Katherine Ann Ronatay CHOOSE

ONE COMPANY AND IDENTIFY FIVE SPECIFIC EXTERNAL FORCES OR FACTORS THAT
AFFECT THE BUSINESS.

EXTERNAL FACTORS AFFECTING MCDONALD'S CORPORATION:

● Political Factors
● Economic Factors
● Socio-Cultural Factors
● Technological Factors
● Environmental Factors
● Stakeholders
● Customer Tastes
● Product

1. EXPLAIN HOW EACH EXTERNAL FORCE OR FACTOR AFFECTS THE BUSINESS.

● Political Factors

Political factors can provide companies with both opportunities and threats.
These factors play a crucial role in their operations and performance as well. McDonald’s
has a presence across 120 countries and territories, and therefore, comes under many
rules. In some countries such as the UK and USA, health and hygiene regulations are
strict, and the restaurant must adhere to them. Two major consequences of breaching
relevant rules and regulations are the loss of money, and damages to brand reputation.
In the UK, McDonald’s was fined £200,000 for health and safety breaches in 2018. An
employee at Lakeside Retail Park branch (West Thurrock) suffered a fractured knee
when he was hit by a car while he was directing traffic in the restaurant’s drive-thru and
car park. The court found that the restaurant had not provided the staff with adequate
training to direct traffic (Liversedge, 2018). Similarly, Selyukh (2019) reports that the
restaurant agreed to pay $26 million in 2019 to settle a legal battle with California cooks
and cashiers. The lawsuit represented tens of thousands of workers who had accused
the restaurant of failing to pay them appropriately. However, it is worth noting that
McDonald’s operates in all of the largest countries in the world. Some of those countries
have very stable political environments making it easier for the restaurant to operate and
make profits. Operating in politically stable countries enables the restaurant to focus on
what it does best without any concern of immediate adaptation to changes.

● Economic Factors

It’s not only the United States’ economy that affects McDonald’s success. The
economy of each country they operate in ultimately affects their results. They must
decide whether it’s a smarter decision to purchase raw materials locally or to ship them
in. The number of tariffs for imported resources and foreign incorporation taxes plays a
vital role in this decision. In 2008, McDonald’s took a financial hit from the economic
recession. Disposable income was at an all-time low while people scrambled to find new
jobs. Since then, McDonald’s brand image has taken a hit due to an increase in health
consciousness among consumers. Many fast food restaurants are adding healthy
options to their menu while trying to shed their “junk food” image. But it’s hard — and
expensive — to change the opinions of the public. Additionally, McDonald’s should factor
in the unemployment rate of each location they’re in. The company is known for its high
turnover rate, meaning they hire and lose workers on a consistent basis. It’s a known
joke that McDonald’s is “always hiring” but this can be a glimmer of hope for locations
with high rates of unemployment.

● Socio-Cultural Factors
 In the case of McDonald’s, several social forces greatly affected its
success in the US. One factor was the prevailing family structure in the US and the trend
towards a youth-orientated culture. In the 1960s and the 1970s the decision-making
role had changed to such an extent that children often made the selection of a place to
eat. McDonald’s special emphasis on children and teenagers as advertising targets was
successful largely because the strategy capitalised on these existing social trends.

● Technological Factors

Technological developments have made international travel and

communication more accessible to consumers and led to a situation in which social
habits and fashions change much quicker. Moreover, lifestyles and attitude
changes cause changes in product demand and how products can be sold to customers.
Technological factors include forces that create new technologies, creating new
product and market opportunities. It is based on considerations as to whether the
local market has sufficiently developed technologies to take full advantage of the
product. It should be noted that high technologies are required to make full use of the
variety of promotional methods using alternative advertising media such as
television or websites (Vrontis and Vronti, 2004). McDonald’s successful
internationalisation can be partly attributed to the way the company has overcome
technological problems. The systematic substitution of equipment for people and
the carefully planned use and positioning of technology have helped each franchise
to be of the same high standard. When McDonald’s entered the Russian market, the
company took into account that technology transfer could provide important
long-term benefits to the Soviet citizenry. Also, since the Soviet machinery lagged 15–
20 years behind Western technology, new machinery from Holland was used to harvest
potatoes used to make French fries.

