The Effects of the Environment on McDonald’s:

The External, Internal and Competitive Environment:

External Environment:

PESTLE factors are often used by businesses to analyse how and why they will be successful
or unsuccessful. Using this framework will also evaluate external factors and their impact on
the business to inform business strategy.

Political:

Government support, such as monetary grants or promotion can inject considerable

enthusiasm into new business ideas, however grants are time constrained and according to
many business owners, the government do little to support their sectors.

 Members of trading communities:

Being members of trading communities, which are often sector related, such as retail,
health, publishing, tourism, catering, etc, can be beneficial for businesses, as they may be
provided networking opportunities, advice, news and opportunities to buy or sell
equipment, services, training, etc.

Each year, McDonald’s donates millions of pounds of food from their supply chain and hot
meals from their restaurants to communities in times of need and crisis. They also support
the Ronald McDonald House Charities (RMHC), which allows families to stay together near
world class care facilities, when a child is diagnosed with a life threatening illness.

 The European Union:

This is another form of trade association, which promotes itself as ‘the best way to realise
our global future’. Also, being a member of any trade association seems credible to
customers and it can be seen to open doors to exclusive opportunities.

Brexit had no impact on McDoanld’s.

 Health and Hygiene Regulations:

McDonald’s policies are influenced by government regulations and political laws of different
countries, for example, the brand and its employees have to follow the health and hygiene
standards of different countries and if the business disregards this, the health and safety
department would shut down McDonald’s franchises.

 Government Pressure:

The government is putting pressure on McDonald’s to follow healthy diet standards, since
their items comprise a high level of sugar and salt, both of which cause hypertension,
diabetes, high blood pressure and heart disease, leading to heart attacks, strokes and
obesity, if this intake of food is consistent. Due to this, McDonald’s now offers diet control
food items to the customers, giving them a choice to add extra sugar, salt and protein to the
food, which is a very good step for McDonald’s by following the health protocol.

 Issues with the UK:

Th British government has very strict healthy regulations, causing McDonald’s a great loss of
money in fines, for example, the British government put a fine of £200,000 on the company
for violating the health standards in 2018.

Economic:

This greatly influences the success or demise of businesses.

 Fiscal and Monetary Policies:

This relates to government revenue, for example from taxes and the fiscal policy affects all
businesses. Government controlled, it dictates levels of taxation, based on the cost of
borrowing. This is how the government generates it income and decides its budget. All
business owners and decision makers cannot ignore changes to fiscal policy.

The monetary policy, controlled by the government relates to the value of our currency and
interest rates, therefore affects everybody. The Bank of England and the Monetary Policy
Committee (MPC) control decisions about how to meet expectations. Inevitably, their
decisions affect all businesses.

McDonald’s should try to focus on managing the national and international markets by
government spending, as well as trying to change the pattern of the economic market.

 Supply Side Policy:

This aims to improve productivity and produce economic growth with methods including:
reducing taxes and corporation tax (the tax paid by private and public limited companies).

 Economic Growth:

The government is striving to grow the economy so the UK does not return to a recession,
by finding ways to grow our economy at international, national, regional and local levels
according to opportunity and need, for example, building projects and increasing job and
training and opportunities.
The pandemic of Covid-19 has plunged the global economy into an economic recession. For
months now, lockdowns and shutdown of businesses have gone on, still carrying on into
2021. McDonald’s major sources of earnings are the franchisees and restaurants, however
the governments of different countries shut down all physical gathering location points for
months and as a consequence, the annual revenue and net income of the business have
decreased by 9.79% and 16.07% in 2020, which was a major setback to the company, also
contributed by the pandemic.

The trend of ecommerce and online shopping have been promoted by the lockdown and
shutdown of businesses during the pandemic of Covid-19, with McDonald’s partnering up
with UberEats and Door Dash, which has allowed the brand to receive online orders and
provide home food delivery, minimising the losses to a great extent.

 Exchange Rates:

They can fluctuate greatly, therefore UK currency, pounds sterling, compares with the US
dollar, euros and the Japanese yen is analysed daily, which are all influential in the UKs
purchasing and selling power globally. Exchange rates are influenced by many factors, such
as unemployment, inflation (a general increase in prices and fall in the purchasing value of
money) and other complex factors, such as the activity on the stock exchange and
speculation.

Due to the different values of currencies in the market, McDonald’s cant sell their products
at the same price in different markets, as it impacts the exchange rate in the international
market. When the UK exchange rate varies, the production cost or order price doesn’t
match the selling price in different countries.

 Tariff:

The import and export tariff plays a major role because McDonald’s has to move raw
material from one country to another, being a multinational brand with more than 38,695
chains across the world, therefore the management should make a decision about whether
to buy the ingredient and raw materials locally or from other countries, as the import and
export taxes would increase the basic cost that would impact the sale.

 Higher Turnover Rate:

Employees do not join McDonald’s permanently, due to the lower wages and long working
hours, therefore they leave the company as soon as they get another opportunity. This has
led to McDonald’s unable to provide quality service, caused by the inconsistent workforce,
which inevitably results in the form of loss of business to the company.

Social:

 Attitudes to Saving:

Banks and the government rely on people to save money, which is used to boost the
economy, as it is borrowed by businesses, householders for mortgages, etc. However, with
low disposable income and interest rates, it is difficult to encourage saving, which has led to
initiatives, introduced by the government, such as increasing the amount that can be
invested in ISAs and premium bonds.
  Spending and Debt:

Starting up and expanding businesses depend on the changes in spending habits, for
example, there has been an increase in pawn brokers, gambling sites, pound and charity
shops and payday lenders, while pubs, building contractors, clothing, furniture and
photography businesses, etc are struggling to survive.

 Rising and Falling Interest Rates:

These have a negative and positive effect on McDonald’s, as they can affect the bond and
share of the business at the time of inflation and recession. On one hand, lower interest rate
makes encourages people to spend more on desired products and services and on the other
hand, higher interest rates dissuades people from spending. This means McDonald’s need to
cut back on spending for new equipment and slowing productivity for less demand in the
market.

 Social Responsibility Requirements:

Spending habits influenced by social responsibility, for example, people can make their
money go further, as well as helping a good cause with the increase in charity shops. They
are also encouraged to take into consideration ethical matters and consequences of their
actions. According to the Office of National Statistics (ONS), tobacco and alcohol sales have
dropped while although the biggest growth area is recreation and culture, this includes
mostly electronic goods.

