BUSM4192 Introduction to Management and SWOT Analysis

PEST Analysis

Following is the detailed PEST analysis of McDonald’s: -

1. Political factors: - the company makes an impact on the political environment on the present industry. This specific feature of PEST analysis is based on impacting actions of the government as well as associated with remote or macro environment of the organization. In this case, the most important political factors are mentioned below: -  
   1. Rise in global trade agreement which can be treated as an opportunity
   2. Pending reforms in term of tax which can also be treated as opportunity
   3. Changing public health agreements and policies

The company has ample opportunities to actually expand the business and which is primarily related to an improved global trade and it can also increase the overall international supply chain (Gerhardt et al, 2014). The company also has the opportunity to change or reform different practices as well as strategies to decrease the overall impact of all kind of taxation on the current business without really violating the present law. At the same time, there are number of public health policies which are increasingly impacting or discouraging people from consuming junk food.  

2. Economic factors: transformation in economic factors impacts the industry environment of the company worldwide. This feature of PESTLE analysis is based on impacting the present economic conditions as well as trends on the remotest of area along with firms. In case of this company, following are some of the economic factors impacting the company: -
   1. The economy is slow however stable development in economy of US.
   2. The economy can also be considered stable but risky with fluctuating European economies.
   3. There is a slowdown in the Chinese economy as well.

The company has a lot of opportunities to develop which can be slow as well as per the American economy which is considered as the biggest market of the company. At the same time, the present economic conditions in continents like Europe can also create threats for the growth of the company in the present region (Sachdeva, 2015). There is also a slowdown in Chinese economy as well which threatens the development of the company in Asia.

3. Social factors: the company should respond to the changes in term of socio-cultural environment in the present macro-environment. This feature of PEST analysis is based on social conditions that also provide a support the business. In this case, following are important social factors are discussed below: -
   1. Increase in gaps related to wealth
   2. Rise in culture based diversity
   3. Trend of following healthy lifestyle

On the basis of number of external factors there is rise in wealth gap and the company has the opportunity to develop since the main targets of eth consumer are mostly from low to medium income households. In addition, the company also has the opportunity to improve the product quality in order to meet a more diverse target market (Sachdeva, 2015). At the same time, the healthy lifestyle is trending these days which is a threat since many products of the company are often perceived as bad for heath.

4. Technology factors: the company’s success is mainly depends on many technological applications. This feature of PEST analysis is based on the impact generated from technologies and ongoing trends in the same area. It is important that McDonald addresses the following factors related to technology: -
   1. R&D at moderate level in the present industry.
   2. Rise in business based automation
   3. Rise in sales with the help of mobile based devices

The company has the option to increase the R&D spending in order to bring some improvement in effectiveness of business as well as impact the efficiency. In addition, the company can also apply additional automation to increase the level of productivity which is mainly based on external factors with rise in business automation (Dundon & Wilkinson, 2014). In addition, the company can also improve its present mobile services in order to tap more consumers with the help of its websites as well as mobile app.

Porter's Five Forces 

Following are Porter’s five forces of McDonalds: -

1. Competitive rivalry (Strong): the company faces a lot of tough competition since the restaurants in fast food industry is saturating. This component of the five forces analysis also deals with the impact of competing with firms in the industry. In the following case, there is a strong force of competitive based rivalry on following factors: -
   1. Rise in number of company (strong)
   2. Rise in level of aggressiveness of company (strong)
   3. Low level of switching costs (strong)

The fast food industry has so many companies of varied sizes like there are many global chains like McDonald or local fast food chain of restaurants. In addition, many medium as well as large companies aggressively market the product. In addition, the overall experience of customer is related to lower switching costs which also means that people can comfortably transfer to other chain of restaurants like Wendy (Dundon & Wilkinson, 2014).

2. Bargaining power of customer (strong):  it is important the company deal with the rising power of consumers. This component of analysis deals with the impact as well as demands of the consumers. In case of this company, following are the factors contributing: -  
   1. Lower level of switching cost (strong)
   2. Rise in number of providers (strong)
   3. High presence of substitute (strong)

Since there is an ease of transforming from one place to another which means the switching cost is low, consumers can easily force their demand on the company.  In this relation, the market saturation plays an important role since consumers can select many fast food restaurants instead of McDonalds (Lee & Lambert, 2016).

3. Bargaining power of suppliers (Weak): - suppliers also have some power to impact the company. The element of five forces analysis also shows the influence of suppliers on different firms. In this case, there is weak bargaining power of the suppliers are discussed in detail below: -
   1. Rise in the number of suppliers (weak)
   2. Low level of forward based on vertical integration (weak)
   3. High level of overall supply (weak)

The huge number of population of suppliers is reducing the impact of so many suppliers on the company. This is specifically true because there is lack of regional as well as international alliance especially among suppliers. There are many suppliers that are not integrated in vertical manner (Muzi et al, 2014). This further means that there is no control on distribution network which is linked to number of facilities of McDonalds.