● Environmental Factors

The climate and physical terrain of a country are important

environmental conditions which have a significant effect on the demand and the type of
product made available. Prior to entry into a new market, it is very important for
McDonald’s to consider the physical terrain and climate in the appraisal. Altitude, relative
temperatures and humidity are some of the climatic conditions that can affect products in
foreign markets. Being environmentally friendly is another important issue to consider.
Environmental groups forced McDonald’s to reduce its use of plastic and
styrofoam packing. While McDonald’s internal market research shows that
environmental issues will have neither a positive nor negative impact on sales, they have
agreed to work with the Environmental Defence Fund, an environmental pressure group,
to reduce unnecessary and harmful waste.

● Stakeholders

It is important that multinational companies highly consider and value their

general public or stakeholders – their staff, suppliers, distributors, shareholders and the
consumers themselves. How a consumer and, indeed, the other ‘publics’ mentioned,
view the company and the products marketed is important, firstly in order to assess what
market you are in but, secondly, to assess whether the corporate image of the
company is functioning in a positive manner. Public perception of your product allows it
to be positioned or repositioned to reach the required target market and, therefore, be
successful. If you view your product as portraying a certain image that is at odds with the
public perception of it, obviously your marketing strategy is not functioning properly.
Likewise, if your business itself is viewed in a negative light by actors both internal and
external to the company, steps need to be taken including the design, quality, marketing
and strategy of what is offered to correct this and therefore create a feel good factor.
Having a good relationship with all publics is highly considered by McDonald’s.

● Customer Tastes
 McDonald’s is not an advocate of global marketing where this involves products
and services being treated as though the world is a single, uniform entity, thus marketing
standardised offerings in the same way everywhere. They follow an
internationalization marketing strategy which involves customising marketing
strategies (this may also include pricing strategies) for different regions of the world
according to cultural, regional and national differences in line with local needs.
Therefore, the concept of ‘think global, act local’ has been clearly adopted by
McDonald’s (Vignali, 2001). Below are some key examples of the Internationalisation
marketing strategy pursued by McDonald’s.

● Product

One of the aims of McDonald’s is to create, where possible, a standardised set of

items that taste the same whether in Singapore, Spain or South Africa. Vignali (2001)
notes that adaptation is required for many reasons, including consumer
tastes/preferences and laws/customs. There are many situations where McDonald’s
adapted the product because of religious laws and customs in a country. For example, in
Israel, after initial protests, Big Macs are served without cheese in several outlets,
thereby permitting the separation of meat and dairy products required of kosher
restaurants. McDonald’s restaurants in India serve Vegetable McNuggets and a mutton-
based Maharaja Mac (Big Mac). Such innovations are necessary in a country where
Hindus do not eat beef, Muslims do not eat pork and Jains (among others) do not eat
meat of any type. In Malaysia and Singapore, McDonald’s underwent rigorous
inspections by Muslim clerics to ensure ritual cleanliness; the chain was rewarded with
a halal (‘clean’, ‘‘acceptable’) certificate, indicating the total absence of pork products.
There are also many examples of how McDonald’s adapted the original menu to meet
customer needs/wants in different countries.

2. DESCRIBE HOW THE COMPANY RESPONDS TO EACH EXTERNAL FACTOR.

● Political Factors: Governmental Conflicts Overseas

McDonald’s must respond to political laws and influences in over a hundred

countries. Like any other restaurant, they must comply with health and hygiene
regulations. If their food doesn’t abide by a certain code, they would be shut down. Their
employees must also adhere to all food and health laws while working in any given
location. Fast food shops are feeling governmental pressure because of the high
amounts of sodium and sugar pumped into their menu. Sugar and sodium are linked to
many common health diseases like type 2 diabetes, hypertension, and heart disease.
Consuming too much of these foods can lead to obesity, stroke, and heart attack. As a
countermeasure, McDonald’s is now offering new “healthy” addition to pre-existing food
choices. For instance, you can now add additional protein to their fruit smoothies. Adding
alternatives is one way to respond to changing public health agreements, but it could
also increase their operating costs too. McDonald’s is also affected by the government
tensions between countries. For instance, the United States’ relationship with the United
Kingdom has been strained as of late. And communication with Russia may be
questionable. Even though they have restaurants located all over the world, McDonald’s
is an American company. Complications amongst governmental parties could shift
current trade agreements, creating a hostile environment for McDonald’s to function
overseas.

