The report is developed to analyse the external environment which the business organisation operates within the competitive business. McDonalds operates during the global operations. The report discusses the nature of the external environment of the organisation and the various models and theories that contributed to the development of business strategies are drawn here. The company monitors the external environment and responds to the external factors with ease and effectiveness by using an effective monitoring system. The monitoring system could help in identifying the progress and make necessary changes for improving the efficiency and business outcomes.
McDonalds is one of the biggest fast food chains in the entire world and serves more than 50 million customers on a regular basis.?Florentina & Georgiana, 2012). The company started with very little capital and soon was able to expand its business through selling of good quality products and services at a reasonable cost. The company expands its business in United States of America and in other places and generates high amounts of revenue. It ensures successful and notable business expansion with ease and efficacy (Comoglio & Botta, 2012). Presently, McDonalds has more than 32000 fast food restaurants all over the world and if present in more than 117 countries. The global sales revenue of more than $22 billion, it is currently one of the largest fast food services company (Ferraro & Briody, 2017).
As the topic revolves around the management of global strategy and cross cultural aspects, McDonalds wants to think globally, act locally, which can help to focus on global business expansion by managing the business activities in a local way to meet the demands and preferences of the consumers in the external business market. A transnational strategy was implemented to manage the global integration at McDonalds. This would allow the company to respond to the external environmental factors properly (Ferraro & Briody, 2017).
McDonalds has developed the value chain strategy by considering he local culture, economic, legal and political factors for managing the global business. To respond to the external factors, the company has also focused on the local management to respond better and at the same time gain more acceptance of the brand products within the foreign market by the consumers. When the local culture where the business wants to manage global expansion is embraced, it would also be easy and convenient for McDonalds to reduce the cost f introducing a new business in some other location and overcome the political issues too. There are many places around the world where beef and pork are not eaten and for that McDonalds has customized its products and services to cater the local needs and made sure that any sort of political conflicts were resolved as well (Florentina & Georgiana, 2012).
To maintain the corporate social responsibilities and provide a helping hand for the protection of the environment and society, McDonald has involved itself by managing various sustainable supply chain management activities to deliver the best quality and healthy food items that are of low calories and are also healthy for the customers. This is how the offerings of McDonalds are glocalised and personalized to fulfill the tastes and cultures of different places and the people residing there. Suppose the company wants to expand its business in India and so the culture of that place should be considered. Beef or hamburgers were not included in the Indian food items, rather chicken burgers are made available to cater the needs and preferences of the customers. While managing global business and cross cultural activities, McDonalds has set the prices of products according to the income of people in that place, rate of inflation and even the rates of currency exchange. This is done to target the lower and middle class segment customers and meet the needs of theirs too (Ho et al., 2012). According to Hong (2012), to develop a useful global strategy and manage global business through adoption of new cultures, the company has analysed the nature of the organization’s external environment through use of PEST analysis, SWOT framework and Porter’s five forces analysis.
The PESTLE analysis identifies the political, economic, social, technological, legal and environmental factors that impacts the external environment of McDonalds. These macro environmental factors help in managing the business according to the plans and at the same time respond to the changes in tax, laws, trade activities and even overcome the obstacles that may emerge during change in demographics (Hong, 2012).
The support by Government, legislations and laws for the management of mergers and acquisitions has affected the global business management for McDonalds. In many foreign countries, actions were undertaken for resolving the health implications due to the consumption of fast food. According to the health related obligations, the consumption of fast food can result in obesity and other problems. To overcome these kinds of issues, McDonalds has focused on the health of individuals and protection of environment through customer surveys and monitoring the market conditions. This has enabled Government control over licensing while managing global business in different countries (Kasemsap, 2016). The employment laws and rules in different market segments further assisted the organisation to operate within the business environment properly by improving the customers’ services and communicating with them to know their needs and preferences. This has helped in the development of good relationships with the Government and regulatory bodies too.
