Post on 29-Nov-2014
PESTLE analysis of McDonalds
PESTLE analysis
to explain company's international strategy for
McDonald
TABLE OF CONTENT
Page
I.
INTRODUCTION
3
II
BACKGROUND
3
III PESTLE ANALYSIS
A. POLITICAL
FACTORS 4
B. ECONOMIC
FACTORS 4
C. SOCIAL-CULTURAL
FACTORS 5
D. TECHNOLOGY
FACTORS 5
E. LEGAL
FACTORS 6
F. ENVIRONMENTAL
FACTORS 6
IV
CONCLUSION
7
V
RECOMMENDATION
8
VI
REFERENCE
9
I. INTRODUCTION
Globalization has made the globe considerably smaller. States lines have turned into
practically a divider separating certain regions of a massive unitary community.
Businesses are the one that are highly affected by this occurrence. The virtual
closeness of states has made trade and commerce an international event. Together
with these advances, the key standards of business are similarly taken into account.
The discussions in this paper shall involve an analysis of the international expansion
strategy utilized by a multinational company. In this case, the situation surrounding
McDonald’s will be taken into consideration. The following annotations and propositions
employed in the following discussions are to be supported by claims on journals and
academic pieces that address international expansion strategies and international
marketing theories.
II. BACKGROUND
The modest beginnings of McDonald’s in Illinois turned out to be among the main brand
names in the international scene. It has been synonymous to what is widely-accepted
the fast-food concept. The company operates over thirty one thousand stores all over
the world to date. It was one of the first to perfect the concept of fast service in the food
industry in its early days of operations in 1955. Given that the products of the company
are mainly western in character, its operations has also expanded to the Asian region.
The first McDonald’s store operated in Hong Kong in 1975. The first shop operated at
Paterson Street in Causeway Bay. Up to this data, the functions of McDonald’s in Hong
Kong covers over two hundred restaurant chains spread in the whole of Hong Kong
alone. In the rest of the globe, it operates thousands of store franchises that functions
autonomously.
III. PESTLE ANALYSIS
Pestle is an analysis of the external macro environment in which a business operates.
According to (2008), pestle stands for political, economic, social, technology, and
environmental factors.
A. Political Factors
The international operations of McDonald’s are highly influenced by the individual state
policies enforced by each government. (2001, 705) For instance, there are certain
groups in Europe and the United States that clamor for state actions pertaining to the
health implications of eating fast food. (2005) They have indicated that harmful
elements like cholesterol and adverse effects like obesity are attributable to consuming
fast food products.
On the other hand, the company is controlled by the individual policies and regulations
of operations. Specific markets focus on different areas of concern such as that of
health, worker protection, and environment. All these elements are seen in the
government control of the licensing of the restaurants in the respective states. For
instance, there is an impending legal dispute in the McDonald’s franchise in India where
certain infringement of rights and violation of religious laws pertaining to the contents of
the food. The existence of meat in their menus in India is apparently offensive to the
Hindu religion in the said market. There are also other studies that points to the
infringement of McDonald’s Stores with reference to the existing employment laws in
the target market. Like any business venture, these McDonald’s stores have to contend
with the issues of employment procedures as well as their tax obligations so as to
succeed in the foreign market.
B. Economic Factors
Organisations in the fast food industry are not excused from any disputes and troubles.
Specifically, they do have their individual concerns involving economic factors.
Branches and franchises of fast food chains like McDonald’s has the tendency to
experience hardship in instances where the economy of the respective states is hit by
inflation and changes in the exchange rates. The customers consequently are faced
with a stalemate of going over their individual budgets whether or not they should use
up more on these foreign fast food chains. (2004) Hence, these chains may have to put
up with the issues of the effects of the economic environment. Particularly, their
problem depends on the response of the consumers on these fundamentals and how it
could influence their general sales. In regarding the operations of the company, food
chains like McDonald’s tend to import much of their raw materials into a specific territory
if there is a dearth of supply. Exchange rate fluctuations will also play a significant role
in the operations of the company.
As stated in the paragraph above, McDonald stores have to take a great deal of
consideration with reference to their microenvironment. The company’s international
supply as well as the existing exchange rates is merely a part of the overall components
needed to guarantee success for the foreign operations of McDonald’s. Moreover, it is
imperative that the company be cognizant of the existing tax requirements needed by
the individual governments on which they operate. This basically ensures the smooth
operations of the McDonald’s franchises. In the same regard, the company will also
have to consider the economic standing of the state on which they operate on. The rate
at which the economy of that particular state grows determines the purchasing power of
the consumers in that country. Hence, if a franchise operates in a particularly
economically weak state, hence their products shall cost higher than the other existing
products in the market, then these franchises must take on certain adjustments to
maintain the economies of scale.
