MacDonald Food Company - Environmental Analysis - Case Study Example

McDonald INDUSTRY Student's name Code & Course Professor's name University City Date 1.0 Introduction MacDonald Food Company in India experienced an incredible enlargement in the year 2001. It expanded its functioning market in India and globally. The company's outlet in 2003 expanded from 15 to 80, and a sum of Rs. 10 billion from Rs. 46.50 million in 2001. The operation of this company was operational for long with slight profits. In a period of three years, the company posted a great achievement regarding product delivery in the global market. Despite low returns on sale, Jasia is hopeful and taunts to invest extra in infrastructural growth strategy. Many people questioned the McDonald's investment move yielding low profits from it. A huge percentage of capital, over 30 million was required for the venture, India available market for this products was low i.e. low demand potential. As such, Investors viewed MacDonald business as unproductive. McDonald interrogated the market strength, weaknesses opportunity and threats to its sustainability. (Mcdonald & Wilson 2016) 2.0 Report findings. It refers to the analysis of the external and the microenvironments where the company operates. It is an analysis of the political, economic, social, technological, environmental and the legal conditions that exist in an area where a firm operates. McDonald company being a global business maneuvers across many borders and its performance can be boosted or stalled through an analysis of the above factors. (Macdonald, 2016) Figure 2.1 A model showing PESTEL analysis of McDonald food company 2.1.2Political factors The company functions in different countries, and it is inclined by the individual policies enacted by the states of the establishment. For instance, the tasks of the McDonald company in India and USA have been stalled by a group of people who interrogates the health implications of public consuming fast foods. The groups articulate that fast food has components such as cholesterol and can also lead to obesity. The set-ups of the company typically guided by the policies and regulations fixed by the board have collided with the state set rules regarding the company operations such as the quality assurance and the countries employment laws. The licensing of the restaurants in some countries has hit hurdles with the host countries raising their conditions restaurant set up at par. More so the product design and marketing by the McDonald company especially in India has faced challenges due to the strict Hindu customs and beliefs concerning products with meat content. Some countries where the company operates have set high tax rates which call for the compliance by the firm such countries include India and USA.(Macdonald & Wilson, 2016) Therefore, for the company to cope with this conditions it has to establish policies and regulations that align to the host countries rules. For instance, it has to abide by the employment regulations and source from within to avoid the conflicts with the government. Also, the company has to ensure that fully adheres to the state and government laws on tax. 2.1.3 Economic factors These factors often come as critical issues to business organizations. For instance, many companies are affected by the present global financial cyclic downturns. Due to the global business operations, McDonald faces different scale of tax and revenue estimations in the various countries. This company is also exposed to the international currency fluctuations mostly in its global food distributions. The inflation which has hit its potential markets has caused a drop in the sales because customers have now prioritized other things to foods offered by McDonald and some even deem them as being luxurious and unaffordable. The economic conditions of the locals also affect the activities of this company. This is because if the financial situation of the locals worsens, the people gets discouraged to spend more money on food. This issue directly affects the company's sales.(Grant, 2016) 2.1.4 Social Factors The people have over the past years changed their lifestyle which has directly impacted McDonald business. The people expects the highest level of service and the modern and latest facilities from a hospitality firm this is tied to the change in mindset as a result of modernity and people relocating to the urban centers. This change in demand varies from society to society and country to country making it almost impossible to predict the demand and therefore generate important decisions concerning productions and marketing trends. For instance, in India, the Hindus prefer vegetables whereas the Muslims avoids pork. Therefore, to cater for and fulfill the customers' expectations, the company needs to research the market and establish a relevant food menu for the customers. (Ward et al 2017) 2.1.5 Technological factors The effect of the technological advancement is also considered as a factor of satisfying the customer's needs. For example, with the competition between KFC and pizza hits up, the company has to ensure that all technological access is secured to reach many customers and try to influence them. Establishment of new and faster mediums, quick and easy to use payment facilities, customer's leisure equipment, wireless internet if put in place can help MacDonald to have a cutting edge in the market and build on its present success. 2.1.6 Environmental Factors The company is condemned of using of using harmful elements such as non-bio gradable substances for its drinks glasses and bottles. The use of Styrofoam containers in meals calls for criticism and should be discouraged. The environmentalists have criticized the company for using polystyrene to package its food. Therefore, for the greater interest of the environment franchisees should be aware of this and use an alternative way of packing food to conserve the environment. 2.1.7 Legal Factors It is essential for a business to follow the established rules and procedures in all its operations. This will take the line of registration, safety regulations, stuff laws and tax payment. In the Arabic countries or the Muslim-dominated environment it is core to having Halal food authorization, and therefore McDonald should care and respect the customer's belief on it. If the company obeys the legal process, then not only will it benefit the business but also the society as a whole. This issue calls for this food giant McDonald company to hit the line in ensuring serious responsibility regarding legal obligations. The company should research the needs of different states and governments concerning the legal requirement to avoid penalties as a result of faulting the law in various areas of operation.