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. FACTORS B. FACTORS POLITICAL 4 ECONOMIC 4

FACTORS E. FACTORS SOCIAL-CULTURAL 5 TECHNOLOGY 5 LEGAL 6 ENVIRONMENTAL 6 IV CONCLUSION 7 V RECOMMENDATION 8 VI REFERENCE 9 . FACTORS F.C. FACTORS D.

BACKGROUND . the situation surrounding McDonald’s will be taken into consideration.I. Together with these advances. In this case. The discussions in this paper shall involve an analysis of the international expansion strategy utilized by a multinational company. the key standards of business are similarly taken into account. 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. The virtual closeness of states has made trade and commerce an international event. INTRODUCTION Globalization has made the globe considerably smaller. II. 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.

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. The first McDonald’s store operated in Hong Kong in 1975. Given that the products of the company are mainly western in character. The company operates over thirty one thousand stores all over the world to date. . The first shop operated at Paterson Street in Causeway Bay. the functions of McDonald’s in Hong Kong covers over two hundred restaurant chains spread in the whole of Hong Kong alone.The modest beginnings of McDonald’s in Illinois turned out to be among the main brand names in the international scene. it operates thousands of store franchises that functions autonomously. its operations has also expanded to the Asian region. Up to this data. In the rest of the globe. It has been synonymous to what is widely-accepted the fast-food concept.

A. 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. (2001. social. According to (2008). technology. economic. On the other hand. there are certain groups in Europe and the United States that clamor for state actions pertaining to the health implications of eating fast food. and environmental factors. For instance. and environment. All these elements are seen in the government control of the licensing of the restaurants in the respective states. pestle stands for political. 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 . Political Factors The international operations of McDonald’s are highly influenced by the individual state policies enforced by each government. worker protection.III. (2005) They have indicated that harmful elements like cholesterol and adverse effects like obesity are attributable to consuming fast food products. 705) For instance. PESTLE ANALYSIS Pestle is an analysis of the external macro environment in which a business operates.

(2004) Hence. 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. B. Like any business venture. In regarding the operations of the company. 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. The existence of meat in their menus in India is apparently offensive to the Hindu religion in the said market. . Exchange rate fluctuations will also play a significant role in the operations of the company. their problem depends on the response of the consumers on these fundamentals and how it could influence their general sales. they do have their individual concerns involving economic factors. Specifically. food chains like McDonald’s tend to import much of their raw materials into a specific territory if there is a dearth of supply. 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. Particularly. 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.the food. Economic Factors Organisations in the fast food industry are not excused from any disputes and troubles. these chains may have to put up with the issues of the effects of the economic environment.

Socio-Cultural Factors Articles on the international strategies of McDonald’s seem to function on several fields to guarantee lucrative returns for the organisation. The rate at which the economy of that particular state grows determines the purchasing power of the consumers in that country. McDonald’s indulge a particular variety of consumers with definite types of personalities. an option with regards to their dining needs. 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. the organisation improves on establishing a positive mind-set from their core consumers. Moreover. the company will also have to consider the economic standing of the state on which they operate on. it is imperative that the company be cognizant of the existing tax requirements needed by the individual governments on which they operate. hence their products shall cost higher than the other existing products in the market. McDonald stores have to take a great deal of consideration with reference to their microenvironment. This basically ensures the smooth operations of the McDonald’s franchises. if a franchise operates in a particularly economically weak state. (2005) pointed out that McDonald’s has launched a sensibly valued set of food that tenders a reliable level of . Hence. ( 1994) It has also been noted that the company have given the markets such as the United Kingdom. C.As stated in the paragraph above. then these franchises must take on certain adjustments to maintain the economies of scale. To illustrate. In the same regard.

Other advertising operations employ popular celebrities to promote their . ( 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. Technological Factors McDonald’s generates a demand for their own products.quality for the respective market where it operates. (2006) The company’s key tool for marketing is by means of television advertisements. They employ animated depictions of their characters like Grimace and Hamburglar. The company uses concepts of consumer behaviour product personality and purchasing decisions to its advantage. ( 1995) Other demonstration of such a marketing strategy is apparent in the commercials of they use. There are similarly some claims that McDonald’s are inclined to interest the younger populations more. In the case of McDonald’s they establish a good system in determining the needs of the market. The existence of play spots as well as toys in meals offered by the company shows this actuality. those who are aged just below the bracket of thirty-five are said to be the most frequent consumers of McDonald’s franchises. (2000) D. (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. ( 1998) It is said to have a major influence on the understanding of the prospective performance of the organisation in a particular market. Additionally.

