Macro and Micro Environment Analysis of McDonalds

Macro and Micro Environment abbreviation of McDonalds2. Literature polish upThis section provides a broad picture of the dissertation that includes setting up the arameters and limits to the field of inquiry going into the research. Its aim is to identify key ideas, merchandise theories applicable and securities industrying case studies that impinge upon the bea of this investigation. It mictur consumes an effective startle lay leading into the introduction and the background of the dissertation.2.1 Macro Environment Analysis of McDonaldsThe analysis is d one(a) using a top down lift where first the Macro Environment and then the Micro surroundings has been examined, in which McDonalds operates.2.1.2 Internal AnlaysisInternal Analysis is through using Value concatenation analysis. The terminus value drawing string was apply by Michael Porter (1985) in his book agonistic advantage cr work throughing and sustaining superior performance. Brown (1997), expound value chain a s a utensil to disaggregate a c at a timern in to strategic each(prenominal)y germane(predicate) activities.In McDonalds case, the key value adding activities ar inbound logistics, operation, bulgebound logistics, trade sales and aid. McDonalds logistics function is to buy nourishment on be fractional of its operator (franchisee) and ar full(prenominal)tail it obstetrical delivery in to their swallow uping places. McDonalds logistics includes the procurement and expedition of raw materials in to suppliers, the procurement and shipment of finished goods between the suppliers and the diffusion centres, together with the w arhousing at each distri b atomic number 18lyion centre, the order and the delivery to eating places of each(prenominal) aliment, packaging and direct supplies. To improve its logistics operation, McDonalds combines a number of victuals- playing plants sanctified to its operation only. The establishment of solid nutrient towns consisting of a distribution centre and a bakery, a meat plant, a sauce plant and a moaner plant, gives McDonalds competitive advantage.The supporting activities that tush be identified are procurement, gracious resourcefulnesss suppuration and technology. McDonalds purposes electronic procurement system. It had set logistics trends for eating places with its online ordering system. It was noned that much than 12% of McDonalds franchisees ordered nourishment supplier electronically. Revamping its issue chain with software package and technology made it easy to respond quickly and efficiently to customers needs. With the online ordering system, McDonalds had a return on investment of 23.2% in 2008. However, the military man resource development at McDonalds is excellent. McDonalds uses a eminent-engagement approach to up both their operations, leading pipeline and employee satis positionion with their life growth. every(prenominal) direction staff at McDonalds receives preparedn ess at one of the regional training centres and at the field centre, Hamburger University in East Finchley. Training all employees to work in one best way (quick-service culture) made McDonalds to gain customers loyalty incessantly leading to a competitive advantage.2.1.3 External AnlaysisPEST analysis is employ for an in depth get winding of macro surroundings in card-playing food diligence where McDonalds operated. Kotler (1998) subscribes that PEST analysis is a useful strategic tool for understanding food grocery growth or decline, crinkle position, potence and direction for operations.POLITICAL The operations of McDonalds are affected by the organisation policies on the enactments of devalued food operation. Currently government are imperative the selling of libertine food restaurant because of health concern much(prenominal) as cardiovascular and cholesterol issue and obesity among the young and children in the country. Governments to a fault keep back the license given for open the fast food restaurant and opposite business regulation need to follow such(prenominal) as for a franchise business. Good affinity with government in giving mutual bene outfits such as body of work and tax is a must for the come with to succeed in either foreign market. McDonalds should besides encourage its workers by ensuring all the hiring, compensation, training or repatriation is according to UK and European Labour Law and the Middle Eastern Labour Laws as stipulated. economic science As a business entity, McDonalds need to face a megabucks of economic variables outside its company or its macro environs. Dealing with internationalistic sourcing for its material McDonalds should be aware on the ball- fermentd supply and currencies exchange. Remember, McDonalds import most of its raw material such as beef and potatoes collectible to local market can non supply in abundant to fitting the occupy of its product. Any upside of currencies espe cially dollar volition be pushing its cost of leverage.Working on the local country, McDonalds must face government regulations on tax of mesh where it gains from the operation and other tax such as entertainment and restaurant service tax. Each country may rush contrary scale or types of tax available and McDonalds should follow the