The Environmental Factor Impacting Upon Mcdonalds Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The conception of environment in general systems thinking is a natural, extensive and woolly concept. The lot is in the environment. The change in business concern about the environment, Business Company takes note. As the public becomes more concerned about environment. If a company's environmental reputation effects peoples buying decision, then business concern may be tied to survival of the enterprise. Because of some law force them to do so. Skin and hair care stores display as culture assumption.

correspondingly environmental events have to be interpreted and they will often refer to environmental forces of a progression of kinds in our post hoc normal and justification of the decisions have been made. We blame the environment for action we have taken and the results of that action.

The activities of group cannot be separated from management and process of leadership. The form of management and style of leadership adopted will influence the relationship between the group and the organization, and is a major determinant of group factor cohesiveness. This will be affected by such thing as the manner in which the manager gives guidance and encouragement to the group, offer help and support, provide opportunity for participation, attempt to resolve the conflict. The job of the group leader is to encourage people to earn the trust of others.

For identifying the influence factors of the external environment, two different analyses can be used. The PEST analysis deals with the remote environment, whereas Porter's five forces handle with the competitive environment.

PEST analysis:

PEST analysis is concerned with the environmental influences on a business. The acronym stands for the Political, Economic, Social and Technological issues that could affect the strategic development of a business. Identifying PEST influences is a useful way of summarizing the external environment in which MacDonald's operates. However, it must be followed up by consideration of how MacDonald's should respond to these influences:

Threat of Entry

      The fast food sector industry is facing the mature stage, although the high barriers to entry considering the huge amount of capital required for MacDonald's to manufacture and development their service and the very low switching costs consumers face when changing food; however it doesn't mean there are no new entrants to food industry for instance American food company as KFC, Burger king and others to be actively present in the market.

Threat of Rivalry

   There is a very high threat of rivalry within the industry, as fast-food maker should always be updated with new taste, innovation and come out with new way. Moreover for MacDonald's the exit barrier is relatively high due to investments made throughout the past decades. With the emergence of American fast-food makers in Europe there had been a diversification considering service and food prices, in other words it is a diversity of rivals.

Threat of Substitutes

Substitutes within the industry are more or less depending on consumers and their preference of food items, it incorporates healthy life style food selection.  Consumers aren't offended by eating unhealthy foods within the most food sector industry, also very fatty food in some food places are reason for not eating unhealthy foods, which decrease the switching cost., plus the Yam brands variety play a major role.

Threat of Suppliers

As fast food makers manufacture their food so the threat is considerably low, as there are a big number of suppliers MacDonald's can choose from, which make suppliers give more discounts, also food elements are more or less standardised. Most of the time fast food companies attach with one supplier and there is no forward integration as suppliers are small comparing the fast food maker and in contrary MacDonald's can integrate backwardly the supplier or in some cases they create an alliance to reduce the costs.

Threat of Buyers

     Except big fast food companies buying lots of food ingredients , solo fast food buyers represent an insignificant threat but at the same time its bargaining power is high as the customer has plenty of different brands and prices to choose from. The large number of consumers are facing as said before low switching costs and the loyalty brand isn't very high which means that MacDonald's has to attract and retain consumers by incentives for example due to price sensitivity, as consumers are looking for the best deals concerning quality/price/service.

Business's negotiation with its environment is typically founded on its management key consuming customers and their satisfaction with its performance revealed by co patterns, new legislation, party correspondence, annual general meetings and stock market prices. Learning and adaptation occurs in response to stimulus across organizational boundaries. An organization that is to inward looking becomes atrophied and can stagnate. In the language of general systems theory any system is subject to the process of activities.

Impacting upon MacDonald's:

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

A- Internal factors

B- 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:

{Customers .Competitors .Strategic Allies .Suppliers .Regulators}


Customers are coming to McDonald's for their food and services. Since long time McDonald's generally targeted the young generation, it has changed in this decade. By doing this McDonald's concentrates on the whole family, targeting a assorted marketplace which includes consumers ranging from kids to elderly people, using products such as the snack for children and Egg Muffin for the elderly. The target of business activity is consumers. McDonald's business policy must determine what those customer needs and desires are. Consumer is a person or person who purchases a good or service for personal or organizational use. But the food is very captivated to attract person and full fill up there natural needs. When they need or need for invention or service exists, a business can earn lot of profit by supplying it promptly and efficiently. The uncertainty and risk involved in assessing consumer needs and wants provide a challenge to the business decision maker attempting to earn a profit. Customer is ready to buy fast food from convenience place like MacDonald's. Customer wants more and better food and services. They want to pay a fair price for the goods and services.