products. the operations of McDonald’s have significantly been infused with new technology. 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 like has become endorsers for McDonald’s worldwide “loving’ it” campaign. this addressed the need of the company to form its corporate reputation to a more positive one and a more socially responsible company. 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. Basically. In the same way. This is to attend to the arguments of obesity charged against the products of the company. . E. This has similarly made McDonald’s apply a more careful consideration on their corporate social responsibilities. Legal Factors There has been the recurrent bellowing in opposition to the fast food industry. The improvement of the inventory system as well as its supply chain allows the company to operate in an international context. The integration of technology in the operations of McDonalds tend to add value to their products. Seen on the website of the company. The company has provided their customers the relevant data that they need with reference to the nutritional substances of their products. this is manifested in the improvements on its value chain. Moreover. the consumers provided freedom in choosing whether or not they want to purchase their meals. ( 2005) The reputation of McDonald’s is apparently a huge matter. On the whole.

employment standards. Otherwise. (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. Other legal concepts like tax obligations. 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. and quality requirements are only a few of important elements on which the company has to take into consideration. . McDonald’s Hong Kong went over the Styrofoam used by both Australia and the United States combined. In the same regard. (1997) further indicated that in 1995. 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. These entail accusations of environmental damage. Environment The social responsibilities of McDonald’s on the state are influential to the operations of the company.This is tied up with the socio-cultural attributes of the market on which they operate. operations in predominantly Muslim countries require their meat to conform to the Halal requirements of the law. For instance. smooth operations shall be hard to achieve. F.

This denotes that having the information on the effects of these alterations swiftly provides these fast food industry giants to take finetuning actions on their acts and still preserve their market position. the markets of nowadays manifest a cutthroat rivalry with the individual competitors. what it preserves as revealed in its processes is the need for flexibility. 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. This level of flexibility is basically acquired through the acquaintance of both the internal and external environment of the company. as indicated in the arguments and comments in this paper. Even though McDonald’s may have been deemed as demigod in the fast food business in the international scene. However. . The slight changes that take place in the market have an effect on the operations of the business in any case. Developments in the international setting have an effect on the more particular factors in the operations in individual organisations. the most significant contribution of this generation is the combination of globalization and internationalization in the businesses sector.IV. Hence. As implied in the introduction of this paper. this could be acquired by setting a certain level of flexibility in the organisation. recognized brands or otherwise. 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. CONCLUSION Debatably.

.

This way. l Economic Factors Before penetrating the market. l Political Factors Since it is apparent that the company is expanding continuously. The frequency of . RECOMMENDATION The following recommendations shall be based on the conclusions and arguments above. The company must also be acquainted with the law in order to know what their responsibilities and their possible liabilities. a good way of establishes good relationship with the government. To do this. especially in the movements in the economic environment. It is advisable that the company rests on the good graces of the government on which they will be penetrating. the company must carry out a well conducted market research.V. it is wise to deal directly with the proper authorities in the respective markets that they intend to operate in. all they have to do is accomplish all the prescribed acts and satisfy all the prerequisites for doing business.

the company will expect significant savings and reduction of costs in the operations. Fundamentally. the company should find out the shifts in areas like the consumer behaviour and purchasing patterns of the market. . a well drafted and comprehensive market research should be conducted initially so as to establish the acts that would conform to good customs. this is the key condition for executing a suitable customer relationship management system. The cost-effectiveness. It is also a good way to correspond with the respective McDonald’s headquarters in every state. public policies. l Socio-cultural Factors Obtain the relevant information from the target market in addition to the individual customers of the organisation. interactivity and real-time effects of the communications are a good way to find suppliers. and morals of the said state. The company must also look into the use of IT to enhance their inventory operations.the shifts in the inflation rate as well as the fluctuations in the exchange rate affects the operations of the company. l Technological Factors Use the internet to their advantage. Similarly. It is imperative that before a franchise is granted to a particular market. As the operations in its inbound and outbound logistics improve.

typepad. 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.l Environmental Factors Find out the environmental regime that governs the operations in every market.typepad.com/term_paper_topics/2009/02/pestle-analysis-ofmcdonalds. Minimize the use of Styrofoam materials and plastic cups. l Legal Factors Hire local counsels to deal with the legal conflicts in individual markets on which the company may encounter.html . Sanctions such as revoking of the franchise license or a particularly high fine should be installed to serve as a deterrent to infringement.com/term_paper_topics/2009/02/pestle-analysis-ofmcdonalds. 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. Read more: http://ivythesis.html#ixzz1LXHxNVUQ http://ivythesis. Constant updating of the social corporate responsibility is imperative. Monitor the waste disposal of the company.

