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ON PESTEL analysis of McDonalds
SUBMITTED TO: MS. JASCHETAN DEEP KAUR
SUBMITTED BY: HIMANK GUPTA RQ1101B28 MBA (HONS)
McDonalds is a leader in convenient foods and beverages, with revenues of about $23 billion and over 1.6 million employees serving the customer’s world -wide. The company consists of the snack business of Beverages and Foods. PepsiCo brands are available in nearly 115 countries having more than 24,500restaurants in the world providing 24 hour service. McDonalds’s success is the result of superior products, high standards of performance, distinctive competitive strategies and the high integrity of our people. McDonalds is continuing to expand and introduce new alternative beverages in the market. Approximately 85% of McDonald’s restaurant businesses world-wide are owned and operated by franchisees. All franchisees are independent, full-time operators. McDonald’s was named Entrepreneur’s Number-one franchise for 1997.Their mission is to be the world's premier consumer Products Company focused on convenient foods and beverages. They seek to produce healthy financial rewards to investors as the company provide opportunities for growth and enrichment to its employees, business partners and the communities in which it operates. Greater variety and quality choices surprise and delight customers with the food and beverage they desire. McDonald’s corp. is currently one of the most successful consumer products company in the world with annual revenues exceeding $23 million and has more than 1.6 million employees. McDonald’s products are recognized and are most respected all around the globe. Currently, its divisions operate in all over the world in beverages, snack foods, and restaurants. The corporations increasing success has been based on high standards of performance, marketing strategies, competitiveness, determination, commitment, and the personal and professional integrity of their people, products and business practices. McDonald’s believes their success depends upon the quality and value of their products by providing a safe, whole some, economically efficient and a healthy environment for their customers; and by providing a fair return to their investors while maintaining the highest standards of integrity.
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.
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 clamour for 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 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 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 McDonalds should protect its workers by ensuring all the hiring, compensation, training or repatriation in accordance to the Indian labour laws.
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 McDonald’s have the tendency to experience hardship in instances where the economy of the respective countries are hit by inflation and changes in the exchange rates, India is not an exception to it. 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 McDonalds. 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 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 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 McDonalds had done before entering the Indian market 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.
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. 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. This procedure is essentially identified in the field as market research. 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 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 organisation in a particular market.
McDonalds should 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 Country’s society. 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. Also
the company should constantly survey and learn about local culture to better understand and design the best product for them.
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 in India, 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 meals’ 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 worldwide “I’m 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 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.
McDonalds use the internet to their advantage. The cost-effectiveness, interactivity and realtime 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.
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 in India have made actions to make the McDonald’s franchises in India 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 franchise license or a particularly high fine should be installed to serve as a deterrent to infringement.
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 the European Union should conform to the existing laws banning the use of genetically modified meat products in their food. This was prime reason which forced McDonalds to eliminate beef, pork and Mutton out of India’s product menu. 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 McDonalds should follow. McDonalds 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, labour 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.
As we all know that 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 place 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 above PESTEL analysis, this could be acquired by setting a certain level of flexibility in the organisation. This level of flexibility can basically be 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, but 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 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. References: 1. http://www.mcdonalds.com/us/en/our_story/our_history.html 2. http://www.mcdonalds.com/us/en/services/playplaces_parties.html 3. http://www.mcdonalds.com/us/en/careers/training_education.html 4. http://www.mcdonalds.com/us/en/careers/training_education.html 5. http://www.oppapers.com/essays/Pestle-Mcdonalds-In-India/670456 6. http://bizniaga.blogspot.in/2008/07/pestle-mcdonalds.html 7. http://www.essayxperts.com/essay-pest-analysis-of-mcdonalds-in-india/
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