Lovely Professional University ASSIGNMENT

ON PESTEL analysis of McDonalds

SUBMITTED TO: MS. JASCHETAN DEEP KAUR
SUBMITTED BY: HIMANK GUPTA RQ1101B28 MBA (HONS)
Introduction
McDonalds is a leader in convenient foods and beverages, with revenues of about
$23 billion and over 1.6 million employees serving the customers world -wide. The
company consists of the snack business of Beverages and Foods. PepsiCo brands a
re available in nearly 115 countries having more than 24,500restaurants in the w
orld providing 24 hour service. McDonaldss success is the result of superior prod
ucts, high standards of performance, distinctive competitive strategies and the
high integrity of our people. McDonalds is continuing to expand and introduce ne
w alternative beverages in the market. Approximately 85% of McDonalds restaurant
businesses world-wide are owned and operated by franchisees. All franchisees are
independent, full-time operators. McDonalds was named Entrepreneurs Number-one fr
anchise for 1997.Their mission is to be the world s premier consumer Products Co
mpany focused on convenient foods and beverages. They seek to produce healthy fi
nancial rewards to investors as the company provide opportunities for growth and
enrichment to its employees, business partners and the communities in which it
operates. Greater variety and quality choices surprise and delight customers wit
h the food and beverage they desire. McDonalds corp. is currently one of the most
successful consumer products company in the world with annual revenues exceedin
g $23 million and has more than 1.6 million employees. McDonalds products are rec
ognized and are most respected all around the globe. Currently, its divisions op
erate in all over the world in beverages, snack foods, and restaurants. The corp
orations increasing success has been based on high standards of performance, mar
keting strategies, competitiveness, determination, commitment, and the personal
and professional integrity of their people, products and business practices. McD
onalds believes their success depends upon the quality and value of their product
s by providing a safe, whole some, economically efficient and a healthy environm
ent for their customers; and by providing a fair return to their investors while
maintaining the highest standards of integrity.
PESTEL ANALYSIS
Pestel is an analysis of the external macro and micro environment in which a bus
iness operates. Pestel stands for political, economical, social, technological,
environmental and legal factors.
POLITICAL FACTORS
The international operations of McDonalds are highly influenced by the individual
countrys policies enforced by each government. For instance, there are certain g
roups in India, Europe and the United States that clamour for state actions pert
aining to the health implications of eating fast food. They have indicated that
harmful elements like cholesterol and adverse effects like obesity are attributa
ble to consuming fast food products. On the other hand, the company is controlle
d by the individual policies and regulations of operations. Specific markets foc
us on different areas of concern such as that of health, worker protection, and
environment. All these elements are seen in the government control of the licens
ing of the restaurants in the respective states of the country. For instance, th
ere is an impending legal dispute in the McDonalds franchise in India where certa
in infringement of rights and violation of religious laws pertaining to the cont
ents of the food. The existence of meat in their menus in India is apparently of
fensive to the Hindu religion in the said market. There are also other studies t
hose points to the infringement of McDonalds Stores with reference to the existin
g employment laws in the target market. Like any business venture, these McDonal
ds stores have to contend with the issues of employment procedures as well as the
ir tax obligations so as to succeed in the foreign market like India.
Analysis:
Since it is apparent that the company is expanding continuously, it is wise to d
eal directly with the proper authorities in the respective markets that they int
end to operate in. This way, the company can adopt a good way of establishing go
od relationship with the government. It is advisable that the company rests on t
he good graces of the government on which they will be penetrating. To do this,
all they have to do is accomplish all the prescribed acts and satisfy all the pr
erequisites for doing business. The company must also be acquainted with the law
in order to know what their responsibilities and their possible liabilities. Al
so McDonalds should protect its workers by ensuring all the hiring, compensation
, training or repatriation in accordance to the Indian labour laws.
