The Environmental Factor Impacting On Mcdonalds Commerce Essay

McDonalds Corporation is the worlds leading food service organization. The corporation started out as a small drive-through in 1948 by two brothers, Dick and Mac McDonald. Raymond Albert Kroc, a salesman, saw a great opportunity in this market and advised Dick and Mac to expand their operation and open new restaurants. In 1961 Kroc bought out the McDonald brothers. By 1967 McDonalds expanded its operations to countries outside the U.S.A. This unyielding expansion led the Corporation to open 23,000 McDonald’s restaurants in 110 countries in 1994, producing $3.4 bn in annual revenues. In addition, McDonald’s opens a new restaurant every three hours. Also, McDonald’s has twice the market share of its closest U.S. competitor, Burger King, representing 7% of total U.S. eating-out sales. Similarly, McDonald’s serves about 1% of the world’s population on any given day through its 23,000 restaurants internationally. Big Mac, the world’s most sold hamburger was developed by Jim Delligutti in 1967 to feed construction workers. ‘Big Mac’ is the biggest attraction and backbone of the corporation. Moreover, McDonald’s maintains its competitive advantage by constantly creating new items to add onto its menu. This shows us that McDonald’s practices an analyzer type of strategy, introducing new items and defending its existing ones.

McDonald’s Corporation (NYSE: MCD) is the world’s largest chain of hamburger fast food restaurants, serving nearly 47 million customers daily. At one time it was the largest global restaurant chain, but it has since been surpassed by multi-brand operator Yum! Brands (KFC, Taco Bell and others) and sandwich chain Subway.

In addition to its signature restaurant chain, McDonald’s Corporation held a minority interest in Pret A Manger 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.

A McDonald’s restaurant is operated by either a franchisee, an affiliate, or the corporation itself. The corporation’s 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 $22.8 billion, and 9% growth in operating income to $3.9 billion.

McDonald’s primarily sells hamburgers, cheeseburgers, chicken products, french fries, breakfast items, soft drinks, milkshakes, and desserts. In response to obesity trends in Western nations and in the face of criticism over the healthiness of its products, the company has modified its menu to include such healthier alternatives as salads, wraps and fruit.

McDonald’s MISSION AND VISION:

They serve people with good quality food, fast and at low cost. McDonald’s vision is to dominate the global food-service industry. Global dominance means, setting the performance standard for customer satisfaction and increases market share and profitability through successfully implementing our convenience, value and execution strategies.

McDonald’s brand mission is to “be our customers’ favorite place and way to eat.” Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience – People, Products, Place, Price and Promotion. We are committed to improving our operations and enhancing our customers’ experience.

Main Body & Analysis:

Environmental Factor Impacting upon MacDonald’s:

The impact of environmental factors is far-reaching upon the Macdonald’s which is being discussed below followed by environmental factor.

Environmental Factor:

The notion of environment in general systems thinking is a wild, all-embracing and woolly concept. “Everything” is in the environment. The environment is all – yet we are interested in specifics. It is people who decide what is significant in the environment and what is not – what the ‘forces’ are that “must” (imperative language) be attended to. Thus prevailing pictures of what ‘the environment’ is are socially constructed. Various definitions and concerns assume the characteristics of propaganda. They are not necessarily neutral definitions and the nature of the elements that supposedly are acting on “us” in the environment, are difficult to define and measure.

Similarly environmental events have to be interpreted and we will often refer to ‘environmental forces’ of various kinds in our post hoc rational and justification of the decisions we have made. We blame the environment for action we have taken and the results of that action.

Finally people e.g. government and powerful decision-makers in business organizations, may intervene to influence and shape events in the environment – to their own advantage e.g. speak to the press, lobby for a change, buy up a rival, try to tickle the equities market up and even cooperate with others to ensure that information on ‘the environment’ is accurate rather than uninformed and misguiding decisions by others than can affect the company’s position (vested interests). John Child’s concept of ‘strategic choice”, and its manifestation in terms of managerial behavior, is significant in this regard.