An increase of customers caring about whatever they put inside their bodies, as it impacts
their health later on, as well as the trend of low calories, less sugar, salt food growing
among the public, as they are saying ‘no’ to fast food, referring to it as ‘junk food’.
McDonald’s food menu doesn’t fulfil their need of a healthy diet and food that doesn’t
jeopardize their health, which isn’t good for the business.

Recently, McDonald’s started offering high protein food with fewer calories to health-
conscious customers, alongside the option to add sugar depending upon their diet control,
which is a great step for the business to address this issue.

The fast food and healthy diet food market has become very competitive in recent years,
making it difficult for McDonald’s, therefore vital for them to remove the level of ‘junk food’
and rebuild its healthy food brand image.

 Change:

This can significantly influence businesses, for example, in Slough, Berkshire, there is a wide
diversity of ethnicity, which has led to new businesses catering for specialist foods, local
government services and training opportunities. Another example, in Kent, there are large
Nepalese settlements while, in other areas of the UK, immigrants from Somalia are building
communities.
  Consumers Tastes/Preferences:

This influences the nature of businesses, for example, the food industry is now strongly
influenced by foreign foods and recipes, while fast food remains very popular, therefore an
increase in restaurants, such as burger chains and ‘simple’ food restaurants. Reports from
the Foreign and Commonwealth Office (FCO) reveal that our favourite takeaway food is still
traditional fish and chips, showing tastes can also remain unchanged.

McDonald’s should offer a local food menu to the different geographically located
customers. Despite western burgers and French fries being occasionally good for the
international market, they wont always choose the same product. Likewise, serving popular
dishes in different regions, for example, Corn Pie for Thai customers, McVegan for Sweden
and Finland, Panzerotti for Italy, Ebi Burger for Hong Kong and McSpicy Paneer for India.

Technological Change:

Advancements in technology influence businesses and create opportunities for new

businesses. During the mid 1980s, fax machines, electronic typewriters and word processors
were introduced within businesses, becoming more common and by the mid 1990s, in order
to meet demand and public interest, training courses and qualifications were offered. By the
early 21st century, internet usage was almost a necessity for businesses to function.

 Automation:

This appeared as early as the 8th century, leading to the first programmable robot developed
in 1954 with robots first introduced into the motor industry in 1962. They are not the only
forms of automation, as we spend much of our everyday lives interacting with some other
forms, including buying tickets, setting alarm clocks, timers for heating, water, cooking,
washing machines, etc. Even certain surgical procedures or treatments are carried out to
some extent by automation.

McDonald’s is one of the first to adapt to the latest technology, which includes a digital
payment system, mobile ordering and self-servicing kiosks, helping the brand to perform
two important functions, by improving the customers experience and saving time by
offering them quick service.

 Risky Tech Investment:

According to many financial critics, high investments in technology within the food industry
could become a risk, as customers may not be ready to accept the technology.

 Improved Communications:

This has changed the way businesses operate, especially how they are structured, for
example more people can now work from home or remotely, as WiFi connections are being
provided on transports, stations, in restaurants, coffee shops, shopping centres, open
spaces, etc, which encourages people to take work on holiday or maximise travel time into
business time. New businesses are increasing rapidly and some innovative ideas may even
operate from a ‘back bedroom’, sometimes based on a new craze, however, unless business
owners know how to sustain their business ideas and can cope with changes in demand,
they can be short lived.

With the young generation very much active on digital and social media platforms like
Facebook, Google, Twitter and Instagram, McDonald’s should exploit the current trends and
launch marketing and promotional campaigns, in order to increase customers engagements,
as this would result in high numbers regarding sales and growth.

Legal:

Heavy fines and even imprisonment are imposed if businesses do not comply with certain
legislation. Businesses are responsible for keeping up to date with developments and
changes to legislations and regulations and ignorance cannot be used as an excuse for non
compliance. They may be difficult to understand and easy to misinterprete, therefore
businesses may need to seek professional advice if in doubt, hence large businesses often
employ their own legal departments.

 Following the Laws:

McDonald’s must follow the health and safety standards of different countries, being a
multinational brand and operating its business in different countries, with management
obligated to follow the labour laws and improve the working conditions for its employees.

 Companies Act 2006 (undergoing updates late 2015):

This law/regulation affects limited, unlimited, private and public companies (McDonald’s a
public limited company). The purpose of this is to protect businesses and their operations
(internally and externally), their employees and shareholders, by making it mandatory for
businesses to operate a code of conduct. This informs company policies and their operations
including: financial, rules for forming and dissolving a business.

 Competition Act 1998 (undergoing amendments late 2015):

This law/regulation affects any business. The purpose of this is to prevent domination by
any one business by addressing the following: anti competitive agreements which prevent,
restrict or distort competition in the UK, abuse of dominant market positions, which
prohibits limiting production, markets or technical development to the detriment of the
consumer.

 Industry regulators:

This law/regulation affects specific sectors. This means regulators (all businesses have their
regulators, including registered charities) supervise to ensure conformity and compliance
across business sectors.
  Employees Protest:

Alongside people often quitting their jobs at McDonald’s, protests and strikes also bring a
negative reputation to the business, for example, when many employees protested against
the company to raise their minimum wage to $15, as well as demanding for better working
conditions and higher wages.

 Government departments:

This law/regulation affects all businesses and the public. This means the multiple
government departments aim to ensure everyone operates in a responsible and trustworthy
manner, for the benefit of public good.

Environmental Factors and Ethical Trends:

This is a concern for businesses and individuals, now more than ever, as we all share a sense
of social responsibility for our survival and that of the planet. Supporting environmental
issues, for example, those affecting the planet, the food we eat and peoples welfare, can be
beneficial for businesses, otherwise they can be forced out of the business, being seen as
not considering environmental factors and ethical trends, therefore some businesses may
choose to adapt their business operations in many ways, for example changing their plastic
packaging to make it more environmentally friendly.

 Carbon emissions:

This has an impact on businesses, due to the increase in taxes imposed on fuel.

