PESTEL Analysis of McDonalds Food Industry PEST Example

PESTEL Analysis of McDonalds viands Industry PEST Example creation McDonalds is the largest unfluctuating nourishment chain in the world. thither be approximately 35,000 McDonalds stores across 119 countries, and they jointly serve nigh 68 million customers a family (McDonalds, 2014). Each McDonalds is either vagabond as a franchise, or by the McDonalds Corporation itself in the UK, approximately 65% of McDonalds eaterys be run as a franchise, and the remaining 35% atomic reckon 18 run by McDonalds themselves. There is a relatively stringent application process problematical in becoming a McDonalds franchisee McDonalds themselves lists well-nigh of the requirements, includinga juicy level of integrity, stemma experience, experience at bottom the pabulum industry, the age and skill to complete a minimum of nine months franchisee training, a full time loyalty to the probability, and a advanced level of investor capital (McDonalds, 2014b). Such commitment to ensuring the strength and commitment of their franchisees has perhaps contributed to the strength of the McDonalds brand, which is among the worlds best-recognised and well- see to ited, get downicularly in the unfluctuating-flying food market (Moskowitz, 2014) This essay leave examine the current contrast milieu McDonalds operates in by dint of a PESTEL digest, to examine the usual out-of-door business environment and the precise industry factors that whitethorn affect the business. The results of this essay give the gate then be designd as the background for a pulverisation analysis to suck up the specialised strengths and weaknesses of the McDonalds business model and its potential future opportunities and threat, which should military service to determine the best strategic direction for McDonalds to take in the coming years. PESTEL Analysis A PESTEL analysis examines the external business environment confront a firm in 6 main atomic number 18as disposala l factor, scotch factors, Sociological factors, Technological factors, environmental factors and Legal factors. Though a single organisation is normally unable to directly affect the external factors facing it, a conglomeration of companies elicit exert some impel on these factors, particularly any policy-making factors through the trenchant use of political lobbying. Proper understanding of these factors allows the organisation to highlight argonas of business opportunity when combined with proper understanding of the business strengths, and also potential threats to the business when combined with a proper understanding of the firms weaknesses (Baines et al, 2011). Thus, for efficient strategic planning, analysis of the external factors is the most important step out front performing an analysis of the business intrinsic strengths and weaknesses through a SWOT analysis. Political The fast food industry is often a prat for giving medication endeavours aimed at improving wellness and reducing obesity, particularly in European countries. In 2003, after the humanityation of a report by the Scientific Advisory Committee on Nutrition (SACN) on the relate between general levels of salt intake among the UK population and heart disease, the UK g bothplacenment introduced initiatives to reduce the amount of salt in more foodstuffs, including many a(prenominal) products within the fast food industry in general, and McDonalds in particular. In receipt, McDonalds reduced the overall salt message of its UK menu by close to 14% (Food Standards Agency, 2005). In Germany, a recent food labelling initiative required all fast food restaurants to provide clear indications of a number of nutritional factors for each of their meals, including salt and sugar levels, calorie content, everlasting(a) and unsaturated fat levels, and a traffic-light label indicating the overall level of healthiness, with super C indicating both low calorie and low fat plectrons, and red indicating high calorie, high fat options (Hurt et al, 2010). Similar initiatives fix been implement in the UK, France and the Netherlands, though reports indicate that the introduced food labelling has little impact on overall rent within the fast food industry (Grunert and Wills, 2007). In Denmark, a government initiative in 2003 placed restrictions on the amount of artificially created unsaturated fats, known as Trans Fat, or TFA, which open been shown to be heavily involved in increasing cholesterol and thereby heart disease risk., TFAs are present in many food industries that rely on lately fat frying, as they can be used for far yearlong than more than conventional oils while still staying relatively fresh (Choe and Min, 2007). anterior to the imposed restrictions, a meal of Chicken McNuggets and Medium French heat up at a typical Denmark McDonalds had, on average, 30g of Trans Fat. After the restrictions, the kindred meal had on average less than 1g of Tr ans Fat (Hurt et al, 2010). In the US, by comparison, the fast food industry is far more self-regulating, with little to no government intervention at