C. Socio-Cultural Factors
Articles on the international strategies of McDonald’s seem to function on several fields
to guarantee lucrative returns for the organisation. To illustrate, the organisation
improves on establishing a positive mind-set from their core consumers. McDonald’s
indulge a particular variety of consumers with definite types of personalities. ( 1994) It
has also been noted that the company have given the markets such as the United
Kingdom, an option with regards to their dining needs. (2005) pointed out that
McDonald’s has launched a sensibly valued set of food that tenders a reliable level of
quality for the respective market where it operates. Additionally, those who are aged
just below the bracket of thirty-five are said to be the most frequent consumers of
McDonald’s franchises. ( 2005)
The multifaceted character of business nowadays is reflected in the harsh significance
of the information on the subject of the existing market. This procedure is essentially
identified in the field as market research. (1997) Information with regards to the appeal
and potential fields of the market would double as obstructions to the success of the
company if this area of the operations is neglected. In the case of McDonald’s they
establish a good system in determining the needs of the market. The company uses
concepts of consumer behaviour product personality and purchasing decisions to its
advantage. ( 1998) It is said to have a major influence on the understanding of the
prospective performance of the organisation in a particular market. (2000)
D. Technological Factors
McDonald’s generates a demand for their own products. (2006) The company’s key tool
for marketing is by means of television advertisements. There are similarly some claims
that McDonald’s are inclined to interest the younger populations more. The existence of
play spots as well as toys in meals offered by the company shows this actuality. ( 1995)
Other demonstration of such a marketing strategy is apparent in the commercials of
they use. They employ animated depictions of their characters like Grimace and
Hamburglar. Other advertising operations employ popular celebrities to promote their
products. The like has become endorsers for McDonald’s worldwide “loving’ it”
campaign. Moreover, the operations of McDonald’s have significantly been infused with
new technology. Elements like the inventory system and the management of the value
chain of the company allows for easy payments for their suppliers and other vendors
which the individual stores in respective markets deal with. The integration of
technology in the operations of McDonalds tend to add value to their products.
Basically, this is manifested in the improvements on its value chain. The improvement of
the inventory system as well as its supply chain allows the company to operate in an
international context.
E. Legal Factors
There has been the recurrent bellowing in opposition to the fast food industry. This has
similarly made McDonald’s apply a more careful consideration on their corporate social
responsibilities. On the whole, this addressed the need of the company to form its
corporate reputation to a more positive one and a more socially responsible company.
( 2005) The reputation of McDonald’s is apparently a huge matter. Seen on the website
of the company, it seems that they have acquired strides to take in hand the key social
censures that they have been berating them in the past decades. The company has
provided their customers the relevant data that they need with reference to the
nutritional substances of their products. This is to attend to the arguments of obesity
charged against the products of the company. In the same way, the consumers
provided freedom in choosing whether or not they want to purchase their meals.
This is tied up with the socio-cultural attributes of the market on which they operate. For
instance, operations in predominantly Muslim countries require their meat to conform to
the Halal requirements of the law. In the same regard, those that operate in countries in
the European Union should conform to the existing laws banning the use of genetically
modified meat products in their food. Other legal concepts like tax obligations,
employment standards, and quality requirements are only a few of important elements
on which the company has to take into consideration. Otherwise, smooth operations
shall be hard to achieve.
F. Environment
The social responsibilities of McDonald’s on the state are influential to the operations of
the company. These entail accusations of environmental damage. Among the reasons
why they are charged with such claims is the employ of non-biodegradable substances
for their drinks glasses and Styrofoam coffers for the meals. (1997) Several civic groups
in Hong Kong have made actions to make the McDonald’s franchises in Hong Kong
aware of the rather copious use of Styrofoam containers and the resultant abuse of the
environment. (1997) further indicated that in 1995, McDonald’s Hong Kong went over
the Styrofoam used by both Australia and the United States combined.
