there will be fewer expenses.
Assets, Debts, and Liabilities
McDonald’s and Pfizer possess a massive base of assets, although McDonald’s has more tangible assets, while Pfizer has more intangible assets. McDonald’s assets primarily consist of PPE, such as land and buildings. Most of Pfizer’s assets are intangible and include patents and trademarks, with its goodwill amounting to 51 billion as of 2022 compared to McDonald’s 3 billion (Investing, 2023; McDonald’s, n.d.). McDonald’s assets are subject to depreciation, making it a less favorable investment option. The two companies differ in debt structure, with McDonald’s going for short-term debts while Pfizer takes long-term debts.
Considering the two companies’ financial positions, Pfizer is a better investment option. This is because, as of 2022, the company had total assets amounting to 197 billion, while McDonald’s total assets amounted to 50 billion (Investing, 2023; McDonald’s, n.d.). In the future, Pfizer will likely outperform McDonald’s as its intangible assets, like patents, will be more likely to provide long-term returns. Additionally, Pfizer has goodwill over McDonald’s, which will put the business in a position to get more premiums paid; thus, it will be more profitable. A long-term debt structure will also give Pfizer better financial flexibility and stability over the long term, making it a more profitable avenue for investors.
Demand, Competition, Products, and Consumer Target Segments
The two organizations operate in two different markets with varying market demands. McDonald’s operates in the fast-food industry, characterized by consistent and resilient market demand (McDonald’s Corp SWOT Analysis, 2022). Conversely, Pfizer operates in the pharmaceutical industry, which is characterized by healthcare solutions and influenced by demographics and disease prevalence. Both companies enjoy sustainable demand and, thus, favorable investment options. Both companies face competition in their respective industries, with McDonald’s being challenged by prominent and emerging fast-food stores.
The products provided by the two companies have complementary options, such as beverages, desserts, and recreational services for McDonald’s, and healthcare products offered along with medications for Pfizer. McDonald’s has a broader range than Pfizer in this regard, although many of its complementary products are offered by competing organizations such as Coca-Cola, raising the barrier to entry. The target audience for the two companies is different since it is based on the industry in which they operate. McDonald’s targets people seeking fast food solutions, with teenagers and young people forming a significant market share (Hamza & Karabulut, 2021). Pfizer’s drug products are targeted to a diverse range of populations that need medical interventions, thus making its market larger in comparison.
Additionally, a SWOT analysis of the two companies reveals that Pfizer is better positioned for success in the future than McDonald’s. The strengths of McDonald’s are having a solid brand name, while Pfizer’s strengths include having a global reach, a skilled R&D team, and a good portfolio (McDonald’s Corp SWOT Analysis, 2022; Pfizer Inc. SWOT Analysis, 2023). McDonald’s is criticized for its unhealthy menu, while Pfizer’s risks include the expiration of patents.
Pfizer has an opportunity to form strategic partnerships, while McDonald’s has an opportunity to expand into new markets. Both companies face the threat of intense competition from established and emerging companies. Based on the market analysis, it would be more recommendable for an investor to choose Pfizer over McDonald’s. This is because the demand for Pfizer products is inelastic and thus more resistant to economic forces; thus, unlike McDonald’s, the company will generate revenues in economic hardships.
Strategies and Initiatives for Efficiency, Profitability, and Sustainability
Regarding marketing strategies, both Pfizer and McDonald’s employ comprehensive approaches to promote their products and enhance brand recognition. Pfizer’s marketing strategy focuses on creating brand awareness through direct-to-consumer advertising, utilizing multiple channels to effectively reach healthcare professionals and consumers (Leavy & Schultz, 2019). By implementing comprehensive marketing campaigns, Pfizer aims to enhance brand recognition and drive product demand.
On the other hand, McDonald’s success can be attributed to its effective marketing strategy (Ciobanu, 2018). The company invests heavily in advertising and promotional campaigns, leveraging digital marketing channels and mobile applications to engage with consumers and foster customer loyalty. McDonald’s innovative marketing initiatives have contributed to its strong brand presence and global recognition.
