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The business began in 1940, with aÂ restaurantÂ opened by brothersÂ Dick and Mac McDonaldÂ inÂ San Bernardino,Â California. Their introduction of the "Speedee Service System" in 1948 established the principles of the modernÂ 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 "Speedee." Speedee was eventually replaced withÂ Ronald McDonaldÂ by 1967 when the company first filed a U.S. trademark on a clown shaped man having a puffed out costume legs.
Some observers have suggested that the company should be given credit for increasing the standard of service in markets that it enters. A group of anthropologists in a study entitledÂ Golden Arches East looked at the impact McDonald's had onÂ East Asia andÂ Hong KongÂ in particular. When it opened in Hong Kong in 1975, McDonald's was the first restaurant to consistently offer clean restrooms, driving customers to demand the same of other restaurants and institutions. McDonald's have recently taken to partnering up withÂ Sinopec, China's second largest oil company, in the People's Republic of China, as it begins to take advantage of China's growing use of personal vehicles by opening numerousÂ drive-thruÂ restaurants. McDonald's reached a deal with the FrenchÂ fine artsÂ museum, theÂ Louvre, to open a McDonald's restaurant and McCafé on its premises, by their underground entrance, in November 2009.
Figure 1 Global Operations
Aims and purpose of the study:
Our aim is to find out
How they operate in the world?
What is their purpose?
Doing right things or not?
Are they concerned about the environment?
We are learning the PESTEL and SWOT analysis, applying in the case of Globalization through the following study. We are taking on McDonald's restaurants, globally recognised business organisation, which is doing a good business since started, finding it as a role model of Global Business. We also analysing the Internal and External environments of McDonald's corporation. Ethical reason involved in this case study as well as Social and Environmental factors.
Study plan & Strategy
Figure 2: Methodology
There are couple of surveys conducted by several organizations to get primary data which includes manual workers, management, staff, owners, local authorities. We consider it as a qualitative research and focused on Global business and its strategy.
3.2 Method of data collection
We have gone through some books, journals, websites, reports and conferences to collect data.
3.3 Method of data analysis
The preparation of the report and analysis of data was done by the MS Office software (MS Word, MS Excel, MS Access, MS Power point) in computer.
3.4 Ethical issues
Surveyors had to consider some ethical issues during the study:
It was ensured that the name of the interviewees' data will remain private and confidential, and the research will not harm them.
We also explained the benefits of the research to them.
Research can be withdrawn at any stage on request of the interviewees.
Question 1: Discuss the environmental factors impacting upon McDonalds, placing emphasis on the key drivers.
The external environment known as the macro environment. These factors are controllable with the environment, can create constraints for the organisation when not taken care off. These factors are Political, Economical, Sociocultural, Technological, Environmental and Legal. Also known as PESTEL factors which we are going to discuss below.
Figure 2 PESTEL Analysis
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and the other businesses Motives and the actions of government and the way that affects businesses are considered. Government legislation and regulation can impact negatively on businesses. It is extremely important that organisation understand the role of the government in the market place be it regulator or a participator e.g. The EU, National government, Local government, Regulatory bodies, and Trade associations.
Political factors that affect the organisations are:
Role of the government, regulator or participator
Rate of change of political direction
Legislative effects on organisational structure and behaviour
Political strategy over time
Marketers need to consider the state of a trading economy in the short and long terms. This is very true when planning for international marketing, though vital for domestic. The economic and competitive environment covers both macro and micro economic conditions which affect the structure of competition in a market, the cost and ability of money for marketing investment in stock and new products, e.g. and the economic conditions affecting a customer's prosperity to buy. The Global recession of the last couple of years, for instance, caused a significant increase in unemployment at all social levels, and thus affected consumers' willingness and ability to buy many kinds of products.