(Macgoldrick & Liu 2017) 3.0 Industrial analysis The food industry is one of the oldest industry globally. It erupted as a result of agricultural revolution to enhance the economic stability of individuals. Up to date, the industry has gone through a vast improvement from the use of ineffective tools. In the contemporary world, the industry has adopted the use of machines in food production and processing. Information technology like the use of website has made it easier for this industry increase its market. Athletes, politicians, and tourists are the principal perpetrators of the growth of this industry. Developed states like U.S.A, Japan, and Australia depended on this industry as an economic activity. This trait was adopted by other countries acting as a source of employment for many people. (Kuo et al , 2016) Political will in conjunction with trade unions made an agreement to foster this industry by constructing and improving more food processing companies for economic sustainability. Different forces which the operational system of this industry include; suppliers, competitors, customers, the public, and intermediaries. This is as shown in the model below. Figure 3.1 a model of the industrial analysis Food industry 3.1.1Customers Food industry targets customers globally. Different companies provide different tastes and preferences for customer's choice. This industry has a freedom of entrance and exit provided that the health status of the products offered will be followed. Client satisfaction is essential in this industry. Tentatively, advertisements are done by different companies to meet the global market. Customer care desk in this industry must be operational and must possess etiquette servers. (Kim et al 2016) 3.1.2Competition Competition is allowed in any given industry. In the food industry, different companies are stipulated hence increasing competition. MacDonald Company competes with Pizza Hut, KFC, and Burger King among other food processing companies; this makes it easy for customer choice and price stability, an advantage to the buyers. There is a favorable competition where these companies deal with different lines of products. (Martin et al 2017) 3.1.3 Suppliers In this industry, vendors are categorized into two. Direct and indirect suppliers. There are those businesses that obtain raw materials from the intermediaries or directly from the producers. The companies should have trust and close relationship with its suppliers for current production. In this industry, the suppliers influence the profits yielded as they determine the quantity and quality of the products to be produced. The vendor selected by a company in this industry must abide by the state's health act. 3.1.4 The public The integrated external groups play a role in the food industry. For instance, the relationship between a given foods processing company with the social media and customers increases the market for its products. The government and financial institutions can provide loans and grants for company's operation. Infrastructure, subsidies and reduced taxes by the central and local government increase returns of companies in this industry. (Kim et al 2016) 3.1.5 Intermediaries Interdependence with other companies formulates a profit generating strategy. The interrelationship of this industry with tourism and transport industry increases its productivity. Many tours are prone to sleeping in hotels and restaurants. As a result, there is increased market for any company dealing with food processing business. 3.2 Limitation of this industry Several limitations crop up in this industry. The element of people's health limits its operational system. This industry must adhere to the health standards of its customers hence restricting the freedom of entry by many companies. Tentatively, competition is huge I this industry. Due to many companies offering the same service to customers, there exist an element of price fluctuation due to price differentiation by different companies. This issue deprives many firms profit maximization strategies. High taxes imposed by the central and local government halts the profit-making mechanism. There is a limitation of capital base for this industry. As such, infant companies find it hard to survive in the competitive environment. (Kuo et al 2016) 3.2.1 The potential directions available and the future growth. McDonald company operates in a very competitive environment and should, therefore, develop valuable and competitive customer friendly packages to tap the high customer range. The company owes to twist its segmentation, targeting and positioning strategies to engage many clients. The products match mostly favors the children and the youths, and they start producing foods that are adult friendly. This plan will automatically come with fiscal implications but none the less it will be profitable in the long run. The segmentation and positioning strategies should be reviewed to cover both urban and rural areas. The company should set up restaurants in the rural areas to tap the high customer base before other companies explore this potential.(Reinhard, 2016) The company has to improve on its promotion techniques. This can be done by using speedy advertisement methods that ensure high customer access. The Internet can be the best place for the company to market its products. The new products that break into the market should be sold at promotional prices such' buy one get one strategy.' Consequently, the products can be offered for free to the customers until they gain high acceptance. McDonald's company should do proper price settings by analyzing the costs by the competitors and also improve on the product brand while employing low-cost strategies without limiting the brand quality. (Reinhard, 2016) These strategies come with limitations because the customers always consider free products to be attached to low quality. Therefore, it needs high levels of customer education through various awareness campaigns. 