2.1.2. Economical analysis
Every business or organisation, will affect the economy of a country. McDonald’s activity and revenues generated have many impacts on economies. For example, all the meat is supplied only by UK and Irish approved suppliers. This increases and adds value to the overall GNP of the UK. The presence of such a large organisation in any country will always be beneficial and would improve any countries economy. A company like McDonalds creates employment even for unskilled workers which is the biggest advantage for any country.
In the UK, VAT (value added tax) in set to 17.5% but excludes that from items like food and water, hence McDonald’s prices are kept low and the society benefits from that. Overall McDonalds is giving a positive boost to economy and to the society.
currency rate
inflation rates-stock-wages-price-resources
2.1.3. Socio-cultural analysis
McDonalds is aware of the variation of social and cultural influences from country to country. Factors include lifestyle, religion, demographics, income and cultural aspects. Consumers are constantly changing their lifestyle and taste resulting in a fluctuating flow of customers. For example, the recent change in eating habits, influencing health conscious customers, to minimise climbing obesity levels. This encouraged McDonalds to introduce healthy food, to suit the needs of the customers.
Another crucial aspect is the differentiation of cultures; McDonalds offers a different range of products for different cultural societies.
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McDonald's Taiwan serves a Toasted Rice Burger
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Happy Meal beverage choices in Japan include two 100% fruit juices and a fruit-vegetable juice blend, as well as milk, carbonated beverages, and oolong tea.
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Guacamole burgers in Mexico (find article website)
(McDonalds. com)
2.1.4. Technological analysis
Technology is considered an input and output of a business, whilst also influencing them environmentally. Innovation and technology is a key success to an organisations. it can be key to the success of a business Investment in technology and innovation is frequently seen as a key success of an enterprise and has been used to explain differences in the relative competitiveness of different countries
Technology is playing a vital role in McDonald's plans to lure more customers into its 1,230 UK fast food restaurants - as well as driving cost savings and operational efficiency across the organisation. Aiming to create a more relaxed experience in a more sophisticated atmosphere, McDonalds’s has replaced it old restaurant design for a new look. Lime green designer chairs and dark leather upholstery, stainless steel kitchen utensils and more, McDonalds’s plans to spend more than 600 million Euros, remodeling 1,280 European restaurants by the end of 2007.(computing website) This revamp will include such new innovations as:
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1,200 UK branches free WiFi network access to the web by December 2007 using to supply its free WiFi service.
- In the US from 2004, wireless trials at 400 restaurants in four cities attracted new, mainly older users, 60 per cent of whom said they wouldn't have visited if it wasn't for the wireless access.
- Handheld devices are already being used to take orders and cut queuing times in 500 of McDonald's UK restaurants
'It's about offering customers more choice and making the restaurants more relevant,
'No one single thing will attract customers, but by offering healthier food options, new décor, entertainment and internet access, people will choose McDonald's over other restaurants’ (Steve Tiley, McDonald's head of management in 2004)
2.1.5. Legal analysis
McDonald’s is one of the top performing companies for providing equal opportunities for ethnic minorities and eliminating sexual discrimination.
Health and safety procedures include food quality checks before the products reach each individual restaurant of McDonald’s.
- It is required to carry out 72 safety protocols every day in every individual McDonald’s restaurants- this is a detailed daily monitoring task set for restaurant managers
“nothing is more important to us than the safety and well being of our customers”. ( McDonald’s website)
2.1.6. Environmental analysis
‘reduce, reuse, recycle’-(McDonalds environmental program policy)
McDonalds is aware of today’s global environmental issues like pollution, high co2 emissions and aspects of global warming, hence McDonalds has changed every aspect of its business in terms of impact on the environment and taking positive action. Therefore McDonalds introduced a European Environmental Board which monitors and controls such environmental measures, appendix 7.3
To peruse these goals McDonalds have addressed: Packaging, Litter, Recycling, Energy saving and Waste.
Packaging: McDonalds has changed their packaging to become environmentally responsible while meeting essential criteria’s such government regulations and ability to recycle waste materials as much as possible. An example of this would be ‘trimmed the amount of material used in our French fry and Mc Nugget cartons.’(McDonalds website)
Litter: litter patrols were first introduced in the UK by McDonalds. Members of staff are sent out to collect McDonalds packaging and litter discarded around the premises. All McDonalds packaging actively support ‘keep Britain tidy’ activities; all packaging carrying the ‘tidy man’ symbol encourage their customers to properly dispose of litter.
McDonalds ‘Tidy Man’ (Image from Google)
Recycling: Below shows the percentage of recycled material used in sales packaging of items in McDonalds.(McDonalds fact file),showing McDonalds commitment to recycling where possible
McDonalds is also a well established charity in RMMC (Ronald McDonald Children’s Charity). There is a charity donation box in every restaurant for World’s children’s day. Because of this they have associated as being a McDonald’s trademark
3.2. Competitive analysis
In this section we are going to analyse current and future competitors within the market sector of fast food. Given McDonalds market position ,they are pressured to continue leading the race in the fast food market; Though only a few competitors in the fast food market are considered a threat, namely Burger King, being the world’s second largest hamburger chain. With more than 11,200 restaurants in the US and about 65 other countries, Burger King is still expanding its service around the world, and the closest rivals to giving McDonalds a run for their money. Another competitor slowly integrating into the market and reaping a potential threat to McDonalds are the ‘YUM! Brands’ known to become the largest fast food operators in the world. YUM! Brands own a number of fast food restaurants, including KFC and Pizza Hut, where the majority are franchised locations. McDonalds and current competitors are well established in the fast food market and have been running their business for as little as half a century, therefore causing difficult for new potential competitors to compete at the same level.