Efficiency is a critical factor for sustainable profitability. Pfizer has implemented measures to streamline its operations and reduce costs. The company has pursued process optimization and automation initiatives to enhance productivity while also investing in research and development (R&D) efficiency by leveraging advanced technologies and collaborations. Rouppe van der Voort et al. (2017) discuss the application of lean principles in the pharmaceutical industry, including Pfizer. Through process optimization and automation initiatives, Pfizer has streamlined its operations, enhanced productivity, and reduced costs. The company’s focus on research and development (R&D) efficiency, coupled with advanced technologies and collaborations, accelerates drug discovery and development timelines, positioning Pfizer for increased profitability and growth.
Similarly, McDonald’s has implemented efficiency measures to enhance profitability. Its strategic approach to supply chain optimization has been widely recognized (Koulen, 2016). The company emphasizes continuous process improvement and technology adoption to enhance operational efficiency, improve the customer experience, and reduce costs. Initiatives such as self-ordering kiosks, mobile ordering, and delivery partnerships have helped McDonald’s maintain a competitive edge in the fast-food industry.
Mergers and acquisitions play a significant role in both companies’ strategies. Pfizer has a history of strategic mergers and acquisitions to expand its product portfolio and strengthen its market position. Acquisitions such as Hospira and Medivation have allowed Pfizer to access new markets, enhance research capabilities, and generate synergistic cost savings. Similarly, McDonald’s has pursued strategic acquisitions and partnerships to diversify its offerings and expand its business (Wondershare Edrawmind, n.d.). Acquiring Dynamic Yield, a technology company specializing in personalized customer experiences, and partnering with delivery aggregators have helped McDonald’s leverage technology and broaden its reach.
Diversification into new products and target markets is another avenue for growth. Pfizer has focused on expanding into biologics, biosimilars, and vaccines, diversifying beyond its traditional pharmaceutical focus. By doing so, Pfizer reduces risks associated with patent expirations and taps into new revenue streams (Pfizer, 2021). In parallel, McDonald’s has diversified its menu offerings, introduced plant-based alternatives, and expanded into different dayparts such as breakfast and late-night. This diversification aligns with changing consumer preferences and allows McDonald’s to cater to a broader customer base.
Both Pfizer and McDonald’s have demonstrated their commitment to sustainability. Pfizer integrates environmental, social, and governance (ESG) considerations into its business practices (Leavy & Schultz, 2019). Similarly, McDonald’s has made significant strides in sustainability initiatives, mainly through responsible sourcing. Based on the discussed metrics, investing in Pfizer would be more advisable because it has better marketing strategies, is more efficient, and has a better commitment to sustainability than McDonald’s. Since McDonald’s has more marketing expenses than Pfizer, investing in the former would be more profitable as fewer expenses could result in higher profits and, thus, more dividends.
Conclusions and Recommendations
Based on the above analysis, it is clear that Pfizer is better positioned to reduce costs in the future. Pfizer’s sales rely on research and development, and once a new product is introduced in the market, the distribution cost remains low (Alkhyeli et al., 2021). On the other hand, McDonald’s sales rely on constant marketing and innovations, which result in increased costs. Additionally, Pfizer is more likely to innovate new products since its main focus is R&D, while McDonald’s mainly focuses on research and development. Pfizer shows more promise for investors than McDonald’s since it offers sustainable products, unlike most McDonald’s products, which are branded as unhealthy.
Investing in Pfizer, the pharmaceutical company, would be advisable for the following reasons. First, the company has existed for a long time and holds a good position in the industry. Pfizer’s financial performance indicators, such as stock performance, earnings ratios, revenue trends, and debt structures, position the company for better performance. Additionally, Pfizer has a more sustainable market demand, and its future outlook is brighter than that of McDonald’s.
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