IV. CONCLUSION
Debatably, the most significant contribution of this generation is the combination of
globalization and internationalization in the businesses sector. Developments in the
international setting have an effect on the more particular factors in the operations in
individual organisations. Alterations could take placer and require intense modifications
to the operations such that it could have an adverse effect on the entire structure of the
company. However, as indicated in the arguments and comments in this paper, this
could be acquired by setting a certain level of flexibility in the organisation. This level of
flexibility is basically acquired through the acquaintance of both the internal and external
environment of the company.
Even though McDonald’s may have been deemed as demigod in the fast food business
in the international scene, what it preserves as revealed in its processes is the need for
flexibility. The slight changes that take place in the market have an effect on the
operations of the business in any case. This denotes that having the information on the
effects of these alterations swiftly provides these fast food industry giants to take fine-
tuning actions on their acts and still preserve their market position. As implied in the
introduction of this paper, the markets of nowadays manifest a cutthroat rivalry with the
individual competitors, recognized brands or otherwise. Hence, any business in spite of
the muscle of the brand name or the size of its reserves could not afford any failures in
their individual markets.
V. RECOMMENDATION
The following recommendations shall be based on the conclusions and arguments
above.
l Political Factors
Since it is apparent that the company is expanding continuously, it is wise to deal
directly with the proper authorities in the respective markets that they intend to operate
in. This way, a good way of establishes good relationship with the government. It is
advisable that the company rests on the good graces of the government on which they
will be penetrating. To do this, all they have to do is accomplish all the prescribed acts
and satisfy all the prerequisites for doing business. The company must also be
acquainted with the law in order to know what their responsibilities and their possible
liabilities.
l Economic Factors
Before penetrating the market, the company must carry out a well conducted market
research, especially in the movements in the economic environment. The frequency of
the shifts in the inflation rate as well as the fluctuations in the exchange rate affects the
operations of the company.
l Socio-cultural Factors
Obtain the relevant information from the target market in addition to the individual
customers of the organisation. It is imperative that before a franchise is granted to a
particular market, a well drafted and comprehensive market research should be
conducted initially so as to establish the acts that would conform to good customs,
public policies, and morals of the said state. Similarly, the company should find out the
shifts in areas like the consumer behaviour and purchasing patterns of the market.
Fundamentally, this is the key condition for executing a suitable customer relationship
management system.
l Technological Factors
Use the internet to their advantage. The cost-effectiveness, interactivity and real-time
effects of the communications are a good way to find suppliers. It is also a good way to
correspond with the respective McDonald’s headquarters in every state. The company
must also look into the use of IT to enhance their inventory operations. As the
operations in its inbound and outbound logistics improve, the company will expect
significant savings and reduction of costs in the operations.
l Environmental Factors
Find out the environmental regime that governs the operations in every market. Monitor
the waste disposal of the company. Minimize the use of Styrofoam materials and plastic
cups. Constant updating of the social corporate responsibility is imperative. This should
also entail that the headquarters should take in hand a manner of internal control of
those that would infringe upon this company objective. Sanctions such as revoking of
the franchise license or a particularly high fine should be installed to serve as a
deterrent to infringement.
l Legal Factors
Hire local counsels to deal with the legal conflicts in individual markets on which the
company may encounter. This is shall ensure the company that the lawyers that will
handle their legal affairs are more versed with the legal regime that would iron out
certain creases on their operations.
Read more: http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html#ixzz1LXHxNVUQ
http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html
SWOT Analysis McDonald's
Strengths
McDonald's has been a thriving business since 1955 and 20 of the top 50 corporate staff employees started as a restaurant level employee. In addition, 67,000 McDonalds restaurant managers and assistant managers were promoted from restaurant staff. Fortune Magazine 2005 listed McDonald's as the "Best Place to Work for Minorities." McDonalds invests more than $1 billion annually in training its staff, and every year more than 250,000 employees graduate from McDonald's training facility, Hamburger University.
The business is ranked number one in Fortune Magazine's 2008 list of most admired food service companies.
One of the world's most recognizable logos (the Golden Arches) and spokes character (Ronald McDonald the clown). According to the Packard Children's Hospital's Center for Healthy Weight children age 3 to 5 were given food in the McDonalds packaging and then given the same food without the packaging, and they preferred the food in the McDonald's packaging every single time.
McDonalds is a community oriented, socially responsible company. They run Ronald McDonald House facilities, which provide room and board, food and sibling support at a cost of only $10 a day for families with children needing extensive hospital care. Ronald McDonald Houses are located in more than 259 local communities worldwide, and Ronald McDonald Care Mobile programs offers cost effective medical, dental and education services to children. They also sponsor Olympic athletes.