In 2019, alongside McDonald’s, their two largest logistics providers, HAVI and Martin Brower
(MB) have also signed up to the SBTi and have committed to cutting carbon emissions from
their operations by 40% per metric ton of goods delivered by 2030. Since this, all of
McDonald’s Global and North American independent logistics suppliers have set science
based targets, which have been approved by the SBTi. In addition, McDonald’s globally
collaborate with supplier partners and industry peers on a range of projects to develop tools
and best practices. One of these projects include the Gold Standard, which is a not for profit
organisation with the purpose to guarantee projects reducing carbon emissions feature the
highest levels of environmental integrity.

 Waste:

The government imposed a change on bags from October 2015 to reduce the waste from
bags provided by supermarkets and larger shops.

More than 69 million customers visit different McDonald’s across the world, therefore
making sense of the fact that plastic packaging creates a daily astronomical amount of
waste, which is why many environmental activists protested against the business to avoid
using plastic straws and packaging, towards the protection of the environment.
  Recycling:

Businesses must comply with the governments green policies, which ultimately impact on all
our lives.

McDonald’s installed more than 1000 recycling units at different location points in the UK,
allowing customers to separate plastic cups for recycling, which is a great step for the
business to address environmental issues.

 Pollution:

Our health, building and surrounds impacted by the amount of pollution produced,
therefore demand for reduced pollution is forcing businesses to close.

McDonald’s UK and Ireland pledges to remove non sustainable hard plastic from its iconic
Happy Meal, in order to improve the businesses impact on the environment, an initiative
part of McDonald’s Scale for Good commitment to sustainability. McDonald’s has
committed to source all packaging from renewable or recycled sources, which means from
2021, every Happy Meal in the UK and Ireland will include either a soft toy, paper based toy
or book. By doing this, 3,000 metric tonnes of plastic will be removed from the business,
making it the largest reduction by McDonald’s to date. This started off as a trial and error
process since March 2020, as paper packaging for Happy Meal toys was introduced,
followed by paper packaging for Happy Meal books from August. This meant plastic
wrapping was entirely removed from 2021, which removed 200 tonnes of plastic.
McDonald’s started offering customers with the choice of a book or a toy with every Happy
Meal from May 2020, which gave families the chance to opt out of a plastic gift, as well as
building on the successful Happy Readers promotion, which has distributed over 90 million
books with the Happy Meal in the last seven years. This was also the time when McDonald’s
ran a five week nationwide toy amnesty, collecting any unwanted plastic toys from all of its
1,350 restaurants and recycling it all into play equipment for Ronald McDonald House
Charities across the UK and Ireland. Over the last two years, McDonald’s UK and Ireland
have taken a number of other steps, in order to reduce plastic across their supply chain.
Only 8% packaging used for McDonald’s products is made from plastic. The removal of
plastic McFlurry lids will remove 385 tonnes of plastic from their supply chain each year.
Fibre based salad boxes will remove 105 tonnes of plastic annually, as well as being
recyclable, likewise to their paper straws and cups. McDonald’s developed a process with
suppliers, James Cropper and Veolia to produce recyclable coffee cups, with recycling units
in all Experience of the Future restaurants, as well as collaborating with retailers including
Pret a Manger, Costa and Starbucks, in order to produce recyclable McFlurry cups, which
can be recycled with other paper cups in one of the many recycling points that have been
established across the country. 22,000 tonnes of outer packaging cardboard is recycled from
restaurants every year and the business have been reviewing alternative to plastic cutlery
and will begin trials of alternatives in the coming months.
Internal Environment:

Corporate Culture:

This varies hugely from business to business, for example, large bans in the city are known
for their long hours and cut-throat attitudes, whereas technology start-ups are known for
their relaxed, casual atmosphere.

McDonald’s driven by a culture that focuses on customer service and satisfaction, which is a
basic tenet of the business, includes integrity and collaboration. Other essential tenets
which McDonald’s ticks off boxes for is flexibility, opportunity and development,
appropriate for modern times, as they guide workplace behaviour and key decisions within
the business. With corporation culture as the core at McDonald’s, it is important for them to
improve customer satisfaction, which depends on employees performance at the frontline
inside the outlets, alongside the teamwork between them. The higher the level of
teamwork, the better the level of service and the higher results in customer satisfaction.
Plus, with McDonald’s providing training to employees, such as how to maintain a jolly
environment, this leads to lower work stress and allows customers to eat in a superior
dining experience. Therefore, corporate culture has a significant impact on customer
experience at McDonald’s.

Corporate Social Responsibility (CSR):

This can greatly influence the operations of a business, for example, in the nuclear industry,
many people jump to conclusions about the dangers of enriching uranium, readily conjuring
up stories, which frighten other or embellish stories from historic events, such as Chernobyl
in 1998 or the Tsunami disaster in Fukushima in March 2011, which led to reductions in
demand and lack of confidence in investing in planned nuclear power stations. The story
telling is usually driven by fear of the unknown and incorrect assumptions but they can have
a great impact on the success of a business.

McDonald’s take their social responsibilities very seriously, for example discovering ways to
reduce, reuse and recycle within their outlets and across their whole business: low energy
LED light bulbs, energy saving equipment, waterless urinals and recycle used cooking oil are
used. They also recycle the cardboard boxes used in more than 89% of their outlets and
more than 85% packaging is made from renewable resources.

Ethics:

This shapes businesses, as naturally, matters like these impact on the organisation and
operation of the business, as well as their funding and company values. With new
businesses emerging, they must have policies and procedures enforced within the
workplace, in order to ensure employees behave ethically, otherwise the government will
have to step in to stop any unethical practice. Other examples of ethical policies are whistle
blowing, which means informing on someone who is doing something wrong or illegal and
those associated with equality, such as homophobic bullying.
Competitive Environment:

With competition at different levels (local, national, international), businesses vary in how
they regard competition and those who view it as destructive may have overlooked
competition as an opportunity. Competition does not mean a business will by default
succeed or fail, instead it relies on careful business planning and a consideration of all
factors, for example if a business owner decided to open their coffee bar at a small rural
railway station, which already had one, it could be viewed as a bad business decision,
however, if their reputation preceded them, by offering a superior product, better customer
satisfaction or improved value for money, then their business might well wipe out their
competitor but overall, decisions like this has to be thoroughly planned.