regulation if it wants to continue the operation. As a franchise, McDonalds should also pay certain fortune of the revenue to the parent company in United States. The economic frame and growth of the country also is an burning(prenominal) indicator to the demand of products that McDonalds offered. As the food charged slightly above normal foods, non many quite a little leave take hold the income range to consume the products. Moreover if the economy is great(p) and income percapita is affected, the demand of McDonalds product allow certainly going down. On the other hand the good economy also nitty-gritty disposable income is to a grea ter extent(prenominal) and people can spend more on more expensive food at fast food restaurant.SOCIAL/CULTURAL The changing lifestyles of Malaysia due to development of Malaysian economy should be also pickings into consideration. While more people are able financially to eat at more expensive outlet such as fast food restaurant, they have higher expectation. They want to have feel in services and more conveniences that can differentiate one restaurant from another. Young urban consumers want technology in their life and facilities such as credit card payment, wireless internet, cozy and relaxing ambient place, and other attraction for their hangout and eating. All these needs should also be taken into consideration. There is not much difference between heathen and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For example in India people (Hindu) do not take beef, Muslim countries do not take pork, German care bee rs, Finnish like fish type of food menu, Chinese like to associate food with something good (for example prosperity), Asian like rice and the Statesns eat in big-sized menu. So far McDonalds has shown good efforts in localization of its menu to suit local taste but it should invariably survey and learn slightly local culture to better understand and design the best product for them.TECHNOLOGY For a fast food restaurant, technology does not give a very high carry on on the company and it is not a significant macro environment variables. However McDonalds should be looking to competitors innovation and improve itself in term of integrating technology in managing its operation. For example in inventory system, supply chain management system to manage its supply, easy payment and ordering systems for its customers and wireless internet technology. Implementation of technology can make the management more effective and cost saving in the long term. This will also make customer happy i f cost savings results in price reduction or promotional campaign discount which will benefits them from time to time.LEGAL As a certified fast food operator, there are many regulations and procedures that McDonalds should follow. For example is the Halal certification that becomes a concern to Muslim consumers. McDonalds should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other judicial requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, labor and employment laws and quality environment certification (such as ISO) in which the outlet has been certified. The well-grounded requirement is important because the offenders will be fined or have their business prohibited from operating which can be disastrous.ENVIRONMENT As one of world largest consumer of beef, potatoes and grumbler, McDonalds always had been critics for worl d environmentalist. This is because high consumption of beef create the green house effect by methane flatulenceses coming from the cows ranch. super scale plantation has effect the environment and lost of green afforest opening for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. In Japan, once McDonalds want to introduce whale burger causing uproar because whales are threaten species. Before using paper packaging, once McDonalds also had been criticized for being insusceptible to pollution because using polystyrene based packaging for its foods. Imagine zillions of people purchase from fast food operator and how is the mend to world environment by throwing away those unverbalised to recycle packaging. Our world is getting concern on environment issue and business operating here should not secure care for profit, but careful usage of world resources for sustainable development and care for environm ent safety and health for our future contemporaries. Critics and concern from all public or activist should be review and support if infallible to ensure we play our neighborly duty better.2.2 market PositionMcDonalds is operating in a very competitive market. In order to take note on the top position of the contest, it is important to understand the companys industry environment to be prepared for actions. Porters 5 Forces is a useful model for analysing the industry environment, it identifies atomic number 23 competitive forces that shape every single industry and market.provider PowerIf suppliers have strong bargaining power, competitive pressure will be greater (Pearce and Robinson, 2004). McDonalds works in tell apartnership with most of their suppliers to protect the quality of their foods and minimise the bargaining power of suppliers.Buyer PowerConsumers acquire power in the food market is high. With the continuously changes in