all, despite many published reports on the link between fast food industry advertising and childishness obesity (Wilson and Roberts, 2012). This is out-of-pocket to two main factors firstly the US political system as a whole tends to be far more committed to laissez-faire sparings than even its most right-wing European counterparts in general, there is far more political inertia to drown (Skousen, 2009). Secondly, the fast food industry has an aggressive and concentrated lobbying front in the capital (of which McDonald plays a significant role), and is politically savvy enough to vacate or negate any proposed regulation that makes it through (Wilson and Roberts, 2012). The fast food lobby has thus far defeated proposed restrictions on Trans Fat content similar to those enacted in Denmark, a proposed soda tax on candied drinks , and policies aimed at softenling the amount of sugar, salt and fat in childrens meals (Wilson and Roberts, 2012). This helps to keep McDonalds US profit margins higher than those countries where such restrictions mystify been imposed (Schlosser, 2012). Economical The recent economic recess was incredibly tumultuous for firms in many industries, reducing revenues and profits across the board, and decreasing consumer want for many goods and services (Kliman, 2012). However not all firms and industries were adversely bear upon some actually saw revenue and profit opportunities increase during the economic downturn due to higher claim these tend to be firms and industries that are seen to provide value for m whizy, of which the fast food industry is one (Bems et al, 2010). Fast food restaurants can be seen as imperfect substitutes for more traditional restaurants many consumers prefer to eat out at a fast food restaurant as a cheaper alternative to a more dear(predicate) t raditional restaurant. In 2008, near the height of the crisis, the fast food industry in the UK actually saw increased harvest-feast in terms of revenue of 4.5%, with an overall increase in penury for McDonalds products of around 4% (Key Note, 2009). Other countries that saw similar increases in guide in the fast food industry in general and McDonalds in particular include Japan, France and Belgium (Economist, 2010). By comparison, in the US the demand for McDonalds products over the fadeout did not increase as in Japan, the UK and France, but more importantly it did not decrease either this during a time where demand in the overall US restaurant industry fell by around 6% (Economist, 2010). These figures paint a picture of the fast food industry being relatively ceding back proof however, as a Moodys report (2009) cautions, this may not al panaches be the case. Consumers may choose to eat at home rather than going out in particularly tough recessions, substituting home-cook ed meals for restaurant ones, value-for-money or some otherwise. They may also focus their demand on low-cost, work out menu items with particularly low profit margins. Indeed, during the recession Burger King saw its US profits fall by around 6% as customers increasingly turned to its dollar menu options which it had chosen to focus on as a merchandising strategy during the recession, with demand for those items increasing by as much as 20%. A number of Burger King franchises actually sued the corporation after requiring them to promote and convey double-cheeseburgers at $1, when they cost $1.10 to make (Economist, 2010). Such poor marketing strategies undoubtedly led to Burger Kings fall in profits during the recession in contrast, McDonalds continued to focus on its more expensive standard menu options, and actually increased marketing spend by 7%, as many companies cut back (Ritchie, 2010). Sociological mend McDonalds and the fast food industry in the US has dish out to dodge most proposed regulation aimed at reducing the ill health of many of their products, they have been perhaps less successful in dodging the prohibit public opinion over the same issue. Fast food in general has seen its public image decline as society in general be tots more health conscious the preceding decades have seen a rise in many societal health-based food initiatives, such as increased demand for unprocessed and organic foods, and a growing public awareness of obesity and heart disease and its links to high-fat foods. In 2004 Morgan Spurlock, an American social-commentary filmmaker in the same vein as Michael Moore, created the documentary Super-Size Me (2004), where he ate only McDonalds for 30 twenty-four hourss, for 3 meals a day (breakfast, lunch and dinner). He did not allow himself to have any other food during that time, and had to upgrade to a super-size meal whenever asked, which had double the amount of french fries of a medium sized meal, and also came with a 42 apothecaries ounce coke. After the 30 day period, he had gained 1 stone and 10.5 pounds of tautological weight which represented a 13% body mass increase, had a cholesterol level of 230 (where levels below 200 are considered healthy) and had developed cirrhosis of the liver (Spurlock, 2004). There have also been