So environment is not what it may seem. Certainly if we here the ‘green’ lobby speak about environment, they will hold particular values and positions dear to their hearts, some of which others might accept but some of which others might also rebut.

However a typical, neutral and managerial description of environmental factors and pressures would cover the following areas (and more). Environmental factors include social-cultural, technological, economic and financial and political-legal events and possibilities. These are often referred to by the mnemonics

S.T.E.P. (social, technical, economic and political factors) also PEST or

S.T.E.E.P.L.E (social/demographic, technical, economic, environmental (natural), political, legal and ethical factors)

The ‘biological and adaptive’ metaphor comes into play when we argue for business change. Typically, if the business cannot respond to the pressures and influences of its environment then it may not survive. It has to adapt. If it serves the needs of clients or stakeholders and satisfies for example its “market mission” then it may prosper. A dominant theme in the study of business is that of competition in the market-place.

A business’s relationship with its environment is typically founded on its service to key “customers” and their satisfaction with its performance revealed by buying patterns, new legislation, party conferences, annual general meetings and stock market prices. Learning and adaptation occurs in response to stimulus across organizational boundaries. Any organization that is too inward looking becomes atrophied and can stagnate. In the language of general systems theory any system is subject to the process of entropy.

Environmental factors can be political, social, ecological, cultural, technological and ethical in nature. Any organization that develops a product or service that they want to market domestically or globally must consider what the impact each of these factors may have for them. Not considering these factors can result in the failed attempt to market a product, which may be successful domestically, in other countries where there is a significant market potential.

Impacting upon MacDonald’s:

Mainly there are 2 types of factors affecting international business like MacDonald’s.

1) Internal factors

2) External factors.

1) Internal factors:-

Internal factors of international business include political parties, suppliers, buyers, competitors and consumer of respective country.

2) External factors: –

External factors of international business are those where you need to examine the whole criteria these are political environment, legal environment, socio-cultural environment, demographic conditions of respective country.

Figure: Environmental Factor

Analysis the environmental factors impacting upon MacDonald’s:

To have a clear picture of McDonald’s corporation we need to look at its Task Environment, which includes its: .Customers .Competitors .Strategic Allies .Suppliers .Regulators

CUSTOMERS:

Customers are those who pay money to acquire an organization’s goods or services. For many years McDonald’s mostly targeted the young people, however this has changed in this decade; McDonald’s has turned towards a more general market. By doing this McDonald’s concentrates on the family, targeting a diverse market which includes consumers ranging from children to elderly people, using products such as the happy Meal for children and Egg McMuffin for the elderly. McDonald’s also realized the changing world we live in and the need for healthier food, since there is an ever changing demographic group, who demand fast, top quality food that is low in calories. McDonald’s responded to this opportunity and introduced a new and innovative product. This new product was a regular hamburger that tasted like the real thing but was made of plant material like Soya beans. This same product also targets another demographic group, vegetarians. McDonald’s mostly uses psychographic segmentation targeting the working and middle classes. These are the people that are more susceptible to enter a fast food restaurant, since these are the people that lead a fast moving life and thus require a fast meal. In brief McDonald’s customers are of all classes, but largely working and middle classes, and people of all ages.

COMPETITORS:

A competitor is an organization that competes with other organizations for resources. In our findings, McDonald’s has two types of competitors in the Lebanese market:

Indirect Competitors:

Indirect refers to firms producing one or two products that compete with McDonald’s products and therefore be a threat to the company. We have identified four indirect competitors: Henry J. Beans, T.G.I. Friday, K. F. C. and Popeye’s. Henry J. Beans offers hamburgers and fries on its menu, therefore competing with McDonalds for customers of these products. However, Henry J. Beans also known as Hank’s is a more of a bar restaurant and therefore a hang out place, as a result charging more money for its products. Hank’s targets middle to upper class customers, so where most of these customers overlap are in the middle class. T.G.I Friday is another indirect competitor reflecting the same characteristics as Henry J. Beans. Other indirect competitors are K. F. C. and Popeye’s, both competing for the chicken nuggets and fries customers. In brief, Hank’s and T.G.I. Friday’s competes with McDonald’s by offering hamburgers and fries, whereas K. F. C. and Popeye’s compete with McDonald’s by offering chicken nuggets and fries.

