Mcdonalds' External Environment Factors
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 2393 words||✅ Published: 9th May 2017|
The business starts between two brothers. McDonald opened a small restaurant in 1940, east of Pasadena, California. 1948 they introduced a ”Speedee Service System” with US trademark on a clown shaped which replaced with Ronald McDonald in 1967. McDonalds started ”drive in restaurant service” in 1961 with McDonald trademark. After McDonald changed the logo with double arched ”M” symbol.
The founder and the builder of McDonald Corporation is Raymond Krocand he developed and changed the American fast food restaurant industry by striking and controlling the hamburger, French fries and milkshake production. He assured customer that the French fries bought in Topeka and New York City would be the same by developing a sophisticated operating and delivery system. Reliability of operating and delivery system made McDonalds brand name.
1.1 McDonald’s Vision
”McDonald’s vision is to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness and value so that we make every customer in every restaurant smile”
1.2 McDonald’s Objectives
Sales – Total revenue of the business earned by selling food and service
Growth – Provides a better or greater service by increasing the market share
Profit – Provide good sustainable profitable growth for its shareholders.
Customer Satisfaction – Friendly and fun environment for customers.
McDonalds External Environment factors
Environmental scanning is monitoring and evaluating of information from the external and internal environments to key people within the firm. When analyzing the external environment must consider the task environment as well. External environment could be categorizes as societal and task environment.
Societal environment includes general forces that do not directly touch on the short-term activities but often influences its long-run decisions. Factors that affect the societal are economic, technological, political-legal and socio cultural.
Task environment means a group of firms producing a similar product or service includes the stakeholders that have as interest over the activities of the company such as customers, suppliers, employees, pressure groups competitors etc.
When analyzing McDonalds the external environment could be view as follows,
2.1 Economical Factors
This includes GDP trends; interest rates, money supply, inflation rates, unemployment levels etc are some of them. If the interest rates were high, people would tend to save more and would affect the consumption income. When the disposable income is reduced demand for food items would reduce this in turn would affect McDonald’s adversely .When the inflation rates are low the prices for products would reduce over time and would increase the demand for consumption goods
2.2 Political – Legal Factors
This would include environmental protection laws, tax laws, government subsidies, foreign trade regulations, stability of government etc. When the tax imposed on
Eg. throughout the 1970’s McDonald’s became involved with a lot of charity word, further in 1974 they established a charity called Ronal McDonald House as temporary housing for the families of ill children receiving treatment at nearby hospitals.
2.3 Technological Factors
This involves spending on research and development, patent protection, new developments in technology, productivity improvements etc.
Eg. McDonald’s has added improvements for food processing such as filet o fish and burgers.
2.4 Sociocultural Factors
This involves lifestyle changes, career expectations, consumer activism, growth rate of population, age distributions, regional shift in population etc.
Eg. McDonald’s caters its menu in different countries around the world and they cater specialized menus to suit different cultures such as in India non-vegetarian menu includes only chicken and fish and not beef as they consider cow as sacred.
2.5 Task Environment
McDonald’s task environment includes its suppliers of raw material such as meat items, customers, competitors such as Burger King, KFC, Juicy burger etc.
Eg. McDonald’s has created alliances with Disney, Coca-Cola etc to fight back the immense competition.
When analyzing the industry of McDonalds it is vital that the most affected external factors are social, technology and economic and the affected factors under task are competitors and customers .This is due to the impact it has on the company’s performance.
Porter’s five forces
Fast food restaurant chain is extremely competitive trade with numerous fast food businesses try to compete with each and improve their business being innovative and high in customer service. In view of the fact that McDonalds has outshined in this trade after establishment in 1940. However, McDonalds started with McCafe to being part of the competition. It was a great privilege to the company to being a major competitor in this sector. Another most important approach was bringing in the breakfast meal to contend existing business serving breakfast. Therefore, McDonalds should be advance and aware of customer taste and preferences to compete with this huge restaurant industry.
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3.2 Barriers to entry
Consequently, with this huge competition it is hard to get into this industry and establish a distinctive brand loyalty name as McDonalds. To get into the market there is a high research and development cost involved. Although, McDonalds has a huge reputable distinctiveness to make more difficult the new entrants to get into the market and accomplish the food chain industry with offering for a comparable price scale.
3.3 Threat of Substitutes
Currently, we find many alternatives towards the food chain industry. Already there is wide range of commodities available for the customers either is substitute by McDonalds Burgers, Beverages, dairy products and many more.
Eg: These substitute products may include products purchased from the local grocery store, food from sit-down restaurants, or delivery foods such as pizza
3.4 Bargaining Power of Suppliers
Bargaining power of suppliers is very low within the restaurant industry on relative size and attentiveness of suppliers and the differentiation of the contribution supplied. However, if the main ingredient of the product is not available there is a high bargaining power of suppliers.
