Contents

Introduction...........................................................................................................................................1
Macro environment...............................................................................................................................1
Strengths...........................................................................................................................................2
Weakness:.........................................................................................................................................3
Opportunities....................................................................................................................................3
Threats...............................................................................................................................................3
PESTLE framework to analyse McDonalds Corporation.........................................................................4
Economic Factors Important to McDonald’s.....................................................................................4
Socio-cultural Factors Influencing McDonald’s Business Environment..............................................5
Technological Factors in McDonald’s Business..................................................................................5
Environmental Factors...........................................................................................................................6
Legal Factors......................................................................................................................................6
Analyse the internal environment and capabilities...............................................................................6
Strengths...........................................................................................................................................7
Weaknesses.......................................................................................................................................7
Opportunities....................................................................................................................................7
Threats...............................................................................................................................................8
Applying Porter’s five forces model evaluate the competitive forces in the market.............................8
Conclusion...........................................................................................................................................13
Reference............................................................................................................................................13

Introduction

Organization and it activities are always being affected by the environment. These can be
divided into external and internal environment respectively.  Internal environmental factors
are events that occur within an organization. Generally speaking, internal environmental
factors are easier to control than external environmental factors (Hultzman, 2003). External
environmental are also the events that take place outside of the organization and are very
difficult to predict and control. External environmental factors can be extremely dangerous
for an organization based on the fact that it is unpredictable and hard to control.
Environmental analysis is a tactical tool. It is a method to identify all the external and internal
elements, which can have impact on the organization’s performance. The analysis involves
considering the level of threat or opportunity the factors might come up. These assessments
are later translated into the decision-making process (González-Benito and González-Benito,
2004). The study helps strategize with the firm’s environment. As the world is getting smaller
and competition is increasing, organisations have increasing pressure to develop its business,
emphasize this knowledge and to strengthen its competitiveness. There are some few
frameworks that can be used to analyse firms’ internal and external environment. These are
PESTEL tool, SWOT analysis, or Porter’s five forces model. A PESTEL analysis is a
framework for marketers (Žvirblis and Zinkevičiūte, (2008). You can use it if you want
analyse and screen the external marketing environment of you firm (Dyson, 2004). The
strategic management tool gauges the macro environmental factors. The results make
decision taking much easier. According to Dyson (2004) SWOT analysis purposes to identify
the strengths and weaknesses of an organisation and the opportunities and threats in the
environment.

Macro environment.
Macro environment involves influences which affect the entire economy of a business.
External environments comprises of factors existing outside the organisation. Irrespective of
the industry, these elements will have massive effect on any firm’s development and
existence. Companies have to be aware of the conditions in its external environment. Again
firms have to be able to identify and understand the most important threats and opportunities
in its external environment that affects the company. External environments comprise of
many different factors containing a vast entity, namely political, sociological, demographical,
global and technological factors, customer preference and related industries factors
(Kozlinskis and Guseva, 2006). External environments can be divided into three major areas
including general, industry and competitor environments (Lynch, 2006). At this stage
McDonalds Corporation will be used as a given organisation and will apply two (2) different
frameworks (SWOT and PESTLE) to analyse the impact and influence of its macro
environment.

McDonalds has been a prosperous business since 1955 (History of McDonald's, 2018)
McDonald's is the world's largest restaurant chain by revenue and also serving over 69
million customers daily in over 100 countries across the world. McDonalds manages its
subsidiaries directly or through franchising. The headquarters is located in Oak Brook, a
suburb of Chicago, in the State of Illinois. In the year 2005 Fortune Magazine listed
McDonald's as one of the best places for minorities to work. McDonalds invests more than $1
billion yearly in training its staff, and every year more than 250,000 employees graduate from
McDonald's training facility, Hamburger University.

Strengths
According to Forbes (2018) McDonald's is the largest fast food company in the world.
Franchisee of the company is extremely successful as they are independent and there are full
time operators. The company pays attention on the four marketing p’s namely, product, price,
place, and people. The company takes good care of its employees and treats them with care
and love. There is not much stress on building up a formal organizational structure rather
employees are expected to feel free without any control. Employees are provided hospitality
training to have a customer focused people in the company. Another key factor is customer
satisfaction. Fast food chain quickly responds to the changing preferences and trends of the
customers. For example, it introduced Premium salads and McChicken (History of
McDonald's, 2018).

McDonald's restaurants have a clean and modern environment. McDonalds continuously

renovate its buildings and also pays attention to the interiors used in order to create a good
atmosphere for both workers and consumers. The prices of their products are set to the extent
that all kind of persons can easily afford it. It also emphasizes on brand loyalty and building
trust.

