McDonald’s: Internal External Factors, Marketing, Competition, Strategy

McDonald’s Internal External Factors, SWOT, Porter’s 5 Forces, Strategy, Marketing Mix.

About McDonald’s

McDonald’s is a fast food chain which originated in America, and was founded by the McDonald brothers Richard and Maurice in California. On a revenue scale, it is the world’s largest restaurant chain, catering to over 69 million customers on a daily basis with outlets in over a 100 countries. As of 2016, McDonald’s has over 36,900 outlets worldwide, and it is the world’s second largest private employer, second only to Walmart, with 1.9 million employees of which 1.5 million work for their franchises.

External as well as Internal Factors

Discuss and analyse the external as well as internal factors influencing McDonald’s, along with getting an insight into the internal environment of the firm. The report also investigates the possible future strategies as well as growth opportunities.

External Environment

The external environment of the business refers to the factors which are not under the business’ control and can be investigated with the help of the PESTEL analysis tool which means Political, Economical, Socio-cultural, Technical, Environmental and Legal factors.

Political

This analysis deals with the effect of government policies and decisions on McDonald’s business dealings and the economy as a whole. McDonald’s is a multinational company, which is why it could be affected by a rise in the number of international trade agreements which gives it the opportunity to further expand its overseas business operations, which leads to improved global supply chains. Being a MNC dealing in the food and beverage industry means that McDonald’s has to adhere to all the health and hygiene regulations of the countries it operates in. If not, its outlets face the risk of being shut down. For instance, lately the government has been pressurising fast food chains due to the high amount of sodium and sugar quantities in the products they serve, which lead to diabetes, obesities, etc. This lead to McDonald’s coming up with the option to give their customers an option to add healthier variants like protein to their smoothies, and so on. This is one way to deal with changing public health agreements, but could also dial up the operating costs (Frue K, 2018).

Economical

McDonald’s operations are also also by the economic conditions of each and every country they operate in, which also affects their results. For instance, they must decide if they should opt to buy raw materials locally, or import them. While making this decision, they must consider the quantity of tariffs on the imported resources as well as the foreign incorporate taxes for the same. McDonald’s must take into consideration the unemployment rate in and around the area they operate in. McDonald’s has a very high labour turnover rate, meaning it employs and loses workers on a regular basis, leading to it having a market reputation of a firm that is ‘always hiring’. This reputation can work in their favour, however, if they set up operations in a country or region with a very high rate of unemployment. (Greenspan R, 2018).

Social

McDonald’s and its businesses thrive on consumer trends. If the disposable income of the consumers rises, they would rather consume fast food than cook at home, which is also common for people who lead busy lifestyles. These lead to a rise in the likelihood for the people to dine out than cook food themselves. However, lately there has been a rise in the consumer trend of going for healthier alternatives rather than consume fast food, which threatens its revenue. As it is rightly said, every threat is an opportunity, and this is no different. This provides McDonald’s with an opportunity to increase the healthfulness of its products, thus providing it with opportunities for business development and expanding its product menu. (Frue K, 2018).

Technological

Several technological factors affect McDonald’s operations. The way the business adapts to or implements these technological advances decides how it fares in the market. If it decides to automate its operations to be efficient and increase productivity, which will require change in the firm’s business set up as well as its operations management and its approaches to boosting productivity. McDonald’s has a reputation of being a firm which does not use a lot of tech as compared to Amazon,etc. The fact is that the tech it employs is essential in providing the best customer services with playing a key role in staff communication amongst workers as well as boosting staff productivity, which proves that it employs technology smartly in the best possible manner. (Greenspan R, 2018).

Environmental

McDonald’s has to be considerate about the environmental rules and regulations in the area it operates in. If there is an increased emphasis on sustainable business strategies, then it would be in McDonald’s best interests to incorporate better and more eco friendly methods in its operations if it wants to strengthen its brand. For that reason it may have to expand its operations or revamp its method of operations to meet the environmental needs of the society. Since McDonald’s is a food and beverage company, it relies heavily on the supply of raw materials. The changes In climate in certain regions, however, threaten the company as they could affect the availability and stability of the food supply. To combat this, McDonald’s would be required to further diversify its supply chain in order to overcome these effects of climate changes as well as ensure a stable supply of raw materials. (Frue K, 2018).

Legal

Legal factors are crucial in affecting McDonald’s entry into a new country, or if it is already operating in a country, then whether or not it adheres to the legal boundaries laid down by the country’s government also plays a major role in whether it succeeds in the country. For instance, when it attempts to enter a country like India where a large proportion of the consumer base is Hindu, then it has a lot of work to do before it can begin operations in India. This is because of two primary reasons. The first one being that the people of India consider the cow to be a sacred animal and for this reason McDonald’s, whose menu consists of a lot of beef items, needs to cater to this preference and modify its menu totally. Secondly, the government has imposed a beef ban, which forbids consumption or production of beef in the country. Thus, to operate in India, McDonald’s had to come up with a totally new menu with a lot more vegetarian options for the people of India. Also, if there is a rise in the national minimum wage in a country then it is a major issue for a company like McDonald’s which has a very large labour force and a majority of its workers are being paid the amount equivalent of the national minimum wage. If the government increases the NMW then it increases McDonald’s costs and majorly disrupts its wage structure due to which it now has to shuffle up its wage structure to comply with the new wage flooring, which it combats by raising the prices of its products. (Greenspan R, 2018).

