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McDonalds Corporation is the worlds largest chain of fast food restaurants, serving nearly 47 million customers daily. McDonald's primarily sells hamburgers, cheeseburgers, chicken products, French fries, breakfast items, soft drinks, milkshakes, and desserts. More recently, it has begun to offer salads, wraps and fruit. 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 fireplaces, and eliminating hard plastic chairs and tables.In addition to its signature restaurant chain, McDonald's Corporation held a minority interest in Pret A Manger (a UK-based sandwich retailer) until 2008, and owned the Chipotle Mexican Grill until 2006 and the restaurant chain Boston Market until 2007. The company has also expanded the McDonald's menu in recent decades to include alternative meal options, such as salads and snack wraps, in order to capitalize on growing consumer interest in health and wellness. (The Money Time, Money matters, simlified)
Being a huge and a competitive business, the company faces different types of criticism. The one that we are going to highlight in this report is the criticism face due to the Morgan Spurlock's documentary, ""The Supersize Me" in 2004. The film showed that McDonald's food was increasing obesity in society and McDonald did not provide the nutritional information about the food they served to the customers.
This report highlights the strategies that could be formulated by the Human Resource Department to overcome the criticism and to meet the market trend. It also states the process of the strategy formulation. In order to formulate strategies and to plan actions, it is first necessary to do an environmental scanning. Environmental scanning gives the internal and external scenario of the business. This report also covers the environmental scanning for Mcdonalds to overcome the critics and be stable in the market.
Q1) Environmental Scanning and the future influence thereof on McDonalds HR in New Zealand:
Environmental Scanning is a process of gathering, analyzing, and dispensing information for tactical or strategic purposes. The environmental scanning process entails obtaining both factor subjective information on the business environments which a company is operating or considering entering. A business unit has to monitor key macroenuiwnment forces (demographic-economic, natural, technological, political - legal, and social - cultural) and significant microenvironment actors (customer, competitors, suppliers, distributors, dealers) that affect its ability to earn profits . The business unit should set up a marketing intelligence system to track trends and important developments. (oppapers.com)
The term "Environmental Scanning" was coined by Aguilar (1967). He defines environment scanning as acquiring information about events and their relationships in a company's outside environment, the knowledge of which would assist top management in its task of charting the company's future course of action. According to the definition, organisations scan the environment to get an understanding of external influences so that they may be able to develop effective response that secures or adjusts their position in the future. (Amanda Spink, 2012)
Organisation objectives Strategies HR policies
Action Plan to Close the GAP
Desired Future HR DemandFuture HR Supply
Environmental scanning has two parts: Internal and External environment scanning . Environmental scanning forms the starting point of Human Resource Planning. Internal Scanning analyses the internal environment of a business to understand what the current cognitive, affective and behavioural qualities of employee's are and if they will be sufficient to achieve the organisations strategic goals. Whereas environmental scanning is external scanning, which is the systematic identification and analysis of key trends in the external environment and the monitoring of their impact on HR strategies. (Hartel)
External Environmental analysis consists of: Political, Economic, Social and Legal analysis of the environment. It is more commonly known as PESTEL strategic management tool. PESTEL is a strategic management tool which provides useful framework to analyze the external environmental pressure on organisation. This covers the factors which are not in control of any organisation but are very important to be considered and analyzed while undergoing a business strategy.
We would analyse the Political, Economic, Social and Legal factors affecting McDonald's in the given case in New Zealand.
Political and Legal Factors:
One of the most important factors for any country which affect trade policy is their legal rule, regulation, and their government. If the government is stable then there is less chance of risk because legal rules and regulations would not change in short time. In New Zealand, the risk is high because every 3 years, the new government applies new rules and regulations which could be good or bad for the organisation. In the same way labour force is very expensive in New Zealand. But if we see in other prospective, the productivity of the labour is more than any other country.