3.5 Bargaining Power Buyers
It always allows customers to seek out for other competitors. In addition, fast food restaurant products buyers can always find alternative suppliers because their benchmarked, undifferentiated. Customers are unable to bargain as they always hold a fixed price. Therefore, there is a very low bargaining influence of buyers in the industry.
Porter’s Value Chain Analysis of McDonald’s
India/ pulled out in USAProcurement: sought partners with expertise on down trade distribution.
HRM specialists in R&D and expertise in food formulation, education to raise
Awareness of issues and raise demand
Technology and development research and developments in quality assurance and packing was readdress to lower cost.
Infrastructure: international organisation more than 50,000 employees works in more than 50 countries, company goal to developing low income products.
*Inbound goods to be used in products
*information formed from nutritional studies
*R&D in field research needs to end users.
*Quality developed in collaboration with good supplies.
*Lack of outbound failed in India
Marketing and Sales
Lack of understanding between the customers substitute products were easily launched in India.
Now outstanding in Singapore and Australia
Services Provided by the companies enrolment standards
Generally, risk assortment factor is concerned with environment act.
McDonalds logo is highly recognized worldwide
McDonalds got branded menu items further promote products and services.
Eg: Big Mac Chicken, Mc Nuggets
It has a strong financial performance and a large market share by fast food sales as a property investor and from franchises of own restaurants.
McDonalds owns ”the Ronald McDonalds House” of children’s charity house.
Precise food safety standards and McDonalds is very vigilant in this regard
McDonalds was the first to provide customers about the food nurture
Specialized training for managers at Hamburger University
Unhealthy food image and also yet to accomplish going on the trend of organic food
Be deficient in new products
Huge employee revenue
More advertising on children
Quality of the food is incompatible
Compared to the other fast food chain order accuracy percentage is low
Always easy to adopt the new product lines
Low-cost menus are available to attract customers
Easy diversification and acquisition to begin new franchises
Franchising in other countries helps to raise the total revenue
It can increase the locations with luxurious customer attractive places
Weaker economy situations with bad impacts from recession though its diversified
Health problems regarding quality of the food and healthier menu items
Major problem of foreign currency fluctuations
Diminish the market share with huge promotion investments
McDonalds Existing Strategy
McDonalds overall strategy can be view as ‘plan to win’; they are not focused on becoming the biggest fast food restaurant chain but the best fast food restaurant. They have customized their menus in different countries as part of their marketing strategy. For example in US they are more focused on breakfast, chicken, beverages and convenience in the outlets. McDonald’s feels that by customizing the products and services to match different continents in the world would give them the competitive advantage over its rivals.
McDonalds existing organisational strategy is to create better service restaurant operations, menu varieties, and better beverage choices such as hot beverages (hot chocolate, latte etc). Further, they have utilised the marketing mix in order to achieve the marketing strategy by operating the outlets for longer hours, offering everyday value meals and enhancing efficiency in drive-thru.
In addition, they focused on becoming the lowest cost producer by minimising the waste; McDonalds reuse many of the disposable items to create higher value. Company focused on increasing profitability through minimising cost as per Porters generic strategies. McDonalds is famous for being differentiation focus as they offer customised products to its customers throughout the world.
Recommended Porter’s Generic Strategies
7.1 Differentiation strategy
Differentiation strategy core objective is to be a business oriented proactive market leader. This strategy explains continuously and slightly better prepared than the competitors to attract and force them for a competition.
McDonalds have been rank as two in chain industry with a market share 33percent. When Burger King achieves 13 percent market share to stay on as a market leader in fast food industry McDonalds can implement and improve new ways of the ordinary process of the customer and technological development in their restaurants.
On the other hand, McDonalds can also bring in new and superior products for customers to gratify their needs. McDonalds can take this strategy to enhance their customer service in a different approach. McDonalds new instructive modules and training process for to get better on poor quality features.
7.2 Cost Leadership strategy
The principle of this strategy is always making it difficult for competitors to capture the market. This works well for the firms, which have already achieved business supremacy, while McDonalds is already the food chain leader in preserving and continuing their position in the market industry need to select to new tactics using this strategy. Opening more stores around the world would able to increase the market growth and will facilitate to deject smaller companies to expand their market share.
In addition, to remain cost competitive and technologically progressive McDonalds need to invest capital in Research and Development to support innovative technologies for their business.
McDonalds needs to increase its product line, by introducing more deserts and more items like Pizza McPuff. In addition, it should have prolonged quick supply in a clean friendly environment by reducing supply chain cost. McDonalds has the opportunity to improve and establish itself to shareholders, stakeholders and public with every issue challenge to retain and attract customers McDonalds is ready to develop their Happy meal choices and to serve finest coffees and other beverages along with introducing cakes, pastries in McCafees. McDonalds ought to supply extraordinary promos throughout festivals and need to increase space for sponsor college or company festivals and specially children’s birthday parties. In addition, a focal point of gifts for all generations such as kids, youth and adults.
Subsequently, evaluating the marketing mix McDonalds achieved the ‘think global, act local’ by combining the elements of globalization and internationalization.
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