Macro and Micro Environment Analysis of McDonalds

Macro and Micro Environment Analysis of McDonalds2. Literature ReviewThis section provides a broad come across of the dissertation that includes setting up the arameters and limits to the field of inquiry going into the query. Its aim is to identify key ideas, solid food grocerying theories applicable and marketing case studies that impinge upon the field of view of this investigation. It makes an impelling starting point leading into the introduction and the background of the dissertation.2.1 Macro Environment Analysis of McDonaldsThe analysis is done using a top waste approach w here(predicate) first the Macro Environment and then the Micro purlieu has been examined, in which McDonalds operates.2.1.2 Internal AnlaysisInternal Analysis is done using Value concatenation analysis. The term entertain reach was used by Michael Porter (1985) in his book militant advantage creating and sustaining superior performance. Brown (1997),described value chain as a shaft to disaggreg ate a barter in to strategically relevant activities.In McDonalds case, the key value adding activities are inbound logistics, operation, outward logistics, marketing sales and service. McDonalds logistics function is to buy nutrition on behalf of its operator (franchisee) and arrange delivery in to their eating houses. McDonalds logistics includes the procurement and shipment of raw materials in to suppliers, the procurement and shipment of finished undecomposeds between the suppliers and the distri exactlyion centres, together with the warehousing at each distribution centre, the ordinance and the delivery to restaurants of all food, packaging and operate supplies. To alter its logistics operation, McDonalds combines a number of food- going marks dedicated to its operation only. The establishment of food towns consisting of a distribution centre and a bakery, a meat plant, a sauce plant and a chicken plant, gives McDonalds competitive advantage.The supporting activitie s that can be identified are procurement, human resources development and technology. McDonalds uses electronic procurement system. It had set logistics trends for restaurants with its online ordering system. It was illustrious that to a greater extent than 12% of McDonalds franchisees ordered food supplier electronically. Revamping its supply chain with software and technology made it easy to respond quickly and efficiently to customers contracts. With the online ordering system, McDonalds had a return on investment of 23.2% in 2008. However, the human resource development at McDonalds is excellent. McDonalds uses a high-engagement approach to improving both their operations, leadership air and employee bliss with their career growth. Every management staff at McDonalds receives tuition at one of the regional training centres and at the national centre, Hamburger University in East Finchley. Training all employees to work in one best itinerary (quick-service culture) made McD onalds to gain customers trueness continuously leading to a competitive advantage.2.1.3 External AnlaysisPEST analysis is applied for an in depth encountering of macro environment in immobile food industry where McDonalds operated. Kotler (1998) charters that PEST analysis is a useful strategic tool for thought market growth or decline, business enterprise perspective, potential and direction for operations.POLITICAL The operations of McDonalds are bear upon by the regime policies on the regulations of unshakable food operation. Currently government are controlling the marketing of fast food restaurant because of health affect such as cardiovascular and cholesterol issue and obesity among the young and children in the country. Governments also control the license give for open the fast food restaurant and different business regulation need to follow such as for a franchise business. Good relationship with government in with child(p) mutual benefits such as employment a nd tax is a essential for the play along to succeed in any foreign market. McDonalds should also protect 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.ECONOMICS As a business entity, McDonalds need to face a lot of economic variables outside its partnership or its macro environment. Dealing with international sourcing for its material McDonalds should be aware on the global supply and currencies exchange. Remember, McDonalds import most of its raw material such as beef and potatoes due to local market cannot supply in plethoric to meet the leave in of its production. Any upside of currencies especially dollar go forth be impacting its cost of purchase.Working on the local country, McDonalds must face government regulations on tax of profit where it gains from the operation and some other tax such as entertainment and restaurant service tax. Each co untry may take a shit different 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 percentage of the taxation to the parent union in United States. The economic condition and growth of the country also is an important indicator to the demand of products that McDonalds offered. As the food hurtd pretty above normal foods, not many community will piss the income range to consume the products. Moreover if the economy is bad and income percapita is affected, the demand of McDonalds product will certainly going down. On the other hand the good economy also means disposable income is more 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 taking into consideration. While more people are able financially to eat at more expensive outlet such as f ast food restaurant, they have higher expectation. They want to have quality 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 cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For eccentric in India people (Hindu) do not take beef, Moslem countries do not take pork, German like beers, Finnish like fish type of food menu, Chinese like to associate food with some social function good (for example prosperity), Asian like rice and Americans eat in big-sized menu. So far McDonalds has shown good efforts in localization of its menu to suit local savor but it should constantly survey and l earn about 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 impact on the beau monde 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 legal and cost saving in the long term. This will also make customer happy if cost savings results in price reduction or processional 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 match to Muslim co nsumers. McDonalds should protect its integrity and consumer confidence by ensuring all materials and process are as claimed or must followed. Other legal requirement that the business owner should follow as stipulated in laws are such as operating hours, business registration, tax requirement, excavate and employment laws and quality environment certification (such as ISO) in which the outlet has been certified. The legal 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 chicken, McDonalds always had been critics for world environmentalist. This is because high consumption of beef causing the greens house effect by methane gasses coming from the cows ranch. Large scale grove has effect the environment and lost of green forest 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 endangered species. Before using writing packaging, once McDonalds also had been criticized for macrocosm insensitive to pollution because using polystyrene based packaging for its foods. Imagine millions of people purchase from fast food operator and how is the impact to world environment by throwing away those hard to recycle packaging. Our world is getting concern on environment issue and business operating here should not just care for profit, but careful usage of world resources for sustainable development and care for environment safety and health for our future generation. Critics and concern from all public or activist should be review and support if necessary to ensure we play our social responsibility better.2.2 Market PositionMcDonalds is operating in a very competitive market. In order to maintain on the top position of the opposition, it is importan t 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 five competitive forces that shape every single industry and market.Supplier PowerIf suppliers have strong bargain power, competitive pressure will be greater (Pearce and Robinson, 2004). McDonalds works in partnership with most of their suppliers to protect the quality of their foods and minimise the bargaining power of suppliers.Buyer PowerConsumers buying power in the food market is high. With the continuously changes in tastes and the improverd concern in healthy 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 SubstituteThe threat of substitute is high in the fast food market due to the strong competition and the increasing make out of brisk to eat foods. Customers have many choices other than McDonalds, and ready to eat meals are cheaper and convenient.CompetitionThe competition in the fast food market is very high. McDonalds has to cope with strong competitors like Burger King, Pizza Hut, Wendy and KFC.Threat of EntryThe threat of new entrant is low in the fast food industry because of the amount of competition with the big players in the market. New entrants will not likely to win due to lack ok economic of scale. The fast food industry is highly competitive. Taking one step further from the internal analysis, in this chapter, external analysis was done so as to determine where McDonalds I positioned in the market, wedded the intensive rivalry. PESTLE is used to gather data for completion of this analysis. From the data using PESTLE, swot analysis is done to determine 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 a nalyzing PEST and SWOT an understanding of boilersuit of the companys power and how it can grow, is established. This was done keeping the focus on Western European Market and the Middle east. 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 MCDonalds competitive advantage and its uniqueness to gain broad target in the aforementioned markets.2.3 Marketing strategy and immixEvery organisations need to identify their strategic aims to be able to have a direct focus of what and when to achieve it within a given time. This is usually based on the organisations limited resources and capabilities. As (Barney 1991), stated an or ganisation 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 objectives and the effectiveness of the global 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.After analysing the market and environment of McDonalds, this chapter focuses on the plans and strategies adopted by the company to overcome its weaknesses and avoid the threats. It uses motley 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 close to a common missio n with a common set of customer focused goal oriented actions. It was called McDonalds designing to Win which was to put the companys concentration on the five drivers of exceptional customer experiences Product, People, Place, advancement 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 established its revitalisation plan in the European and the Middle East markets.While doing the seek 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 enhance 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 unanimity 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 beingness able to adapt to a specific environment. It has a pricing strategy 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 ad vertise 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 th at marketing managers can control in order to best satisfy customers in the target market. (Please refer to appendix 2 for further information on the 5 Ps)ProductThe adjacent are the strategies applied by McDonalds on their ProductsTo satisfy customers desire for premium products at low-cost prices.More choices on the Happy 