McDonald's has two types of competitors in the Albanese market:

Indirect Competitors:

Indirect refers to company make few products that compete with McDonald's goods and therefore be a threat to the company. We have identified five indirect competitors: Loan JB, S.K.I. Friday, .G.K and Popeye's. Menry J. Loan offers burgers and chips on its menu, therefore competing with McDonalds for customers of these products. By the way Loan J. also known as Mank's is a more of a pub, Mank's targets middle to upper class customers, There most of the customers are in the middle class. G.I Friday is another competitor reflecting the same characteristics as Loan J. Beans. Other indirect competitors are G. C. and Popeye's, both competing for the chicken nuggets and fries customers. In brief, Mank's and G.I. Friday's competes with McDonald's by offering burgers and chips, whereas S. F. C. and Popeye's compete with Mc by offering Meat ball and chips.

Direct Competitors:

Direct Competitors do the same producing products or services as McDonald's does. We found that McDonald's has four direct competitors: Burger King, K.F.C, L.F.C and Lendy's. McDonald's contiguous competitor is Burger King, which operates a total of 8644 restaurants in 111 countries. K.F.C is McDonald's second larges challenger, That is also in the fast food business, where L.F.C operates 7776 restaurant in 33 countries. Burger King, McDonald's 3rd largest rival is also in the food business and is the only direct rival apart from chicken and chips in the Lebanese market. Lendy's operates 4080 restaurants in 31 countries. As we have illustrated McDonald's faces hard opposition from their major competitors.


Delivering as connection of business that provides assets for other company. McDonald's has practiced a backward vertical combination, by replacing most of its suppliers. It has been done so for two reasons, to reduce costs, and to ensure that, products are of top quality. These goods include beef and milk to be used in its products that stuff gets from farms. Other company or suppliers include local grocery stores which delivery company with clean and fresh vegetables. mild drinks are supplied exclusively by CoCola, which is also its ally. McDonald's goods also include raw material such as flour, sugar, yeast and e

Strategic Allies:

.McDonald's has formed a strategic alliance.Walmart is the main allies of McDonald's. which is a large mall chain in the United State. and several nearby countries, which offers great chance for both companies. McDonald's has restaurants come in each Walmart, McDonald's offer its customers conveniences and excellent fast food at a cheap price ease of accessibility. McDonald's business describes it best in this scenario. Business policy makes them to work together for their own profit. McDonald's has a different business policy to get young people. They have some attractive good food for busy time like sandwich, big mac, happy meal . One can fill up the car with gas and get a meal all in one stop. The vital alliance that McDonald's has is with Dignity; McDonald's has the only one sole company, which have right to sell fast food in Disney's theme parks around the U.S., Other Disney operations in the globe. below the terms of the agreement. A strategic ally is an large company working together with one or more other organizations is a joint scheme or a similar deal. McDonald's will operate pub and Disney will sponsor its films through McDonald's.


The governments have enacted substantial legislation to encourage to competition among business groups. Many laws, such as those outlawing monopolies, price fixing and other practice that restrained. Another good example could be the embargo obligatory on Oman where United State. Organizations were banned to operate in this country.. Lebanon banned few years ago USA product and food, when the United State Government having war with other. Another good example would be the embargo imposed on Oman where United State. One of the first laws passed to regulate competition. Price discount are legal, however if they are based on actual lower selling cost. Such as discount for large order. . banned to operate in this country. The act also made mandatory that all mergers be approved by justice department. Those resulted in the streamlining of McDonalds' farms throughout their operations around the world. The outline of the chore environment which is by meaning a specific organizations that affect the business, those are competitors, suppliers, customers, strategic allies and regulators.

After critically analyze the internal and external data of MacDonald's,Value chain analysis will be:

Primary Activities: The Primary activities for McDonald's are the followings: Product Designing, Resources purchase, Production, Marketing and Distribution and finally Customer Service.

Product Designing is becoming of the key features within the industry. As nowadays fast food company provide food which are almost standardized, so with the right tools MacDonald's food have already an image of strength and power. MacDonald's is at the same trying to offer food that are not only powerful but also less fat food consuming.