Direct Competitors:

Direct competitors refer to firms producing the same products or services as McDonald’s does. Here we found that McDonald’s has three direct competitors: Burger King, Wendy’s and Hardee’s. McDonald’s closest rival is Burger King, which operates a total of 9644 restaurants in 110 countries. Wendy’s is McDonald’s second largest rival, which is also in the fast food business, where Wendy’s operates 6776 restaurants in 32 countries. Hardee’s, McDonald’s third largest rival is also in the fast food business and is the only direct competitor apart from Juicy Burger in the Lebanese market. Hardee’s operates 3080 restaurants in 20 countries. As we have illustrated McDonald’s faces stiff competition from three major competitors, Burger King, Wendy’s and Hardee’s.

Suppliers:

Suppliers are an organization that provides resources for other organizations. McDonald’s has practiced a backward vertical integration, by replacing most of its suppliers. It has done so for two reasons, 1) To reduce costs, and 2) To ensure that its products are of top quality. These supplies include beef and milk to be used in its products, which it gets from its farms. Other suppliers include local grocery stores that supply McDonald’s with fresh vegetables. Soft drinks are supplied exclusively by Coca-Cola, which is also its ally. McDonald’s supplies also include raw material such as flour, sugar, yeast, etc.,.

Strategic Allies:

A strategic ally is an organization working together with one or more other organizations is a joint venture or a similar arrangement. McDonald’s has formed a strategic alliance with: Walmart, Chevron, Amoco, Disney and Coca-Cola. Walmart, which is a large shopping mall chain in the U..S. and several neighboring countries, is allied with McDonald’s, which offers great opportunities for both companies. McDonald’s has restaurants in each Walmart, offering its customers conveniences and excellent fast food at a low cost ease of accessibility. McDonald’s corporation describes it best in this scenario: Imagine a busy shopping day at your local Walmart and having the ability to sit down with the kids and enjoy many of our McDonald’s favorites, like ‘Big Mac’ sandwiches, world famous fries and kids favorite ‘Happy Meal’. McDonald’s understands your busy lifestyles and the demands on your time. That’s why we are making it easier for you to do more things in less time. McDonald’s is engaged in an alliance with two petrol companies, Chevron and Amoco. This alliance represents the ultimate in convenience. At these locations, one finds a full-menu McDonald’s restaurant with dining room service. Nothing can be more convenient, because one can fill up the car with gas and get a meal all in one stop. Another important alliance that McDonald’s has is with Disney. Here McDonald’s has the sole right to sell fast food in Disney’s theme parks around the U.S., and other Disney operations in the world. Under the terms of the agreement, McDonald’s will operate restaurants and Disney will promote its films through McDonald’s.

Regulators:

Regulators are groups or governmental agencies that can control and influence the organization’s policies and practices. An example is Lebanon a few years ago when the U..S. government banned all U..S. citizens and organizations to come or operate in Lebanon. Another good example would be the embargo imposed on Iran where U..S. organizations were banned to operate in this country. Another group of regulators called interest groups can and have influenced McDonald’s to treat its animals (cow and chickens) in a much more humane manner, which resulted in the restructuring of McDonalds’ farms throughout its operations around the world. The summary of the task environment which is by definition a specific organizations or groups that affect the organization, which includes competitors, suppliers, customers, strategic allies and regulators. Here we described the task environment’s importance to McDonald’s, where McDonald’s faces both opportunities and has threats in its environment.