ECONOMICAL FACTORS
Organisations in the fast food industry are not excused from any disputes and tr
oubles. Specifically, they do have their individual concerns involving economic
factors. Branches and franchises of McDonalds have the tendency to experience har
dship in instances where the economy of the respective countries are hit by infl
ation and changes in the exchange rates, India is not an exception to it. The cu
stomers consequently are faced with a stalemate of going over their individual b
udgets whether or not they should use up more on these foreign fast food chains
like McDonalds. Hence, these chains may have to put up with the issues of the ef
fects of the economic environment. Particularly, their problem depends on the re
sponse of the consumers on these fundamentals and how it could influence their g
eneral sales. In regarding the operations of the company, McDonalds tend to impor
t much of their raw materials into a specific countrys territories if there is a
dearth of supply. Exchange rate fluctuations will also play a significant role i
n the operations of the company. As stated in the paragraph above, McDonald stor
es have to take a great deal of consideration with reference to their microenvir
onment. The companys international supply as well as the existing exchange rates
is merely a part of the overall components needed to guarantee success for the f
oreign operations of McDonalds. Moreover, it is imperative that the company be co
gnizant of the existing tax requirements needed by the individual governments on
which they operate. This basically ensures the smooth operations of the McDonal
ds franchises. In the same regard, the company will also have to consider the eco
nomic standing of the country on which they operate on. The rate at which the ec
onomy of that particular country grows determines the purchasing power of the co
nsumers in that country. Hence, if a franchise operates in a particularly econom
ically weak country, their products shall cost higher than the other existing pr
oducts in the market, then these franchises must take on certain adjustments to
maintain the economies of scale. However in case of India the company has been a
ble to maintain a constant level of prices for their products.
Analysis:
Ideally before penetrating the market, the company must carry out a well conduct
ed market research, especially in the movements in the economic environment whic
h McDonalds had done before entering the Indian market due to which the company
has been able to bear the
frequency of the shifts in the inflation rate as well as the fluctuations in the
exchange rates which affects the operations of any company.
SOCIO-CULTURAL FACTORS
Articles on the international strategies of McDonalds seem to function on several
fields to guarantee lucrative returns for the organisation. To illustrate, the
organisation improves on establishing a positive mind-set from their core consum
ers. McDonalds indulge a particular variety of consumers with definite types of p
ersonalities. It has also been noted that the company have given the markets suc
h as the United Kingdom and India, an option with regards to their dining needs.
McDonalds has launched a sensibly valued set of food that tenders a reliable lev
el of quality for the respective market where it operates. Additionally, those w
ho are aged just below the bracket of thirty-five are said to be the most freque
nt consumers of McDonalds franchises. The multifaceted character of business nowa
days 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 m
arket research. Information with regards to the appeal and potential fields of t
he market would double as obstructions to the success of the company if this are
a of the operations is neglected. In the case of McDonalds they establish a good
system in determining the needs of the market. The company uses concepts of cons
umer behaviour product personality and purchasing decisions to its advantage whi
ch is clearly evident in case of India as the company was quick in removing thei
r Pork and Mutton products from Indias menu. It is said to have a major influence
on the understanding of the prospective performance of the organisation in a pa
rticular market.
Analysis:
McDonalds should obtain the relevant information from the target market in addit
ion to the individual customers of the organisation. It is imperative that befor
e a franchise is granted to a particular market, a well drafted and comprehensiv
e market research should be conducted initially so as to establish the acts that
would conform to good customs, public policies, and morals of the said Countrys
society. Similarly, the company should find out the shifts in areas like the con
sumer behaviour and purchasing patterns of the market. Fundamentally, this is th
e key condition for executing a suitable customer relationship management system
. Also
the company should constantly survey and learn about local culture to better und
erstand and design the best product for them.
TECHNOLOGICAL FACTORS
McDonalds generates a demand for its own products. The companys key tool for marke
ting is by means of Online Facebook and Google ads, Collaboration with websites
like Snapdeal and Timesdeal to promote sales in India, television advertisements
, banners and hoardings. There are similarly some claims that McDonalds are incli
ned to interest the younger populations more. The existence of play spots as well
as toys in meals offered by the company shows this actuality. Other demonstration
of such a marketing strategy is apparent in the commercials they use. They emplo
y animated depictions of their characters like Grimace, Ronald and Ham burglar.
Other advertising operations employ popular celebrities to promote their product
s. The like has become endorsers for McDonalds worldwide Im loving it campaign. Moreov
er, the operations of McDonalds have significantly been infused with new technolo
gy. 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. The integration of techn
ology in the operations of McDonalds tends to add value to their products. Basic
ally, this is manifested in the improvements on its value chain. The improvement
of the inventory system as well as its supply chain allows the company to opera
te in an international context.
Analysis:
McDonalds use the internet to their advantage. The cost-effectiveness, interacti
vity and realtime effects of the communications are a good way to find suppliers
. It is also a good way to correspond with the respective McDonalds headquarters
in every Country. The company must also look into the use of IT to enhance their
inventory operations. As the operations in its inbound and outbound logistics i
mprove, the company will expect significant savings and reduction of costs in th
e operations.