Resource purchase: the purchase of the right material is very important, as seen in Porter's Five Forces, suppliers have very low power on MacDonald's in other words the organisation can almost select its preferable price over the supplier.

Production: MacDonald's was the largest fast food chain in U.S.; the production reached its peak in the early 1970's. However, its methods have showed an inadequacy, as they have been producing more than the demand.

Customer Service & Support: generally supporting the customers after a sale. MacDonald's has an customer care number so if customer needs help or have an enquiry they can call for free.

Support Activities sustain the daily operations of MacDonald's but are not directly implicated in the manufacturing process of MacDonald's food. These activities include Human Resources, communications and Consumer crediting.

Assess the performance improving options taken or proposed by MacDonald's at the time of the case.

MacDonald's knew that it could only improve from within (internally) as Macro economic factors like exchange rate, inflation rate etc are beyond their reach.

All successful businesses have mainly two aims;

cut costs

increase sales

In MacDonald's case increased sales was not an accessible option, so therefore the company had to focus on performance improving options, here below is what MacDonald's proposed at the time of the case.

- In 2006 MacDonald's return nearly $5 billion to shareholders through shares acquired and dividends paid.

- MacDonald's reduced its workforce by 20% in an attempt to boost productivity and reduce costs by $600 million

-Use competitive pricing and offer additional services

- MacDonald's increased the company's dividends by 50 per percent raising the annual $0.67 per share to $1.00 per share totalling about $1.2 billion.

- MacDonald's sells fast food in Disney's theme parks around the world as well as ocean park in Hong Kong

- In 2006 revenue and operating income reached a record high of $21.6 billion and $4,4 billion respectively.

- MacDonald's serves nearly 54 million customers daily.

- MacDonald's formed a strategic alliance with Fiat SPA in 2001 a restructuring plan called "Project Olympia" was produced to again reduce costs and decrease production capacity by 15%

- -Moving production to cheaper areas in this case a U.S. plant was closed down and manufacturing transferred to cheap area

-Integration of operations

- MacDonald's abandon cost incurring practices like using different food and service for different customers

Strategically MacDonald's have achieved both some success and failure in its operations to improve the situation in U.S. and Europe, for example the reduction of employees and closures of unproductive plants are fully justified as the business can't continue to record huge losses year on year, in fact these decisions should have been made faster reflecting MacDonald's poor management structure unable to make quick decisions in a ever changing market. MacDonald's was also correct to cut out the practice off using different type of food items and service for different customers as this reduces overheads as any loss making business must cut costs at every opportunity. However there are also strategic failures MacDonald's implemented for example a strategic alliance with an different food company would have been more beneficial then with Fiat as this alliance could have given MacDonald's access to superior management and technology resources, in return MacDonald's could have offered some concessions to the US market. Another example of poor strategic decision making is the use of competitive pricing which a loss making business should never implement as good marketing could over time allow for premium prices. MacDonald's should have offered extended warranties as this actually costs the company very little in real terms.

Critical success factors for MacDonald's:

Critical Success Factors (CSF's) are the critical factors or activities required for ensuring the success of any business. So MacDonald's can use it significantly to present or identify a few key factors that MacDonald's should focus on to be successful


MacDonald's Critical Success Factors

Product price

MacDonald's can charge lower prices by improving production

Develop product quality

MacDonald'scan improve their product quality by using Varity techniques such as just-in -time production and total quality management

Need more reliability from customer

MacDonald'smust be aware of outside influences and adapt its product range to meet customer needs

Expand product feature to attract more customers

MacDonald'sneeds additional or unique features on its fleet of cars to attract customers and grow market share.

Environmental factors

MacDonald's has to offer its customers more value than competitors, as this is always required in a competitive environment.

Ansoff's product / market matrix analysis for MacDonald's

Ansoff (1987) compiled a table that represents a firm's product in its respected market. The purpose of this diagram is to develop a greater understanding in which direction to grow, if necessary.

The demand for customer and intense price competition MacDonald's swing to focus on "healthy lifestyle" food. The Product analysis below:











Market Penetration:

-Introduce new products into existing markets.

-Offers to replace the existing ones

Product development

- MacDonald's launched healthy lifestyle food to upmarket to boost its sales.

