Business in the Business Environment - Case Study Example

Strategic Analysis of McDonald’s Name of University Submitted by Names: Tutor: Date : Strategic Analysis of McDonald’s Mc Donald’s Corporation is regarded as the World’s largest fast-food restaurant chain of hamburger. It serves around 68 million people daily in 119 countries. Brothers Maurice and Richard McDonald began the company in 1940 and it has maintained being headquartered in the United States. In 1955, a businessperson, Ray Kroc, joined the company and subsequently bought it to oversee its growth. In its organization worldwide, it has operated as an affiliate, franchise or the corporation itself (Mc Donald's 2013; Jurevicius 2013 ).The company primarily sells cheeseburgers, French fries, hamburgers, chicken, breakfast items, milkshakes, soft drinks and deserts. However, as the consumer demands keep on expanding, it has responded by introducing fish, wraps, salads, smoothies and fruits. The company has continued to obtain its revenue through royalties, fees, rent and sales from its products. In the year 2012, it reported annual revenue of $27.5 billion with net earnings of $ 5.5 billion. PESTLE Analysis Pestle (political, economical, social cultural, technological and legal factors) analysis is the analysis of external/ macro environment in which the business firm operates. Political Factors Taking in mind that Mc Donald is an international business with many branches, affiliates and franchises abroad, its operations will highly be influenced by individual country’s policies. For instance, as the clamor of fast foods’ implication on health statuses of individuals keeps on rising, its product demand is likely to be affected. There are indications that the company’s products harbor harmful elements like cholesterol, and other fats that are attributable to adverse health effects like obesity ( Zhou and Zhang 2012). In some specific market focus, the company has been caught struggling to obtain licenses in some states where it is seen as infringing the law. This has been seen in India whose operation has been regarded as offensive to the Hindu religion. The company is also obliged to fulfill its employment and tax obligations in foreign markets. As Shin notes, the company’s remuneration seems to be ‘heartless’. Its minimum wage is too low, which may ignite political debates against it (2013). As a matter of analysis, since the company has kept pace with continuous expansion in demand for its products, it is essential that it consider dealing directly with proper authorities in the market area in which it intend to operate. This means that it rests on the good graces of government authorities in the countries in which it intend open business. This will imply that it accomplishes every individual country’s prerequisites to the level of satisfaction before starting operations. The Corporation must also adhere to laws, order, and fulfill its responsibilities to avoid any likely liabilities. As regards employees, the company should ensure its workers are protected through quality hiring, training and compensation, basing on each country’s employment law. Economic factors As already mentioned, the company’s affiliates, branches and franchises will continue to face hardship especially in the countries where they operate. Therefore, these will in turn influence consumer response to the products. Exchange rates will also have an effect if it tends to import raw materials from one country to another. According to the US Today (2012), the company reported that economic volatility that was being experienced around the world could result in raised expenses and therefore pressuring up the profit results. In the 2012, its share went down by 1.3%. This is because, due to economic hardships in areas such as the Middle East, Asia Pacific and Africa, the company’s sales went down by 1.7% (Shin, L 2013), In China country, its sells remarkably went down because of the dinner promotion that was occurring there. However, in Europe, its performances were profoundly well. The sales there, which had been driven majorly by new gains in Russia, the United Kingdom and France, rose by 2.9%. Although, economically, the company has continued to outshine its rivals, more firms that are similar continue to expand their areas of operations and hence new markets (Jurevicius, J 2013),However, for more good news, the company expects to experience worldwide ease in inflation of food supplies, which analysts rely on to, predict bright future. As they have noted, most of McDonald’s sales occur outside US, in emerging markets that are growing very fast like Russia, India, China and Eastern Europe. By tapping into strong middle class, the company is expected to post strong financials. As already noted, the company will have to do more, dwelling on individual country for it to survive in foreign markets. It also needs to be cognizant of foreign exchange, as it prefers purchasing raw materials from one country to another. As the countries in Eastern Europe, India and China continue to emerge with faster growth, the company has to maintain similar levels of prices for their products to earn profit. However, in those countries that are still struggling with higher costs, the company can improve on its economies of scales, to reduce costs and at least break even. This will call for a very organized Research and Development Team that will reconsider each country. Social Cultural Factors For social cultural factors, as the company operates in several countries independently, it will have to understand the cultural norms of each one of them. According to Bedoya (2013), these will include how local people would like to be respected, their language, formal and informal regulations in that country. It is also essential that one understands the directness of commands and their effects in several languages, management of culture shocks and so forth. As a matter of concern, the company has tried to establish a very positive mindset in customers (Bedoya 2003). In order to avoid culture shock, the company has tried to employ locals to serve their compatriots. It has also given dining options to some countries like India, France and United Kingdom as regards their dining needs. Additionally, in order to function well in the social cultural niche, it is imperative that the company does a very good research to determine the needs of every individual according