SWOT and PESTLE Analysis On Mcdonalds Organisation Marketing Essay
McDonald's Restaurants Limited, formerly known as McDonald's Hamburgers Limited is owned by McDonald's Corporation based in Illinois, United States was found in 1955 by Mr. Ray. A. Kroc. McDonald’s primarily franchises and operates McDonald's restaurants in the food and beverages industry segment. There are more than 30,000 McDonald’s in 121 locations all over the world, including Canada, the Caribbean, Europe, Central and South America, Australia, Japan, Korea, Southeast Asia, even Russia and China. It has the fastest growth rate in the fast-food restaurant industry (Aboutmcdonalds 2010).
McDonald's Restaurants Limited manages the UK operations of McDonald's franchise restaurants, with its footprint of more than 1,330 company-owned and franchised locations within the UK alone. McDonald's opened its first UK restaurant October 1974. Around 60% of these are owned and operated by the company. The remainder are operated by franchisees. McDonald's is a large scale employer. In September 2004 in the UK the company-owned restaurants employed 43,491 people: 40,699 hourly-paid restaurant employees, 2,292 restaurant management and 500 office staff. McDonald's franchisees employ a further 25,000 people. Most employees are paid by the hour and are called to as 'crew members'. Their primary responsibility is to prepare the food, serve customers and carry out tasks for the efficient running of the restaurants. Each McDonald's restaurant is structured as an independent business, with restaurant management responsible for accounting, operations, inventory control, community relations, training and human resources (Aboutmcdonalds 2010).
(Aboutmcdonalds 2010) McDonald's brand mission is to "be our customers' favourite place and way to eat". McDonald’s worldwide operations is aligned around a global strategy ‘’the Plan to Win’’ that centres around the five basic customer experience – People, Products, Place, Price and Promotion and shows their commitment to improve their operations and enhance their customers' experience.
Marketing Audit: (Jobber 2007:44) Marketing audit is a systematic examination of a business’s marketing environment, objectives, strategies and activities, with a view of identifying key strategic issues, problem areas and opportunities. The analysis of the internal and external environment of a business defines about the current position, how it was achieved and where are we heading. The internal audit focuses on those areas which are under the control of marketing management and the external audit is concerned with those areas or forces over which management has not control. For McDonald’s, both external and internal analysis have been performed and is discussed below.
Internal Analysis - SWOT ANALYSIS: This analysis is an intended planning used for evaluating the strengths, weakness, opportunities and threats for company, or a business venture or an industry or project. SWOT analysis involves specifying the goal of the project or goal of the business venture or goal of a company. It also identifies the external and internal factors which are unfavourable and favourable for achieving the goal. Albert Humphrey credited this technique who led the conference in 1960’s and 1970’s in Stanford University by making use of the information from Fortune 500 organisations.
It is about the characteristics of a company or a business venture which gives advantage over other companies or business venture in the same industry.
Weaknesses are the features which place the company at disadvantage relation to others.
External chances for making the more profits and grater sales in the industry.
These are the external elements in the surroundings which might cause problem for the organisation or a business venture.
SWOT analysis use is not only for profits of the firm. It also helps in decision making whenever the desired objective is defined. Per Say: governmental units, non-profit companies and individuals. SWOT analysis might be useful in protective crises management and in pre-crises planning. It also helps in creating a suggestion during a feasibility survey.
McDonalds firm Strengths, weakness, opportunities and threats are discussed below:
It is about the characteristics of a company or a business venture which gives advantage over other companies or business venture in the same industry.Strengths which are identified from the McDonalds firm are discussed below:
It has a very strong brand name and reputable for their ownership.
It has a menu which is of fixed menu like (Mc Chicken Sandwich, Quarter Cheese, Mc Nuggets etc) in which they all are same around the world this enhances their strong brand name.
Food is prepared very systematically and effectively.
This firm is one of the world’s fast food retailer organization/firm having more than 35,000 restaurants in the world and by its sales. McDonalds is serving around 60 million people or customers in the world in 119 countries.
Having a strong presence worldwide and having stores located in important city centers, market places, theme parks.
Providing an attractiveness quotient especially to the kids segment by introducing the kid’s meal free toys and the brand image of Ronald Mc Donald.
Weaknesses are the features which place the company at disadvantage relation to others. Weaknesses which are identified from the McDonalds Company are discussed below:
It advertising targets mainly on children that might slow down the aged people and youngsters.
For new products development Mcd does not gives more importance, which is lacking innovation in the product.
It mostly concentrates on hot foods which are mostly burgers; instead it not bothered about the varieties of drinks and food.
Due to the franchise network the product quality might be varied in accordance to the area of operation.
Source (Jobber: 2007)
External chances for making the more profits and grater sales in the industry.Identified Opportunities of McDonalds are discussed below:
McDonalds is capable of launching a food which is of healthy, by additional stress in order to provide a healthy salads and foodstuff.
It is capable of developing all the restaurants to an upscale level for capitalizing on the upper subdivision market.
It is also capable of expanding its newer market into lesser development countries and smaller markets due to its strongest brand name.
It can put an additional impetus in the area of new product development and concentrate on developing newer products following the present trend or requirement according to the market specification.
For improving the concentration on the firm social responsibilities by giving more stress to community and environment services.
These are the external elements in the surroundings which might cause problem for the organisation or a business venture. McDonalds identified threats are discussed below:
In the local market the firm threat can arise from their competitors like burger king, KFC etc.
Concentration on the customer shifting from the fast food items to the health food options and the change in the lifestyle is a threat for the position in the market.
A downturn in recession or economy even affects the entity spending power that further will act as a threat for the firm.
As discussed above strong completion between its competitors like Burger King and KFC Subway etc, will give wider options for the customers for the selection of food.