With the growth in economy and increase in consumer spending, the business organisation can succeed in the global business environment and at the same time, increase the employment opportunities for people all over the world. The company understood the level of income before setting its prices of the offerings in different markets. The rates of interest were also considered along with the inflation rate to ensure that the products’ prices were set properly and customers were kept satisfied. To overcome the unemployment related issues, McDonalds created scopes for employees to work within the new stores that had been set up in different countries, which resulted in global business expansion too (Lessard, Lucea & Vives, 2013). The global supply chain and rates of interest were considered by analyzing the market prices and even looking into the taxation procedures for managing the foreign operations perfectly and manage the tax accessibility condition for gaining proper support by the Government. The economic factors could also make the company set the right prices of products and ensure that their needs and requirements were fulfilled.
Social
The social factors are related to the attitudes, lifestyles, behaviours and distribution of income. Consumers’ incomes differ and so to cater the needs of in an economic market segments, McDonalds has developed a positive mindset among people by adding some vale based meals. This has provided convenience for the various market segments to make purchases and even allowed the company to sustain in the global market. The company excluded beef and pork made food items in various countries o ensure that the cultural diversity of the place is maintained and positive brand image is created on the consumers’ minds too (Marchi, Maria & Micelli, 2013).
Technological
With technological improvements, McDonalds has marketed its products efficiently and implemented marketing policies to make more customers aware of the kinds of products delivered. The integration of business activities with the use of new machineries and equipments have also enhanced the value chain and managed the manufacturing and production of food items at a rapid scale. The information system used by the organisation could assist in reduction of expenditures and manage the inbound and outbound logistics operations properly (Martin & Chaney, 2012). With the implementation of advanced technologies, new machineries and equipments were used for enhancing the production level and ensure that the sales could be increased to achieve better profit level.
The SWOT framework is used to determine the strengths, weaknesses, opportunities and threats faced by the company while operating within the global business environment.
One of the major strengths of McDonalds in China is to embrace the foreign culture and even striving to customize its products according to the needs and preferences of the customers. By adopting the new culture, it would be easy to meet the demands of customers in the market segments, which has been beneficial for McDonalds to establish fast food joints and introduced the teriyaki burger. McDonalds is the second largest fast food restaurant network within the fast food industry and due to the sharing of fixed costs, the prices of products are comparatively lower. Immense employment opportunities are present which has allowed recruitment of numerous individuals all over the world (Mcdonalds.com, 2017). Because the huge market size and enhanced power in terms of better productivity, more profit and better flow of business operations and processes, McDonalds can easily outnumber its competitors.
Sometimes the market share decline, which is a major weakness of the company and for the lower and middle class families, the cost of McDonald’s food items may be higher. The quality of food items also deteriorate and with the competition by other fast food chains, the revenue has slowed down along with the growth in income. (Kasemsap, 2016)
There are opportunities to expand globally and joint ventures with other supermarkets to expand the range of products available. McDonalds has responded to the social changes by enabling innovation and kept the quality of food consistent to move towards a healthier and safe lifestyle. The use of customer relationship management or CRM and management of databases has allowed the company to position its products by analyzing the market conditions and his strengthened the value proposition. To ensure successful global business, the company has moved to India and other countries as well (Mendenhall et al., 2017).
Competitors like Subway, KFC, etc pose few threats for McDonalds. Nowadays, more and more people are getting health conscious and so they are trying to avoid fast food items. The changes in demographic conditions and fluctuations in rates of foreign exchanges have affected the business profit and made McDonalds experience down turn in economy (Meyer, 2014).
There are many suppliers of the company such as Coca Cola, Clorox company, etc. that supplies raw materials, resources and other paper items for production of food items and packaging purposes too. There are huge numbers of suppliers including the people who supply raw materials and resources and other food components for the production of good quality food items available at McDonalds. Due to this, the level of uniqueness and innovation is also considerably low. Due to this, the bargaining power of the suppliers is low when compared to the other forces (Meyer & Estrin, 2014).
Customers are the most important stakeholders in business and so McDonalds need to make sure that the needs and requirements of theirs are fulfilled. There are many substitute products nowadays, which can make the consumers switch on to the products of some other company like KFC, Pizza Hut, etc. With the increase in numbers of fast food substitutes, the consumers have often purchased the food items from those companies rather than from McDonalds such as burgers, crispy potato chips and other fired items. Due to this, the profit level might decline and this could also deteriorate the sales largely. To overcome this kind of situation, McDonalds has developed strategies related to pricing and differentiation for increasing the trust and loyalty of consumers and influenced their buying behaviors too (Okoro¸2012).