Economic factors that need to be considered within the environment are:
Gross domestic products
Government policies- fiscal and monetary
Income - current, growth and distribution
Industrial - structure, growth and labour markets
Wealth - distribution, effect on the buying power
Employment - structure, FT/PT, male/female, regional disparity
The social and cultural influences on business vary from country to country. The sociocultural environment is of particular concern to marketers as it has a direct effect on their understanding of customers and what drives them. Not only does it address the demographic structure of markets, but it also looks at the ay in which attitudes and opinions are being formed and how they are evolving. A general increase in health consciousness, for instance, has stimulated the launch of a wide variety of products with low levels of fat and sugar, fewer artificial ingredients and no addictives. Aspect most difficult to understand, product and quality because it does deal with human behaviour.
It is very important that such factors are considered given below:
Cultural/sub cultural group - x'tics, growth, decline
Natural segments - characteristics, differentiations, growth/decline/change
Demographics - socio economic groupings, home ownership, geography, family structure, family life cycle, usage rate etc.
Social trends - changes, personal value system, structure of the society, morals and ethical positions and belief systems
Psychographics - preferences, benefits, attitudes and belief systems
Technology is vital for competitive advantage, and is a major driver for globalisation. Technological innovation and technological improvement have had a profound effect in all areas of marketing. Computer technology, for instance, has revolutionised product design, quality control, materials and inventory management, the production of advertising and other promotional materials, and the management and analysis of customer information. The rise in direct marketing as a communication technique, owes a lot to availability of cheap and powerful computerised database management. Technology also affects the development of new process and materials, as well as the invention of completely new products or applications, such as the multimedia home PC, including DVD- ROM drive, or the development of the low calorie sweeteners, Zero cokes, Diet cokes those have revolutionised the dieting market. Information technology in the use of computers and computerizations are considered, effects on the cost of increasing IT automatic is also worthwhile considering.
Factors to be considered to get technological advantages are:
Universal availability of technology - rate race of technological age
Organisations able to keep up with customers acceptance
Rate of technological change
Research and development - cost of investing, control
Production technology - versus cost savings, internal skill base
Protection of technology - patents, copy rights etc
Environmental issues include the climate change; global warming, waste management and ISR have been of major concern in recent years. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities. This area has caused consumers to think more critically about the origins, content and manufacturing processes of the products they buy. Consumers, e.g. want product made with the minimum of pollution and are looking for the reassurance, where applicable, that they are made of renewable resources. Many paper products now carry notices sating that they are made of wood from managed forests that are replanted after harvesting. In the same spirit, consumers are also demanding that unnecessary packaging is eliminated and that packaging should be recyclable.
The issue of animal welfare is linked with environmental concepts, and shows itself in a number of ways. Product testing on animals has become increasingly unacceptable to a large number of vocal consumers, and thus there ahs been a proliferation of cosmetics and toiletries, e.g. which proclaim that they have not been tested on animals. With some products this may only mean that they are made from ingredients that have been separately animal tested sand proved safe in the past, but that the current formulation has not itself been tested. Cosmetics retailer, The Body Shop, has, e.g. been at the forefront of positioning itself overtly on this issue, reassuring concerned customers about its own products and publishing the worst excesses of animal testing.
Another area of animal welfare which has captured the public imagination is that of intensive farm production methods. Public outcry against battery egg production, e.g. opened new marketing opportunities for free- range eggs, since consumers wanted the alternative and were prepared to pay for it. Similarly, outdoor- reared pork and organic beef are starting to appear in supermarkets. Pressure groups are becoming more adept at using advertising and promotional techniques to activate public opinion.
Health consciousness has played a major role in the thinking behind consumer markets. The tobacco market has been particularly hard hit by increased awareness of the risks of smoking, and pressure from health lobbyist and the public has led to increased regulation of that industry. Food products have also been reappraised in the light of health concerns, with more natural ingredients, fewer artificial addictives, less salt and less sugar content demanded. Linked with this, the market for low calorie products has also expanded, serving a market that wants to enjoy tasty food in quantity, but lose weight or at least feel that they are eating healthy.
E.g. Princes thought it was to a winner after a study found that vitamin B3 and Zinc could be found in its corned beef, as both have been linked with male fertility (The Grocer, 2000).