Recommendation (Weaknesses into Strength and Threat into Opportunity)
Some recommendations for McDonalds like: Weaknesses into Strength <-> Threat into Opportunity is explained in brief below: Main important determinants of the company’s future direction are the outcomes of the marketing audit. SWOT analysis helped to find out the strengths, weaknesses, opportunities and threats of the McDonalds firm
(Source: Jobber: 2007)
From the SWOT analysis which is discussed above the results analyzed identified some feasible recommendations for turning weaknesses into strengths and threats into opportunities.
For the regular and loyalty consumers McDonalds includes loyalty coffee cards (If a person buys coffee for 6 times and the 7th time coffee is free for him/her). This process helps the regular customers to bring back and also helps to retain the new customers.
By increasing the range of the products whichever they offer, this helps the firm marketing position to improve. This consists of more wide range of food items compared to the routine menu that might include new mixture of burgers to new drinks and also new product line not like the similar ones like mcd and their competitor are providing currently.
For sustaining and attaining the competitive advantage, the firm should encourage the innovation which is of higher order one and also it must try in investing money in R&D (Research and Development) area for the customer needs and customer tastes for inventing the innovative food products.
(Jobber, 2007) McDonalds can deliberately improve/develop the brand image building like strong brands improves profits and add value, it is also a barrier to their competitors and even effects positively customer brand perceptions.
As health experts or health doctor will say people to avoid the fast food products in which like McDonalds provides or cooks. For this the company should make sure that they make understands the people about nutrition’s included in the food (So company should do extensive promotion about the food nutrition).
McDonald’s dream is to grow to be the world’s best fast service restaurant and that seems to achieve in long-term. Because the competition is growing day-by-day, McDonald’s can take planned steps in order to full-fill their dream in a very small term for grabbing a good market share (aboutmcdonalds 2010).
The branding and advertising generally concentrates on the children and youngsters, that is a excellent sign but the firm should also give equal priority to people of older aged groups, that can direct to an increase in profits for the firm as it is an unexplored market for the organization.
In addition to the recommendations above, McDonald can put into practice the latest technology/skill/knowledge to make routine possible operations within their outlet to have a fast service to the customers.
External Analysis: External analysis comprises of macro-environment and micro-environment.
PESTEL Analysis: PESTEL analysis in common it measures a market. It is also known as Macro-Environment analysis. In simple words PESTEL analysis are the legal factors which might affect the performance of the business. [PESTEL – P: Political, E: Economic, S: Social, T: Technological, E: Environmental L: Legal].
Brief introduction on PESTEL analyses explained below and then related to McDonalds firm.
These factors refer to government policy like the degree of interference in the financial system.
These factors include taxation change, growth in economic, exchange rates, interest’s rates and inflation.
Changes in the social factors can cause on the requirement for the company’s products and willingness of every individual to work and the availability
New technological create new processes and new products. Such as High Definition TV’S, MP3 Players, Online gambling and computer games.
This factor consist of climatic and whether changes. If there are any changes in temperature this can cause on several industries consisting insurance, tourism and farming.
These factors are related to the legal surroundings in which the companies operate.
Distinctive PESTLE Factors includes:
Ex: The euro, taxation policy, EU Enlargement
Ex: exchange rates, unemployment, national income, exchange rates, interest rates
Attitudes to work, income distribution, ageing population.
New product growth, rate of technological obsolescence, innovation
Environmental issues and Global warming
Health and safety, competition law, employment law
PESTEL analysis for McDonald’s is included
(Source: Jobber: 2007)
The government policy of health and safety for fast foods is affecting the way in which McDonald’s operates.
Increasing government regulations regarding the health concerns, cardiovascular diseases and obesity among young people and kids.
Issues regarding the employment and taxation rules which may change according to time for example the company had a problem regarding the labour laws in Malaysia.
Regional issues which may hamper the sales of product as seen by issues in places like India where McDonald’s had a problem with the meat offered in sandwich.
McDonald needs to import raw materials like meat and potatoes because of the unavailability of them in the local market.
As a franchise McDonalds need to pay a certain amount to the parent company in the USA.
With the global level of operations it follows, McDonald’s needs to look on its global supply chain and the currency exchange rates as money rate fluctuation can affect the economy of the company
The economy of a particular country may also affect the individuals’ purchasing power which has a direct effect on the economy of McDonald’s.
The needs of young people has an influence on the way in which the company runs its outlets as it needs to set up locations which are hip, trendy and to the taste of the new generation.
The cultural differences based on the regions of operation have a direct impact on the local menu as for example the Indian market would like an addition of more vegetarian food and the exclusion of beef from the menu, whereas for the Muslim dominated areas there is a restriction on the usage of pork in the menu, the Germans like to include beer and the Finnish have an attraction to have food in the meal, the Americans like to have a big meal whereas the Asians would like to include rice.
With the advent of the net age, advertising and promotion is carried out on a large scale on the internet. McDonald to show its technical advancement has given an option of internet based food-ordering.
With the advent of technological advancement McDonald’s is improving the supply chain which is contributing to the value chain.
With the high consumption of beef, chicken and potatoes McDonald’s is under criticism from environmentalist because of the excessive emission of methane.
In Japanese market McDonalds wanted to introduce whale burger causing uproar among the environmentalist because of whales being an endangered species.
McDonald’s were once criticized for using polystyrene in packaging, for which they improved upon and started to have paper packaging.
McDonald’s needs to follow legal requirements like taxation policies and employment regulation which need to looked upon.
The Halal certification has become a concern for the Muslim customers and forms a legal factor for McDonald’s.
The government and environmental certifications like the ISO certificate is necessary for operations in various countries.
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