4.0 SWOT analysis of MacDonald Food Company Strength McDonald's company records an attractive, expensive and busy infrastructure like all shopping malls, airports and classic restaurants for its operational system. The company enjoys a huge global market share for instance, in 2009, it recorded very high returns of $58 billion. It is a food giant globally with minimal competition hence dominating the market. McDonald's company has operated for more than 60 years. As such, its operational strategies are up to date with experienced workers. Offering community based support, it has been rated the based industry in India and globally. Active supply sequence, effective communication mix and supervision of quality and proper food quantities makes the company strong. Workers provides steadfast services hence increased customers. Weaknesses Company returns variations displays a great downfall. Net profits in 2006 were $3,544 million reducing to $2, 395 million in 2007. The high worker turnover portrays a feeble pattern of its staff. Its adverts mostly target the children disregarding the old and working population. As such, returns becomes low. The castoffs of food are slated by the company. There is stumpy food novelties by the company as it stick to the oldest ways of food preparation and brands. Opportunities By inventing new food McDonald's can attract more customers and successful innovation can boost up its sales. More so, there is variety of products provided under one roof. This encourages customers demanding variety of food products. The sale of McDonald’s food has been enhanced by inventions of novel food products. As such, the company has attracted many customers using dissimilar food globally. Tourists from vast parts of the world prefer this company due to variety of food available. Entertaining elements captivated by technological advancement in the area can attract many customers. Technological advancement can as well foster its marketing strategies to meet global market. Economic strike can make people disregard other products but not food this makes this company have steady customers throughout the periods. In such condition, the company is ready to set affordable prices at any given period. Threats This company is threatened by the health issues. It is always criticized by the health state officials. Operational structure of this company is affected by the currency fluctuations in the global market. Devaluation of currency affects this company negatively as it receives little foreign cash. Competitors like KFC, Pizza Hut Burger King etc. are working. These companies compete for customers which reduces their sales in long run. To attract more customers, the competing company reduces prices for its products. McDonald company in tern reduces the prices of its products which reduces their returns. Strength McDonald's company records an attractive, expensive and busy infrastructure like all shopping malls, airports and excellent restaurants for its operational system. (Das, et al 2016) The company enjoys an enormous global market share for instance, in 2009, it recorded very high returns of $58 billion. It is a food giant globally with minimal competition hence dominating the market. McDonald's company has operated for more than 60 years. As such, its operational strategies are up to date with experienced workers. Offering community-based support, it has been rated the based industry in India and globally. Active supply sequence, effective communication mix, and supervision of quality and proper food quantities make the company strong. Workers provide steadfast services hence increased customers. (Dey, 2016) Weaknesses Company returns variations displays a great downfall. Net profits in 2006 were $3,544 million reducing to $2, 395 million in 2007. The high worker turnover portrays a feeble pattern of its staff. Its adverts mostly target the children disregarding the old and working population. As such, returns becomes low.(Grant, 2016) The castoffs of food are slated by the company. There are stumpy food novelties by the company as it sticks to the oldest ways of food preparation and brands. Opportunities By inventing new food, McDonald's can attract more customers, and successful innovation can boost up its sales. More so, there is a variety of products provided under one roof. This encourages customers demanding a variety of foodstuffs. (Goen et al 2016) The sale of McDonald's food has been enhanced by inventions of novel food products. As such, the company has attracted many customers using different food globally. Tourists from vast areas of the world prefer this company due to the variety of food available. Entertaining elements captivated by technological advancement in the area can attract many customers. Technological progress can as well foster its marketing strategies to meet the global market. An Economic strike can make people disregard other products but not food this makes this company have regular customers throughout the periods. In such condition, the company is ready to set affordable prices at any given time. (Grant, 2016) Threats This company suffers health issues. The health state officials always criticize it. The operational structure of this company is affected by the currency fluctuations in the global market. Devaluation of currency affects this company negatively as it receives little foreign cash. Competitors like KFC, Pizza Hut Burger King, etc. are working. These companies compete for customers who reduce their sales in the long run. To attract more customers, the competing company lowers prices for its products. McDonald company, in turn, reduces the prices of its products which reduces their returns.(Macdonald & Wilson, 2016) 5.0 Recommendations. McDonald company should establish a low price strategy on its products. This strategy will ensure a competitive edge with other businesses operating in the same line of business. The company should review the segmentation and positioning strategies to render services not only to urban centers but also the rural areas where there is a broad customer base. The company restaurants should engage in goods that attract the adults because the adults constitute the majority working population which means high chances of buying the products. McDonald's company should impress significant technological innovations and engage the customers mostly through the internet to market the products. This idea will counter the influence of other firms operating in the same line of business. (Macdonald & Brown,2016) 6.0 conclusion. The company management should do a thorough analysis and explore its weaknesses in the market and improve on the areas where the competitors are beating them. This extensive effort should be established and integrated to ensure compliance of the company to the different legal requirement in the various countries. More so the company should improve on the product match and work towards reaching the broader customer base in rural areas. Appendix List of figurers and tables Figure 2.1: A model showing PESTEL analysis of McDonald food company Figure 3.1: a model of the industrial analysis Table 4.0 SWOT analysis of MacDonald Food Company References McDONALD, M.A.L.C.O.L.M. and Brown, L., 2016. 5 Strategic marketing planning. The marketing book, p.86. Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons. McDonald, M. and Wilson, H., 2016. Marketing Plans: How to prepare them, how to profit from them. John Wiley & Sons. Das, A.S., Gupta, A., Singh, G. and Subramaniam, L.V., 2016. Mining Qualitative Attributes to Assess Corporate Performance. In Optimization Challenges in Complex, Networked and Risky Systems (pp. 269-281). INFORMS. Kuo, C.M., Huang, G.S., Tseng, C.Y. and Boger, E.P., 2016. 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