With McDonalds continuing development in a wider and healthier variety of product, McDonalds is able to sell more than the market would suggest, hence attracting new types of customers. This is causing McDonalds to slowly branch into new market sectors, introducing a whole new game with a wide range of new players. However, with this healthier variety, they will be competing with established companies in a different market sector. For example, ‘Pret a Manger’, as they also offer healthy food on the go.
3.2.1. Michael E. Porter 5 forces
‘Porters model says that a structure of an industry and the ability of firms in that industry to act strategically depend upon the relative strength of five forces: current competition, potential competition, threat of substitute products, power of buyers and the power of suppliers.’(Worthington and Britton,2006,P.351)
A graphical representation of Porters Five Forces
(wikepidia website)
Threat of substitute products
Much of the expenditure by firms to differentiate their products is designed to reduce the threat from substitute products. If competitors are selling the same product in similar or exact comparison to their own, they must implement ways to differentiate their product to the rest, for example a direct threat to McDonalds burgers is Burger King. Indirect substitute products are also a treat such as pizza hut, as they sell an alternative product in the same market.
Bargaining power of customers
McDonalds needs the customer as much as the customer needs McDonalds. Without customers McDonalds would go bankrupt, whereas the customer may freely move on to the next best substitute available. McDonald’s therefore had to keep an eye on their existing and potential customers, to keep their service consistent and running smoothly. McDonalds has to research ways to keep existing customers loyal and to switch potential customer from coming on a one off basis to a regular basis. Individual bargaining power of a customer is low but if customers form together in pressure groups bargaining power is higher. For example the mc liable protest which led to trial in 1990. (McSpotlight website)
Power of suppliers
McDonalds is famous all over the world for it’s ‘’unique’’ taste, it is very crucial for the company to ensure that their suppliers are excellent in providing them the best resources. Over the years, McDonalds has developed a scheme to ensure that their products are produced to the highest standards in terms of taste, size and shape. From that we can say that McDonalds has power over the supply of resources for example, the meats they use .Overall power of suppliers is low as there are many suppliers in the market. They are still dependant on certain suppliers for products they offer like Coca Cola. For these products they don’t have any control in the production process because these come as finished goods.
Threat of new entrants
New firms entering the market increase the level of competition in the industry. Potential competition has to overcome certain barriers to enter the market sector. We consider the fast food industry to have a number of barriers. Some include legal barriers such as franchising. By McDonalds offering the opportunity to franchise it opens the door for potential competitors in the industry without them ever becoming threat because they are running their own business while representing McDonalds. Another method used to prevent potential competition could be to invest heavily in capital equipment. Advertising branding can be “thought of as deliberately erected barriers to entry since they increase the expense of any firm entering the market.”(Worthington and Britton,2006,P354.)
Competitive rivalry within an industry
Though McDonalds is the world’s first fast food company by sales, success can only be continued so long as competitors are kept on close view. McDonalds has a number of key competitors, its key competitor being Burger King Holding Inc, YUM!, Brands Inc and Doctors Associates Inc. Rivalry in the industry consistently thrives McDonalds towards offering consumers new products and improving existing products. Through McDonalds brand image it encourages consumers to perceive a product or service to be superior to the competition. Competition in this market is monopolistic, there is a no price competition, thus companies focus on advertising and branding.
4.0. Conclusion and Recommendations
In this assignment we have discussed the current prospects of the McDonald’s organisation providing a detailed analysis of the external environmental issues by using certain theories, PESTLE and PORTERS five forces, to analysis and applying to our research. Given our research into McDonald’s and their current situation, we feel that it is safe to say that McDonald’s has done well thus far considering the negative criticisms and accusations they have encountered. Tired of being vilified , McDonald’s has put implemented valiant efforts and commitments to improving the companies menu, reputation, and profits, not only has this helped in McDonald’s revenue in the past five years but has encouraged the public that it is once again safe to dine in McDonald’s. Even though McDonald’s have accomplished to revive from the fall back, we can foresee future challenges arising. As we mentioned that McDonalds introduced new products to the menu due to the health drive, if they continue to do so, will they be unintentionally branching into other market sectors? This may be a problem as within new market sectors there will be new competition. Part of the new competition would include established companies in that market sector that have experience and resources. Therefore reputation in the new market would be something that McDonalds would have to gain through penetration marketing strategies.
6.0. Bibliography
Websites
mc spolight legal
http.//www.mconalds.co.uk/pages/goodworks/ourenviornment.html
http.//www.mcdonalds.co.uk/pages/goodworks/ourenviornment.html
http.//www.mcdonalds.co.uk/pages/goodworks/ourenviornment.html
burger mexico
Books
McDonalds fact file booklet 2005/2006
Lancaster, G. & Reynolds, P., 2004, Marketing, Palgrave Macmillan.
Worthington, I. & Britton, C., 2006, “The Business Environment”, 5th Edition, Prentice Hall.
7.0. appendix
7.1.
7.2.
7.3.
The Environment Action Team is headed by the CEO. It decides on all relevant environment topics and is composed in such a way that all important internal and external bodies and departments are represented.
(McDonalds website)