The last force is Rivalry among existing competitors. There is a lot of rivalry and competition within the fast food chains, each fighting to keep their customers and to take their competitors’ customers. McDonald’s has the advantage against its competitors, because it is larger and more profitable than its competitors, therefore it has more money to use in advertising and innovation to retain and lure customers. McDonald’s also keeps a competitive pricing strategy as well as a value menu, which in the current economy is something many people need. It has also added healthier options to their menu for the more health conscious consumer.
In general, McDonald’s can surmount these pressures by continuing to be the leader in fast food. Being such a large global business, it can take advantage of economies of scale which helps drive down their costs from their suppliers, which in turn allows them to be able to offer value options to their consumers that might be a little harder for their competitors to offer because they do not purchase at McDonald’s scale.
Besides the Porter’s five forces analysis, a PESTEL analysis is necessary for the success of McDonald’s. PESTEL is an analysis of the external macro and micro environment in which a business operates. PESTEL stands for political, economical, social, technological, environmental and legal factors.
Firstly, the international operations of McDonald’s are highly influenced by the individual country’s policies enforced by each government. For instance, there are certain groups in India, Europe, and the United States that against the state actions pertaining to the health implications of eating fast food. 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 of the country. For example, the existence of meat in menus in India is apparently offensive to the Hindu religion in the said market. There are also other studies those 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 like India.
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, the company can adopt a good way of establishing 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. Also McDonald’s should protect its workers by ensuring all the hiring, compensation, training, or repatriation in accordance to the labor laws.
Secondly, organizations 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 McDonald’s have the tendency to experience hardship in instances where the economy of the respective countries 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 like McDonald’s. 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, McDonald’s tend to import much of their raw materials into a specific country’s territories 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’s 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. In the same regard, the company will also have to consider the economic standing of the country on which they operate on. The rate at which the economy of that particular country grows determines the purchasing power of the consumers in that country. Hence, if a franchise operates in a particularly economically weak country, 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. However in case of India the company has been able to maintain a constant level of prices for their products.
Ideally before penetrating the market, the company must carry out a well conducted market research, especially in the movements in the economic environment which McDonald’s had done due to which the company has been able to bear the frequency of the shifts in the inflation rate as well as the fluctuations in the exchange rates which affects the operations of any company.
Thirdly, articles on the international strategies of McDonald’s seem to function on several fields to guarantee lucrative returns for the organization improves on establishing a position mind-set from their core consumers. McDonald’s indulge a particular variety of consumers with definite types of personalities. It has also been noted that the company have given the markets such as the United Kingdom and India, an option with regards to their dining needs. 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.
The multifaceted character of business nowadays is reflected in the harsh significance of the information on the subject of the existing market. 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 the consumer behavior product personality and purchasing decisions to its advantage which is clearly evident in case of India as the company was quick in removing their Pork and Mutton products from India’s menu. It is said to have a major influence on the understanding of the prospective performance of the organization in a particular market.
McDonald’s should obtain the relevant information from the target market in addition to the individual customers of the organization. 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 Country’s society. Similarly, the company should find out the shifts in areas like the consumer behavior and purchasing patterns of the market. Fundamentally, this is the key condition for executing a suitable customer relationship management system. Also the company should constantly survey and learn about local culture to better understand and design the best product for them.
Another concern is technological factors. McDonald’s generates a demand for its own products. The company’s key tool for marketing is by means of Online Facebook and Google ads, Collaboration with websites like Snapdeal and Timesdeal to promote sales, television advertisements, banners, and hoardings. 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 meal” offered by the company shows this actuality. Other demonstration of such a marketing strategy is apparent in the commercials they use. They employ animated depictions of their characters like Grimace, Ronald, and Ham burglar. Other advertising operations employ popular celebrities to promote their products. The “like” has become endorsers for 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 McDonald’s tends 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.
McDonald’s uses 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 Country. 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.
Environmental factors are also considerable problems. The social responsibilities of McDonald’s on the country are influential to the operations of the company. These involve 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. Several civic groups have made actions to make the McDonald’s franchises aware of the rather abundant use of Styrofoam containers and the resultant abuse of the environment.
The company should find out the environmental regime that governs the operations in every market. It should also monitor the waste disposal of the company. McDonald’s should 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 franchises license or a particularly high fine should be installed to serve as a deterrent to infringement.
Finally, 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. 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 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.
As a certified fast food operator, there are many regulations and procedures that McDonald’s should follow. McDonald’s should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other legal requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labor and employment laws, and quality & environment certification (such as ISO) in which the outlet has been certified. The legal requirement is important because the offenders will be fined or have their business prohibited from operating which can be disastrous. The company should hire local counsels to deal with the legal conflicts in individual markets on which the company may encounter. This shall ensure the company that the lawyers that will handle their legal affairs are more versed with the legal regime that would ease out certain problems on their operations.