Internal Environment

Organisation Structure

McDonald’s employs a divisional organisational structure, which means that it groups every organisational function into divisions, with specialised workers operating in each division. This is to ensure organisational flexibility and autonomy. Due to having many departments, the span of control is wide, with a long chain of command. Departmentalisation is high, with all decisions taken by the head of departments, which means it is highly centralised. Due to there being a large number of departments and many workers, the information has to pass through many layers of the hierarchy before it can reach the person it was intended for, thus communication in such an organisation tends to be slow. Its organisational structure also has three main parts:

• The global hierarchy, which deals with its operations worldwide and focuses primarily on corporate control, and is a common feature of a majority of business organisations globally.
• Performance based divisions: They are the most recognisable feature of this organisational structure. The main aim of this is to maximise performance as well as efficiency of its employees.
• Function Based Groups are where specialised workers come in, and are segregated under specialised departments like Human Resources, Franchising, and so on, which helps McDonald’s to cater to the basic customer demands while carrying out the basic functions of the business. (Thompson A, 2018)

Organisation Culture

McDonald’s has a clan culture, centred around the organisational aim to encourage learning and prioritising human resource development. This culture aims to maximise productivity by promoting organisational efficiency, which also enhances the customer service quality alongside. McDonald’s organisation culture has four distinctive characteristics, which are segregates as per McDonald’s priorities. They are:

• Worker Centric: It makes the employee requirements a priority, with the firm’s Core Values focusing on the importance of backing its people. For this reason, it encourages its employees to get involved in management to help better processes and procedures.
• Individual Learning: the firm’s culture focuses on the importance of lifelong employee learning because they feel that it promotes efficiency, quality and business effectiveness. They encourage this by providing training and development chances, and much more. All these methods make sure that an organisation culture which emphasises learning is maintained to spur the employees on to keep on evolving via learning.
• Organisational Learning: McDonald’s also prioritises learning on an organisational level, because it is believed that the individual learning of the employees can be aggregated to develop organisational knowledge to spur the business onto performance levels never seen before. The firm aims to implement this culture via policies, meetings, etc which promote employee communication and feedback. (Thompson A, 2018)

Strategy

McDonald’s Mission statement states ‘to be our customers’ favourite place to eat and drink’, which exemplifies the importance of focusing the business on the consumer while keeping the firm as a major influence on their food and beverage purchase decisions. Its vision statement states that ‘to move with velocity to drive profitable growth and become an even better McDonald’s serving more customers delicious food each day around the world’, which means that it aims to make their customers a priority while maintaining their organisational goals of profits and expansion alongside.

McDonald’s employs several business strategies to gain an advantage in the market, the most prominent of which are:

• Introducing new products into the market targeting price sensitive regions and customers, making the brand attractive to customers across all price regions.
• Eliminate certain menu items which were low in demand and instead focused on basic and best selling menu items like the Quarter Pounder to provide quicker and better customer service. (McDonald’s 600, n.d.)

For a business to succeed, it has to plan not only for the present day, but also look to the future, like:

• Speed up building of its ‘Experience of the Future’ concept design in the United States which consists of kiosk ordering, as well as a much more modernised and exciting restaurant ambience. (Meyer, 2018)
• Expand its delivery range and digitalise due to the fact that over 75% of its customer base lives within 3 miles of a location. (Dixon, 2017

Management

McDonald’s has always tried to cut costs, and recently it lay off workers with the aim of reducing expenses in excess of $500 million by 2019. It also said that it would be delayering the hierarchical system which means that a lot of employees would be made redundant. However, the company did not specify which employees or what level of employees would lose their jobs. (Whitten, 2018).

Marketing Mix

Product: Since it operates in the food and beverage industry and is a multinational company, it has to cater to the constantly changing tastes and preferences across different countries, thus it has to regularly update its product after heavy market research so that the customers keep on visiting McDonald’s.

Price: It employs the cost leadership business strategy and thus charges competitive rates from the consumer, along with giving the customers the opportunity to dine at a quarter of the costs at other upscale restaurants.

Place: Generally, McDonald’s outlets can be found in congested and busy places like malls due to the sole reason that they want their restaurants to be easily accessible, thus attracting more customers.

Promotion: It usually relies on association, and endorsements of popular sports teams and paid promotions especially in the United Kingdom, owing to the fact that the people there love football and thus the brand has a higher chance of expanding its consumer base through the popular sport.

Process: It is required for McDonald’s to have a homogenous process, due to the fact that it has to keep the production process the same everywhere due to quality control, and the importance of process for a giant like McDonald’s cannot be underestimated. It also has to keep its process in compliance with the cultural and legal needs of the environment they operate in.

People: For them, it is usually their employees or the managers or the people who handle their franchises or manage their outlet. It is important for McDonald’s to manage all of these people associated with the company properly, because they are essential for the company to expand its consumer base in all parts of the world and these people provide excellent consumer service if treated well.

Physical Evidence: McDonald’s has a reputation of having a lively ambience in its restaurant, and maintaining this goes a long way in retaining its customers which is a part of the mission statement of the company. (Dudovskiy, 2018).

Summary

McDonald’s is a multinational company with thousands of restaurants worldwide, and employs close to a quarter million people, operating in 100 countries around the globe. It believes in the theory of continuous learning, believing that employees keep on learning throughout the production process, and they feel that the growth of employees at an individual level will help the organisation grow as whole, reaching new heights. This belief means that McDonald’s provides its workers with opportunities to grow and learn via training ,etc and is an employee oriented business, with focus being on employee well being. It is also aiming to revolutionise its outlets, with new updates like service kiosks being added to provide a ‘futuristic’ feel. It also aims to cater to the tastes and preferences by coming up with new products or editing its menu as per the tastes of the customers in the region it operates in.