It is the first company to officially introduced 'Fast Food Culture'. McDonald’s fast food
chain has more than 30000 branches in 120 countries and it is an important part of U.S.
culture. These are some successful items of food chain: French Fries, Happy Meal etc
(History of McDonald's, 2018).

Weakness:
Customer behaviour and expectation differs enormously among different cultures and
boundaries.

Unhealthy food image and also yet to accomplish going on the trend of organic food

Be deficient in new products

Enormous employee revenue

More advertising on children

The quality of the food is incompatible

Compared to the other fast food chain order accuracy percentage is low

Opportunities
Globalization, diversity and ethics are the major factors that have determined the success of
McDonald's. According to Bateman and Scott (2004) competition in the global market is very
tough. McDonald's has joined the list of Fortune 500 corporations as a top food service
retailer. The company requires very effective strategic planning for its marketing activities.
There is no difference between the global marketing decisions and the decisions that are
made locally. These global marketing decisions may differ from country to country.
McDonald's provides its employees to work in different cultural settings in order to bring the
best out of them. This is as a result of its large scale working, which lays down the basis of an
excellent marketing strategy for appointing new employees. The company also runs a global
central set of courses for its restaurant management (McDonald's, 2005).

Threats
Mature Industry

The industry is already quite mature and over stored. It has many competitors and can
incorporate many other new ones. McDonalds has a lot of competitors in the fast food
industry, namely KFC, Burger king Wendy's, and Subway. The competition is very intense in
the fast food industry. These two companies are the main competitors that are trying very
hard to overtake McDonalds as the market leader.

More health - conscious customers: A lot of consumers are now backing off from fast food
due to health problems. Legal threats that confront the Corporation like law suits against their
advertising, meals, obesity caused by their food, fries, employment etc.

Changing Demographics: The demographic factors such as density of population, age

structure, family composition, income of the people and size and other pose a threat to the
McDonalds.
Instabilities of exchange rates: Since McDonald's a global company; therefore, it is facing the
problem of foreign exchange fluctuations. These variations might affect its revenues and
profits.

PESTLE framework to analyse McDonalds Corporation .

The political impact on every company is very crucial and so McDonald’s considers that to
be very important. This aspect of the PESTEL analysis refers to the effects of governmental
action on macro-environment of businesses. In McDonald’s case, the most significant
political external factors are as follows:

 Increasing international trade agreements

 Pending tax reform
 Evolving public health policies

McDonald Corporation has the opportunity to increase its business based on improved
international trade, which can improve global supply chains. McDonald’s also has the
opportunity to change its practices and strategies to lessen the impact of taxation on the
business without going against the law. However, public health policy increasingly tends to
dishearten people from patronizing fast foods from firms like McDonald’s. Nevertheless,
they also have the opportunity to address this external factor by improving the quality of its
products.

Economic Factors Important to McDonald’s

Considering the economic changes going on in the world, it has a huge influence on the
McDonalds Corporation. The PESTEL analysis relates to the effects of economic conditions
and trends on the macro-environment of businesses. The following are the most famous
economic ex

ternal factors facing McDonalds: Slow but stable growth of the U.S. economy, Stable but
risky European economies and Slowdown of the Chinese economy.

McDonald Corporation has the prospect to grow in the American economy even if the
economy is currently slow. Though, the on-going situation in Europe could threaten
McDonald’s growth in the continent. In Asia, the slowdown of the Chinese economy
threatens the company’s growth in that region as well. In this aspect of the PESTEL analysis
of McDonald’s, the economic external factors mainly threaten the business.
Socio-cultural Factors Influencing McDonald’s Business Environment
McDonald’s must respond to sociocultural changes in its macro-environment. This aspect of
the PESTEL analysis refers to the social conditions that support or affect businesses. The
following are the most significant sociocultural external factors for McDonalds: Widening
wealth gap, Increasing cultural diversity and Healthy lifestyle trend

The company’s target consumers are mostly from medium and low-income households,
based on this McDonald’s has the opportunity to widen wealth gap. Going forward on this,
McDonald’s has the opportunity to develop its products mix to meet the expectations of its
diverse target market. The health aspect of the McDonalds is at treat because of the current
healthy lifestyle trend going on and there are a lot of the negative campaign going against fast
foods like what McDonalds is selling. But the company has the potential to improve its
products in order to be healthier by not making people grow fat.

