Environmental scan for McDonalds Company - Term Paper Example

?Ethics paper Introduction Environmental scan refers to collection of information about an organizations’ marketing environment. It therefore includes both internal and external environmental factors that influence an organization’s competitive advantage in its market. This paper seeks to conduct environmental scan for McDonald’s Company and General Motors Company. Environmental scan for McDonalds Company Internal environment McDonalds is a fast food company that operates internationally. An environmental scan of the company’s environment indicates both positive and negative aspects that the organization should consider towards a strategic position in its market. One of the organization’s internal environmental factors is its human resource strategy that has a specialized training program for its personnel. The company makes significant investments into this initiative to develop a strong human resource base for efficiency and effectiveness towards a quality driven competitive advantage. The company also has acculturated quality production that has established its admiration among consumers who are satisfied with the organization’s products. Similarly, the organization, in its management and operations, is dynamic and flexible to different cultural needs across its diversified market. As a result, the company is able to meet its customers’ needs and expected utility. The organization also operates under strict food safety policy in which raw materials are only accepted into production processes if they meet safety standards (Marketing, 2012). A number of challenges also characterize its internal environment. The company for example faces a high employee turnover leading to more investment in recruiting and training new employees. Such a high turnover rate also destabilizes implementation of policies and organizational culture that has to be continually reinforced. The organization’s profitability has also been unstable and therefore unpredictable. This means that long-term financial plans cannot be established with certainty because it is difficult to obtain a reliable forecast of the organization’s profitability (Marketing, 2012). External environment External environment refers to factors that emanates from outside the organization and which the organization has no power to control. McDonald’s external environment includes political factors, economic factors, technological elements, socio-cultural aspects, physical environment, and competition among other factors. Political factors define to rules and regulations that control the organization in its operational localities. Being an international organization, McDonald’s is subjected to different local laws and international regulations that shape its operations. As a result, the management should be informed of the laws and political systems in regions where the company’s branches operate. It should also be flexible to adjust to any changes in regional laws that will affect its subsidiaries (Vrontis and Pavlou, 2008). The organization’s economic environment defines demand for its products and trends in consumers’ spending habits. It is therefore susceptible to general economic trends such as recessions, periods within which the consumer’s economic potentials are constrained leading to low demand. Economic recovery periods however improve demand towards higher profitability levels. The company, through its subsidiaries operates under different economic potentials across regions. This affects pricing strategy of the company’s products and defines profitability across different regions. Successful international venture however indicates the company’s success in implementing technology towards communication and coordination of its activities across geographical barriers. Application of technology also explains the organization’s standardization in its subsidiaries such as the franchises. Similarly, social and physical environmental factors are variables across the company’s international market and present different advantages and disadvantages to the subsidiaries (Vrontis and Pavlou, 2008). Another important external environmental factor around the company is its competitive environment. McDonalds faces low competition in the industry that is dominated by few large-scale companies. Strong barriers to new entrants into the industry’s market maintain the low level of competition. This is partly because of the attained economies of scale by the established players that makes it difficult for new and small-scale firms to break through. The organization also has a great advantage with respect to substitutes, buyers’ power, and suppliers’ power. Some of the company’s steps towards competitive advantage include development of new brands of products, expanding its market base to acquire new customers, differentiating its products, brand imaging, and innovation (Vrontis and Pavlou, 2008). Environmental scan for General Motors Company Internal environment General Motors is a motor vehicle manufacturing company with a strong significance in the United States economy. Besides dealing in motor vehicles, the company has ventured in insurance and financial services. This identifies its first internal environmental factor that is the capacity to diversify its product base. It also manufactures different types of vehicles such as car and trucks. The company also has a branding approach to its products that are associated with high levels of stability such as the Chevrolet. Further, it has a diversified market that is globally felt. While these identify the company’s beneficial internal environment, it has a number of detrimental factors within its internal environment. It has for example faced difficulties leading to closure of many of its dealers, indicating declining trends in operations, profitability, or demand. The company has also faced liquidity problems in its history with about 100 percent shrink in its liquidity from the year 2007 to the year 2008. There has also been significant decline in its segments’ performance besides low credit rating (Marketingteacher, 2012). External environment Being an international company with a global target market, the company is subject to different political and legal systems that its central management must consider. Its operations and profitability in different regions also vary depending on regional economic stability. Further, it is vulnerable to global economic trends such as recession. It is also greatly influenced by the technological developments that it incorporates in its products. The company operates in a competitive environment with competitors such as Ford and DaimlerChlysler, Toyota, Volvo and Isuzu, a factor that offers customers a strong bargaining power due to availability of substitutes. The company however still has the opportunity to expand its market in some regions besides exploring opportunities in marketable brands such as trucks and hybrid vehicles (Marketingteacher, 2012; Management, n.d.). Conclusion Based on the scan, McDonalds has competitive advantage with respect to its qualified personnel, quality products, large-scale operations and its global market while General Motors has its competitive advantage in its special brands and a globalized market. McDonalds derive its competitive advantage from its branding, economies of scale, broad based market, and customers’ utility while General Motors majorly derive its competitive advantage from branding and a wide market base. The companies however lack an established approach to measuring effectiveness of their strategies. Reference Management. (n.d.). Organizational environments and cultures. Retrieved from: http://www.management2e.nelson.com/instructor/pdf/02Chp02_Management.pdf Marketing. (2012). SWOT analysis McDonald’s. Retrieved from: http://www.marketingteacher.com/swot/mcdonalds-swot.html# Marketingteacher. (2012). SWOT analysis General Motors. Retrieved from: http://www.marketingteacher.com/swot/general-motors-swot.html Vrontis, D. and Pavlou, P. (2008). The external environment and its effect on strategic marketing planning for McDonald’s. J. International Business and Entrepreneurship Development (3.3/4) 289- 307. Read More