Any company or organisation, in order to start a new business or to strategise its existing business unit, needs a vast amount of money and investment. In New Zealand because of the high interest rates, the company might have to pay big amount of interest which is good for the government but might decrease the profit for the company.
The main aim of the company is to grow. McDonalds is growing continuously. Hence it should take care that in the market in which it intends to operate, it should deal with the right authorities. This can help the company to establish good relationship with the government. And having a good relationship with the government is very important for the company, since the company can not operate smoothly without the support of the government. The company needs to meet prescribed requirements by New Zealand government. The company should also have all the details about the legislation and the law. It also needs to take into consideration the influence of the ruling party over the current trade conditions. McDonalds also needs to ensure that the hiring, training, compensating, and the equality in employment are in accordance to the law of New Zealand.
New Zealand's agrarian structure economy has shifted to a free market economy over the last 20 years. The country's economy is now mainly dependent on international trade. New Zealand's per capita income is very low because of the low population, 4, 430, 800, (business newzealand).
New Zealand's Economic growth over the last 20 years:
1999 - 2004
(Reserve bank of New zealand)
It is evident from the table above that majority of the industries have experienced growth. There has been increase in job growth, unemployment has decreased, household income has increased, profits of companies have become strong, and the government has substantial fiscal surplus. (Reserve bank of New zealand)
Because of the growth, the inflation rate in New Zealand is very low. Because of this the raw materials and services are available at cheap rate. As a result of this, business makes more profit. New Zealand's total trade with the world was valued over $92 billion in the year to December 2011(annual growth of 10.4%). New Zealand's total exports grew by 9.6% and reached $47.7 billion in the year to December 2011. While New Zealand's imports were at $44.7 billion in the year to December 2011 which gave it a growth of 11.3%. (Zealand, Year to December 2011). Clearly New Zealand's export is more than its import. This shows that New Zealand is rich in Natural resources and has high productivity.
Mcdonalds, generally imports much of its raw material, if the country is in lack of resources. However, in case of New Zealand, Mcdonalds can decrease the trade cost because of minimum imports and by using country's available resources. Hence with this study it appears that Mcdonalds has big scope for growth.
Before expanding in New Zealand, Mcdonalds must conduct a research analysis of the economic condition of that country like the import - export ration, GDP Growth, exchange rate, employment and unemployment ratio, national reserves and inflation. Another important factor to be considered by Mcdonalds is the competitor. Mcdonals should also analyse competitor's strategy, growth and their contribution in country's economy.
Socio Cultural Factors:
This is one of the most important factors to be considered by the company while operating in a foreign country. The company needs to customise its products in such a way that they match the social environment of that country. The company will not be accepted by the people, if it doesn't customize its products as per the social needs of the country. Any company operates because of its customers. If the customers don't accept the company and its products, then the company is likely to fail.
The social aspect of any country is being analysed by Mcdonalds at a very primary level. Mcdonalds has about 20,000 restaurants across the globe. (Kincheloe, 2002). As per the past experiences in different countries, Mcdonals has customised its menu and products as per the requirement of the social need of the country. In New Zealand, the population mostly consists of European 56.8%, Asian 8%, Maori 7.4%, Pacific Islander 4.6%, mixed 9.7% and other 13.5%. (Central Intelligence Agency). The main religion followed here is Roman Catholics and Christianity. During festivals and Christmas, the demand for meat increases. Also as per the analysis, majority of the population in New Zealand ranges between 15-64 years of age. The fast food style is highly preferred by the youths and hence this leads to the increase in sales of Fast food industry. As per the 2007 records, the obesity rate in New Zealand is 26.5%, which was closest to USA with 34%. (OECD Health Data: Americans are OECD's Most Efficient Eaters) This means that New Zealanders are free eaters and are not conscious about the diet. It means that the fast food industry has completely been accepted by New Zealand. Hence Mcdonalds has a very bright opportunity to expand and to sustain their business in New Zealand.