Factors Influencing Competitive Advantage:

It is crucial a business keeps its eye on what its competitors are doing and tries to anticipate
what they are planning to do to keep a competitive advantage.

 Differentiation:

This may mean developing new products, branching out into new products or services,
especially something unique from your competitors.

 Pricing policies:

This means how a business determines prices for wholesale and retail products or services
to achieve its planned profits.

 Market leadership:

This means a business, which has the largest or larger share of the market in relation to its
competitors.

 Reputation:

This means something a business cannot buy but has to earn, which takes many years to
develop and maintain, unlike a bad reputation, which can rapidly ruin a business, no matter
how large or small.
  Market share:

This means the percentage of a given market a business holds.

 Cost control:

This means managing and controlling costs for a business to remain viable.

 Technology relationships with customers:

This may mean databases holding customer details, purchase history and preferences, etc,
telephone and online support, etc, however there is a risk of relationships breaking, for
example, misunderstandings, due to language differences, listening to annoying music while
queuing for a response, being charge high costs, etc.

While trying to manage their costs, businesses may be driven to outsource services, which is
buying services or products from outside suppliers, often overseas to cut costs, such as after
sales, help desks, etc, which can have positive and negative impacts on their reputation.

 Suppliers:

All businesses are dependent on them and their ability to supply when required and at the
agreed price. The external environment impacts on suppliers, as well as the business being
supplied. This process is known as logistics, which is the operation and management of
getting supplies from one point to another and this includes: supplies being available at the
agreed cost (materials to supplier may have increased), transport (timescales interrupted,
due to road works, bad weather, ferry strikes, etc), availability of personnel (interruption,
due to holidays, sickness, strikes, shortages, etc).

 Employees:

Businesses are impacted by external environmental factors, for example, lack of

productivity, due to illness, which is generally unpredictable, unlike anticipated changes to
schedules in advance, such as planned holidays.

 Other factors have an impact on the number of employees a business can afford
and on the availability of potential employees, when a business is seeking to
recruit.
Benefits and Importance of Establishing and Maintaining a Competitive Advantage:

This includes controlling costs, having an advantages over competitors, informing future
plans, such as structure, pricing, location of business, means of promoting and providing
services or products.

Important features consist of anticipating business and job security, providing what the
market demands or needs and anticipating areas of developments.

Situational Analysis of McDonald’s environment:

This is an investigation into the state of the internal and external factors affecting a business
to inform managers/owners, so they know how to plan for its future. it requires an
evaluation on potential customers and the competition to gain a glimpse of the financial
future of the business and inform decision making. Also, this underpins the marketing or
business plan, which is used by managers, in order to review the aims and objectives of the
business. Situational analysis can be done using the following techniques: PESTLE analysis,
SWOT analysis, 5Cs analysis, Porters five forces.

SWOT analysis:

This is a useful approach.

McDonald’s Strengths:

 Stable income through successful franchising and marketing campaigns:

Revenue can be gained by collecting monthly rent and royalty fee from McDonald’s
franchises, which covers over than 90% of 43,772 McDonald’s location, based on the
percentage of sales. Due to the predictable revenue, the business is in the process of
converting its own restaurants into franchises, also franchising internationally, adjusting to
the culture, by adapting to local tastes.

 Strong brand recognition through marketing campaigns:

Marketing techniques, such as the Happy Meal, the iconic Golden Arches and Ronald
McDonald, have helped the business become a branding success story, being synonymous
with fast food. The result of having spent millions of dollars on marketing campaigns
involving digital, print and TV is loyalty and uniqueness from its competitors.

 Food quality is consistent:

Working with local and global suppliers allows McDonald’s to provide consistent, quality
products, which is a big plus to travelers in a foreign country.
  Using technology to improve customer experience in stores and mobile
applications:

Customers are able to customize and pay for their orders without talking to an employee,
with the self serving kiosks provided by many McDonald’s outlets. They also have a mobile
application for ordering for pick up or delivery. In 2019 McDonald’s acquired Dynamic Yield
(an agnostic platform that integrates with the businesses existing tech stack, personalise,
optimize and act on the businesses data, by using the tools already in the businesses stack,
including data management platforms, ecommerce enterprise systems, email marketing
service, web analytics solutions, etc.), in order to improve their drive through experience, by
changing the menu items, depending on the weather, time of day and trending items, as
well as acquiring Plexure (a customer engagement platform that uses digital marketing tools
to increases sales), in order to attract customers, by using offers and loyalty programs on
mobile devices.

McDonald’s Weaknesses:

 Income is heavily dependent on the franchisee, however McDonald’s is not more

immune to sales decline compared to businesses that own and operate their own
restaurant:

Being a franchise, this means McDonald’s has little operating leverage, thanks to its low
level of assets, which leads to the business having to bail out franchisees, when they are
struggling financially, due to wage rate inflation, store remodels and tech upgrades.

 Little exposure in the worlds largest market, China:

With a population of more than one billion people, McDonald’s is not taking advantage of
this market enough, with only 9% of McDonald’s locations worldwide in China, only
contributing to 3% of operating income.

McDonald’s Opportunities:

 Invest in the McCafe brand to enter into the coffee business:

According to numerous reports, McCafe featured locations generally generate 15% more
sales than a regular McDonald’s with the menu, consisting of many popular coffee store
items from espressos and cappuccinos to cold frappes and smoothies enough to take on
chains like Starbucks. With coffee beans also offered in retails bags so customers are able to
enjoy a McCafe at home, McDonald’s should leverage McCafe’s current position further to
penetrate the coffeehouse market.
  Introduce limited-time offers of premium items to boost margin and compete with
Shake Shack and Five Guys:

McDonald’s could offer their premium items at a lower cost, in order to gain sales from low
income consumers, luring them into thinking paying for bundled items is priced low.
McDonald’s premium fresh beef quarter pounder and other higher priced items have
currently fueled the US same store sales gains, therefore the demand is their for
McDonald’s to capitalize on it.

 Introduce healthier items to the menu to attract new customer bases and change
the image of the company of being an ‘unhealthy’ food chain:

Despite the various healthy choices, such as the salads, sliced fruits and yogurt, McDonald’s
menu should expand on healthy items to enable health conscious customers to buy a whole
meal at McDonald’s and also to change the current image of the business. McDonald’s
should also include meat alternative burgers and vegan friendly fries on its menu, in order
to foresee the trending vegetarian and vegan diet.

