Published on February 20, 2014
WELCOME TO THE WORLD OF McDonald’s
PESTLE ANALYSIS OF MCDONALD’S STRATEGIC MANAGEMENT
GROUP PROJECT REPORT Name of Students Roll nos Bipin Sharma 149 Amey Chopa 159 Sachin Thomas 165 Bipin Tiwari 173 Philip Dias 174 Darian Alvares 175
PESTLE ANALYSIS Political Factors Economical Factors Environmental Factors PESTLE Social Factors Legal Factors Technological Factors
PESTLE ANALYSIS Pestle is an analysis of the external macro environment in which a business operates. PEST analysis (Political, Economic, Social and Technological analysis) describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. . Some analysts added Legal and rearranged the mnemonic to SLEPT; inserting Environmental factors expanded it to PESTEL or PESTLE, which is popular in the United Kingdom.
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 are available in nearly 115countries having more than 24,500restaurants in the world providing 24 hour service.
COMPANY PROFILE The modest beginnings of McDonald‟s in Illinois turned out to be among the main brand names in the international scene. It has been synonymous to what is widely-accepted the fast-food concept. The company operates over thirty one thousand stores all over the world to date. It was one of the first to perfect the concept of fast service in the food industry in its early days of operations in 1955. Given that the products of the company are mainly western in character, their operation has also expanded to the Asian region. In the rest of the globe, it operates thousands of store franchises that functions autonomously.
POLITICAL FACTORS There is an impending legal dispute in the McDonald‟s franchise in India where certain infringement of rights and violation of religious laws pertaining to the contents of the food. The existence of meat in their menus in India is apparently offensive to the Hindu religion in the said market. . There are also other studies that points to the infringement of McDonald‟s Stores with reference to the existing employment laws in the target market. Like any business venture, these McDonald‟s stores have to contend with the issues of employment procedures as well as their tax obligations so as to succeed in the foreign market.
ANALYSIS OF POLITICAL FACTORS Since it is apparent that the company is expanding continuously, it is wise to deal directly with the proper authorities in the respective markets that they intend to operate in. This way, the company can adopt a good way of establishing good relationship with the government. It is advisable that the company rests on the 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 prerequisites for doing business. The company must also be acquainted with the law in order to know what their responsibilities and their possible liabilities. Also McDonalds should protect its workers by ensuring all the hiring, compensation, training or repatriation in accordance to the Indian labour laws.
ECONOMICAL FACTORS Branches and franchises of McDonald‟s have the tendency to experience hardship in instances where the economy of the respective countries are hit by inflation and changes in the exchange rates, India is not an exception to it. The customers consequently are faced with a stalemate of going over their individual budgets 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 effects of the economic environment. Particularly, their problem depends on the response of the consumers on these fundamentals and how it could influence their general sales. In regarding the operations of the company, McDonald‟s tend to import much of their raw materials into a specific country‟s territories if there is a dearth of supply. Exchange rate fluctuations will also play a significant role in the operations of the company. However in case of India the company has been able to maintain a constant level of prices for their products
ANALYSIS OF ECONOMICAL FACTORS Ideally before penetrating the market, the company must carry out a well conducted market research, especially in the movements in the economic environment which McDonalds had done before entering the Indian market. 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.
SOCIAL FACTORS McDonald‟s indulge a particular variety of consumers with definite types of personalities. It has also been noted that the company have given the markets such as the United Kingdom and India, an option with regards to their dining needs. McDonald‟s has launched a sensibly valued set of food that tenders a reliable level of quality for the respective market where it operates. Additionally, those who are aged just below the bracket of thirty-five are said to be the most frequent consumers of McDonald‟s franchises. In the case of McDonald‟s they establish a good system in determining the needs of the market. The company uses concepts of consumer behaviour product personality and purchasing decisions to its advantage which is clearly evident in case of India as the company was quick in removing their Pork and Mutton products from India‟s menu. It is said to have a major influence on the understanding of the prospective performance of the organisation in a particular market
ANALYSIS OF SOCIAL FACTORS McDonalds should obtain the relevant information from the target market in addition to the individual customers of the organisation. Similarly, the company should find out the shifts in areas like the consumer behaviour and purchasing patterns of the market. Fundamentally, this is the key condition for executing a suitable customer relationship management system. Also, the company should constantly survey and learn about local culture to better understand and design the best product for them.