Heinz, with a long trading of nutrition, decided a few years ago to focus on the health agenda, reducing the salt in its baked beans by 20% and pursuing salt reduction within its other products. By re-emphasising wholesomeness and nutritional values in its promotion, along with the launch of new chilled and healthy products and more detailed labelling system, it hoped to demonstrate a commitment to healthy eating. Maybe it's a case of 'Greenz Meanz Heinz'! (Harrison, E. 2004)
Health concerns also led to a boom in products and services linked with fitness. Health clubs, aerobics classes, yoga, exercise videos, sportswear of all kinds and trainers are just some of the things that profited from the fitness boom.
These are government rules, state rules, legal issues, international law. These are related to the legal background in which organisations operate. In recent years in the UK there have been many significant legal changes that have affected organisations' actions. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for organisations to recycle are examples of relatively recent laws that affect an organisation's actions. Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed) and demand (e.g. if the law affects the likelihood of customers buying the good or using the service).
Different categories of law include:
Consumer laws; these are designed to protect customers against unfair practices such as misleading descriptions of the product
Competition laws; these are aimed at protecting small firms against bullying by larger firms and ensuring customers are not exploited by firms with monopoly power
Employment laws; these cover areas such as redundancy, dismissal, working hours and minimum wages. They aim to protect employees against the abuse of power by managers
Health and safety legislation; these laws are aimed at ensuring the workplace is as safe as is reasonably practical. They cover issues such as training, reporting accidents and the appropriate provision of safety equipment
By using the PESTEL framework we can analyse the many different factors in a firm's macro environment. In some cases particular issues may fit in several categories. For example, the creation of the Monetary Policy Committee by the Labour government in 1997 as a body that was independent of government but had the ability to set interest rates was a political decision but has economic consequences; meanwhile government economic policy can influence investment in technology via taxes and tax credits. If a factor can appear in several categories managers simply make a decision of where they think it best belongs.
However, it is important not to just list PESTEL factors because this does not in itself tell managers very much. What managers need to do is to think about which factors are most likely to change and which ones will have the greatest impact on them i.e. each firm must identify the key factors in their own environment. For some such as pharmaceutical companies government regulation may be critical; for others, perhaps firms that have borrowed heavily, interest rate changes may be a huge issue. Managers must decide on the relative importance of various factors and one way of doing this is to rank or score the likelihood of a change occurring and also rate the impact if it did. The higher the likelihood of a change occurring and the greater the impact of any change the more significant this factor will be to the firm's planning.
It is also important when using PESTEL analysis to consider the level at which it is applied. When analysing companies such as McDonalds, Sony, Chrysler, Coca Cola, BP and Disney it is important to remember that they have many different parts to their overall business - they include many different divisions and in some cases many different brands. Whilst it may be useful to consider the whole business when using PESTEL in that it may highlight some important factors, managers may want to narrow it down to a particular part of the business (e.g. a specific division of Sony); this may be more useful because it will focus on the factors relevant to that part of the business. They may also want to differentiate between factors which are very local, other which are national and those which are global.
This version of PESTEL analysis is called LoNGPESTEL:
Provision of services by local council
UK government policy on subsidies
World trade agreements e.g. further expansion of the EU
UK interest rates
Overseas economic growth
Local population growth
Demographic change (e.g. ageing population)
Improvements in local technologies e.g. availability of Digital TV
UK wide technology e.g. UK online services
International technological breakthroughs e.g. internet
Local waste issues
Global climate change
Local licences/planning permission
International agreements on human rights or environmental policy
Environmental factors impacting upon McDonalds
We are going to analyse the PESTEL factors how they placing impacts upon McDonalds. This is very important to set affective strategy through analysing the External environment to achieve the organisation's global objectives.
Generally, the Company does not make contributions to political parties, candidates for public office or political organizations. However, because public policy issues have the potential to impact the Company's business, its employees, franchisees and the communities in which McDonald's restaurants operate, the Company's management believes that in certain cases it may be appropriate and in the Company's best interests to use its resources to make political contributions. Therefore, McDonald's Corporation Board of Directors has adopted this Political Contributions Policy to ensure that such contributions are made in a manner consistent with the Company's core values and to protect and/or enhance shareholder value.