McDonald’s Threats:

 New trends toward health and wellness impact consumer demand for fast food:

This has caused McDonald’s revenue to deteriorate, however if McDonald’s plans, this
threat can turn into a new opportunity to capture a whole new customer base.

 New regulations from governments around the world put restrictions on fast food
to curb out obesity:

Fast food chains, alongside restaurants are required by the government to list their menu
items with calories figures, which may discourage many customers from making a purchase.
Also, regulation son fat and sugar content will cost McDonald’s to reformulate their food
and request them with suppliers.

 The companys use of boxes, wrappers, cups and straws is not sustainable for the
environment:

McDonald’s are among the heavy users of plastic users of plastic straws and cups and
generate tonnes of waste every year. In order to avoid posing a negative image to
customers, McDonald’s should replace its current packages material with environmental
friendly ones.

5Cs Analysis:

This analysis is used to inform the marketing of a business, as well as the business
operations, as it focuses on current internal operations, using data and statistics.
Company:

 Product image and branding:

McDonald’s ranked at ninth in a 2020 ranking of brands by their value (129 billion US
dollars), with a drop in value by one percent compared to the previous year, perhaps due to
the uproar of COVID-19. In 2019, considered as the largest quick service restaurant chain in
the world, McDonald’s generated a worldwide revenue of 21.08 billion US dollars, having
spent over 440 million US dollars on advertising worldwide that year.

 Technology:

The fast food giant gives credit to its 3Ds strategy for its strong US performance: delivery,
digital and drive thru. In order to push sales higher, McDonald’s has heavily invested in self
ordering kiosks, machine learning and voice activated drive thru technology, digital sign
boards, mobile pay and ordering upgrades and kitchen robots to dunk fries, chicken nuggets
and fish patties into vats of oil. The presence of these innovations have made a whole lot of
a difference, recovering with a rise of 4.6%. McDonald’s has survived the COVID-19 crisis
with the crucial drive thru, which sources an estimation of about 70% of McDonald’s
business. This strategy has proved to be worth it, as McDonald’s reported earnings of $2.35
per year, compared to $2.11 the previous year, which has opened further opportunities for
them, as they are planning to open another 1,300 new restaurants next year.

 Culture:

McDonald’s global operations are driven by this, with their basic principle of customer
service and customer satisfaction with other major cultural values, including integrity and
collaboration. The businesses culture promotes flexibility, opportunity and development,
which are some essential principles of a modern culture that strives to deliver the highest
customer satisfaction.

One way organisation culture influences McDonald’s is strengthening the everyday

performance of the employees and their teamwork at the frontline, in order to achieve
customer satisfaction. By training employees to provide the best quality customer service,
to work as a team and to maintain a radiant environment, consequently resulting in superior
employee performance, lower work stress and superior dining experience for customers.

Another way organisation culture influences McDonald’s is marketing, as it shapes the

image of the business, as a fast food brand globally. As well as depending on the
environment and level of service, the customers perception of the business relies on their
innovative foods with new twists, released for the purpose of attracting, engaging and
retaining customers. This creates happiness for customers and employees, offering a
significant competitive advantage for the brand, which works well for McDonald’s, as it has
resulted in stronger brand equity and superior returns on marketing investment.

 Mission and vision:

McDonald’s changes alongside the global food service industry environment, by responding
with adjustment to its corporate mission and vision statements. The fast food restaurant
chain considers these as essential policy and strategic management tools to guarantee
continuous growth. On one hand, their mission statement establishes the business as an
influential favourite food service destination, while on the other hand, their vision
statement pushes the business to achieve growth and improvement.

McDonald’s mission statement is ‘to be our customers favourite place and way to eat and
drink’, maintaining the business as a major influence on their food and beverage purchase
decisions, while also highlighting the significance of their focus on their customers. They
want to become the target customers favourite, therefore they consider customers
preference as a major determinant of their business, by developing their menu and recipes
to satisfy consumers preferences. McDonald’s also develops restaurant designs and layouts
to increase productivity and customer experience. Furthermore, they aim to influence how
people eat and drink by promoting the business, brand and products.

McDonald’s vision statement is ‘to move with velocity to drive profitable growth and
become an even better McDonald’s serving more customers delicious food each day around
the word’, which is also included in the growth plan the business introduced in 2017. This
clearly shows McDonald’s aims to grow and expand its operations, such as opening more
locations and improving operational efficiency to improve profit margins. Another aim is for
them to implement comprehensive improvements of the business to include various
aspects, such as product development, marketing, franchising and human resource
development.

Collaboration:

 Suppliers:

McDonald’s suppliers include the following: Tyson Foods (TSN), Lopez Foods, 100 Circle
Farms, Gaviña Gourmet Coffee, Hildebrandt Farms.

The business uses numerous direct and indirect suppliers that are held to clear standards for
quality and efficiency. Direct suppliers that coordinate purchasing and distributing to
restaurants are used, whereas indirect suppliers that operate facilities, such as grain mills,
abattoirs, farms and ranches.

 Stakeholders:

McDonald’s operates by understanding and effectively managing ESG (Environmental,

Social, Governance) through constant engagement with stakeholders. This minimizes risk,
maximises shared value, ensures brand trust and builds long term resiliency.

Environmental and social issues that are of most importance of their stakeholders are
prioritized, allowing McDonald’s to engage with them their approach and evolution of key
issues, quantitative and external data gathering and internal reviews.
Good governance is essential to manage McDonald’s priority ESG issues, drive collaboration
and accountability across the business, which in turn would help deliver long term value for
stakeholders. The following are their key governance bodies: board of directors, cross
functional leadership team, cross functional working groups, partnering with franchisees
and suppliers,

Cross functional working groups prioritise engagement with stakeholders when working to
implement global and local strategies to drive action and progress.

Regularly engaging with key stakeholders will allow McDonald’s to identify the issues that
matter most to them and to learn from their insights and expertise, which is important for
the business, as they have to constantly evolve and adjust to global trends and concerns, in
order to maintain successful.