After having a look in general about PESTEL, understanding the micro and macro factors that would affect McDonald’s newly launch products in the current competitive environment is important and can decide the success of the brand.
The environmental factors which are under macro and micro environment, directly or indirectly impact McDonald’s. Currently McDonald’s is using lots of strategy which got positive and negative effects on company. It should keep the effective and successful strategy and modify or redesign the failure strategy.
As McDonald’s is a global company and running businesses most of the countries in the world, that's way, this company faces lots of challenges and issues. There is a relation between key drivers and environmental factors because the key drivers for change are environmental factors who have got a high effect on the success or failure of strategy.
Customers are a major environmental factor for McDonald’s. Every day, nearly 54 billion customers are served by the company. Though McDonald's customers are mainly young generation, the company is always conscious about their choice. For this reason, customers demand, their choice, their liking, everything impacts McDonald’s.
McDonald’s is producing their product and they are serving those directly to customers. Therefore, the factor of product and service is impacting the company. Product quality, product variety, quick and friendly service, every things are important for company. Those got an important impact on McDonald’s.
McDonald's main competitors are Wendy's, Burger king and Hardees. McDonald’s always needed to treat competitors carefully. That's the reason the factor related with competitor like competitors product quality, service, price competition, market, sales, growth everything affecting them.
More than 390,000 employees work in McDonald’s. Employees are impacting McDonald’s because company is recruiting, training staff for company, at the same time wages also related with this. It is not uncommon for McDonald’s to be the employer of first resort for young people just entering the workforce, older workers desiring extra income, or for those planning on transferring from one corporation to another. So, employees impact McDonald’s in this way.
McDonald’s is producing their main product that means burger, salads in their own kitchen; they are cooking all fries, nuggets and meat patties in their own grill. Hence, the use of equipment, special control devices, temperature regulators, point-of-sales systems, inventory upkeep, financial information and communications are all linked to different technologies. In this way, the company is affected by technology.
Different political decision, rules, motives also influence McDonald’s. Different countries might have different political view; they could take different decision about food Company. Specially laws, because government makes laws and this law might be changed at the same time of government changing.
Economy is important factor which influence McDonald’s. The company always needs to think about profitability, growth, to expand of company. So, they need to consider countries demand, supply, production, distribution, exchange rate, business cycles, and differential economic growth rates around the world.
McDonald's is growing day by day by increasing the number of restaurant. The main source of ingredient and packaging is nature. They have a Rain Forest Policy, which declares its commitment to beef purchasing practices that do not contribute to tropical de-forestation. Everyday McDonald’s using a huge amount of napkins, carryout bag, and tray lines. Oil and water is other major ingredient using in the company. The continuous and enormous use of natural resources can disturb the balance in the ecosystem. In Europe, McDonald's has been recycling vegetable grease by converting it to fuel for their diesel trucks Now, every body are conscious about environment. So, McDonald’s need to careful about environment that, what the company is doing that's environmental friendly.
McDonald’s is doing business worldwide. So, different regions customers got different culture and religion. For example, in India, the non-vegetarian menu includes chicken and fish items only. Beef is not on the menu in India because are considered sacred. Like that, in Muslim they introduced halal meat for burger.
Because of McDonald’s is an international worldwide restaurant company, the globalization affects their corporate strategy. The company is trying to expand its business in global market like China. That's why before moving into global market McDonald’s needs to consider about the region, culture, and religion of customers. Moreover, they need to think food habit and chose of customer of new regions. And the same time regions government rules, law, economy, politics influence McDonald’s to build their business.
Different country got own law which influence McDonald's. Health and safety has a distinct impact on the functioning of chains in different countries. For example, all restaurants in the Muslim region are halal-approved, meaning food is prepared and handled according to the tenets of Islamic law.
Share holders impact McDonald’s because they invest money on that. That's way, if MacDonald's do good business and if its prospect is good, then price of share will increase and there is a possibility of getting more dividend for shareholder. On the other hand, if the company needs more money for invest, then McDonald’s will issue more share in market.
Though, still McDonald's is the largest over the counter quick service food restaurant in the world. After that they should consider the environmental factors which impact the company. And the strategies which company is using now, those have positive and negative effect on business. The management of McDonald's has to continuously keep an eye on the umbrella activities of the organization, by evaluating what works and what don't to create the organization strategies. In order to implement the strategies effectively and successfully, the upper level management should create a safe environment for reassure, support, changes, and commitment of the organization. It is then recommended that McDonald’s must make sure that all the strategies are well planned and implemented carefully beforehand, because these changes and strategies will be the deciding for the success or failure of any organization.