Emphasis on the key driver of MacDonald’s:

We shall also explore McDonald’s Workforce Diversity and its Total Quality Management to emphasis on the key drivers. These are given below:

Workforce Diversity:

Diversity exists in a group or organization when its members differ from one another along one or more important dimensions such as age, gender, and ethnicity. Diversity is very important for McDonald’s. Here millions of teens start out by working at McDonald’s. Here some of the teenagers move on to get various jobs such as movie stars, skilled workers, famous athletes, management positions and other educated positions in society. At McDonald’s two thirds of middle and upper management started out as crewmembers in a McDonald’s restaurant. There are opportunities for everybody in McDonald’s from teenagers to elderly workers, and from people just entering or reentering the job market. Moreover, McDonald’s offers special jobs for people who have disabilities, such as people who are in wheel chairs and those who must use crutches permanently. Furthermore, McDonald’s offers their workers flexible working hours. For example, hours for people seeking just a few hours of work per week and those who seek full time positions. The work force at McDonald’s also have some say in their working hours, such as if they prefer the morning, mid-day, or evening shifts in the restaurant. So, McDonald’s uses diversity to create a good atmosphere in their work places among workers and management. Here they offer work to all kinds of people without discrimination and the workers have flexible hours that provides customer satisfaction.

Top Quality Management:

Quality is the entirety of features and distinctiveness of a product or service that stand on its ability to satisfy stated or implied needs. For McDonald’s, total quality management (TQM) involves that the employees are at work on time, are neatly dressed, and are clean. The employees must make sure that the customers constantly receive safe food, which implies that the employees must wash their hands often to remain clean. Moreover, the employees must follow certain Standard Operational Procedures, so the customers always receive exceptional quality and service. This includes the employees using plastic gloves when they prepare the food, that the meat and fries are properly fried, and that the vegetables are thoroughly washed when used in the food. Another TQM is that the employees rely on teamwork and high energy to get the job done, so that the customers do not have to wait long for their food. Furthermore, McDonald’s management emphasizes that their restaurants should be clean. This involves that the restaurants are tidy, sparkling and spotlessly clean. As McDonald’s illustrates the quality is that the employees delivers fast, accurate and friendly service with a smile.

External and Internal Factors Affecting McDonalds –

The purpose of this paper is to discuss external and internal factors affecting McDonald’s management functions. This will be accomplished by explaining how McDonald’s deals with each of the external and internal factors. There were three factors that were chosen to outline the success of McDonald’s corporation. The first factor is globalization, which is define as closer contact between different parts of the world, with increasing possibilities of personal exchange, mutual understanding and friendship between “world citizens”. Diversity, the difference among people and cultures, is the second factor discussed in the paper. The final factor is ethics, which can be defined as a set of principles of right conduct. This paper explains how the McDonald Corporations uses the factors to conduct business around the world.

In today’s society, corporations and enterprises are expanding their businesses in the global markets. Globalization is necessary for success and survival in the worldwide market; however, global competition is not easy (Bateman & Scott, 2004). By the end of the twentieth century, the list of Fortune 500 companies was no longer only United States corporations due to an increase in international companies joining the list (Global Capitalism, 2005). As a leading food service retailer, McDonald’s joins those corporations with restaurants in 119 countries (McDonald’s, 2004). Important strategic decisions are a key factor to their success with consideration for both internal and external factors. When considering the foreign market, companies need to consider there are risks. There must be local marketing to appeal to the local consumers and also to build relationships and trust (Bateman & Scott, 2004). Therefore, the strategic planning for marketing has to be effective. McDonald’s caters its menu in other countries to the cultures of the regions. For example, in India, the non-vegetarian menu includes chicken and fish items only (Welcome, n.d.). Beef is not on the menu in India because are considered sacred. Global marketing decisions are no different than those made domestically but the decisions are unique to each country (Sister & Sister, 2005). Furthermore, operating on a global scale allows a company’s employees to experience working in different cultural environments. This is a good marketing strategy for recruiting employees. McDonald’s has a global core curriculum for its restaurant management (McDonald’s, 2004). Paula Doherty, a general manager states, “I’ve had incredible experience in different countries and…cultures…as a trainee manager – from Poland to Israel to the Philippines and more. Doing the job successfully has given me a real sense of achievement” This business strategy speaks to their commitment to a diverse workforce.