McDonald’s often partner with NGOs (Non Governmental Organisations) to help provide
external insights and perspective that informs and shapes their strategies and management
of ESG issues, develop and implement initiatives on the ground and facilitate multi
stakeholder and industry wide collaborations that drive change at scale, which would often
result in greater impact.
 Distributors:

The purpose of distribution centres is to coordinate purchasing and distributing products to

restaurants by special vehicles equipped with temperature control mechanisms. McDonald’s
only accept products transported in ideal conditions.

The purpose of processing facilities is to produce finished products. McDonald’s states it has
a sustainable supply chain that focuses on their 3Es: economies, environment, ethics.

Customers:

 Demographic:

All sorts of people drive by and eat at McDonald’s, however their biggest customer base is
parents with young children, with teenagers and businessmen ranking second and third. In
the USA, females prefer eating at McDonald’s more than males, with the middle class
section of society most attracted to McDonald’s. Serving around 1% of the world population
daily, over 70 million customers every day, their customer traffic is more than the
population of Great Britain.

 Where, what and why they buy:

Operating in over 100 countries, with over 38,000 restaurants globally, 40% located in the
USA, where there are more McDonald’s than hospitals. The country with second most
McDonald’s locations is Japan, with China and Germany ranking third and fourth.
The following are the top 10 most selling McDonald’s food items in 2020, starting with no.1:
French Fries, Big Mac, Snack Wraps, Happy Meal, Egg McMuffin, Apple Pie and Apple Slices,
Chicken Nuggets, Premium Salads, Double Cheeseburger, McGriddles Breakfast Sandwich.

 Pricing:
  Frequency and quantity purchased:

With French fries and big macs as the most selling and most popular McDonald’s, they sells
80 hamburgers every minute globally, over 10 million pounds of fries every day globally,
over 1 billion big macs every year and 200 coffees globally every 20 seconds. They use over
2000 pounds of beef and over 2500 eggs every minute. McDonald’s is the biggest toy
distributor worldwide, distributing over 1 billion toys every year. Over 22,000 McDonald’s
restaurants allow you to order via mobile, while over 8000 McDonald’s offer home delivery
of food in over 40 countries.

Competitors:

 Current and potential:

A few of McDonald’s current competitors are the following: Burger King, Domino’s,
Starbucks, Wendy’s, KFC, Subway, Pizza Hut.

A few of McDonald’s potential competitors are the following: Taco Bell, Tim Horton’s.

 Market share:

McDonald’s market share – 21.4%

Burger King’s market share – 1.2%
Domino’s market share – 1.6%
Starbucks market share – 7.5%
Wendy’s market share – 8.2%
KFC’s market share – 2.8%
Subway’s market share – 2.8%
Pizza Hut market share – 1.2%
Taco Bell’s market share – 7%
Tim Horton’s market share – 4.8%

 Strengths and weaknesses of competition:

Burger King’s strengths – strong brand recognition through a large network of franchise
restaurants. Successful franchising is the bare bone of Burger King’s operation. Solid
franchise performance. Food quality is consistent.
Burger King’s weaknesses – inability to compete with Wendy’s in breakfast items sales.
Reliance on franchisees. Unstable ownership causes a lack of long term strategies

Domino’s strengths – Domino’s is a hugely popular brand name and has high brand loyalty.
Diverse range of products offered by Domino’s apart from pizzas. Hygienic food and quick
service. leader in online and mobile ordering as compared to its competitors. Domino’s has
a strong brand equity supported by heavy advertising and marketing campaigns. Global
franchise operations, with more than 3500 in over 50 countries. Efficient and effective
supply chain management enables it to maintain its goodwill and promises. More than
200000 people are employed with Domino’s.
Domino’s weaknesses – high fat and high calorie food is not good for health conscious
people. Intense competition means Domino’s has limited growth in market share.

Starbucks strengths – a large retail network with coffee shops and third party retailers
maximise brand exposure. A vertical integrated supply chain helps Starbucks gain
competitive advantages by reducing costs between channels, improve coordination, and
control the quality of its products. Social media and technology connect Starbucks with
young, savvy customers. Financial performance is solid.
Starbucks weaknesses – some customers do not like the dark roast coffee that Starbucks
offers by default. Instability in the supply chain can adversely affect profits.

Wendy’s strengths – more than 40 years of experience in the fast food industry. Global
presence with restaurants in around 30 countries. Third largest burger chain with around
6650 locations. Employee strength of 46000. Globally recognized brand. Strong supply chain
network. Popular for its taste and use of fresh beef instead of frozen. Financial stability.
Effective marketing and advertising.
Wendy’s weaknesses – fast food perceived as unhealthy. Operation of franchisees is difficult
to manage. Less number of locations as compared to its competitors globally.

KFC’s strengths – strong international presence. Fast growth. Strong financial condition.
Outdo the competitor. Diversity in menu. Loyal customer base. Trade secret.
KFC’s weaknesses – issues on food. Issues on franchisee operations. Issues on supply chain
and distribution.

Subway’s strengths – one of the leading players in the sandwich chain business. Offers a
wide variety of sandwiches and other products. Large global operations due to their more
affordable franchise opening costs.
Subway’s weaknesses – sales have been declining. Lack of strategic planning in opening up
new stores. The $5 footlong promotion. Leadership issues. Negative publicity and
controversies.

Pizza Hut’s strengths – Pizza Hut is a huge popular brand name and high brand loyalty.
Innovative range of pizzas under one roof provided by Pizza Hut. Hygienic food preparation
and quick service. sound financial situation and international turnover of the brand. Pizza
Hut has good advertising and marketing through TVCs, print, online ads and OOH media.
Over 15000 franchises around the world, which also provides excellent home delivery. More
than 150000 people are employed with Pizza Hut. Apart from pizzas, it also offers pastas,
wings, etc. Pizza Hut have been involved in sponsorship of events, sports teams, movies, etc.
Pizza Hut’s weaknesses – franchise management and service quality is a massive challenge.
Many options for customers means high brand switching and limited market share for Pizza
Hut.

Taco Bell’s strengths – Taco Bell is a hugely popular brand name with high brand loyalty.
Taco Bell adopted a healthy trans fat free formula, which is a key competitive advantage
over other competitors who have not yet switched to the healthier recipes. Hygienic food
preparation and quick services. Good advertising and marketing of the brand. Taco Bell has
more than 7000 locations worldwide. More than 170000 people are employed with the
business. More than 30 countries have Taco Bell outlets.
Taco Bell’s weaknesses – high fat and high calorie food is not good for health conscious
people. High competition means limited market share growth for Taco Bell.