Technological Factors in McDonald’s Business

The adoption of technology especially the usage of mobile platforms with the likes of tablets,
smartphones and similar handheld devices is very vital when it comes the aspect of using ICT
to involve the dynamic interchange between consumers and suppliers (Law et al., 2014). The
success story of McDonalds mostly depends on the introduction technological applications.
This aspect of the PESTEL analysis relates to the impact of technologies and related trends
on the macro-environment of companies. McDonald’s must address the following
technological external factors: Increasing business automation and increasing sales through
mobile devices. This will help consumers in a lot of ways.

The company has the ability to improve its business effectiveness and efficiency by
conducting increase research and development investments. McDonald’s can introduce more
automation to increase productivity, based on the external factor of increasing business
automation. Last but not the least McDonald’s can improve its mobile services to attract more
customer through its website and mobile app. In the technological aspect of the PESTEL
analysis, McDonald’s has major opportunities for growth.

Environmental Factors
Ecological external factors affect McDonald’s consumers and the company’s performance.
This aspect of the PESTEL analysis refers to the environmental issues in firms’ macro-
environment. The following are the most significant ecological external factors affecting
McDonalds: Rising interest for corporate environmental programs, increasing emphasis on
sustainable business strategies and Climate change. McDonald’s could expand its corporate
social responsibility policies to reach even high performance in addressing environmental
concerns. However, climate change remains a threat because of its negative effects on
livestock’s. In this aspect of the PESTEL analysis, the ecological external factors highlight
corporate social responsibility opportunities, although McDonald’s also needs to further
diversify its supply chain to address the effects of climate change.

Legal Factors
McDonald’s must obey legal requirements imposed on its macro-environment. This aspect of
the PESTEL analysis pertains to the impact of laws or regulations on firms. The most
significant legal external factors for McDonald’s are as follows: New legal minimum wage
levels in the U.S., Local health regulations in workplaces and schools and Animal welfare
regulation.

McDonald’s faces the challenge and difficulty of higher minimum wages due to the change in
wages, and this might lead to higher costs and prices. On the other side, local health
regulations impacting food service in workplaces and schools could reduce the company’s
revenues from these areas. In addition, McDonald’s must look into animal welfare controlling
effects on its supply chain. For instance, the company can implement new strategies to ensure
animal welfare among meat producers.

Analyse the internal environment and capabilities

Internal environmental factors, on which we're focusing on, are events that occur within an
organization. Generally speaking, internal environmental factors are easier to control than
external environmental factors. Some examples of internal environmental factors are:
Management changes, Employee morale, Culture changes and Financial changes.

The SWOT analysis is one of the most popular strategic analysis models. This involves
looking at the strengths and weaknesses of your business' capabilities, and any opportunities
and threats to your business. Once you have identified all of these, you can assess how to
capitalise on your strengths, minimise the effects of your weaknesses, make the most of any
opportunities and reduce the impact of any threats.
Starbucks SWOT Analysis (Internal analysis)

Strengths
High visibility locations to attract customers
Established logo, developed brand, copyrights, trademarks, website and patents
Company operated retail stores, International stores
Valued and motivated employees, good work environment
Good relationships with suppliers
Industry market leader with a globally renowned brand
Customer base loyalty
Product is the last socially accepted addiction
Widespread and consistent
Knowledge based

Weaknesses
Size
Lack of internal focus
Every increasing number of competitors in a growing market
Self cannibalization
Cross functional management
Product pricing

Opportunities
Expansion into retail operations
Technological improvement
New channels distribution
New introduction of products
Distribution agreements
Brand extension in the same line or different categories
Developing international markets
Continued domestic expansion or domination of segment

Threats
Increased competition from coffee shops to restaurants, street carts, supermarkets
US market saturation
Coffee price volatility in developing countries
Negative publicity from poorly treated farmers in supplying countries
Consumer trends toward more healthy ways and away from caffeine
Fragile state of worldwide production of specialty coffees
Estrangement of younger, domestic market segments
Corporate behemoth image
Cultural and Political issues in foreign countries

Applying Porter’s five forces model evaluate the competitive forces in

the market.
The five forces model was developed by Michael E. Porter to help companies assess the
nature of an business’s competitiveness and develop corporate strategies according.
According to the model, organisations will be challenged with five diverse forces that will
impact the firm’s competitiveness. These forces are threat of new entrants, bargaining power
of suppliers, bargaining power of buyers, threat of substitute products and rivalry among
competing firms (Lindroos and Lohivesi 2006 pp. 219-220). This five forces model is a
significant pattern to help firms determine whether the industry is attractive and has potential
to earn beyond break-even point. According to Hitt et al. (2007 pp. 49-53), the industry is
unappealing and there are small chances to achieve competitive position, if there are low
entry barriers, buyers and supplier have strong bargaining power, there exists intense rivalry
among competitors and there will be strong competitive threat of product substitutes.
Companies should be conscious of all these forces when they are planning their strategies and
considering industries to enter. Below is the diagram for the five forces of Porter’s.
Applying this model to a specific firm, we are going to use our first example from P1
(McDonalds Corporation).