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 increased concern on health eating.McDonalds is controlling the quality of the foods by working 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 working 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 RecognitionValues and Leadership BehavioursCompetitive Pay and BenefitsLearning, Development and Personal growingResources to Get the Job through with(p)PlaceMcDonalds 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 minutes away by foot in the city or by car. The following are McDonalds strategies on PlaceTo make the environment the g old 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 while enjoying their foods.Giving customers more reasons to visit McDonalds by adding more products offering such as coffee and to locate in the right place.Relocating, renovating and rebuilding 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 advertising spending and broaden their reach through public relations and by placing adverts in media well beyond the traditional prime-time network television format. The objective of spending so much money on promotion is to build brand loyalty and bonds of trust. The following are the strategiesThe new creative brand direction Im Lovin It is design ed to connect with customers around the world, especially young adults, moms and kids. It has became McDonalds signature brand voice in 119 countries, generating cognisance 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, study trends and find inspiration to create world-class advertising.PriceMcDonalds has a rigorous 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 orderSelecting a final price (www.mcdonalds.com)2.4 Performance MeasurementQuality is an impor tant 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 forwards 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 three 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 Company and has relied on its franchisees to play a major role in its success. McDonalds remains committed to franchisi ng 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. ad is used to differentiate McDonalds products from competitors and as a means of branding Advertising Spend in 2001 amounted to 39m (KFC 14m, Burger King 8.6m, Pizza Hut 7.4m).Furthermore, McDonalds is involved in various high profile sponsorship schemes (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 lily-livered 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 law of continuation of good products such as Big Macs and Cheeseburgers. Also, they are well aware that if McDonalds has too many products running at the same time then the promote 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 ranked as last out of 60 chains for taste. Statistics that describe McDonalds cleanliness are no t 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 renowned 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 gild and the environment. However many ethical issues are subjective and based on ones set and beliefs. As a result, they are often difficult to enforce and easy to neglect. The result of this is that when the costs are added up, the social balance sheet contains enormous debts to company (McEwan, 2001).This chapter discusses the ethical issues that McDonalds have been facing over a period of time and how effectively it addressing its corporate social responsibility. The 2008 corporate social respons ibility report has been critically evaluated and based on that it is determined, whether much of its efforts are just 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 Wells (1998). social Responsibility deals with the purposes for which companies should act (Wells, 1998), and merged Responsibility is the liability attached 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. Nevert hless many critics of McDonalds still believe that this, like many Corporate Responsibility Reports, is simply a potpourri 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 core 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 Report. 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 slope trial, upon its completion in June 1997 (McSpotlight.org The McLibel Trial, 2005).One of the main ethical criticisms consistently faced by McDonalds o ver 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 dangerously overweight (Walsh, 2003), while in 2001 it was reported that 300,000 deaths a year in the U.S. are link to obesity compared to 400,000 through cigarette smoking (McMans first gear and Bipolar Weekly, 2004). McDonalds contribution is a result of the unhealthy nature of fast food. For example, a meal of a Big Mac and medium fries 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. fodderary requirements. Apart from obesity, diabetes, high blood pressure, heart dise ase 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 clearly 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 his cholesterol by 60 points, dropped his libido and turned his liver into pate (McMans Depression and Bipolar Weekly, 2004). He also experienced 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 c ollectable toys in Happy Meals, as well as colorful advertising campaigns and promotions in schools. Most 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 tactics 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 square 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 cleansing 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 Street Journal poll in 1991 claimed that 53% of people avoided p urchasing a product because of environmental concerns about a product or manufacturer (Hawken, 2002). The most famous environmental issue is the suggestion that McDonalds has destroyed hundreds of acres of Brazilian rainforest to make way for large-scale cows 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 compactness of Carbon Dioxide in the atmosphere.McDonalds also annually produces over 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