They are a global company operating more than 23,500 restaurants in 109 countries. By being spread out in different regions, this gives them the ability to weather economic fluctuations which are localized by country. They can also operate effectively in an economic downturn due to the social need to seek out comfort foods.
They successfully and easily adapt their global restaurants to appeal to the cultural differences. For example, they serve lamb burgers in India and in the Middle East, they provide separate entrances for families and single women.
SWOT Video
To watch the full SWOT Analysis video please register free here
Approximately 85% of McDonald's restaurant businesses world-wide are owned and operated by franchisees. All franchisees are independent, full-time operators and McDonald's was named Entrepreneur's number-one franchise in 1997. They have global locations in all major airports, and cities, along the highways, tourist locations, theme parks and inside Wal-Mart.
They have an efficient, assembly line style of food preparation. In addition they have a systemization and duplication of all their food prep processes in every restaurant.
McDonald's uses only 100% pure USDA inspected beef, no fillers or additives. Additionally the produce is farm fresh. McDonald's serves 100% farm raised chicken no fillers or additives and only grade-A eggs. McDonald's foods are purchased from only certified and inspected suppliers. McDonalds works closely with ranchers, growers and suppliers to ensure food quality and freshness.
McDonalds only serves name brand processed items such as Dannon Yogurt, Kraft Cheese, Nestle Chocolate, Dasani Water, Newman's Own Salad Dressings, Heinz Ketchup, Minute Maid Juice.
McDonald's takes food safety very seriously. More than 2000 inspections checks are performed at every stage of the food process. McDonalds are required to run through 72
safety protocols every day to ensure the food is maintained in a clean contaminate free environment.
. McDonald's was the first restaurant of its type to provide consumers with nutrition information. Nutrition information is printed on all packaging and more recently added to the McDonald's Internet site. McDonalds offers salads, fruit, roasted chicken, bottled water and other low fat and calorie conscious alternatives.
Weaknesses
Their test marketing for pizza failed to yield a substantial product. Leaving them much less able to compete with fast food pizza chains.
High employee turnover in their restaurants leads to more money being spent on training. They have yet to capitalize on the trend towards organic foods. McDonald's have problems with fluctuations in operating and net profits which
ultimately impact investor relations. Operating profit was $3,984 million (2005) $4,433 million (2006) and $3,879 million (2007). Net profits were $2,602 million (2005), $3,544 million (2006) and $2,395 million (2007).
Opportunities
In today's health conscious societies the introduction of a healthy hamburger is a great opportunity. They would be the first QSR (Quick Service Restaurant) to have FDA approval on marketing a low fat low calorie hamburger with low calorie combo alternatives. Currently McDonald's and its competition health choice items do not include hamburgers.
They have industrial, Formica restaurant settings; they could provide more upscale restaurant settings, like the one they have in New York City on Broadway, to appeal to a more upscale target market.
Provide optional allergen free food items, such as gluten free and peanut free. In 2008 the business directed efforts at the breakfast, chicken, beverage and convenience
categories. For example, hot specialist coffees not only secure sales, but also mean that restaurants get increasing numbers of customer visits. In 2009 McDonald's saw the full benefits of a venture into beverages.
Threats
They are a benchmark for creating "cradle to grave" marketing. They entice children as young as one year old into their restaurants with special meals, toys, playgrounds and popular movie character tie-ins. Children grow up eating and enjoying McDonalds and then continue into adulthood. They have been criticized by many parent advocate groups for their marketing practices towards children which are seen as marginally ethical.
They have been sued multiple times for having "unhealthy" food, allegedly with addictive additives, contributing to the obesity epidemic in America. In 2004, Michael Spulock filmed the documentary Super Size Me, where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. This documentary was a direct attack on
the QSR industry as a whole and blamed them for America's obesity epidemic. Due in part to the documentary, McDonalds no longer pushes the super size option at the dive thru window.
Any contamination of the food supply, especially e-coli. Major competitors, like Burger King, Starbucks, Taco Bell, Wendy's, KFC and any mid-
range sit-down restaurants.
McDonald's is the leading global foodservice retailer with more than 31,000 local restaurants serving more than 58 million people in 118 countries each day. More than 75% of McDonald's restaurants worldwide are owned and operated by independent local men and women. Read more...
Last updated July 2009
Disclaimer: This case study has been compiled from information freely available from public sources. It is merely intended to be used for educational purposes only.