Threat of new entrants: McDonald's was never terrified in a moment when it first noticed
that Burger King is going to start up in the Austria to be precise Salzburg. At the beginning,
McDonalds was well aware of their market position and how their customers and potential
ones perceived them. Second, Burger King is not visibly positioned well and the customers
are not so much interested in their products compared to McDonalds. Third, for Burger King
compete very well within the shortest McDonald's it needs to open 15 shops every 2 months
which is impossible and even if it was possible Burger King would still need more than a
year to catch up with McDonalds.

Rivalry among existing firms: McDonald's does not really see Turkish fast food shops or
consider it a main competitor. But rather they see Kentucky Fried Chicken and Burger king
are the main competitors of McDonald's in the fast foods industry. KFC has the second
largest market share of the fast food industry in London after McDonald's and Burger king
has the third largest share of the industry. McDonald's is continued to come up with creative
and interesting ideas and views to beat the competition which is the main strategy that
McDonald's is adopting against competition.

Threat of substitutes: As an alternative of buying McDonald’s products, consumers can

decide to prepare food at home and it will be more healthy and cheaper. So therefore it is
considered to be a threat to McDonalds because people will buy less causing reduction in
sales.
Power of buyer: Consumers of McDonalds have the ability to influence the price because
there are many competitors and substitutes that consumers can switch to such as Burger king
or KFC therefore the consumers have the supremacy in purchasing the product of not and can
influence it.

Power of supplier: When it comes to over suppliers, McDonalds has the sole power to
choose who to work with because there are many suppliers out there that are willing and
ready to work with McDonalds because it is a well-recognized organization across the world.
The only problem is that McDonalds needs to follow some quality measurements in
providing the food which might not be easily taught to new suppliers.

Applying a range of theories concepts and models, interpret and devise strategic plan
for the organisation.

When strategic planning arrived on the scene in the mid-1960s, corporate leaders embraced it
as “the one best way” to devise and implement strategies that would enhance the
competitiveness of each business unit. Strategic planning is a process that brings to life the
mission and vision of the enterprise. A strategic plan, well-crafted and of value, is driven
from the top down; considers the internal and external environment around the business; is
the work of the managers of the business; and is communicated to all the business
stakeholders, both inside and outside of the company. It is critical to business success and
development. According to Pirraglia (2018) strategic planning focuses on the company’s
overall output not just departments. It is very vital for businesses to map a good strategy in
order to be successful in the competitive market. By doing so, McDonald’s general strategy
determines its basic approach to developing its business and taking the lead in the market.
Been the largest fast food restaurant chain in the world, McDonald’s uses its intensive growth
strategies to support it business ides and development in order to expand. McDonald’s
primary general strategy plan is cost leadership approach. According to Porter’s model, this
strategy comes with a company minimizing costs in order to offer products at low prices for
its consumers. McDonald’s is known for its cheaper products prices compared to competitors
like Subway and KFC. Applying Ansoff Matrix to McDonalds Corporation and its products.
McDonald is a company that hardly change its offers. However, it needs to innovate its
products on continues basis so that it can continue to compete at the high level. Ansoff
Matrix is one of the best suitable marketing model for companies.
  Existing Products New Products

Market Penetration
hamburgers, cheeseburgers, chicken Product Development    
products, French fries, breakfast items, Innovation in all products, Introduction of
Existing
soft drinks, milkshakes and desserts. new products (Brands)
Markets
Happy meal, speedy service.
More recently, it has begun to offer McSpaghetti, McPizza

salads, wraps and fruit.

    Market Development   

It has presence across 121 countries and

Diversification
New still planning to open outlets in the
McCafe, McStops
Markets following countries:
Uruguay Chipotle Mexican Gril

Nigeria

Tunisia

Ansoff Matrix’s helps companies to strategize well by focusing on their present and potential
products, markets and customers. It helps them to also consider ways to grow via existing
products and new products, and in existing markets and new markets.

Product Development Strategy

McDonald’s Corporation is known for introducing new techniques for customers to enjoy. It
also continues to provide an attractive level of consumer economic surplus to its guests and
potential customers.

Market Development
McDonald's is a Global or worldwide fast food company. It has more than 31,000 business
outlets (franchisees) in 121 countries round the world and it always chase the additional
market fragments on geographical base. When the company is expanding into new markets,
the market development strategy usually has more risk than a market penetration strategy.
Nevertheless, in success case of McDonald’s developments of new markets have been
confirmed that it does not face such challenges.