Tim Horton’s strengths – it is Canada’s largest fast food service with over 100000
employees. It has over 4500 restaurants in 1964 and has enjoyed a strong brand image. Tim
Horton’s commands majority of the Canadian market for baked goods and holds major of
the Canadian coffee market. It has been purchased by Burger King in August 2014 and they
now are the third largest operator of fast food restaurants in the world. Nutritional
information on most of its menu items is made available by the business in a two page
brochure and is available online. Canadian Business magazine has name Tim Horton as the
best managed brand in Canada twice. It also promotes itself through the Tim Horton
Children’s Foundation
Tim Horton’s weaknesses – it announced closing many stores in the north eastern US, due
to high competition. According too the blog Coffee and Conversation, “Tim Horton does not
sell organic coffee, does not sell Fair Trade coffee, and does not disclose the source of its
green beans”. Does not cater to the health conscious segment.

Porters Five Forces:

This is used to evaluate the position of a business, in terms of its competition, with each five
category evaluated in relation to the impact of suppliers on the business.

Buyers:

Buyers have a high bargaining power with McDonald’s , as there are a large number of
options for them. Their multinational and local restaurants almost always offers the same
products and there is no big difference between the offerings of the fast food chains, which
is the reason why buyers do not have to bear a high cost for switching the brand in this
industry. This is one factor contributing to their high bargaining power, as well as the lack of
radical differentiation between the offerings of the chain.

Suppliers:

Suppliers have a low bargaining power with McDonald’s, as the business has a range of
options for the purchasing of raw material, such as meat, cheese, vegetables, buns, etc.
Also, the level of innovation and differentiation by the supplier is limited, which further
takes the power away from them and despite service providing them a competitive
advantage, it is not a factor that takes the power away from the business.
Substitutes:

Substitutes are a high threat with McDonald’s, as food is a necessity and is required by all
humans to stay alive but there are chances a particular food can be replaced by another
food. Their fast food creates a negative impact on the health of their customers, with
awareness increasing. Due to this, people are shifting to healthier food, as globalization is
also making an impact and different cuisines from all over the world are getting accepted in
different regions, which are substituting fast food to some extent.

New Entrants:

New entrants are a high threat with McDonald’s, as the lack of capital and skills intensive
nature of this fast food industry is the reason that it invites small and large investors, in
order to invest in it. Also, setting up does not require massive capital, it can be started from
a small level from a street corner shop, which again does not require a high level of skills
and expertise, which makes it further easy to start the business.

Existing Rivals:

According to Strategic Management Insight 10 January, 2020, McDonald’s is the second-

largest restaurant network serving customers in 43,772 locations, following the first-largest
restaurant network, Subway (37,241), with third and fourth being Starbucks (27,339) and
KFC (21,487). Uncountable small level fast food restaurants that are providing similar
products to the people, due to the fact that fast food products are globally accepted,
making the competition within the industry intense.

Different Market Structures:

Several of these dictate the degree of risk to business operations, for example, the market
structure determines the amount of power and competition in the market. To plan
strategically and operationally, a business will need to understand this.

Market Structures:

The two types are perfect competition and imperfect competition (although there are at
least four main types, including a monopoly). The differences between perfect and
imperfect competition are based on the following: number and size of the producers of the
products being sold, number of customers buying the product or service the business offers,
type of products or services, the effectiveness of communicating or marketing the products
and services.

 Perfect Competition:

This refers to businesses, which all supply exactly the same product at the same price, such
as newspapers and possibly basic food products, however, where suppliers can manufacture
their own brands, they become more competitive. The business has to find other ways to
guarantee they maintain or increase their market share, such as customer service or
location, where the cost of products cannot be increased by individual businesses to
increase their profits.

As the number of suppliers, producers and customers are unlimited, there are no barriers to
entry. The following are criterias defining perfect competition: all firms sell an identical
product, all firms are price takers, (this is when a company has to accept the prevailing price
of a product in the wider market), all firms have a relatively small market share, buyers
know the nature of the product being sold and the prices charged by each firm, the industry
is characterized by freedom of entry (a business has freedom of choice to enter or leave the
market, due to an unlimited number of buyers and sellers) and exit.

 Imperfect Competition:
This faces less competition, as while there may be many sellers, such as clothing shops,
cafes, jewellers, etc, their product lines are not identical, which allows businesses to
determine their own prices.

Features of Different Market Structures:

Each different market structure has similar and different features.

Perfect competition: Imperfect competition:

Number of sellers: Many Variable, possibly not
identical
Barriers to entry: None Potentially significant
Type of substitute products: None Many
Nature of competition: Price only Price, quality, etc
Pricing power: None Potentially significant

 Number of Firms:

Newspaper sellers can operate in a small locality yet still survive, although profits will be
small, yet they are not without risk and even he smallest retailer needs to understand their
own strengths and weaknesses and those of their competitors, to grain market share (albeit
small in their sector).

 Freedom of Entry:

This differs when a business has an imperfect competition structure, with criterias more
flexible, for example, in pricing, however the business is unlikely to have unlimited
customers and the cost to run the business will probably be quite high.

 Nature of Product:

This determines the market structure, as well as the freedom of entry, number of
competitors offering similar products and whether the environment can sustain the market
share or withstand further businesses entering the market.

Relationship Between Demand, Supply and Price:

Business markets are dependent on examining the relationship between demand, price and
supply.

Influences on Demand:

The following are the most common factors influencing demand for a product or service:
affordability, competition, availability of substitutes, level of gross domestic product (GDP),
needs and aspirations of consumers.

 Affordability:
This means whether or not customers can afford or are willing to pay for the offer.

 Competition:

If this reduces its prices for products, quality and service, demand can reduce significantly.

 Availability of Substitutes:

This is used by businesses, which are struggling to keep sufficient profit to remain operating,
in order to keep their costs down and profits up. They may resort to a substitute, which may
be inferior or superior or seek out alternative and more competitively priced supplies,
therefore alternatives depend on supply and demand from all sides of the operation. This is
to be used only after a business has considered all external factors and has undertaken a
situational analysis, as substitutes are costly.