many damaging reports make about the fast food industry in general and McDonald in particular, including a number of studies that have suggested fast food addiction shares many of the same characteristics as drug addiction (Garber and Lustig, 2011 Volkow and Wise, 2005). A paper by Johnson and Kenny (2010) arrange that high-fat food triggered many of the same dopamine receptors in rats as those triggered by cocaine or heroin, and can override standard ingest responses and lead to bout of compulsive, addictive-like eating. In response to this, McDonalds has phased out the super-size option for all of its US meals (the UK supersize meal option had been phased ou t in 2001 due to very low demand, and had not been introduced in any other countries) and began crack more healthy menu options, including fruit smoothies, salads, milk, water and fruit (Pompper and Higgins, 2007). They have also launched a number of innovative marketing campaigns aimed at set off the new federal agency of healthy alternatives, a policy that is estimated to cost an superfluous $35million in marketing costs (Vizard, 2013). Such an approach appears to have been effective, with no sales decline reported in any month over the last 10 years (Vizard, 2013). Technological The advent of the cyberspace has receptive up many opportunities for low-cost, high-impact marketing across a range of firms and industries. Increasingly, firms are being judged more and more strongly on their online presence and comprehend technological savvy it can seriously harm a business image if they are seen as out-of-touch with the modern technological world (Chaffey, 2009). market opp ortunities using the internet are many and varied and can range from intricate, involved, multi-layered viral campaigns, through website design and functionality to a simple social media presence. eon the fast food industry was slow to catch on to the benefits of internet marketing in the beginning, most firms have now embraced its potential, and McDonalds is at the forefront. As well as taking the (now somewhat standard) step of establishing a strong social media presence, with the creation of both a Facebook page and chirrup account in 2009, McDonald have also run a number of successful online marketing campaigns, including an Ask McDonalds Youtube campaign in 2012, where over 20,000 questions from the public were answered, with most being based around the feel and bring chain of McDonalds food and burgers. Many of the questions were answered through short Youtube videos, some of which have gathered over 10 million views, and most of which were received very positively (Macmi llan, 2012). However, as with most other firms, the internet has turn up to be a double-edged sword in terms of marketing success for McDonalds. There have also been a number of invalidating articles posted on Facebook and Twitter about the company and its products, including an obvious mockery post that claimed a batch of McDonalds hamburgers in Oklahoma had been found to have been contaminated with human warmness (Hooton, 2014, p1). Despite the obvious fickleness of the claims (the posts were taken from a joke news site, satirising the Tesco horse meat shite of 2013) many people online believed the stories, claiming to be sickened by them, and declaring they would boycott McDonald products from now on (Hooton, 2014). Such delusive information is easily spread online with little to no information regulation firms can be at the mercy of false accusations and internet pranks. Also, in direct contrast to the successful Youtube campaign was a perhaps less successful Twitter cam paign, where McDonalds promoted the Mcdstories hashtag for twitter users to post their stories and positive experiences with the firm. However, as there was no ability to either control or properly interact with the responses as with the Youtube campaign, the campaign collapsed almost outright with a glut of negative anti-McDonalds tweets, outweighing the positive responses by around 10 to 1 (Kolowich, 2014). Careful monitoring of the companys online presence and quick response to such incidents will go some way to mitigating the potential victimize. milieual In recent years, environmental issues have come to the forefront of public consciousness with the rise of many green initiatives and movements. In response, many businesses now include some form of environmental damage mitigation to counteract the negative environmental aspects of their typical business labor methods typical methods include the replanting of trees to offset coke emissions caused by the transportation of goods, a reduction in the amount of paper used in the administrative side of the business, energy-saving initiatives such as the turning off of lights, electrical appliances and computers when facilities are not in use, and a reduction in the amount of publicity used in the production process (Satya, 2002). Environmental concerns about a business operations are particularly pronounced in the food industry, as food production techniques are often associated with poor environmental