The threat of rivalries is high because with the presence of well known fast food restaurants like Subway, KFC and others, the sales have declined largely for McDonalds. McDonalds also holds a strong leadership position (Lessard, Lucea & Vives, 2013) in terms of the brand value among the major competitors in business. It is based on certain external factors including the low costs of switching, more fast food chains and wide range of other food items offered by the rivalries in business (Pieterse, 2015).
The threats of new entries of products in the market are moderate because McDonalds has already created a sustainable market position, because of which, customers prefer the healthy and hygienic food items like low fat and carbohydrate foods and foods consisting of high nutritional value at reasonable prices more when compared to some other companies within the food and restaurant industry. Though many small and medium-sized organisation were established, still it was difficult to develop a strong brand name and image that McDonalds currently possessed (Simic & Dimitrijevic, 2012).
The substitutes of McDonald’s food items took over the market in China and many of the customers had even shifted their focus from the company to some other company like KFC, Pizza Hut, etc. The substitute products such as chicken crispy items, French fries and chicken nuggets, etc. were competitive when compared based on quality and satisfaction of the consumers. To overcome the issues related to the substitute products and services, quality of products of McDonalds should be improved to ensure satisfaction of the consumers.
BCG matrix is used to understand the high performance products as well as the low performance products in the market depending upon the business growth rate and relative position measured in terms of market share.McDonalds use it to develop long term plans and find out the scopes and opportunities and udnerstanding where to invest and when to introduce new products in the market. It has also allowed the company to increase its wide variety of products to attract more customers and generate more business revenue.
The stars refer to the products that make the company gain high market share within the growing market. The profit level is dependent upon the investments that are done to the growing market (Srivastava, Mithas & Jha, 2013). For managing global business, the geographical segment that rakes in high within the growing market is the European market segment. Thus, this segment is considered as stars that has generated the highest amount of revenue and the products of the company that fall in the category of stars could be the McFlurry and other drinks items. This kind of segment needs proper development within the market for penetrating the new market segments and get evolved into cash cows.
The market share is low for the products in this category which are needed to survive in the high growth market. The products delivered by McDonalds in this category are Softie and other ice cream products. These products have lower market share and need to survive in the high growth market to get turned into stars (Voegtlin, Patzer & Scherer, 2012).
Fewer investments are needed and McDonalds can use the generated funds for other purposes. Chicken burgers, French fries, etc. fall in the category of cash cows because most of the profit is generated. On the other hand, in terms of global business and cultural acceptance, McDonalds has setup in America as well. The American segment has generated 31 percent of the revenue. McDonalds need to expand its range of products to target more customers and fulfill their needs and preferences (Wild, Wild & Han,2014).
This category products have the low market share within the lower growth market. Both these aspects could affect the business functioning and so retrenchment and liquidation must be done for overcoming the poor financial condition in case of financial crisis faced by the organisation. It has a smaller market share within the mature growing industry and few the products failing in the category are vegetable wraps, chicken wraps, etc (Comoglio & Botta, 2012).
Conclusion
The topic of the report shed limelight on the management of global business embracing the different culture of different countries and through implementation of the perfect international strategy. To become successful in the global business environment, McDonalds had embraced new cultures to cater the needs and requirements of people and maintained a stable financial condition at the same time. The global strategy that was chosen by McDonalds was the transnational strategy and by implementing the value chain strategy. McDonalds also managed its corporate social responsibilities by developing products that could create lesser impact on the environment and at the same time ensured that the people could be kept safe and healthy after consuming the food items of McDonalds. The PEST analysis was done to determine the political, economic, social and technological factors that impacted the business. The SWOT framework showed the strengths of the company including the string brand name and image, size of the company, easy and convenient food joints while the weaknesses included slowing down of economy and immense competition in the market. The monitoring system for the external environment was managed by utilizing the Porter’s five forces framework and BCG matrix and lastly few recommendations were provided to enable McDonalds respond to the environmental forces appropriately.
References
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