Macro environment includes social and demographic, legal and political process, technological, and environmental factors (Kotler, 2003). The forces in Macro environment have a major impact at the level of industry. Macro environment refers to some external factors which are uncontrollable and effects in decision making of any organisation. Sometimes business has to change their business strategy in the change of macro environment. This change is obvious for large organisation when they are expanding their business nationally and internationally in the line of new operations. In business term it is called PESTEL analysis. In 1890 and early 1990 PEST forces was widely used to identify the future business trends. (John Kew, and John Stredwick, p1). Gerry Johnson etl (p54) also emphasizes that the PEST tools can be used to identify the future trends of business and the impact on organization.
As we know that business is continually reacting to changes in the environments in which they operate. This is because a PEST analysis of Political, Economical, Social, and Technological factors will reveal many of the external influences on a business performance Therefore, a PEST analysis is considered as a useful tool for analysing a business and in particular understanding market growth or decline. (Robert J. And Chapman, p-118).
Local, National, Global policies
Tax , tax, Tax
Political influence, pressure
Inflation ,unemployment ,trade
GDP, consumption, investment, growth
Monetary policy, fiscal policy
Demographic (national and local)- age, gender, race.
Households, education, health
Income distribution , expenditure
Life style and work, leisure balance
Social responsibility and business ethics
Information technology, digital electronics
New systematic materials
New energy sources
Employment law: health, data protection, race, sex, disability, employment rights, employment relations.
Customer law: description of goods, sale of goods, safety of goods
Corporate law: company law, fair trading, competition law, surveillance.
methodologies and process- farming, nuclear power
stake holder power, influence
The Impact of Economic and Social environment on McDonalds Corporation:
All businesses are affected by national and global economic factors. National and global interest rate and fiscal policy will be set around economic conditions. The climate of the economy dictates how consumers, suppliers and other organisational stakeholders such as suppliers and creditors behave within society.
Economic factors affect both the business organization and its consumers and customer irrespectively. Increase of interest rate affects a firms cost of capital; exchange rate affects the cost of exporting goods and supply and price of imported goods in an economy. Inflation may provoke higher wage demands from employees and cost. Business will need to understand how to cope with the changes of economical factors.
McDonalds collaborates with suppliers to obtain fresh, high quality ingredient for their products and at the same time reducing the cost of food. So dealing with the international suppliers the McDonalds face a lot of economic variables such as currency exchange. An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. Conversely a "booming" or growing economy will have low unemployment, high spending power and high stakeholder confidence.
In recent years fast food industry has experienced a fatal affect due to the credit crunch, and we can see the reflection on changing of the menu price. Also the minimum wages of hourly paid employee has been increased which increase the company cost. In the case of McDonald's corporation changing the economical factors could not affect the company strategy. The company that is more recession resistant. They served an extra two million customers a month in 2008 compared with last year. They also offer 4000 new job in these tougher trading time.
The UK inflation Rate
Annual inflation rates - 12 month percentage change
The figure above shows the in UK the inflation rate in June, at 1.8 per cent in 2009. We can see that there was also a large downward pressure from restaurants and hotels where prices rose by less than a year ago.
In 2008 the global comparable sales increase 6.9%, revenues increased to a record $23.5 billion, and earnings per share rose 17 and 15 percent respectively. In 2009 global comparable sales growth t 3.8%, earning per share rose by 9% respectively. This scenario proves that the company has achieved a satisfactory level success because of better menus, extending the opening hours, renovate restaurants and technology.
The economical growth indicates that the recession does not affect the sales growth of McDonald because of their product pricing strategy and the focus on customer needs.
The changes of social factors demand to change the management strategy of the company. Population changes are the one of the vital factors which has a direct impact on organizations. Changes in the structure of a population will affect the supply and demand of goods and services within an economy. Falling birth rates will result in decreased demand and greater competition as the number of consumers fall. Conversely an increase in the global population and world food shortage predictions are currently leading to calls for greater investment in food production.
Therefore, organisations must be able to offer products and services that aim to complement and benefit people's lifestyle and behaviour. If organisations do not respond to changes in society they will lose market share and demand for their product or service.
Social culture like values, attitudes, and believes differ from country to country even within the same geographical area can be varied. Social forces affect our attitudes, interests and opinions. Within the UK people's attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Last year McDonalds was alleged by socially. McDonalds is food is critically commenting because of obesity among the young and children. And other diseases like cardiovascular and cholesterol. The obesity of young people has become a social problem. They add some new food in their menu like, salad, premium salad, fruit beg, and carrot sticks.
Considering the future of the business the company and the convenience of customers McDonalds Corporation has taken some initiatives for putting nutritional information for all menu items on the reverse of their tray liners and printing nutritional labelling on the packaging of its food items. The McDonalds Happy meals contain less than 35 percent of calories from fat and 600 calories.
