Environmental Factors And The Impact On Business: A Case Study Of Qantas Airlines

Effects of External Environment on Firm

Analysis of business environment

Abstract

External environment direct effects on the business operations have not yet attracted many scholars attention as part of strategic management practice. The main objective of this study is to investigate the effects of external environment on the organisation’s operation. The case analysis revolves around Australian and international firms. The paper compares the Australian firms with international firm and also studies the measures used by the firms to control the effects of external environment on firms operation. It identifies two categories of external environment factors namely microenvironment and macro environment. The micro environment involves the micro part of the business environment which includes; financiers, suppliers, market intermediaries, customers and public perception. The macro environment comprises the macro part of the environment which includes economic, political and legal, technological, environmental and social factors.  These factors have a significant impact on the performance of the organisation. They affect all the processes in the course of running business.  Due to these challenges of the external environmental, firms have been able to come up solutions to the concerns, although firm have no control over some of external environment effects.

Introduction

The external environment is a very important factor to firm because it may have potential impact on the operations. The external environment is the source of inputs for the firms which they can transform to outputs. Then, the firms give the outputs back to the environment. The organisations have no control over all the occurrences in the environment.  The environment may cause problems or opportunities that may affect the operations of the organisation. Although markets where firms compete exist, there are external environmental factors that affect the running of the business. The external environment of the organisation is full of uncertainties and for a firm to deal with these qualms, it must be aware and fully understand the external environment of the organisation (Evans, 2012, pp. 34).

Since it is not possible to examine everything that occurs in the environment as some elements in the environment may be more relevant to some businesses than others, what to be observed and measured in the external environment remain unresolved. Due to the problems above, it is suggested that external environment ought to consist of two broad aspects: external factors and internal factors, and the dimensions (Ferrell & Hartline, 2012, pp. 42).

The external environment factors have different effects on the firms. For the firms operating internationally, economic fluctuation and changes in the exchange rates across different countries may affect the performance of a business. Diverse nations have different government regulations and policies which affect the operations of the business in a different way (Ferrell & Hartline, 2012, pp. 44). People have different customs and beliefs across different countries in the world. Therefore, customs and beliefs affect demand of products in the market.  Technology helps organisations in advertising their business (Brinker, 2010, pp. 14). Advertising business creates more customers hence increasing total sales of the organisation.

The Micro Environment

Organisations put various measures to counter the above challenges, although they do not have control over some effects. The organisations have to study and understand the markets in the areas they want to extend their business operations (Knox & Marston, 2013, pp. 52). A clear study of the social setting is very crucial. The corporation has to clearly understand customs and beliefs of that particular community or country. For the organisations operating internationally, they must have a clear picture of the economic status of that nation so as to put plans that will fit to that specific economy without any negative impact on its performances (Ferrell & Hartline, 2012, pp. 46).

Organisation should also clearly know the government regulations and policies of the country they want to expand their business (Evans, 2012, pp. 36). The company should understand the taxing system and government policies of that state. This will help the organisation to run their businesses without conflicting with policies of that specific country. Thus, the paper has clearly studied the effects of external environment on the operations of the business in great details. The study has compared three companies and the measures they put to counter some of the effects from external environment.

Effects of external environment on firm

An external environment is made up of all the outside factors that affect the running of the business. There are two types of external environments; micro environment and macro environment. Micro environment is composed of all the factors that directly affect the operation of business (Dawson, 2014, pp. 6). Macro environment is comprises general factors that a business is not able to control.

The micro environment

The micro environment includes the following; financiers, suppliers, market intermediaries, customers and public perceptions.

Suppliers; it happens when the suppliers fail to deliver the business with goods.  The business will have nothing to sell, which lead to a direct impact on the operation of the business (Grant, 2010, pp. 37). Therefore, it will result to a decreased total sales hence reduced income to the business.

Customers; customers are required in the running of a business. A business with no customers cannot survival because they play a big part in the running of the business. The more the customers, the more sales a company makes hence increasing profits of the firm (Ferrell & Hartline, 2012, pp. 48).