 Level of Gross Domestic Product (GDP):

This is one of the most important indicators used by economists, in order to calculate the
state of the economy. The ONS (Office for National Statistics) calculates these numbers,
dependent on quarterly data gathered by the following: output (the value of goods and
services produced from a sample of every type of business and sector), expenditure (the
value of all goods and services purchased by businesses, government and individuals,
including all exported sales), income (the value of money generated primarily through
wages and profits).

 Needs and Aspirations of Consumers:

This influences demand, with our needs include basic requirements, such as food, warmth,
water and safety. Consumers also have other varying needs, which are those products and
services they are used to and believe they cannot or do not want to live without, which
might include: mobile phones, technology and multimedia, entertainment, beauty
treatments, own transport, all of which increase demand on businesses, also influencing the
fluctuation in prices.

We also have aspirations, which may include: latest trends in clothing, technology
improvements, home improvements, home or garden projects, larger housing or improved
location, newer, faster or bigger transport, holidays (more frequent and luxurious).

Influences on Supply:

Whether supply can meet demand relies on being able to anticipate current and future
demands, based on GDP data and other statistical information, such as UK consumer
spending and Consumer Price Index, both available from the ONS. Crucial to meeting
demand is the ability of the business to meet supply needs, for example, if an unexpected
spell of hot weather increases consumer demand for BBQ charcoal, business is lost if the
supplies are not available.
  Availability of Raw Materials and Labour:

These are influenced by unseasonable weather, which then in turn influence the reduced
supply, with increased prices.

Examples of raw materials in short supply globally include the following: graphite, platinum,
iron ore, coal, scrap iron, Colombian emeralds.

Even if there is a surplus of a raw material, this can still influence supply, for example, the
price suppliers can charge to manufacturers and the effects of availability are also reflected
in the stock market. Labour availability influences supply, as all businesses rely on them to
supply their products or services. Consequently, the manufacturing process will be
significantly interrupted, if a supplier does not have enough labour to transport the raw
materials to the manufacturer, which may also cause cost implications, if the business
decides to find another supplier or another way to obtain the raw materials.

 Logistics:

The process of ensuring smooth logistic is complex, as supply is influenced by logistics and
the labour needed for a smooth operation.

 Ability to Produce Profitability:

All businesses rely on this. The cost of raw materials control suppliers, compelling them to
forecast their business plans, based on the costs they are likely to incur to manufacture the
product and then sell it to customers. Then forecasting the businesses needs, they
anticipate the cost of supply, to ensure they make sufficient profit to continue operating.

 Competition for Raw Materials:

Prices will increase when raw materials, for example, some metals and fuel become scarce,
which impacts suppliers and their market share. In a similar manner, there is competition
between suppliers to maintain their profits, when raw materials become more readily
available, as well as keeping their customers, who can choose where to take their business.

 Government Support:

If the government feel there is a significant need to boost the UK economy, they provide
support for businesses, which directly affects them, while government grants, for example,
for central heating and insulation supports businesses indirectly, by increasing demand and
generating a need for supply.

Government spending directly influences McDonald’s business policy, business pattern,

production, employment sector, market operations and economic environment control
situation, as well as their supply goods and services in the private sector, therefore if the
McDonald’s demand falls, it can also decline the spending on the government. The
government could grant spending on education and proving training to the labour class to
improve productivity and performance. With this initiative, McDonald’s employees can be
trained and educated for better and improved work performance. The impact of
government spending on McDonald’s is significant, as this could increase their consumption
power and ensuring income growth of the nation.

Elasticity; Price Elasticity of Demand:

This term is used by economists in order to measure the relationship between quantity in
demand and change in pricing.

Price elasticity of demand = % change in quantity demanded / % change in price

The product is considered elastic (or responsive to price changes) when a small change in
price is accompanied by a large change in the quantity demanded, whereas if it were to be a
large change in price accompanied by a small amount of change in the quantity demanded,
it would be considered inelastic.

Pricing and Output Decisions:

Due to normally being small, perfect competitive businesses are unable to affect price, as
the prices for the products they sell are predetermined, therefore the price they pay to
suppliers is also unlikely to be negotiable.

With more influence over both pricing and output decision making, imperfect competitive
businesses are able to use a range of methods, such as loss leaders to increase their profits,
based on either the price they charge for their products and services or the price they are
willing to pay for output, such as goods, services and labour. What is output to one can be
input to another, depending on the type of business and on whether goods are coming in or
out.

Loss Leaders:

This is when a product or service offered at a knock down price, possibly even at a loss to
the business to attract additional sales and increase profits and market share.

McDonald’s may offer bargains on product lines, which are slow to move or they may
promote reduced prices during a certain time in day to attract customers at quiet times or
to shift excess stock.

Evaluate the extent to which the business environment affects a McDonald’s, using a
variety of situational techniques:

Evaluate how changes in the market have impacted on McDonald’s and how they may
react to future changes:
References:

McDonald's - Wikipedia
What You Can Learn From McDonald's Acquisition Of Dynamic Yield (forbes.com)
Porter's Five Forces of McDonald's|Porter Analysis
You searched for McDonald's - SWOT & PESTLE.com (swotandpestle.com)
SWOT Analysis of Mcdonald's: 2020 Detailed Overview (swotanalysistemplate.com)
• McDonald's: brand value 2020 | Statista
McDonald's Bets on Technology Are Paying Big Dividends | The Motley Fool
McDonald’s Case Study: Cross Functional Collaboration and Organizational Culture.
(notesmatic.com)
Our Stories (mcdonalds.com)
McDonald’s Mission Statement & Vision Statement (An Analysis) - Panmore Institute
An overview of the supply chain of restaurant giant McDonald's (marketrealist.com)
Governance & Stakeholder Engagement (mcdonalds.com)
60 McDonald's Statistics and Interesting Facts in 2021 (connectivasystems.com)
McDonald's Menu Prices - [UPDATED] March 2021 - Price List UK (burgerlad.com)
McDonalds SWOT 2020 | SWOT Analysis Of McDonalds (managementglossary.com)
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| MBA Skool-Study.Learn.Share.
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| MBA Skool-Study.Learn.Share.
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