As a prominent example of the rapid globalization of the AmericanÂ fast foodÂ industry, McDonald's is often the target of criticism for its menu, its expansion, and its business practices. E.g. In 2001,Â Eric Schlosser's bookÂ Fast Food NationÂ included criticism of the business practices of McDonald's. Among the critiques were allegations that McDonald's (along with other companies within the fast food industry) uses itsÂ politicalÂ influence to increase its profits at the expense of people's health and the social conditions of its workers. The book also brought into question McDonald's advertisement techniques in which it targets children. While the book did mention other fast-food chains, it focused primarily on McDonald's.
In 1999, FrenchÂ anti-globalisationÂ activistÂ José BovéÂ vandalized a half-built McDonald's to protest against the introduction of fast food in the region.
McDonald's got cheaper menu which is affordable for consumers. It is not difficult to get into a new market like poorer areas. McDonald's restaurants are found in 119 countries and territories around the world and serve nearly 47 million customers each day. McDonald's operates over 31,000 restaurants worldwide, employing more than 1.5 million people. The company also operates other restaurantÂ brands, such as Piles Café. It has got financial strength to invest anywhere in the world.
Focusing on its core brand, McDonald's beganÂ divestingÂ itself of other chains it had acquired during the 1990s. The company owned a majority stake inÂ Chipotle Mexican GrillÂ until October 2006, when McDonald's fully divested from Chipotle through a stock exchange. Until December 2003, it also ownedÂ Donatos Pizza. On August 27, 2007, McDonald's soldÂ Boston MarketÂ toÂ Sun Capital Partners.
On the other hand, competitors like Burger King's market share among quick service sandwich chains dropped by 10.95% in 2006, Krispy Kreme Doughnuts possibly of going bankrupt.
However, increased expansion of traditional rivals, Yum brands are the leading quick service chains in china, McDonald's Europe sales dropped by 1.9%, but Burger King's sales growth is an estimated 18.2 % compared to McDonald's 11.2%, Yum brands variety and wide rages of pricse for selctions, Wendy Frescata product line increased sales by 3.2%, average menu price increased by 3.2% (National Restaurant Association NRA) are the important factors that we need to consider carefully.
McDonald's always understand social values, culture and responsibilities. Try to get closer to the locals or community, which makes the consumers happy and feel deep connected to the restaurants. Engaging in various type of social activities such as charity fund rising, playground for kids, sponsoring local schools or charities etc.
Figure 3 Community support model
There are some global factors we need to look at such as rising population in China, Chinese consider drive-through a novelty where car ownership is growing rapidly, 6% increase in social shopping areas (i.e. malls, plazas), Hispanic population has recently increased by 14 % in the USA, developing a "healthy lifestyle" program to attract health conscious customers, growing public awareness of fast food being unhealthy, beef declined in France, Halal foods in the Islamic states, Menu choices for Asian countries etc.
McDonald's mission is to be the world's best quick service restaurant, deliver excellence to the customers in each of their restaurants and achieve profitable growth by expanding the brand McDonald's through innovation and technology.
They introduced their "Forever Young" brand by redesigning all of their restaurants in 2006, the first major redesign since the 1970s.
The design includes the traditional McDonald's yellow and red colours, but the red is muted to terra cotta, the yellow was turned golden for a more "sunny" look, and olive and sage green were also added. To warm up their look, the restaurants have less plastic and more brick and wood, with modern hanging lights to produce a softer glow. Contemporary art or framed photographs hang on the walls.
The exterior has golden awnings and a "swish brow" instead of the traditional double-slantedÂ mansard roof.
The restaurants feature areas:
The "linger" zone offers armchairs, sofas, and freeÂ Wi-FiÂ connections. Starting in 2010 Wi-Fi access will be free.
The "grab and go" zone features tall counters with bar stools for customers who eat alone;Â plasma TVsÂ offer them news and weather reports.