Diversification

Diversification is normally not a great idea for the company, since companies cannot risk
making new products in the new markets. For franchisee system that McDonald’s adopts is it
highly impossible to be successful if you decide t diverse. Nevertheless, McDonald has also
proved success in this strategy by owning a majority stake in Chipotle Mexican Grill & Pert
A Manger and acquiring Donatos Pizza.  

Pricing Strategy

McDonald’s is a truly global company that needs to have many strategies in place in order to
sustain a global competitive advantage it faces (Jordan, 2011). Pricing strategy is one of the
famous ways company’s use to attract customers. McDonalds came with the concept of value
pricing in various part of the world when they first began to operate.

Penetration Pricing

At the beginning when McDonald’s began to serve coffee, they ran a large marketing
campaign in order to gain some market share in the industry since there were a lot of known
coffee shops already. For a limited time frame, one could get a free small coffee every
morning from 4-7am in places like India, china and other part of Europe. This was meant to
promote their new coffee partnership with Green Mountain Coffee and helped notify the
public that McDonalds is now into selling coffee.

Psychological Pricing.

This approach is used when the marketer wants the consumer to respond on an emotional,
rather than normal or rational basis. Example Price Point Perspective (PPP) 0.99 Cents not 1
US Dollar. . McDonald’s uses psychological pricing a lot, with items costing 99p. It’s weird
how consumers react to prices like that.
Conclusion
Macro environment has influences on every firm regardless of their location. McDonalds
Corporation takes critical look at those factors when developing and selling their products.
On the other side internal environmental factors also affect firm but they have maximum
control over these elements. When a firm knows it’s SWOT it helps them to know the
direction to take rather than not knowing it. The five forces model developed by Michael E.
Porter also help companies to assess the nature of a business’s competitiveness and develop
corporate strategies. These five model guides McDonalds to survive in the competition. It is
very energetic for businesses to find a good strategy in order to be successful in the
competitive market. Both pricing strategy and marketing strategy helps firm to be very
competitive.

Reference
Bateman, T. S., & Snell, S. A. (2004). Management: The new competitive landscape. Boston,
Mass. [u.a.: McGraw-Hill/Irwin.

Bhatnagar P. (2005). Retrieved from

http://money.cnn.com/2005/04/14/news/fortune500/mcdonalds_anniversary/index.htm

[24/02/2018]

Dyson, R. G. (2004). Strategic development and SWOT analysis at the University of

Warwick. European Journal of Operational Research,  152, 3, 631-640.
Forbes (2018) YOUR READING LIST. Retrieved from
https://www.forbes.com/pictures/feji45hfkh/1-mcdonalds-3/#55272e2b15a7 [24/02/2018]

González-Benito, J., & González-Benito, O. (2004). Environmental proactivity and business

performance: An empirical analysis. Madrid: Fundación de las Cajas de Ahorros
Confederadas para la Investigación Económica y Social.

Law, R., Buhalis, D., & Cobanoglu, C. (2014). Progress on information and communication
technologies in hospitality and tourism. International Journal of Contemporary Hospitality
Management, 26, 5, 727-750.

Lindroos, J.E. & Lohivesi, K. (2006) Onnistu Strategiassa. 2nd Edition. WSOY.

Lynch, R. (2006), Corporate Strategy. 4th edition. Prentice Hall.

Hitt, M. & Hoskisson, R. & Ireland, R.(2007), Management of Strategy. Thomson South-
Western. International Student Edition.

Hultzman, R. (2003) Retrieved from https://study.com/academy/lesson/internal-and-external-

environments-of-business-lesson-quiz.html [24/02/2018]

Kozlinskis, V., & Guseva, K. (January 01, 2006). Evaluation of some business macro
environment forecasting methods. Journal of Business Economics and Management, 7, 3,
111-117.

History of McDonald's (2018) Retrieved from

http://www.historyoffastfood.com/fast-food-history/history-of-mcdonalds/ [24/02/2018]

Jordan, (2011) Global Pricing Strategy Example: McDonald’s. Retrieved from

http://globalpricingstrategies.com/global-pricing-strategy-example-mcdonald’s/

[24/02/2018]

Pirraglia, W. (2018) Why Is Strategic Planning Important to a Business? Retrieved from

http://smallbusiness.chron.com/strategic-planning-important-business-2671.html
[24/02/2018]
Žvirblis, A., & Zinkevičiūte, V. (2008). The integrated evaluation of the macro environment
of companies providing transport services. Transport,  23, 3, 266-272.