tastes and the subjoin concern in hea lthy eating, companies in the food market has to make changes and improvements to satisfy its customers. Otherwise there is a high possibility in getting bad publicity and lost in profit.Threat of comforterThe threat of substitute is high in the fast food market due to the strong competition and the increasing keep down of ready to eat foods. Customers have many choices other than McDonalds, and ready to eat meals are cheaper and convenient. disceptationThe competition in the fast food market is very high. McDonalds has to debate with strong competitors like Burger King, Pizza Hut, Wendy and KFC.Threat of EntryThe threat of sassy entrant is low in the fast food industry because of the aggregate of competition with the big players in the market. New entrants will not plausibly to win due to lack ok economic of scale. The fast food industry is highly competitive. Taking one step further from the intragroup analysis, in this chapter, external analysis was do so as to hold wher e McDonalds I positioned in the market, given the intensive rivalry. PESTLE is use to call for entropy for issue of this analysis. From the data using PESTLE, swot analysis is done to regulate how McDonalds strong market position as the largest foodservice and fast-food retailing chain in the world is bolstered by robust all-round growth witnessed by the company. By analyzing PEST and SWOT an understanding of overall of the companys power and how it can grow, is established. This was done keeping the focus on Western European grocery store and the Middle vitamin E. Hence the impact of European Regulations and turbulence caused by terrorism and Iraq war is also taken as a significant point as part of analysis.Porters five forces model is used as the tool to analyse the market competition in the European and the middle east market. The existing rivalry in the industry is already strong although McDonalds is in a dominant market position.The above analysis helps to conclude MCDon alds competitive advantage and its uniqueness to gain broad target in the alike markets.2.3 merchandising Strategy and MixEvery organisations need to identify their strategic aims to be able to have a direct focus of what and when to master it within a given time. This is usually based on the organisations modified resources and capabilities. As (Barney 1991), stated an organisation could extend their limited resources and capabilities through organisational learning, sharing, generation of knowledge, redeployment of existing resources in an effective and efficient ways.In this section, the strategic aim of McDonalds is discussed. This is used for evaluating the way it has implemented its neutrals and the effectiveness of the globular and local marketing strategies. This was important to fully understand its market and environment in order to evaluate its right marketing plans and the adopted strategies. aft(prenominal) analysing the market and environment of McDonalds, this chapter focuses on the plans and strategies adopted by the company to tame its weaknesses and overturn the threats. It uses conglomerate survey results to determine the effectiveness of its marketing mix. In the year 2003, when, McDonalds had been having problems on losing market share, reducing profit and bad publicity, the company started aligning their global system around a cat valium relegating with a common set of customer focused goal lie actions. It was called McDonalds Plan to supercharge which was to put the companys concentration on the five drivers of prodigious customer experiences overlap, People, line, advance and Price. This plan was aimed to increase profits by improving its services to increase customers. These 5 variables are also known as the Retail Marketing Mix or the 5 Ps. They are the variables that marketing managers can control in order to best satisfy customers in the target market. This chapter discusses and evaluates the way McDonalds has est ablished its revitalisation plan in the European and the Middle East markets.While doing the research on the five Ps, McDonalds relationship marketing is also examined, that is viewed as an asset and the companys marketing goal is to attract, maintain, and put up customer relationships. Then there is an argument on whether the combination of five Ps with the relationship marketing is enough to stay on the competition or is there any other areas to be focussed as well.In the aspect of marketing sales McDonalds adopted the concept of 7ps of marketing mix formulated by McCarthy (1975) and Gilligan Fifield (1996). These 7ps includes product, place, price, promotion, people, process, physical. With these 7ps McDonalds was able to create a union of items that taste the same in different countries. McDonalds realises that although there is cost savings in standardisation but success can be achieved by being able to adapt to a specific environment. It has a set outline that enables it to cope with a particular market. In setting price, McDonalds looks at the elasticity of demand for its product in response to price. Considering the diverse range of culture, custom in different countries, McDonalds has localised its marketing communication strategy using different promotion and