4. Threat of substitute (strong): Substitutes are crucial concern for this company. The component of the five forces analysis further deals with so many effects of substitutes on the growth of the firm. In case of this company, following are some important factors: -  
   1. High level of substitute presence (strong)
   2. Low level of switching cost (strong)
   3. High level of performance and cost ratio (strong)

There are so many alternative for McDonald’s product like products from many food producers which are artisanal by nature and are also local bakeries (Ghobadian & O’Regan, 2014). The customer can further cook the food at their household. It is easier to move from this company to other substitutes.

5. Threat of new entrants (Moderate): new entrants can also influence the market share of the company. This feature of the five forces analysis is related to the impact on new players of many present firms. In case of McDonalds, there is moderate level threat on new entry discussed below: -
   1. Low level of switching cost (strong)
   2. Moderate level of cost in capital (moderate)
   3. High level of cost which is related to development of brand (weak)

Since there is low switching cost, customer can comfortably move from McDonalds towards a new setup of fast food restaurant based organizations. In addition there is moderate level of capital cost based on new chain of restaurant which makes it easier for medium and small size companies to impact McDonalds (Dey, 2016).

Management Strategic (SWOT)

Following is the detailed discussion: -

1. Strengths
   1. Worldwide equity in terms of brand
   2. Almost forty two percent of market share in fast food industry in US
   3. Food quality and consistency in taste
   4. Successful products over the years like Happy Meals, Fries, Promotion and many others (Dess et al, 2014).
   5. International market
   6. Position of balance sheet
2. Weakness
   1. Decrease in market share because of saturation and rising focus on healthy lifestyle.
   2. Product development is weak
   3. Number of disgruntled franchisee system
   4. Impacted quality of products
   5. Slow growth of revenue and income growth
3. Opportunities
   1. Global expansion
   2. Only serving a percent of total population of world
   3. Rise in dining out industry
   4. Rise in retailers and rise in joint venture with them
   5. Overall consolidation of number of retailers with good locations (Dess et al, 2014).
   6. Rapidly responding to social change through innovation within health lifestyle. The trend is moving into healthy snacks which are also supported with new opportunity to position (Dess et al, 2014).
   7. High use of CRM since database marketing is more appropriately market the consumer target groups. It can also recognize the consumers and prevent the case of any brand switching.
4. Threats
   1. Mature or saturated industry
   2. High competition
   3. Awareness on healthy lifestyle and cautious consumer
   4. Change in demographics
   5. High fluctuating rates of foreign exchange
   6. Recession in the economy

Conclusion

The report has discussed about McDonalds and different aspects of the company with the help of PEST analysis, Porter’s five forces and SWOT analysis. The complete analysis shows that there are so many opportunities for the growth of the business. The company has the option to capitalize on so many strategies specifically related to technology in order to increase the effectiveness and overall productivity (Rowley & McMurtrey, 2016). The company must also improve the quality of product in order to deal with social and other external factors. The analysis also shows that the organization should deal with so many threats surrounding it and it is important to deal with external threats by increasing the base into high-developed economies and other countries in South Asia.

Reference

Crawford, A. (2015). McDonald's: A Case Study in Glocalization. Journal of Global Business Issues, 9(1), 11.

Dess, G. G., Lumpkin, G. T., & Eisner, A. B. (2014). Strategic management: Text and cases.

Dey, K. (2016). The fast food industry in the UK. Analysis of McDonalds with PESTEL, VRIN and Porter's Five Forces.

Dundon, T., & Wilkinson, A. J. (2014). Case Studies in Global Management: Strategy, Innovation and People Management. Tilde Publishing and Distribution.

Gerhardt, S., Hazen, S., & Lewis, S. (2014). Small Business Marketing Strategy Based on McDonald's. ASBBS Proceedings, 21(1), 271.

Ghobadian, A., & O’Regan, N. (2014). A case study and interview with Jill McDonald CEO and President of McDonald's Northern Europe Division. Journal of Strategy and Management, 7(1), 87-100.

Lee, A., & Lambert, C. (2016). Special Sauce in Sesame Seed Buns: Legal Strategy and Public Policy in the Fast-food Industry. Sage Business Cases, 1-16.

Muzi, L., Shuang, L., Jiangang, Z., Sailing, Z., & Ming, Z. (2014). Strategy of the Furniture Enterprise Crisis Management in the New Media Environment: Reflections on McDonald's food safety incidents. Furniture & Interior Design, 11, 009.

Rowley, B., & McMurtrey, M. E. (2016). McDonald's and the Triple Bottom Line: A Case Study of Corporate Sustainability. Journal of Strategic Innovation and Sustainability, 11(1), 33.

Sachdeva, A. (2015). Evaluation and selection of differentiation as a strategy for McDonald’s.