Fortune Magazine 2005 listed McDonald's as the "Best Place to Work for Minorities.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.000 employees graduate from McDonald's training facility. McDonalds is a community oriented. The business is ranked number one in Fortune Magazine's 2008 list of most admired food service companies. and they preferred the food in the McDonald's packaging every single time. Ronald • • • . socially responsible company. 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.000 McDonalds restaurant managers and assistant managers were promoted from restaurant staff. One of the world's most recognizable logos (the Golden Arches) and spokes character (Ronald McDonald the clown). 67." McDonalds invests more than $1 billion annually in training its staff. Hamburger University. and every year more than 250. They run Ronald McDonald House facilities. In addition. 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.

this gives them the ability to weather economic fluctuations which are localized by country. theme parks and inside Wal-Mart. For example. By being spread out in different regions. dental and education services to children.McDonald Houses are located in more than 259 local communities worldwide. They successfully and easily adapt their global restaurants to appeal to the cultural differences. • They are a global company operating more than 23. All franchisees are independent. • 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. along the highways. full-time operators and McDonald's was named Entrepreneur's number-one franchise in 1997. and Ronald McDonald Care Mobile programs offers cost effective medical.500 restaurants in 109 countries. They can also operate effectively in an economic downturn due to the social need to seek out comfort foods. and cities. They also sponsor Olympic athletes. they provide separate entrances for families and single women. . they serve lamb burgers in India and in the Middle East. They have global locations in all major airports. tourist locations.

High employee turnover in their restaurants leads to more money being spent on training. Nestle Chocolate. Formica restaurant settings. growers and suppliers to ensure food quality and freshness. In addition they have a systemization and duplication of all their food prep processes in every restaurant. . Heinz Ketchup. Currently McDonald's and its competition health choice items do not include hamburgers. 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. fruit. Kraft Cheese. like the one they have in New York City on Broadway. In 2009 McDonald's saw the full benefits of a venture into beverages. assembly line style of food preparation. They have yet to capitalize on the trend towards organic foods. $3. such as gluten free and peanut free. Operating profit was $3. bottled water and other low fat and calorie conscious alternatives. In 2008 the business directed efforts at the breakfast. Leaving them much less able to compete with fast food pizza chains. McDonald's have problems with fluctuations in operating and net profits which ultimately impact investor relations. Nutrition information is printed on all packaging and more recently added to the McDonald's Internet site. McDonald's foods are purchased from only certified and inspected suppliers.433 million (2006) and $3.602 million (2005). Opportunities • • • • .544 million (2006) and $2. McDonald's uses only 100% pure USDA inspected beef.984 million (2005) $4. McDonalds offers salads. no fillers or additives. Newman's Own Salad Dressings. chicken. they could provide more upscale restaurant settings.879 million (2007). beverage and convenience categories. Additionally the produce is farm fresh. McDonalds only serves name brand processed items such as Dannon Yogurt. • • • Weaknesses • • • • Their test marketing for pizza failed to yield a substantial product. Dasani Water. roasted chicken. Net profits were $2. to appeal to a more upscale target market. hot specialist coffees not only secure sales. McDonald's was the first restaurant of its type to provide consumers with nutrition information. McDonald's serves 100% farm raised chicken no fillers or additives and only grade-A eggs.395 million (2007). McDonalds are required to run through 72 safety protocols every day to ensure the food is maintained in a clean contaminate free environment. They have industrial. McDonalds works closely with ranchers. In today's health conscious societies the introduction of a healthy hamburger is a great opportunity. For example. but also mean that restaurants get increasing numbers of customer visits. Provide optional allergen free food items. McDonald's takes food safety very seriously. Minute Maid Juice. More than 2000 inspections checks are performed at every stage of the food process.• • They have an efficient.

. like Burger King. Read more. where he went on an all McDonalds diet for 30 days and wound up getting cirrhosis of the liver. especially e-coli. toys. Starbucks. McDonalds no longer pushes the super size option at the dive thru window. . Major competitors. • • • McDonald's is the leading global foodservice retailer with more than 31. allegedly with addictive additives. Wendy's. Michael Spulock filmed the documentary Super Size Me. They entice children as young as one year old into their restaurants with special meals. In 2004.. More than 75% of McDonald's restaurants worldwide are owned and operated by independent local men and women. Due in part to the documentary.Threats • They are a benchmark for creating "cradle to grave" marketing. They have been criticized by many parent advocate groups for their marketing practices towards children which are seen as marginally ethical. It is merely intended to be used for educational purposes only. They have been sued multiple times for having "unhealthy" food. playgrounds and popular movie character tie-ins.000 local restaurants serving more than 58 million people in 118 countries each day. This documentary was a direct attack on the QSR industry as a whole and blamed them for America's obesity epidemic. Any contamination of the food supply. contributing to the obesity epidemic in America. Last updated July 2009 Disclaimer: This case study has been compiled from information freely available from public sources. Children grow up eating and enjoying McDonalds and then continue into adulthood. Taco Bell. KFC and any midrange sit-down restaurants.

Sign up to vote on this title
UsefulNot useful