ENVIRONMENTAL FACTORS
The social responsibilities of McDonalds on the country are influential to the op
erations of the company. These involve accusations of environmental damage. Amon
g 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. Several civic grou
ps in India have made actions to make the McDonalds franchises in India aware of
the rather abundant use of Styrofoam containers and the resultant abuse of the e
nvironment.
Analysis:
The company should find out the environmental regime that governs the operations
in every market. It should also monitor the waste disposal of the company. McDo
nalds should minimize the use of Styrofoam materials and plastic cups. Constant u
pdating of the social corporate responsibility is imperative. This should also e
ntail that the headquarters should take in hand, a manner of internal control of
those that would infringe upon this company objective. Sanctions such as revoki
ng of the franchise license or a particularly high fine should be installed to s
erve as a deterrent to infringement.
LEGAL FACTORS
There has been the recurrent bellowing in opposition to the fast food industry.
This has similarly made McDonalds apply a more careful consideration on their cor
porate social responsibilities. On the whole, this addressed the need of the com
pany to form its corporate reputation to a more positive one and a more socially
responsible company. The reputation of McDonalds is apparently a huge matter. Se
en on the website of the company, it seems that they have acquired strides to ta
ke in hand the key social censures that they have been berating them in the past
decades. The company has provided their customers the relevant data that they n
eed with reference to the nutritional substances of their products. This is to a
ttend to the arguments of obesity charged against the products of the company. I
n the same way, the consumers provided freedom in choosing whether or not they w
ant to purchase their meals. This is tied up with the socio-cultural attributes
of the market on which they operate. For instance, operations in predominantly M
uslim countries require their meat to conform to the Halal requirements of the l
aw. In the same regard, those that operate in countries in the European Union sh
ould conform to the existing laws banning the use of genetically modified meat p
roducts in their food. This was prime reason which forced McDonalds to eliminate
beef, pork and Mutton out of Indias product menu. Other legal concepts like tax
obligations, employment standards, and quality requirements are only a few of im
portant elements on
which the company has to take into consideration. Otherwise, smooth operations s
hall be hard to achieve.
Analysis:
As a certified fast food operator, there are many regulations and procedures tha
t McDonalds should follow. McDonalds should protect its integrity and consumer c
onfidence by ensuring all materials and process are as claimed or must followed.
Other legal requirement that the business owner should follow as stipulated in
laws are such as operating hours, business registration, tax requirement, labour
and employment laws and quality & environment certification (such as ISO) in wh
ich the outlet has been certified. The legal requirement is important because th
e offenders will be fined or have their business prohibited from operating which
can be disastrous. The company should hire local counsels to deal with the lega
l conflicts in individual markets on which the company may encounter. This shall
ensure the company that the lawyers that will handle their legal affairs are mo
re versed with the legal regime that would ease out certain problems on their op
erations.
CONCLUSION
As we all know that the most significant contribution of this generation is the
combination of globalization and internationalization in the businesses sector.
Developments in the international setting have an effect on the more particular
factors in the operations in individual organisations. Alterations could take pl
ace and require intense modifications to the operations such that it could have
an adverse effect on the entire structure of the company. However, as indicated
in the above PESTEL analysis, this could be acquired by setting a certain level
of flexibility in the organisation. This level of flexibility can basically be a
cquired through the acquaintance of both the internal and external environment o
f the company. Even though McDonalds may have been deemed as demigod in the fast
food business in the international scene, but what it preserves as revealed in i
ts processes is the need for flexibility. The slight changes that take place in
the market have an effect on the operations of the business in any case. This de
notes that having the information on the effects of these alterations swiftly pr
ovides these fast food industry giants to take fine-tuning actions on their acts
and still preserve their market position. As implied the markets of nowadays ma
nifest a
cutthroat rivalry with the individual competitors, recognized brands or otherwis
e. Hence, any business in spite of the muscle of the brand name or the size of i
ts reserves could not afford any failures in their individual markets. Reference
s: 1. http://www.mcdonalds.com/us/en/our_story/our_history.html 2. http://www.mc
donalds.com/us/en/services/playplaces_parties.html 3. http://www.mcdonalds.com/u
s/en/careers/training_education.html 4. http://www.mcdonalds.com/us/en/careers/t
raining_education.html 5. http://www.oppapers.com/essays/Pestle-Mcdonalds-In-Ind
ia/670456 6. http://bizniaga.blogspot.in/2008/07/pestle-mcdonalds.html 7. http:/
/www.essayxperts.com/essay-pest-analysis-of-mcdonalds-in-india/