Problem Background
McDonald’s is the world’s largest fast-food chain, with operations in many countries across the globe. Therefore, it is affected by many external and internal factors, with two worthy mentions being the economic factors and its relations with suppliers. The company faces a significant threat of customers avoiding fast food for healthier alternatives. However, it has an opportunity to boost its sales through online means and the strength of having a solid brand name. This paper will analyze McDonald’s external and internal environment and provide possible solutions for the future.
General Environment
The selected segment is economic since economic factors greatly influence organizations such as McDonald’s. The mean elements of the economic segment are inflation rates, interest rates, trade deficits or surpluses, budget deficits, personal savings rates, business growth rates, and the gross domestic product (Hitt, 5). Since McDonald’s operates in the food and beverage industry, it is susceptible to economic changes. When the economy is in a recession, customers may slow down on spending on snacks and fast foods offered by the company, which significantly affects its revenues. Conversely, when the economy is booming and customers have a lot of disposable income, they could end up overspending on McDonald’s products, demonstrating the company’s sensitivity to economic changes.
Economic forces also influence McDonald’s in procurement since they affect the cost of inputs, transportation, and labor. This trend is influenced by inflation and currency fluctuations, which economists say affect all supply chain sectors (Assaf, 6). Economic factors could also influence the company’s ability to access funding through investments or credit.
When the economy is in a recession, it is harder for McDonald’s to attract investors, unlike when it is doing well. Additionally, economic factors influence the interest rates charged on loans, which could increase the cost of capital for McDonald’s loans. Compared to all other segments, economic factors have a more significant influence on the company.
Five Forces of Competition
Of Potter’s five forces, McDonald’s is more likely to be affected by the bargaining power of the suppliers than the other forces since it affects the cost of production, final price, and the company’s profitability. The company has addressed this force effectively in the past five years through scanning, monitoring, forecasting, and assessing. McDonald’s has regularly scanned the supply market, identifying early signals of environmental changes and trends (Hitt, 5). This has included monitoring key ingredients such as beef, chicken, and potatoes.
The company has also been closely tracking suppliers to ensure that there are no outages and that it procures from the cheapest supplier. From its monitoring sessions, the company has employed experts who can make future predictions and forecasts of the supply market. Finally, McDonald’s has been assessing the external supply environment to check for changes in the supply trends.
Future Improvements
Based on McDonald’s historical information, it can be predicted that the supply force will continue to be significant to the company in the next 5-10 years. McDonald’s should thus ensure that it diversifies its supplier base, as studies have shown that it increases the company’s bargaining power and reduces the risks of supply chain disruptions (Shahana and Babbitt, 1). The company should also consider investing in vertical integration, where it sets up its supply centers, further reducing the supply chain risks. To address the supply chain force in the upcoming years, the firm has to ensure that it creates a good relationship with its suppliers, which could result in better deals. Moreover, it is recommended that McDonald’s leverage the technology and keep a record of all its supplies and supply needs.
Greatest External Threat
The most severe threat facing McDonald’s today is the increasing trend towards healthier eating habits and the need to reduce fast food that is high in calories, fat, and sodium, which are McDonald’s main products. The shift towards healthier eating has seen McDonald’s revenues decline, reaching their peak in 2011 and 2012, but have since plateaued and started reducing in recent years, leading into 2023 (Macrotrends, 4). To address this concern, McDonald’s should consider diversifying its activities and innovatively making fast food healthier.
The recent introduction of plant-based meat by McDonald’s in 2020 helped drive sales and attracted health-conscious clients (Peter, 3). Moreover, fast food industries offering healthy fast food, such as Subway and Chipotle, have enjoyed increasing revenues (Yeasun Chung and Jun, 7). Therefore, introducing healthier food alternatives will positively impact the company’s revenues.
Greatest Opportunity
The most incredible opportunity available to McDonald’s is selling its goods and services online. The opportunity is significant because it will allow the company to be scalable and reach all its clients more effectively and efficiently. Studies have shown that organizations in the food and beverage industry with efficient online delivery systems enjoy more profits (Marc, 2). The COVID-19 pandemic has also changed customers’ habits, and a shift from traditional store purchases to online ordering has been observed (Marc, 2).
To fully take advantage of this proven opportunity, McDonald’s should set up good strategic plans to facilitate a flawless transition into an online food and beverage supplier. The process would entail investing in technologies that will improve the online shopping experience for its clients and streamline the supply process for its employees. McDonald’s should form strategic partnerships with supply companies such as Uber Eats and DoorDash, enabling easy access to all its clients.
Strengths
McDonald’s greatest strength is its global reach, and it has a strong, recognizable brand thanks to being in the industry for many years. The company can use its strong brand image to diversify both in terms of operations and geography. Recently, McDonald’s has ventured into new regions such as China, India, and other highly populated Asianic countries, but its operations have yet to reach most parts of the country.
Therefore, the company should invest more to reach all major cities in China, India, and other countries where it has recently set up its operations. Emphasizing core values and being committed to corporate social responsibility (CSR) strengthen a company’s brand image (Hitt, 5). The company should maintain its brand image through various CSR strategies, such as offering healthy foods, ensuring the sustainability of the environment, and participating in social events in the regions where it operates.
Weaknesses
The greatest weakness of McDonald’s today is its bad reputation for offering unhealthy food products. The company is associated with high obesity and other health problems in the US. McDonald’s could address this problem by being more transparent about its products and showing the possible consequences of consuming each product. The company could ensure this by understanding the changing nature of the environment and customers’ tastes and preferences (Hitt, 5). Adopting this transparency strategy, the retailer could attract health-conscious and cautious customers into its stores.
Sources
Althaf, Shahana, and Callie W. Babbitt. 2021. Disruption Risks to Material Supply Chains in the Electronics Sector. Web.
Helmold, Marc. 2020. Total Revenue Management. Springer International Publishing.
Jones, Peter. 2022. Plant-based Food in the Hospitality Industry: An Exploratory Case Study of Leading Fast-Food Outlets. Web.
Macrotrends. 2022. McDonald’s Revenue 2006-2019. Web.
Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization. 13th ed. Cengage Learning.
Razin, Assaf. 2020. De-Globalization: Driven by Global Crises? National Bureau of Economic Research. Web.
Yoon, Borham, Yeasun Chung, and Kyungyul Jun. 2020. Restaurant Industry Practices to Promote Healthy Sustainable Eating: A Content Analysis of Restaurant Websites Using the Value Chain Approach. Web.