MBA Fall 2023

Marketing Management and Analytics

Assignment no. 1
Submitted by:
Muhammad Faisal Semester 1 Reg ID:

What is the purpose of external Environment analysis? What are the

general forces that could influence or have influenced McDonalds’
development in China?

Environment Analysis
External environmental analysis helps companies determine their
operations and strategies by considering external factors. McDonald's
expansion in China was influenced by factors such as American
company KFC, local Chinese quick service restaurants, the growing
middle class, and affluent population. These factors led to competition
from local and foreign restaurants, causing McDonald's to increase
operating hours, implement home delivery services, and drive throughs.
Consumers demanded higher standards and resistance to high prices,
causing McDonald's to increase operating hours to 24 hours, implement
home delivery services, and drive throughs in many locations. Suppliers
were also crucial, with McDonald's sourcing 95% of its food from local
growers and suppliers. In summary, a successful company must be
aware of external factors and adapt their strategies to match internal
strengths and weaknesses with external threats and opportunities.

Forces that could influence or have influenced

In China, the fast food industry is dominated by several rivals, including
McDonald's, which is the second largest provider. KFC is the primary
competitor, along with noodle and dumpling stalls, which are becoming
part of the fast food culture. New market entrants, such as Burger King,
Subway, Mo's Burger, themed restaurants, and Starbucks, have entered
the market, offering different experiences but still aiming to be a
Western brand.
Buyer bargaining power is strong, as they have no switching costs and
can purchase from multiple sellers. McDonald's has recognized this by
offering tiered pricing, altering their menu, training staff, and updating
their décor.
Suppliers have a strong competitive force, as McDonald's has
established its own internal supply network to sell to both domestic and
export markets. Chinese partners have created joint ventures with
McDonald's, strengthening its supply chain, which has created 95% of
the materials needed. This makes suppliers a strong competitive force.
Substitute products also exist in the fast food arena, such as noodles,
dumplings, sandwiches, chicken, pizza, traditional Chinese restaurants,
and home-cooked meals. There is a vast array of substitute products
available for Chinese consumers, making substitute products a
moderate competitive force. Overall, the fast food industry in China is
characterized by competition, bargaining power, and substitute
products.