-Promoting this product

-Increase usage by existing customer

-Increase the market share of those products


Market development:

-Export the products to a new market

-create a new market segments

- New distribution channels

- Market via internet.

-Better customer services

Diversification :

- MacDonald's started servicing to rising population in china

Table: Ansoff's matrix

Emphasis on the key driver of MacDonald's:

We as well discover McDonald's Workforce Diversity and TQM These are given below:

Workforce Diversity:

Workforce is a strong commitment for there regulation. Different members differ from one another along one important level such as age, male/female society. Work Diversity is very important for McDonald's. Now millions of teens start their job working at McDonald's. some of the younger move on to get a variety of jobs such as skilled workers, famous football player, supervision positions and other educated positions in society. At McDonald's 1 thirds of middle and top management started out as worker in a McDonald's. Lots of opportunities for everybody in McDonald's from kids to elderly workers, and from people just entering on the job market. McDonald's offers particular jobs for people who have disabilities, people who are in controls chairs and those who must use crutches permanently. McDonald's offers their workers elastic working hours. For example, students are looking for a 20 hrs of work every week and The work force at McDonald's also have some say in their working hours, such as if they prefer the early morning, afternoon, midday, or evening shifts in the restaurant. As example, hours for people seeking just a part time of work and those who seek permanent position. That's why McDonald's uses diversity to create a good social activities and loyal for job seeker even for disable people work places between workers and management. McDonald's offer works to all ethnic of people without partiality and the workers have a lithe hour that provides customer pleasure.

Quality Management:

Management is active, not theoretical. It is about changing behavior and making things happen. It is about developing people, working with them, reaching objectives and achieving results. McDonald's, total quality management (Total Quality Management) involves that the employees are at work on time. Peter Durker, who is widely regarded as the guru of management. The emergence of management as an essential, has a new basic institutions is a pivotal event is soc .customer preferences are extremely significant. A McDonald's customer wants clean and. accuracy food. The exact quality food for the customer there vegetable is fresh and washed. Complain and returns from customer can build up and result of lost customer and sales, because of that McDonald's are very conscious about there quality. The quality control manager must check there food temperature in a proper way. McDonald's are sincere about their quality focus. Satisfying customer or client quality needs must be a goal of all employees. Employee must have the skills and abilities to achieve the quality standard can be met. They aware of the acceptable quality standards and how the standards can be met.. As McDonald's point up the quality fast, exact and friendly service with a big smile.

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.

Environmental Scan



Internal Analysis   

   External Analysis

/ \      

           / \

Strengths   Weaknesses   

   Opportunities   Threats


SWOT Matrix

Figure: SWOT Analysis Framework

SWOT Strategies of Macdonald's:

The SWOT Matrix

The SWOT analysis provides convenient heading under which to study an organization in its environmental setting and may provides a basis for decision making and problem solving..hish can be developed in to what is a commonly known acronym, opportunities and threat facing organization

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:




S-O strategies

S-T strategies


S-T strategies

W-T strategies

S-O strategies:

S-O s Strengths are those positive aspect or distinctive attribute or competencies which provide a significant market advantage or upon which the organization can build for example. through the pursuit of diversification . As like MacDonald's expands their Chinese market and increasing advantages are those positive aspect or distinctive attribute or competencies which provide a significant market advantage 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.


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. 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.

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.

It has located itself in major airports, cities, highways, tourist locations, theme parks.

. It earns revenue by fast food sales as well as a property investor and a franchiser of restaurants.

W-T strategies:

W-T 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.

Additionally when companies settle self-protective plane to prevent the firm's weakness from the effect of external threat. Here the following weakness are given of MacDonald's, if they prevent this they can avoid lots of external threat.

It uses advertising that mostly targets children.

Elevated 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.

Advertisement techniques that target children


The generally high level of community involvement .We have discover a large company such as McDonald's and shown how its Task upbringing, Workforce Diversity and Total Quality Management can have a reflective effect on the business. In order for such a corporation to remain a leader in its field, it must stay growth slanting and constantly have possibility company high level of statutory controls, legislation and ministerial guidance to overcome turbulence. Another important factor is the type of strategy that it follows. McDonalds always promoting new products, while protecting their existing products. They should continue their current strategies with a very close direction and if there is any threats should take prompt action to cope up with the management. The system they created on their atmoshfare, difficult to manage foreign product to their own systematic way.