● Economic factors: The economy of 100 countries

 It's not only the United States’ economy that affects McDonald’s success. The
economy of each country they operate in ultimately affects their results. They must
decide whether it’s a smarter decision to purchase raw materials locally or to ship them
in. The number of tariffs for imported resources and foreign incorporation taxes plays a
vital role in this decision. In 2008, McDonald’s took a financial hit from the economic
recession. Disposable income was at an all-time low while people scrambled to find new
jobs. Since then, McDonald’s brand image has taken a hit due to an increase in health
consciousness among consumers. Many fast food restaurants are adding healthy
options to their menu while trying to shed their “junk food” image. But it’s hard — and
expensive — to change the opinions of the public. Additionally, McDonald’s should factor
in the unemployment rate of each location they’re in. The company is known for its high
turnover rate, meaning they hire and lose workers on a consistent basis. It’s a known
joke that McDonald’s is “always hiring” but this can be a glimmer of hope for locations
with high rates of unemployment.

● Socio-cultural factors: A negative brand image across the globe

Consumers obsessively scrutinize what they’re putting into their bodies. We’re
seeing a rise in low-carb and low-sugar diets. People are jumping on the intermediate
fasting bandwagon. Why? Because they’re seeking ways to strengthen their bodies
without sacrificing health. Unfortunately, McDonald’s menu doesn’t comply with these
demands, making them a less desirable option for health-conscious adults. McDonald’s
is trying though. You can swap out high sugar ingredients in their drinks for a low-calorie
alternative. And, as mentioned above, they’ve recently come out with high-protein
smoothies. However, consumers are still complaining about the high sugar content in
these drinks. Overseas, fries and hamburgers don’t cut it. People in Asian countries, for
example, are used to eating their local cuisine. Although hamburgers and fries can be
nice to have once in awhile, it might not be the first choice option for international
audiences. While McDonald’s has offered localized menu options in countries like Japan
and Canada — an opportunity they should take advantage of more often — it can be a
costly endeavor for the company too. McDonald’s needs to shed its unhealthy image to
move forward with the growing food trends. It won’t be easy. But it’s necessary if they
want to survive among other fast food companies who are reshaping their menu for their
customers.

● Technological factors: Less tech but stronger impact

Cosmetics revolve around selling products online. Retail giants, like Amazon,
designed their business structure for internet use only. Compared to these, it doesn’t
seem McDonald’s has a strong need for technology. But that’s not true. The tech they
use is necessary to improve staff productivity, communication amongst teams, and
produce food as quickly as their customers expect. However, McDonald’s has recently
upgraded their menus with flashy television screens hanging from the ceiling behind their
cashiers. They also use their website to showcase nutritional information. In some
locations, you can order your food online, allowing you to stroll in and grab your meal
without waiting in line. They’ve also remodeled their stores as a means to rebrand their
image. Many McDonald’s now have a new set of paint, chairs, and tables to match their
fancy flat screen menu displays. They also provide free Wi-Fi to encourage more
customers to order and stay. But, as the old joke continues, their ice cream machine is
still down more than it’s ever up. McDonald’s is also active on social media. They use
Facebook and Instagram ads to nab their customers’ attention with their new or returning
offerings, like their summer hit, the McCafe Vanilla Chai Frappuccino. Although
McDonald’s is incredibly well-known (and needs a little introduction), not capitalizing on
social technology will only give their competition, like Wendy’s, known for their witty and
hilarious Twitter conversations, an advantage.

● Environmental Factors
 McDonald’s has taken a number of steps to respond to environmental concerns.
For instance, it installed recycling units in over 1000 restaurants in the UK so that
consumers are able to separate cups and plastics for recycling (McDonald’s, 2020).
Likewise, it has measures in place to reduce its greenhouse gas emissions, and the
amount of paper and plastic packaging it uses daily. It is also currently working on
protecting water resources.

