External Analysis (PESTEL)
From the case study, it is apparent that McDonald’s is a successful business with several opportunities and threats that should be addressed for it to remain viable.
Political Factors
The significant political factors affecting McDonald’s are trade agreements, tax reforms, and public health policies. Based on the improved local and international trade, McDonald’s has an opportunity for further expansion. Moreover, the company might consider reforming its business practices to minimize the potential impacts of tax reforms. The public healthcare policy encouraging healthy living is a threat to this fast-food establishment.
Economic Factors
McDonald’s has an opportunity for growth with the improving internal and external market economies. However, the slowdown in the economies of some external markets is a threat. For instance, the financial performance in the external market has not been stable in the last couple of years.
Sociocultural Factors
The widening wealth gap, increasing cultural diversity, and healthy living are the sociocultural factors impacting McDonald’s business environment. The widening wealth gap is an opportunity since McDonald’s prices are affordable. Moreover, the increasing cultural diversity in the US and other markets is an opportunity for the business to improve its current product-mix to appeal to diverse markets. However, the healthy living trend is a threat since McDonald’s products are perceived as unhealthy junk food.
Technical Factors
The success of McDonald’s is dependent on technological applications in managing the drive-throws, ordering systems, and the entire supply chain. The increasing automation of the business is an opportunity in addition to increased sales supported by mobile app services.
Environmental Factors
The increasing campaigns on sustainable business are an opportunity since McDonald’s is at the forefront in supporting such initiatives. However, climate change is a threat since most McDonald’s products are plant and animal-based.
Legal Factors
The local public policies are a threat to McDonald’s since the cost of meeting minimum health and safety standards is very high. The minimum wage bill in the US market is also a threat.
Competitors
The main competitors of McDonald’s are Burger King, Wendy’s, Taco Bell, Fast Casual, and Subway. These establishments are very successful and have cut a market niche for themselves. The competitors offer perfect substitute products. This means that they have similar food menus as MacDonald at competitive prices. At present, the competitors are a real threat to McDonald’s dominance in the US fast-food market and beyond because of competitive pricing and similar food items.
Business-Level Strategy
McDonald’s has been able to survive the impact of competition through strategic pricing and product diversification. At present, McDonald’s has more than forty products that are bundled under very competitive prices. In addition, the McDonald culture has been deeply rooted in the US through a series of successful promotional strategies such as discounts and group menu packages. However, McDonald’s is currently grappling with the challenge of product quality, labor, and how to appeal to the millennial customer segment. These challenges have resulted in a serious identity crisis for this business with a household name in the US.
Strategic Recommendations
McDonald’s should consider image rebranding and adjusting the taste of its menus. Moreover, the business should improve on the service delays when implementing a product diversity strategy to appeal to the millennial customer segment. The company should also consider streamlining its financial management to progress on accountability to minimize losses as a result of wastage and poor decision-making. However, these recommendations should be integrated into the proposed image rebranding.