advertisement. For instance McDonalds uses the England footballer Alan Shearer as a logo to advertise its hamburgers in the UK and in France its uses Fabien Barthez, the French international goalkeeper. Obviously, McDonalds uses a number of styles to attract customers.After analysing the market and environment of McDonalds, this chapter will be focusing on the plans and strategies adopted by the company to overcome its weaknesses and avoid the threats. In the past few years, McDonalds has been having problems on losing market share, reducing profit and bad publicity. In the year 2003, the company have aligned their global system around a common mission with a common set of customer focused goal oriented actions. It is called McDonalds Plan to Win which was to put the companys concentration on the five drivers of exceptional customer experiences Product, People, Place, Promotion and Price. This plan was aimed to increase profits by improving its services to increase customers. These 5 variables are also known as the Retail Marketing Mix or the 5 Ps. They are the variables that marketing managers can control in order to best satisfy customers in the target market. (Please raise to appendix 2 for further information on the 5 Ps)ProductThe following are the strategies applied by McDonalds on their ProductsTo satisfy customers inclination for premium products at inexpensive prices.More choices on the blessed meal such as fruit options and milk for the kids.To address the desire for foods that fit into todays lifestyle. McDonalds has added new choices like meal-size salads, fruit options and sandwiches in order to fit the change magnitude concern on health eating.Mc Donalds is controlling the quality of the foods by operative in partnership with its suppliers and to work closely with food experts to ensure the quality is in the highest standard.PeopleThe following are the marketing strategies adopted by McDonalds on its PeopleSpeeding up service by simplifying the restaurant environment for their staff and customers.Ensuring the restaurant staffs are focused on being friendly, as well as fast with hospitality training.Providing cost-efficient, relevant training for their world-wide workforce. There are more than 1.6 million people worldwide work for McDonalds. McDonalds has placed emphasis on the training and development of its employees, aiming to provide career opportunities for people to achieve their potential.McDonalds has five commitments to their employees, which areRespect and Recognition set and Leadership BehavioursCompetitive Pay and BenefitsLearning, Development and Personal GrowthResources to bring about the Job DonePlaceMcDonal ds has over 30,000 restaurants in 119 countries. It opens in places where has high consumer flows such as high street, shopping malls, train station, airports, retail parks, gas stations, and even schools. Freestanding restaurants are positioned so that customers are never more than a few proceeding away by foot in the city or by car. The following are McDonalds strategies on PlaceTo make the environment the gold standard for cleanliness. They have recalibrated their standards and are consistently enforcing them.McDonalds has added additional service to customers by providing Wi-Fi accessibility in some of the restaurants so customers can stay connected to the internet mend enjoying their foods.Giving customers more reasons to visit McDonalds by adding more products offering such as drinking chocolate tree and to locate in the right place.Relocating, renovating and re get uping some of the restaurants to give McDonalds a fresh edge.PromotionEvery year McDonalds spent huge amount of money on promotion. The company has been trying to maximise the impact of the denote spending and broaden their reach through public relations and by placing adverts in media well beyond the traditional prime-time ne devilrk television format. The objective of spending so much money on promotion is to build denounce loyalty and bonds of trust. The following are the strategiesThe new creative brand direction Im Lovin It is designed to connect with customers around the world, especially young adults, moms and kids. It has became McDonalds speck brand voice in 119 countries, generating awareness figures as high as 96% in some parts of the world.Appealing to young adults with relevant advertising. McDonalds is bringing top creative teams from around the world to gather ideas, hit the books trends and find inspiration to create world-class advertising.PriceMcDonalds has a pixilated pricing process that is used to determine the price for that particular market in each country. The reason is to be able to offer affordable prices to customers and also to be profitable for the company. The following are the process which sets out the basic framework that allows the company to set localised pricingSelecting the price objectiveDetermining demandEstimating costsAnalysing competitors costs, prices and offersSelecting a pricing methodSelecting a final price (www.mcdonalds.com)2.4 Performance MeasurementQuality is an important issue in services due to the features of inseparability, intangibility and perishability. That which can not be stored and is intangible cannot be checked for defects