McDonald’s commitment to diversity is established on the foundational belief that diversity is not just a moral and ethical issue, but also a business issue (McDonald’s, 2005). Due to the global expanse of McDonald’s business, diversity has become an integral part of the internal company culture. McDonald’s has over 30,000 restaurants around the world, which means franchise owner/operators, employees, and customers represent just about every culture, religion or ethnicity on earth. In addition, McDonald’s promotes the use of local suppliers and based on their policies of diversity, expects and retains suppliers that have a similar diversity culture. Knowing and understanding the local customs and traditions of the communities where McDonald’s has established businesses, integrating people from these communities into the company, and adapting locally to the tastes and cuisines of the community, has made McDonald’s the leader in their industry.

In the United States alone, McDonald’s has won numerous awards and received national recognition for diversity. According to McDonald’s website, www.mcdonlads.com, awards include; PUSH-Excel Corporate Partner Award, Corporate Achievement and Image Award, Nullities Corporate Award, Corporate Vision Award, and the Circle of Inclusion Award. These awards and recognitions are not the result of a surface attempt to appease the critics. They are the result of McDonald’s embracing and integrating diversity into their company ethos as an asset and an ally.

McDonald’s realizes that having diversity as an asset greatly enhances the profitability of the company. Diversity is a direct reflection of a company’s interpersonal relationships. These relationships, if positive, result in a rewarding venture. Conversely, if the relationships are negative, the company’s morale declines and if not addressed, leads to the deterioration of the company. This deterioration directly impacts the company’s income and the community’s acceptance of the business. However, McDonald’s leadership encourages diversity through their policies and programs. McDonald’s proven success with leveraging the advantages of diversity can be attributed to their core value of ethics.

McDonald’s success is built on the foundation of personal and professional integrity (www.mcdonalds). From the beginning, McDonald’s has based its reputation on trust and dependability, and their commitment to the community made them a household name. Founder Ray Kroc, believed in giving something back to the community in order to make the world a better place. Throughout the 1970’s, McDonald’s became involved with a lot of charity work. In 1974 established a charity called Ronald McDonald House. The purpose of this program was to provide temporary housing for the families of seriously ill children receiving treatment at nearby hospitals. Since the 70s, more than 10 million families around the world benefited from the comfort provided by Ronald McDonald Houses (www.rhmc).

In addition to their community involvement, McDonald’s has a long-standing commitment to environmental protection. Restaurants around the world have innovative programs for recycling, resource conservation, and waste reduction. The environmental achievements of this corporation have been recognized by organizations such as the Audubon Society, Conservation International, Keep America Beautiful, the National Recycling Coalition, and the U.S. Environmental Protection Agency (www.mcdonalds).

McDonald’s is also an equal opportunity employer. As an equal opportunity employer McDonald’s ensures that employees and job applicants are selected, trained, and promoted without discrimination to race, gender, sexual orientation, age or disability. The company promotes their employees based on their relevant skill, talents, and performance. In support of this McDonald’s promotes and sustains a working environment, which is free from unlawful discrimination, harassment and bullying. Employees are regarded as members of a team where everyone’s opinion is valued and respected. The Human Resources department monitors the effectiveness of the discrimination policies at regular intervals and takes corrective action as necessary to ensure that they being complied with (www.mcdonalds). Employees who feel that they have been treated unfairly are encouraged to use the remedies outlined in the Company’s handbooks. McDonald’s ethical standards, as well as their strategies for globalization and diversity are instrumental to the overall success of the company.

The purpose of this paper was to discuss external and internal factors that have affected McDonald’s. This was achieved by explaining what the factors are where and how McDonald’s dealt with each of the external and internal factors. The factors discussed were globalization, diversity, and ethics. The paper illustrates how globalization is necessary for success and survival of McDonalds in the worldwide market. The paper also shows how diversity integrated people from different communities into the company, and adapted tastes and cuisines of the community. McDonalds showed ethics by being an active leader in the communities. There are many different values to the dollar around the world, many issues that have occurred in many of those regions/websites, and about 119 countries served by McDonald’s that rely on the functions of management to succeed.