TECHNOLOGICAL FACTORS McDonald‟s generates a demand for its own products. The company‟s key tool for marketing is by means of Online Facebook and Google ads, Collaboration with websites like Snap deal and Times deal to promote sales in India, television advertisements, banners and hoardings. There are similarly some claims that McDonald‟s are inclined 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. The „ like‟ has become endorsers for McDonald‟s worldwide “I‟m loving it” campaign. Moreover, the operations of McDonald‟s have significantly been infused with new technology. 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.
ANALYSIS OF TECHNOLOGICAL FACTORS McDonalds use the internet to their advantage. The cost-effectiveness, interactivity and real-time effects of the communications are a good way to find suppliers. It is also a good way to correspond with the respective McDonald‟s headquarters in every Country. The company must also look into the use of IT to enhance their inventory operations. As the operations units inbound and outbound logistics improve, the company will expect significant savings and reduction of costs in the operations.
LEGAL FACTORS There has been the recurrent bellowing in opposition to the fast food industry which has made McDonald‟s apply a more careful consideration on their corporate social responsibilities. The company has provided their customers the relevant data that they need with reference to the nutritional substances of their products. This is to attend to the arguments of obesity charged against the products of the company. In the same way, the consumers provided freedom in choosing whether or not they want to purchase their meals. This is tied up with the socio-cultural attributes of the market on which they operate. This was prime reason which forced McDonalds to eliminate beef, pork and Mutton out of India‟s product menu.
ANALYSIS OF LEGAL FACTORS As a certified fast food operator, there are many regulations and procedures that McDonalds should follow. McDonalds should protect its integrity and consumer confidence 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 which the outlet has been certified. The legal requirement is important because the 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 legal 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 more versed with the legal regime that would ease out certain problems on their operations.
ENVIRONMENTAL FACTORS The social responsibilities of McDonald‟s on the country are influential to the operations of the company. These involve accusations of environmental damage. Several civic groups in India have made actions to make the McDonald‟s franchises in India aware of the rather abundant use of Styrofoam containers and the resultant abuse of the environment.
ANALYSIS OF ENVIRONMENTAL FACTORS 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. McDonald‟s should minimize the use of Styrofoam materials and plastic cups. Constant updating of the social corporate responsibility is imperative. This should also entail that the headquarters should take in hand, a manner of internal control of those that would infringe upon this company objective. Sanctions such as revoking of the franchise license or a particularly high fine should be installed to serve as a deterrent to infringement.
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. Even though McDonald‟s may have been deemed as demigod in the fast food business in the international scene, but what it preserves as revealed in its 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. Hence, any business in spite of the muscle of the brand name or the size of its reserves could not afford any failures in their individual markets. As implied the markets of nowadays manifest a cut throat rivalry with the individual competitors, recognized brands or otherwise.
RECOMMENDATION To do this, all they have to do is accomplish all the prescribed acts and satisfy all the prerequisites for doing business. The company must also be acquainted with the law in order to know what their responsibilities and their possible liabilities. Before penetrating the market, the company must carry out a well conducted market research, especially in the movements in the economic environment. The frequency of the shifts in the inflation rate as well as the fluctuations in the exchange rate affects the operations of the company. It is imperative that before a franchise is granted to a particular market, a well drafted and comprehensive 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 state. The company must also look into the use of IT to enhance their inventory operations. As the operations in its inbound and outbound logistics improve, the company will expect significant savings and reduction of costs in the operations.
RECOMMENDATION Find out the environmental regime that governs the operations in every market. Monitor the waste disposal of the company. Minimize the use of Styrofoam materials and plastic cups. Constant updating of the social corporate responsibility is imperative. Hire local counsels to deal with the legal conflicts in individual markets on which the company may encounter. This is shall ensure the company that the lawyers that will handle their legal affairs are more versed with the legal regime that would iron out certain creases on their operations.
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