before delivery to customers. In addition each individual involved in the exchange process brings with them varying levels of expectations and levels of satisfaction in addition to the unpredictable nature of human beings. It is this dominant role of human interaction in services that shape customers expectations and create difficulties in understanding and implementing quality initiatives (Behara Gundersen (2001)).Officially McDonalds names lead elements in their strategy to be the worlds best quick service restaurant People (being the best employer), Customers (providing them excellence) and System Growth (for owners/operators, suppliers and company).McDonalds has always been a franchising conjunction and has relied on its franchisees to play a major role in its success. McDonalds cadaver committed to franchising as a predominant way of doing business. Approximately 70% of McDonalds worldwide restaurant businesses are owned and operated by independent businessmen and women, our franchisees. Usually, McDonalds offers franchises to poor performing restaurants in order to sustain profitability.Advertising is used to differentiate McDonalds products from competitors and as a means of branding Advertising fall in 2001 amounted to 39m (KFC 14m, Burger King 8.6m, Pizza Hut 7.4m).Furthermore, McDonalds is involved in various high profile conferrership schem es (e.g. major Sponsor of FIFA World Cup, gold sponsor and official restaurant of the Olympic Games) that secures them favourable PR.Recently McDonalds acquired Boston Market Chicken restaurants, the Donatos pizza chain and Chipotle Mexican Grill. In the UK, it purchased the Aroma coffee chain and 33% of Pret A Manger. This demonstrates that McDonalds has diversified into other segments of the fast food/ convenience /take away market.McDonalds is the worlds largest food service organisation. It has the greatest market share of the breakfast, lunch and dinner market and holds 67% of the UK Burger Market.McDonalds golden arches are the worlds biggest brand with higher awareness than Coca-Cola.McDonalds is constantly introducing new products, usually for a limited period of time. This is because management recognise that consumers like variety as well as a continuation of good products such as Big Macs and Cheeseburgers. Also, they are well aware that if McDonalds has too many products discharge at the same time then the speed of customer service will deteriorate.However, McDonalds has not introduced healthier products in response to growing concerns about obesity.It is difficult to evaluate the extent to which McDonalds fulfils customers demands. In the 2001 consumer survey conducted by Sandelman Associates, McDonalds was bedded as last out of 60 chains for taste. Statistics that describe McDonalds cleanliness are not available and therefore the achievement of this objective is difficult to examine, but anecdotal evidence suggests that suitable policies are in place to meet that objective. Customer service quality is difficult to assess but it is famous for being quick.2.5 Ethical CriticismEthical behaviour has come up as one of the most important aspect of any organisation. By Doing the right thing internally and externally, businesses created a good working atmosphere, while also benefiting society and the environment. However many respectable issues are subjective and based on ones values and beliefs. As a result, they are a lot difficult to enforce and easy to neglect. The result of this is that when the costs are added up, the brotherly balance sheet contains enormous debts to society (McEwan, 2001).This chapter discusses the ethical issues that McDonalds have been face over a period of time and how effectively it addressing its incarnate social responsibility. The 2008 corporate social responsibility report has been critically evaluated and based on that it is determined, whether much of its efforts are provided descriptive or has been realistic. It uses various results from the data set based on the primary and secondary research to determine the effectives.It is the notion of an organizations debts to society, which led to the branch of ethics known as corporate social responsibility. This refers to the economic, legal, ethical, and philanthropic expectations placed on organizations by society at a given point in time ( Carroll and Buchholtz, 2000). This theory of responsibility to society is based around two headings, stated by rise up (1998). Social right deals with the purposes for which companies should act (Wells, 1998), and Corporate Responsibility is the liability committed to a company for actions done in its name (Wells, 1998).On 2002, McDonalds published its first Corporate Responsibility Report and this was followed up with an updated version in 2004. Neverthless many critics of McDonalds still believe that this, like many Corporate Responsibility Reports, is simply a medley of generalities and assumptions, that do not provide hard metrics of the company, its activities or its impacts on society and the environment (Hawken, 2002), and is peripheral to the shopping centre interests of an organization (Strategic Direction, 2002). Consequentially, there is a need to analyse the claims made towards McDonalds, and whether they