Critical Evolution the current strategy of MacDonald’s:

The current strategy involve of SWOT analysis as well as SWOT matrix or strategies which is given below accordingly.

SWOT Analysis Framework

Environmental Scan

          /

Internal Analysis   

   External Analysis

/       

           /

Strengths   Weaknesses   

   Opportunities   Threats

|

SWOT Matrix

Figure: SWOT Analysis Framework

SWOT Strategies of Macdonald’s:

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm’s strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

Strengths

Weaknesses

Opportunities

S-O strategies

W-O strategies

Threats

S-T strategies

W-T strategies

Figure: SWOT / TOWS Matrix

S-O strategies:

S-O strategies pursue opportunities that are a good fit to the company’s strengths. As like MacDonald’s expands their Chinese market and increasing advertising and restaurant location because Chinese population is increasing day by day .In addition their car ownership is growing rapidly which is another opportunity for MacDonald’s to expand their market development.

Horizontal integration is the another opportunity which is tuned into strength for MacDonald’s because by acquiring Krispy Kren Corporation they captured the market of them .As well as the advantages of horizontal integration is expansion of a firm within an industry in which it is already active for the purpose of increasing its share of the market for a particular product or service. Cost minimization, raw material availability, quick delivery and others factors are the advantage of horizontal integration which is adopting MacDonald’s as a current strategy.

It can adapt to the needs of the societies and undergo an innovative product line which might be the good opportunity for MacDonald’s to transform into strength. It would be the remarkable opportunities to turn in to strength.

Researching green energies and green packaging solutions and incorporating these findings as a part of their marketing strategy and advertisements which would be another opportunity to transfer into strength.

Create new product offerings. Continue to use technology to influence revenue strategy: possibly use text messages to deliver specials offers to individuals who sign up for such services .These also might treated as opportunity which can be concerted in to strength.

W-O strategies:

W-O strategies overcome weaknesses to pursue opportunities. As MacDonald’s weakness is lack of menu development so they have to work hard with this strategy and currently they are working with that as well which is being convert to pursue opportunity.

They are currently doing menu development as well as product development of healthy lifestyle and Hispanic food lines which were weakness of them.

In addition MacDonald’s has several weakness which might be tune in to pursue opportunity if they overcome that weakness.Like-

It uses advertising that mostly targets children.

High employee turn-over.

It has yet to accomplish going on the trend of organic food.

Price competition with the competitors resulting in low revenue.

Lack of innovative products.

S-T strategies:

S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats. Macdonald’s are increasing their number of restaurant as well advertisement in the Disney and Ocean Park as well as key markets to avoid the external threat of competitors like Burger King, Starbucks, Wendy’s Taco Bell, and KFC.

Moreover there are numerous strength which can use its strengths to reduce its vulnerability to external threats.

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It takes steps in adjusting the Ingredients and product offerings in order to comply with the upgraded health standards deemed necessary by the USDA.

It’s recognized as one of the worlds’s most recognized logos.It has branded menu items i-e Big Mac, Chicken McNuggets, which further promote McDonalds.

Active Children’s Charity: The Ronald McDonald House. It is recognized as a socially responsible and community oriented firm.

Globalization: 31,000 restaurants serving 120 countries. Of the 31,000 restaurants at least14, 000 restaurants in the US. It has located itself in major airports, cities, highways, tourist locations, theme parks.

Earns revenue not merely by fast food sales, but also as a property investor, a franchiser of restaurants. It earns revenue by fast food sales as well as a property investor and a franchiser of restaurants.

W-T strategies:

W-T strategies establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats. As Macdonald’s concentrate their development of product and redesign of website which is being user friendly. In addition they are increasing their sales promotion and advertisement to reduce external threat.