to a particular age group. Consequently, while recognizing that pork and mutton will not be acceptable in Muslim countries, the company has to remove them in their menu (Bedoya 2003). Moreover, initially, when the company was entering Asian market, especially the Chinese one, it faced a lot of cultural conflicts. There was a clash of cultures from US and China. However having learned from experience, the company has decided to adapt the custom and enhanced differences of some extent. For instance during the springtime, Macdonald owned Chinese restaurant is decorated in China red with animal signs and traditional Chinese paper cutting works. This also applies to Muslims during the celebration of Iddul Fittri ( Zhou and Zhang 2012). The company therefore should obtain relevant information in any area of target. It is therefore imperative that the franchises conduct a very comprehensive market research that will help to serve every customer conforming to his customs, policies, and morals. As shifts in cultures are real, the company should keep on realizing on the anticipated patterns. This will make it to enjoy improved customer relations. Technology Technologically, the company has been a leader in trying to run its storylines across companies such as Twitter, Facebook, Instagram and YouTube. From the domains of service, tills, training, stock control and administration; it has computerized all its systems to make sure they accomplish their tasks effectively. Noticeably, the company lags behind Starbucks in the use of new technology (Maher 2013; Baertlein 2013). Its latest move has seen it taking a serious technological testing of improving tasty foods and enhancing quicker transactions that include payments. It should also be noted it has been, on several occasions, charged with claims that it mostly employs non-biodegradable materials such as Styrofoam coffers and drinking glasses to serve its meals. This has caused uproar from various civic groups who demand that the company to rescind (Mc Donald's 2013).The company therefore, should always maintain its practices as per the regulation of every market niche. Importantly, it should invest in Research and Development to be always ahead and have unique products that goes with pace of customers and other stakeholders. Legal Issues The company has been involved in various lawsuits. The subjects of the suits have mostly revolved around trademark issues. It has also been launching a defamation issue, which has been seen as one of the biggest PR disaster in history. Among but a few, in August 30 2013, the company has been fighting out with Bakshi in court on issue of management. Bakshi claims that he has earned a lot for the American food chain company but it wants to buy out his shares despite huge profits he has been making for it. In 1990’s the company filed a suit for Libel against environmental campaigners, Dave Morris and Helen Steel. The case, which took seven and a half years, resulted in a public relation disaster to the company (Rautray 2013). This is because, the kind of damages awarded were very negligible. Although the judge did in its favor, he also ruled in favor of a number of defendants claims. Nevertheless, the defendants returned to the court to challenge the heavy burden of proof and amount of damage that had been laid before them, as barring the right for fair trial. This led the court to reinterpret defamation law. In the Mc China Wok Away (UK) versus the company, the judge ruled in favor of the UK outlet because it believed that the prefix Mc would not cause any confusion (Rautray 2013). Apart from winning legal battles, the company also requires to observe regulations such as Halal principles in Muslim countries, GMO regulations in Europe, and regulation on food substances that cause and increase obesity in US and other countries. Nevertheless, the business should try as much as possible to protect its integrity to build consumer confidence in their product. This will need that it hires locals as counsels in matters of employment, tax quality environments and so forth (Rautray 2013). Environmental Factors According to Meadow, the company has been charged with employing non-biodegradables in its services to customers. However, it has started a recycling program whereby hot drink cups and a burger boxes can be reused. The management is also trying, although not getting credit from its stakeholders, to reduce the size of those items that are non-biodegradable. The company therefore should bring more policies that ensure proper disposal of wastes and environmental conservation (Meadow, 2013). Importantly, It should constantly be reversing its corporate responsibilities and discharge any affiliate restaurant or franchise that violates environmental regulations. In conclusion, the company still enjoys a fervent market share. However, from the external analysis, if the PESTLE factors are not reconsidered very seriously, it may see itself losing out to upcoming giants, or being barred to practice in various countries. Therefore, the recommendation proposed should be adhered to. List of References Baertlein, L (2013), Mcdonald's Signals Weak 2013 As U.S. Rivals, Europe Economy Bite, viewed 2 November 2013, Bedoya, UEW (2003), MCDO: The Socio Cultural Impact of Fast Food on Parisian Dining Habits and Pop Culture, University of Pennsylvania. Daily mail Reporter, (2010), Mcdonald's, KFC and Pepsi to Help Write Government Policy On Obesity And Diet-Related Disease, Daily Mail, Amazon Publishers. Jurevicius, J (2013), SWOT Analysis of Mc Donald’s, Strategic Management Insight, viewed 2 November 2013, Maher, J (2013),Mcdonald's Testing Fast Food, Fast Pay Technology,News10abc, viewed 2 November 2013, Mc Donald's, (2013), What Makes McDonald’s?, viewed 2 November 2013, Meadow, D. (2013), Bad and Good Environmental Marks for McDonald's, The Donella Meadows Archive, viewed 2 November 2013, . Shin, L (2013), Would A Higher Minimum Wage Help McDonald's Workers?, Forbes, viewed 2 November 2013, < http://www.forbes.com/sites/artcarden/2013/07/30/would-a-higher-minimum-wage- help-mcdonalds-workers/> Rautray, S (2013), Mcdonald’s Offers to Buy out Indian Partner Vikram Bakshi, The Economic Times, Amazon Publishers USToday, (2012), McDonald’s Warns Of Global Economy's Impact On 2Q. Zhou L, and Zhang, Q (2012), Cultural Adaptation Pattern Analysis of McDonald’s and KFC in the Chinese Market, University of Uppsala. Read More