have been resolved within the two Corporate Responsibility Rep ort. The incident which has done the most damage to McDonalds ethical reputation was the McLibel trial, where the company expected a quick conclusion to its action against activists who had distributed a pamphlet, Whats Wrong with McDonalds?. Instead it ran for two and a half years and became the longest ever English trial, upon its completion in June 1997 (McSpotlight.org The McLibel Trial, 2005).One of the main ethical criticisms consistently faced by McDonalds over the last 30 years relates to the food offered in its stores. Critics claim that McDonalds is a major contributing factor to the ver-increasing levels of obesity in the UK and European countries. Medical studies show that waistlines are expanding faster in the UK than in any other European countrywith 1 in 5 adults hazardously overweight (Walsh, 2003), while in 2001 it was reported that 300,000 deaths a year in the U.S. are related to obesity compared to 400,000 through cigarette smoking (McMans notion and Bipolar Wee kly, 2004). McDonalds contribution is a result of the unhealthy nature of fast food. For example, a meal of a Big Mac and medium hot up would provide you with 910 calories, as well as 46g of fat, 13g of which are saturated (McDonalds.com, 2005). Considering the fact that this is half the Recommended Daily Allowance for a female adult, it is clear that McDonalds does not meet U.S. dietary requirements. Apart from obesity, diabetes, high blood pressure, heart malady and some forms of cancer are related to a diet high in fat, saturated fat, salt and sugar (Inside the McLibel trial, 1995). The impacts of a McDonalds diet were clear shown in Morgan Spurlocks controversial film Super Size Me, where he ate nothing but McDonalds for one month. Although this was an extreme example, the impacts on Spurlock were dramatic. Spurlock gained 25 pounds, raised(a) his cholesterol by 60 points, dropped his libido and turned his liver into pate (McMans low and Bipolar Weekly, 2004). He also exper ienced headaches and depression, and actually became addicted to the products. The impact of a McDonalds diet on children is also a major ethical concern, as an increasing number of children are faced with obesity problems. Every month, 90 percent of the children between 3 and 9 in America visit a McDonalds (Schlosser, 2001). McDonalds has been criticised for exploiting children with advertising. They have traditionally aimed themselves towards children with collectable toys in Happy Meals, as well as colorful advertising campaigns and promotions in schools. well-nigh criticized is the use of the Ronald McDonald clown character, which has been seen as a cynical exploitation of children to use a clown to drum up business (Inside the McLibel trial, 1995). These marketing tactical maneuver contribute to the increasing unhealthy diet of many children. Stakeholders in a corporation may not only be human because animals are also seen as an important part of society and deserve the same treatment as humans. McDonalds has been criticized for the way it treats animals before they are killed and turned into fast food. The corporation is the worlds largest promoter of meat-based products, the largest user of beef and the second largest user of chicken (McSpotlight.org McDonalds and Animals, 2005), and thus is faced with the usual claims aimed at slaughterhouses. It is claimed that chickens were crammed into sheds with less than one strong foot of space per bird and no daylight (Inside the McLibel trial, 1995). As a result, 44% had leg abnormalities and other health problems (Inside the McLibel trial, 1995). This treatment was not just reserved for chicken but also other animals involved in McDonalds fast food products. 40% of piglets were held in indoor breeding units, and half had tails docked for no apparent reason (Inside the McLibel trial, 1995). Ethical criticism is also aimed at the methods for killing the animals. 14% of chickens received pre-stun shocks, which caused undue stress, while 1% (1,350 per day) were decapitated before being stunned (Inside the McLibel trial, 1995).As well as social ethical issues, corporations must also consider environmental ethics, which means treating natural resources not just as commodities, but as part of the ecological whole. It is important because it affects the image of the company and consumers perceptions. For example, a Wall passage Journal poll in 1991 claimed that 53% of people avoided purchasing a product because of environmental concerns about a product or manufacturing business (Hawken, 2002). The most famous environmental issue is the suggestion that McDonalds has destroyed hundreds of res publica of Brazilian rainforest to make way for large-scale cattle ranching. This not only removes a valuable natural resource, but also has an impact on global warming, as the rainforest is an essential mechanism for the tightness of Carbon Dioxide in the atmosphere.McDonalds also annually produces ove r a million tons of packaging used for just a few minutes before being discarded (McSpotlight.org Environment, 2005). Traditionally a number of ozone depleting gasses were used in polystyrene foam packaging. In the 21st century, McDonalds uses almo