controls, particularly in emerging third world economy producers, and budget meat suppliers (Foster et al, 2007). Indeed, a number of protests have been levelled at many fast food firms in general, and McDonalds in particular on nineteenth July 1985, Greenpeace in the UK declared an anti-McD Day of Action (Veggis, 2014, p1) which involved demonstrations, protest enclosure and pickets of many McDonalds stores across the UK. The Day of Action has been repeated every year on the same date, and protests agai nst the promotion of junk food, the unethical targeting of children, evolution of workers, animal cruelty, damage to the environment and the global domination of corporations over our lives (Veggis, 2014, p3). In 1997, two of the protestors were sued by McDonalds for libel, after repeating some of these claims in many McDonalds restaurant. The judge found in favour of McDonalds for some of the allegations of libel, but found others had some truth to them and could not be considered libellous, including claims that they falsely advertise their food as nutritious, risk the health of their semipermanent regular customers and are culpably responsible for cruelty to animals reared for their products ( justice Bell, 1997, p13). In response to this, McDonalds have initiated a number of Corporate Social tariff (CSR) policies centred on reducing the environmental impact of the business they currently record in Earth Hour, an initiative that encourages many businesses to turn off their li ghts and sassy equipment on a specific hour each year, to reduce their carbon footprint. They have also sought to reduce the environmental impact of their packaging, seeking out more biodegradable packaging in many markets they have initiated paper-reduction policies in many of their administration centres, and they have also instigated investigations into the care and direction of the animals reared for their product supply, with a view to ensuring no unnecessary cruelty or inhumane treatment is taking place (McDonalds, 2014c) Legal The specific good environment in which McDonalds operates is highly dependent on the specific country and market in question however, most of the markets that McDonalds operates in have some form of a health and Safety sound framework, particularly with regard to food preparation. Many, if not all of the countries McDonalds operates in has some form of public health inspection system with regard to food producers in the UK, it is the Food Standar ds Agency, while in the US, it is the Food and medicine Administration (Campbell et al, 2008). In both markets, any employees with food-handling capabilities must take part in food-hygiene training at the companys expense. McDonalds has implemented a system that adds additional controls to those required by either health agency, and as their customer-facing website states, there are at least 70 rubber checks on beef and chicken every day. In fact, McDonalds besotted standards have been used by government agencies as models for their own regulations (McDonalds, 2014d, p1). In this way, their dedication to food safety over and above that required by law can be used as a marketing tool, to emphasise their commitment to quality (Campbell et al, 2008). There are also a number of employment laws to consider in each market, including those regulating the supreme length of an employees daily and weekly working hours, the requirements for employee breaks and facilities, tax and payroll requirements, business registration and accountancy standards for reporting profit and loss (Jones, 2013). McDonalds tends to adhere to the same legal standards across markets for each of these areas, even in markets with less stringent regulations or legal requirements than those of the UK or US markets (McDonalds, 2014a). last In conclusion, McDonalds faces a number of challenges from its external environment, including the threat of pass on government health regulation in the US, social concerns about the unhealthiness of their products, adverse publicity from hoaxes or failed marketing campaigns on the internet, and additional protests regarding the environmental impact of the business. Through understanding these challenges, McDonalds marketing and strategy managers can use the business strengths, such as its commitment to food quality and safety, its successful marketing campaigns, and the overall strengths of its brand, to turn these challenges into potential business op portunities. In order to do so, they can use the information provided by this PESTEL analysis as the groundwork for a comprehensive SWOT analysis, to enable the intelligent setting of future strategy for McDonalds. In this way, they can help to vouch McDonalds remains a market leader in the fast food industry. References Baines, P, Fill, C and Page, K (2011), commercializeing, second Ed, Oxford Oxford University bid Bems, R, Johnson, R and Yi, K (2010), Demand Spillovers and the Collapse of Trade in the Global Recession, IMF Economic Review, intensiveness 58, Issue 1, pp295-326 Campbell M, Gardner C, Dwyer J, Isaacs S, Krueger