● Socio-Cultural Factors

International strategies of McDonald’s seem to act 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 have
understood its customers based on their characteristics. A recent survey has proved that
McDonald’s most frequent customers are below the age of thirty-five (Ivythesis, 2011).

● Stakeholders

It is important that multinational companies highly consider and value their

general public or stakeholders – their staff, suppliers, distributors, shareholders and the
consumers themselves. How a consumer and, indeed, the other ‘publics’ mentioned,
view the company and the products marketed is important, firstly in order to assess what
market you are in but, secondly, to assess whether the corporate image of the
company is functioning in a positive manner. Public perception of your product allows it
to be positioned or repositioned to reach the required target market and, therefore, be
successful. If you view your product as portraying a certain image that is at odds with the
public perception of it, obviously your marketing strategy is not functioning properly.
Likewise, if your business itself is viewed in a negative light by actors both internal and
external to the company, steps need to be taken including the design, quality, marketing
and strategy of what is offered to correct this and therefore create a feel good factor.
Having a good relationship with all publics is highly considered by McDonald’s.

● Customer Tastes

McDonald’s is not an advocate of global marketing where this involves products

and services being treated as though the world is a single, uniform entity, thus marketing
standardised offerings in the same way everywhere. They follow an
internationalization marketing strategy which involves customising marketing
strategies (this may also include pricing strategies) for different regions of the world
according to cultural, regional and national differences in line with local needs.
Therefore, the concept of ‘think global, act local’ has been clearly adopted by
McDonald’s (Vignali, 2001). Below are some key examples of the Internationalisation
marketing strategy pursued by McDonald’s.

● Product

One of the aims of McDonald’s is to create, where possible, a standardised set of

items that taste the same whether in Singapore, Spain or South Africa. Vignali (2001)
notes that adaptation is required for many reasons, including consumer
tastes/preferences and laws/customs. There are many situations where McDonald’s
adapted the product because of religious laws and customs in a country. For example, in
Israel, after initial protests, Big Macs are served without cheese in several outlets,
thereby permitting the separation of meat and dairy products required of kosher
restaurants. McDonald’s restaurants in India serve Vegetable McNuggets and a mutton-
based Maharaja Mac (Big Mac). Such innovations are necessary in a country where
Hindus do not eat beef, Muslims do not eat pork and Jains (among others) do not eat
meat of any type. In Malaysia and Singapore, McDonald’s underwent rigorous
inspections by Muslim clerics to ensure ritual cleanliness; the chain was rewarded with
a halal (‘clean’, ‘‘acceptable’) certificate, indicating the total absence of pork products.
There are also many examples of how McDonald’s adapted the original menu to meet
customer needs/wants in different countries.

REFERENCES:
● Guest. (n.d.). Strategic management- McDonalds (1). Retrieved August 26, 2021, from
https://pdfcoffee.com/strategic-management-mcdonalds-1-pdf-free.html

● HowandWhat.net. (2020, July 25). PESTEL analysis of McDonald's (mcdonald's external

ENVIRONMENT ANALYSIS). Retrieved August 26, 2021, from
https://howandwhat.net/pestel-analysis-mcdonalds/

● Frue, K. (2018, April 29). Pest analysis of mcdonald's: Which factors affect their future
success. Retrieved August 26, 2021, from
https://pestleanalysis.com/pest-analysis-of-mcdonalds/

● Writepass. (2013, July 04). Strategic analysis (SWOT, Pestel, Five Forces) of
McDonalds. Retrieved August 26, 2021, from
https://writepass.com/journal/2012/12/the-term-restaurant-is-an-establishment-where-foo
d-is-prepared-and-served-to-the-people-and-alwaysalmost-refers-to-any-sort-of-dine-in/#
B_Socio-Cultural_Factors

● Pratap, A. (n.d.). Pestel analysis of mcdonalds.pdf. Retrieved August 26, 2021, from
https://www.academia.edu/32432279/PESTEL_Analysis_of_McDonalds_pdf?auto=down
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