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McDonald’s Competitive Strategy and Management Research Paper

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Updated: Jun 20th, 2020

Executive summary

This report was prepared for McDonald’s to assess external factors that are impacting the organization’s competitive strategy. Chart one highlights the PESTEL analysis with regard to political/legal, economic, socio-cultural, technological, and ecological factors that are influencing the performance outcomes of the business establishment. Chart two is utilized to further analyze the important external forces that could bring the most essential business opportunities and threats. Finally, will aim at offering some important recommendations that could be adopted by the management so that the firm could realize excellent performance outcomes on the platform of gaining and maintaining a competitive advantage.

Analysis

Political/legal forces Economic forces Socio-cultural forces Technological forces Ecological forces
– High taxation rates
– Protests from health groups
– Unfavorable tax laws
– Strict employment laws
-Changing inflation rates
– Unfavorable exchange rates
-Majority of customers understand English
-Changing lifestyles support fast food
-Rise of the middle class
-Online transactions
-High uptake of technology
-Hi-tech advertising
-Effective inventory system
-Environmental damage
-Use of non-biodegradables

Figure 1. A chart representing the political/legal, economic, socio-cultural, technological, and ecological forces of McDonald’s.

Political/legal forces

The operations of all multinational firms are influenced by policies of nations in which they conduct business. In fact, management teams of organizations closely analyze policies of a state before establishing markets in them. McDonald’s has been adversely affected by policies in some countries (Arthaud-Day, Rothaermel & Collins, 2014; Rothaermel, 2013). For example, in the US and Europe, governments have been petitioned to declare various types of fast food unhealthy for human consumption. The argument has been that it could lead to health complications, such as obesity and cancer. Tax laws have the potential to support or deter the growth of the organization in many countries (Arthaud-Day et al., 2014).

For example, in countries where tax laws are conducive for foreign firms, then it would be expected that the performance outcomes of McDonald’s would be realized. On the other hand, it would be futile operating in states with very strict tax laws. From a general perspective, the company is experiencing high taxation rates across the globe. Global labor unions are protesting in order to allow their members to have better labor conditions in both local and foreign firms. This could impact the firm negatively because it would be required to hire more workers in the context of restrictions on less working hours (Rothaermel, 2013).

Economic forces

Multinational companies could be negatively impacted by inflation and exchange rates. For example, high inflation rates in many global markets would imply less spending by consumers. In addition, high interest rates would prevent individuals from seeking loans from banks and other institutions. Thus, there would be less money to be spent on fast food offered by McDonald’s (Arthaud-Day et al., 2014).

Socio-cultural forces

It is essential for the management of McDonald’s to identify the social and cultural aspects of global markets so that the company can record excellent sales. The organization has been recording good sales in the past because of the huge investments it puts in understanding the attributes of its customers across the world (McDonald’s, 2014). Through frequent surveys, the firm was able to determine that most of its customers were aged less than thirty-five. The rise of the middle class could positively impact the organization. In addition, lifestyle changes are also ensuring that many potential customers are adopting fast food, which is the focus of McDonald’s (Arthaud-Day et al., 2014; Rothaermel, 2013; Mishra, 2013).

Technological forces

The adoption of technology has impacted many businesses in many ways. The company utilizes television to advertise its products. In fact, the advertisements are based on the platform of sound technological applications. In addition, technology has resulted in better inventory system and supply chain, which imply better operations of the firm. With the rise of the internet, it could be expected that sales would increase due to online sales and marketing (Strategic Management Insight, 2013).

Environmental forces

Environmental damage is a sensitive issue in global businesses. In the recent past, the company has been accused of damaging the environment through the adoption of non-biodegradable materials. For example, it has been argued that glasses and Styrofoam coffers that are used by the business establishment are not good the environment (Rothaermel, 2013).

Opportunities Threats
-Increase in franchises
-Increase in global population
-Health commitment
-Excellent innovations
-Business legal threats
-Campaign by main competitors
-Protests from parents
-Food contamination

Figure 2. A chart representing the opportunities and threats of McDonald’s.

Opportunities

Opportunities are important factors that would present an organization with an excellent avenue for growth and expansion. With regard to McDonald’s, opportunities present it with an excellent platform on which to base its international operations in order to realize better performance outcomes. The enterprise is characterized by an international brand, which is supported by a considerable network of franchises spread across the world. In the end, the network will provide the firm with an ideal approach to growth. High-level innovation helps the company to produce high quality products that capture the attention of customers (Arthaud-Day et al., 2014). The ever increasing global population would lead to increased consumption of products that are sold by McDonald’s (Rothaermel, 2013; Strategic Management Insight, 2013).

Threats

Business threats could negatively impact the multinational company. In fact, it should try to minimize the number of threats in its markets. Legal suits against the firm on the premises of its advertising could reduce its revenues. Stiff competition from other established firms in the food industry could make the business outfit lose many of its customers (McDonald’s, 2014). In fact, the most established business rivals of the firm are Burger King that operates in about 20 countries and Wendy’s, which has branches in over 28 countries (Arthaud-Day et al., 2014). In addition, parent organizations have been petitioning the firm against selling fast food to children because it causes obesity (Rothaermel, 2013; Strategic Management Insight, 2013).

The most important forces for the firm to address

McDonald’s should focus on addressing ecological and socio-cultural forces. If it addresses ecological forces, then it would imply that it would not be banned to operate in some countries due to ecological malpractices. A thorough understanding of the socio-cultural aspects among populations would result in increased sales because the management would execute best approaches to dealing with diversity.

Conclusion and recommendations

It is apparent that McDonald’s is a global brand whose performance has been quite good, but for the year 2013. The management should work toward implementing strategies that would reduce the level of competition from competitors by being more innovative and using other aspects such as lower pricing. It should also take advantage of the growing global population to open branches in more markets so that to record higher sales in the future. In addition, it would be important for the firm to continue with its commitment to producing healthy food products, which would not cause an alarm to consumers. In fact, it can do that by changing its product refining approaches. Finally, as shown in the PESTEL analysis, the multinational firm has a brighter future, which would be supported by innovation.

References

Arthaud-Day, M. L., Rothaermel, F. T., & Collins, J. (2014). Web.

McDonald’s (2014). . Web.

Mishra, L. (2013). Subway Customer Loyalty And Evaluating Marketing Strategies. Journal Of Business Management & Social Sciences Research, 2(11), 17-30. Web.

Rothaermel, F. T. (2013). Strategic Management (2nd ed.). New York, NY: McGraw-Hill Education. Web.

Strategic Management Insight. (2013). SWOT analysis of McDonald’s. Web.

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