To illustrate the question the Part-B we need to understand and emphasis on several thing which help to make a strong business strategy like market research. Market research can provide authentic the information which will be present strength for the organization and help to avoid future environmental threat.
In the competitive business markets McDonald's faces competition from other businesses. Additionally, economic, legal and technological changes, social factors, the retail environment and many other elements affect McDonald's success in the market.
To identify the business position and its strengths and weaknesses need to do market research. Market research identifies these factors and anticipates how they will affect people's willingness to buy. Market research considers everything that affects buying decisions. It can be the psychological factors or product itself. As the economy and social attitudes changes customer's buying patterns. McDonald's corporation needs to identify whether the numbers of targeted customers are growing or shrinking and whether their buying habits will be changed in the future. In some cases psychological factors are important, e.g. what image does the product give or how the consumer feels when purchasing it.
These additional psychological factors are significantly important to the customer. They can be even more important than the products' physical benefits. Through marketing, McDonald's establishes a prominent position in the minds of customers.
The influence of Macro environment especially on global business organization is significant to change its business strategy and the change of its operations. Macro environment also hold the control of future business decision making. The influences of economic and social environment are the major factor for a business organisation to change its business infrastructure. In recent years the fast food industry has faced a fatal an economic recession and still it has an impact on some business organisation. The overall sales goes down worldwide, some organization could not create new job opportunity at all. If we look at the history of McDonald's Corporation's we will find that that in 2008 the global comparable sales increase 6.9%, revenues increased to a record $23.5 billion, and earnings per share rose 17 and 15 percent respectively. During the time of recession the company was operating their business successfully. Also they created 4000 new job opportunity where as other company has to cut down their employee to reduce their cost. For example, McDonald's retained a 33% stake in the Pret A Manger.
Economy is the vital factor for technological advancement of a country. If the country is economically stable than they invent new technology an introduce it to facilitate the business activities internally and externally. McDonald's corporation is economically table and doing their business in developed countries and the choice of the customer of those countries, taste and life style, behaviour has been considered consciously to reach the success of the business. The organization has already used technology on till operation and production. In UK restaurant handheld communication devices are already being used to take orders and minimise the queuing times in 500 of McDonald's UK restaurants.
They have a plan to use in some 561 drive-thru restaurants BT Open zone Wi-Fi hotspots to attract travelling business people. In the US, wireless communication system in 400 restaurants in four cities attracted new, mainly older users. Touch screen TVs will be piloted in 10 restaurants during the first quarter in 2008. Internet terminals and PlayStations are likely to be introduced this year.
McDonald's corporation introduce the modern technology to create more customers and uphold their branding image even in the fatal recession time. To create a more stable position in business market In January 2008, McDonald's started verifying its prices across the country depending on local economic conditions. In this the company increased some food prices in order to compensate for higher wholesale food costs.
McDonalds Corporation is also socially concern. As their business operation is linked each other they can focus on local customer choice. To attract the customer and make McDonalds more appealing they are refurbishing and decorating its restaurants. Considering the local tastes they have redesigned 2000 restaurant with casual dining and coffee shop. New staff uniforms are being introduced in 2008, designed by Bruce Oldfield. The refurbishment and creating new image of McDonalds has been possible because of good turnover of business.
McDonalds is most popular recognised brand in fast food world. When they intrude in a new business market in new country they must comply with the government policy, keep pace with the political unrest and other political barriers.
As McDonald's business strategy is to focus on customer needs and satisfy their needs, they try to provide their best service according to the taste, choice of the people of the country. They also consider the religious value norms and customer attitudes of the customer. For example, in some Muslim country they serve Halal food to the customer.
McDonald's void the plastic condiments beg and committed to use environment friendly packaging and recycle it is good decision to protect the balance of environment. In 2008, McDonalds announced that of its Sheffield restaurants have been using a biomass trial that had cut its waste and carbon footprint by half in the area. In addition, in Europe, McDonalds has been recycling vegetable grease by converting it fuel for their diesel trucks.
The influence of Macro Environment in a specific business organisation is a continuous matter and thus it is obvious that McDonald's restaurant is within its effect in marketing decision making. Despite this tough environment, McDonald's delivered another exceptional of growth, posting strong sales and increased market share around the world. In 2009, global comparable sales increased 3.8 percent. Earnings per share for the year increased 9 percent to $41.11, while consolidated operating income increased 6 percent. According
The CEO of McDonald's corporation gladly said there is nothing profound about our plan to win. It essentially identifies the five core divers of our industry-leading owner/ operators, world-class suppliers and talented, experienced employees around initiatives that drive results.
Following the marketing strategy of McDonald's it is highly visible that economical and social factors played significant role among the other Macro environmental components. McDonald's has successfully overcome the economic recession and social obligation and gained technological advancement.
Though recently government has become strict to provide permission the marketing of fast food restaurant because of the health related issues but McDonalds Corporation has overcome those issues and boost their business in the competitive business market.