The "flexible" zone is targeted toward families and has booths featuring fabric cushions with colourful patterns and flexible seating.
Different music targeted to each zone.
Branches in theÂ United KingdomÂ have an even more contemporary look and feel to the stores, replacing the red with a deep British racing green and overall making the stores look more casual, similar to aÂ StarbucksÂ branch. Branches in Germany have also been redesigned to have a more contemporary style and green exterior. Additionally, in Germany, the traditional "golden arches" over red sign is being changed to "golden arches" over green.
McDonald's takes its responsibility to the environment seriously. In 1990, established Global Environmental Commitment, and since then, they have been focused on incremental improvements designed to continuously improve environmental performance, both in supply chainÂ and in restaurants.Â
At the restaurant level, they are focused globally on three main fronts:Â
Figure 4 Environmental responsibilityÂ
EnergyÂ efficiencyÂ -Â Find furtherÂ ways to increase energy efficiency in restaurants to save money and reduce environmental impact.Â
Sustainable Packaging & Waste ManagementÂ - ContinueÂ exploring ways to reduce environmental impacts of consumers packaging and waste in restaurant operations.Â
Green Restaurant DesignÂ - Enhance current strict building standards to incorporate further opportunities for efficiency and innovation in the design and construction of restaurants.
They must meet all the legal requirements wherever do business. E.g. in Europe they need to follow the National governments, Local governments rules along with EU rules. In the UK they are following Sunday trading law, bank holidays, minimum wages etc. Some countries are liberal but some are strict.
McDonald's has been involved in a number ofÂ lawsuitsÂ and other legal cases, most of which involvedÂ trademarkÂ disputes. The company has threatened many food businesses with legal action unless they drop the Mc or Mac from their trading name. In one noteworthy case, McDonald's sued a Scottish café owner called McDonald, even though the business in question dated back over a century (Sheriff Court Glasgow and Strathkelvin, November 21, 1952). On September 8, 2009, McDonald's Malaysian operations lost a lawsuit to prevent another restaurant calling itselfÂ McCurry. McDonald's lost in an appeal to Malaysia's highest court, the Federal Court.
McDonald's has defended itself in several cases involvingÂ workers' rights. In 2001 the company was fined £12,400 by British magistrates for illegally employing and over-workingÂ child labourÂ in one of its London restaurants. This is thought to be one of the largest fines imposed on a company for breaking laws relating to child working conditions (R vÂ 2002Â EWCA Crim 1094). In April 2007 inÂ Perth,Â Western Australia, McDonald's pleaded guilty to five charges relating to the employment of children under 15 in one of its outlets and was fined AU$8,000.
We have leaned from the above McDonald's case study that it is very important to do PESTEL and SWOT analysis for a company before goes Global profitably. There are many companies doing or planning to do Global business. All companies are not successful in the case of Globalization. There are some factors stands up when we analyse the situations such as PESTEL and SWOT. These are the key drivers to the global success.
McDonald's as a global business organisation doing their best to get best output. Maintaining quality, service and product, understanding the locals, helping the environment, social activities, employee satisfactions, hungry for profit, are the main ingredients behind their Global success.
The external environment is enormously complex and vibrant. Take your eyes off it for a moment and you may find there has been a major change in the aggressive landscape. This is why PESTEL analysis really needs to be undertaken on a regular basis. However, even then it does not ensure that every significant change will be identified. Have you ever been waiting to meet someone in a crowded place and not noticed there were there until they were almost directly in front of you? You were too busy looking at someone else or for something else (you were sure they would be wearing a particular coat, for example). The same can happen to managers scouring the external environment - there is a lot going on in many different places and it is perfectly possible that they miss the changes that later turn out to be incredibly important. This is particularly likely when people have already decided in their minds what should be happening. They "know" their friend will be coming from a particular direction so that's the only place they look. This is fine if the friend does come from this direction but not so good if he or she chooses a different route. When using PESTEL analysis managers must be prepared to look all around them and question their assumptions!