P, and Ying J (2008), Effectiveness of public health interventions in food safety a systematic review, University of York Centre for Reviews and Dissemination Chaffey, D (2009), Internet Marketing Strategy, Implementation and Practice, Harlow Pearson Education Choe, E and Min, D (2007), alchemy of Deep-Fat Frying Oils, Journal of Food Science, acco unt book 72, Issue 5, ppR77-R86 Economist (2010), The changes facing fast food Good and hungry Online, uncommitted http//www.economist.com/node/16380043 Accessed 9th October 2014 Food Standards Agency (2005), UK salt reduction initiatives, London FSA Foster, C, Green, K, Bleda, M and Dewik, P (2007), Environmental impacts of food production and consumption final report to the Department for Environment Food and Rural Affairs, Brussels UN Food and Agriculture Organisation Garber, A and Rustig, R (2011), Is fast food addictive?, Current Drug shame Review, Volume 4, Issue 3, pp146-162 Grunert, K and Wills, J (2007), A review of European research on consumer response to nutrition information on food labels, Journal of Public Health, Volume 15, Issue 5, pp385-399 Hooton, C (2014), Those human meat found in McDonalds factory stories and Facebook posts are a hoax, obviously Online, forthcoming http//www.independent.co.uk/life-style/food-and-drink/news/those-human-meat-found-in-Mc Donalds-factory-stories-and-facebook-posts-are-a-hoax-obviously-9784592.html Accessed 9th October 2014 Hurt, R, Kulisek, C, Buchanan, L and McClave, S (2010), The Obesity Epidemic Challenges, Health Initiatives, and Implications for Gastroenterologists, Gastroenterol Hepatol , Volume 6, Issue 12, pp780-792 Johnson, P and Kenny, P (2010), Dopamine D2 receptors in addiction-like repay dysfunction and compulsive eating in obese rats, constitution Neuroscience, Volume 13, Issue 1, pp635-641 Jones, L (2013), Introduction to Business Law, 2nd Ed, Oxford Oxford University Press Justice Bell (1997), Justice Bells Verdict 19th June 1997 Online, open http//www.mcspotlight.org/case/trial/verdict/verdict0_sum.html Accessed tenth October 2014 Key Note (2009), Fast-Food Home-Delivery Outlets Market Update 2009, London Key Note Kliman, A (2012), The failure of capitalist production Underlying causes of the great recession, 1st Ed, London Pluto Press Kolowich, L (2014), The Rules of T witter Hashtags Hits and Misses From 7 Big scratchs Online, Available http//blog.hubspot.com/marketing/twitter-hashtag-campaign-examples Accessed tenth October 2014 Macmillan, G (2012), How McDonalds created a social media success with questions campaign Online, Available http//wallblog.co.uk/2012/08/20/how-McDonalds-created-a-social-media-success-with-questions-campaign/ Accessed 8th October 2014 McDonalds (2014a), Corporate Info Online, Available http//www.McDonalds.com/us/en/our_story/Corporate_Info.html Accessed 7th October 2014 McDonalds (2014b), McDonalds International Franchising Online, Available http//www.McDonalds.co.uk/ukhome/Aboutus/Franchising.html Accessed 7th October 2014 McDonalds (2014c), Striving for a Sustainable Future Online, Available http//www.McDonalds.co.uk/ukhome/Ourworld/Environment.html Accessed 10th October 2014 McDonalds (2014d), Food Safety Online, Available http//www.McDonalds.ca/ca/en/food/making_informed_choices/food_safety.html Accessed 1 0th October 2014 Moodys Investors Services (2009), Fast-Food Advantage, New York Alacra Store Moskowitz, D (2014), McDonalds Brand Strength Still Dominates Its Peers Online, Available http//www.fool.com/investing/general/2014/04/03/McDonalds-brand-strength-still-dominates-its-peers.aspx Accessed 8th October 2014 Pompper, D and Higgins, L (2007), Corporation-bashing in documentary film A case survey of news media coverage organizational response, Public Relations Review, Volume 33, Issue 4, pp429-432 Ritchie, J (2010), How McDonalds Thrived During the Recession Online, Availablehttps//www.mint.com/blog/trends/McDonalds-recession-09212010/ Accessed 9 th October 2014 Satya, L (2002), Environmentalism A Global History (review) Journal of humanness History, Volume 13, Issue 2, pp525-529 Schlosser, E (2012), Fast Food Nation The dingy Side of the All-American Meal, 1st Ed, New York Houghton Mifflin Harcourt Skousen, M (2009), The Making of Modern Economics, 2nd Ed, New York M E Sharpe Spurlock, M (2004), Super-Size Me, Documentary, New York The Con drudgery Company Veggis (2014), Whats Still Wrong With McDonalds Same date every year Online, Available http//www.veggies.org.uk/event.php?ref=50 Accessed 10th October 2014 Vizard, S (2013), McDonalds vows to ramp up marketing of healthy options Online, Available http//www.marketingweek.co.uk/news/McDonalds-vows-to-ramp-up-marketing-of-healthy-options/4008065.article Accessed 9th October 2014 Volkow, N and Wise, R (2005), How can drug addiction help us understand obesity? Nature Neuroscience, Volume 8, Issue 1, pp555-560 Wilson, D and Roberts, J (2012), Special Report How chapiter went soft on childhood obesity Online, Available http//www.reuters.com/article/2012/04/27/us-usa-foodlobby-idUSBRE83Q0ED20120427 Accessed 8th October 2014