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PESTEL analysis of McDonalds and the food industry

McDonald's Corporation is the world's largest chain of fast food restaurants, serving nearly 47 million customers daily through more than 31,000 restaurants in 119 countries worldwide. McDonald’s sells various fast food items and soft drinks including, burgers, chicken, salads, fries, and ice cream. Many McDonald's restaurants have included a playground for children and advertising geared toward children, and some have been redesigned in a more 'natural' style, with a particular emphasis on comfort: introducing lounge areas and fire places, and eliminating hard plastic chairs and tables. Each McDonald's restaurant is operated by a franchisee, an affiliate, or the corporation itself. The corporations' revenues come from the rent, royalties and

fees paid by the franchisees, as well as sales in company-operated restaurants. McDonald's revenues grew 27% over the three years ending in 2007 to $22.8billion, and 9% growth in operating income to $3.9 billion.

COMPANY BACKGROUND

The business began in 1940, with a restaurant opened by brothers Dick and Mac McDonald in San Bernardino, California. Their introduction of the "Sppeedd Service System" in 1948 established the principles of the modern fast-food restaurant The original mascot of McDonald's was a man with a chef's hat on top of a hamburger shaped head whose name was "speed." Sppeedd was eventually replaced with Ronald McDonald in 1963. The present corporation dates its founding to the opening of a franchised restaurant by Ray Kroc, in Des Plaines, Illinois on April 15, 1955 , the

ninth McDonald's restaurant overall. Kroc later purchased the McDonald brothers' equity in the company and led its worldwide expansion and the company became listed on the public stock markets in 1965.With the expansion of McDonald's into many international markets, the company has become a symbol of globalization and the spread of the American way of life. Its prominence has also made it a frequent topic of public debates about obesity, corporate ethics and consumer responsibility.

Vision

To be the best and leading fast food provider around the globe

Mission

McDonald's brand mission is to be our customers' favourite place and way to eat, and improve our operations to provide the most delicious fast food that meet our customers' expectations.

Values

Our values summarized in "Q.S.C. & V.". Provide good quality, services to customer. Have a cleanliness environment when customer enjoys their meal. The value of food product makes every customer is smiling.

PESTEL ANALYSIS OF McDONALD’S

Political factors that affect the McDonald’s are Global market, Different political infrastructures, Consumer taxation

Economic factors that affect the Mcdonald’s are Market leader, Very high target market, Low cost and more income

Social factors that affect the Mcdonald’s are Fragmented supplier, work force, Working within many social group, Increase employments

Technologies that affect the Mcdonald’s are Advanced technology development, Quality standard

Environment factors that affect the Mcdonald’s are Quality packing, Local manufacture foreign supplies

Legal factors that affect the Mcdonald’s are Legislation for product, Sustained logo

PESTEL FACTORS

4.1: Political Factors

The operations of McDonalds are affected by the government policies on the regulations of fast food operation. Currently government are controlling the marketing of fast food restaurant because of health concern such as cardiovascular and cholesterol issue and obesity among the young and children in the country. Governments also control the license given for open the fast food restaurant and other business regulation need to follow such as for a franchise business. Good relationship with government in giving mutual benefits such as employment and tax is a must for the company to succeed in any foreign market. McDonalds should also protect its workers by ensuring all the hiring, compensation, training or repatriation is according to Malaysian Labour Law as stipulated.

4.2:Economic Factors

As a business entity, McDonalds need to face a lot of economic variables outside its company or its macro environment. Dealing with international sourcing for its material McDonalds should be aware on the global supply and currencies exchange. Remember, McDonalds import most of its raw material such as beef and potatoes due to local market cannot supply in abundant to meet the demand of its product. Any upside of currencies especially dollar will be impacting its cost of purchase.

Working on the local country, McDonalds must face government regulations on tax of profit where it gains from the operation and other tax such as entertainment and restaurant service tax. Each country may have different scale or types of tax available and McDonalds should follow the regulation if it wants to continue the operation. As a franchise, McDonalds should also pay certain percentage of the revenue to the parent company in United States.

The economic condition and growth of the country also is an important indicator to the demand of products that McDonalds offered. As the food priced slightly above normal foods, not many people will have the income range to consume the products. Moreover if the economy is bad and income percapita is affected, the demand of McDonalds product will certainly going down. On the other hand the good economy also means disposable income is more and people can spend more on more expensive food at fast food restaurant.

4.3:Socio-Cultural Factors

The changing lifestyles of Malaysia due to development of Malaysian economy should be also taking into consideration. While more people are able financially to eat at more expensive outlet such as fast food restaurant, they have higher expectation. They want to have quality in services and more conveniences that can differentiate one restaurant from another. Young urban consumers want technology in their life and facilities such as credit card payment, wireless internet, cozy and relaxing ambient place, and other attraction for their hangout and eating. All these needs should also be taken into consideration. There is not much difference between cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For example in India people (Hindu) do not take beef, Muslim countries do not take pork, German like beers, Finnish like fish type of food menu, Chinese like to associate food with something good (for example prosperity), Asian like rice and Americans eat in big-sized menu. So far McDonalds has shown good efforts in localization of its menu to suit local taste but it should constantly survey and learn about local culture to better understand and design the best product for them.

4.4:Technologcal Factors

For a fast food restaurant, technology does not give a very high impact on the company and it is not a significant macro environment variables. However McDonalds should be looking to competitors innovation and improve itself in term of integrating technology in managing its operation. For example in inventory system, supply chain management system to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can make the management more effective and cost saving in the long term. This will also make customer happy if cost savings results in price reduction or promotional campaign discount which will benefits them from time to time.

4.5:Environment

As one of world largest consumer of beef, potatoes and chicken, McDonalds always had been critics for world environmentalist. This is because high consumption of beef causing the green house effect by methane gasses coming from the cow’s ranch. Large scale plantation has effect the environment and lost of green forest opening for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. In Japan, once McDonalds want to introduce whale burger causing uproar because whales are endangered species. Before using paper packaging, once McDonalds also had been criticized for being insensitive to pollution because using polystyrene based packaging for its foods. Imagine millions of people purchase from fast food operator and how is the impact to world environment by throwing away those hard to recycle packaging. Our world is getting concern on environment issue and business operating here should not just care for profit, but careful usage of world resources for sustainable development and care for environment safety and health for our future generation. Critics and concern from all public or activist should be review and support if necessary to ensure we play our social responsibility better.

4.6:Legal Factors

As a certified fast food operator, there are many regulations and procedures that McDonalds should follow. For example is the Halal certification that becomes a concern to Muslim consumers. 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, labor 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.

CONCLUSION

From its humble beginnings in Illinois, McDonald’s has become one of the prevailing brand

names in the world that has become synonymous to the fast-food concept in the food industry.

McDonalds has a strong marketing strategy, being supervised by the mother company, no

matter at which part of the world the outlet is. The marketing strategies of McDonald’s guarantee

lucrative proceeds for the company. It is said that McDonalds focuses to a specific kind of

consumers with particular kinds of personalities.  Other articles have pointed out that McDonald’s has given the market with an alternative dining experience. Debris noted that McDonald’s has launched a sensibly priced set of meals that gives an unfailing level of quality for the public. As well, those who are under thirty-five years of age are deemed as the most frequent consumer’s of McDonald’s stores.

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