Financiers; starting a business may require the owner to have a finance. The growth of a business will also depend on the ability of the owners to obtain additional finances. Financiers help businesses put their big investments in progress. If a business financier fails, this will have a direct impact on the way the business was expected to operate in future. A company with more reliable financier is more likely to be successful than the one without.

The Macro Environment

Market intermediaries; these are the middlemen who act between the buyer and the seller. They put a connection between the buyer and the seller and thus middlemen have direct effects on the operations of a business (Bonet, Cappelli, & Hamori, 2013, pp. 342). Business intermediaries include wholesalers, distributors and any other related people.

Public perception is the relationship the business has with the general public. A business should relate well to the public as lack of good relationship with the public will result to customers lose.

The macro environment

Macro environment factors include economic, political and legal, global dimensions, socio-cultural, and technological dimensions (Ferrell & Hartline, 2012, pp. 49). These factors may have more impact on one organisation than the other, depending on the nature of the business.

Economic; a business should be able to respond to economic changes. In countries with strong economy, business can exercise a good flexibility in terms of expenses, price and hiring (Goi, 2015, pp.5). In a deprived economy, there is high unemployment and low incomes. The business should be careful in pricing its products and services and take caution in terms of expenses. Changes in an economy, for example fluctuations in exchange rates, may cause a significant impact in the performance of an organisation (van Dijk, van Engen & Paauwe, 2012, pp. 74).

Political and Legal; it includes aspect such government regulation, corporate taxes, sales taxes and import duties (Grant, 2010, pp. 39). They all have an impact on the operations of the business. There are cases where certain products are banned or declared unsafe which can force a recall of products. In companies which operate globally are mostly affected by government regulations and policies in the states they operates. Political instability also affects the performance of a firm.

Sociocultural; it involves the behavior of the customers which determines the goods, services and standards valued by the society (Dawson, 2014, pp. 9). The social cultural forces involve the demographics and values of a certain customer base. Demographics refer to the measures of the characteristics of the people or social groups making up that society. Demographic characteristics mostly use income, gender and age (Grant, 2010, pp. 41). Values are the beliefs of people about different types of products. Changes in the way a society values an item can affect a business. Customs and beliefs of a certain group of people determine the demand of a product in that particular group of people (Dawson, 2014, pp. 12).

Case Study

Technological dimension; it involves the scientific processes used in production of goods and services. For an organisation to be successful, it will depend on how well they identify and respond to the external technological changes (Brinker, 2010, pp. 15). Technology helps companies to promote their products and make more customers locally and globally. In addition, it helps in production of a more quality product (Goi, 2015, pp.8).

                                                                                                                                Case study

                                                                                                                                Qantas airlines

                                          

Qantas airlines international main external environment effect was competition. Qantas faced a high competition both directly and indirectly in the global market (Ogaga, Berendien & Anneli, 2015). The company encountered direct competition from airlines that were marketing full service in international air travel.  Direct primary competitors in the market were Singapore and Fly emirates airways (Hanson, 2012, pp. 11).

Market analysis

In the year 2013, international passenger moving to and from Australia was done by forty eight airlines that operated in that month with a total of over three million travellers.  The number showed a growth of 7.8% in December 2013. Passenger utilisation declined from 82.4% in 2012 to 80.2% in 2013 (Gregson et al., 2015, pp. 605). Centre for aviation (CAPA), an independent aviation market analysis organisation published a wide margin of profit of between 2.1% and 2.9% in 2012 and 2013 in this industry. International air transport associating on (IATA) predicted this rise of profit due to cost cutting and demand increase (Diggines, 2010).  Regardless of the growth in the market, Qantas airlines’ share in the market has been falling for the last 10 years. The fall was from 34% in 2002 to 16% in 2013 (Gregson et al., 2015, pp. 606). Qantas airlines tried to recover the loss through low cost business jet star which led to growth of 2% of the market in 2006 to 8% in 2012 (Diggines, 2010).

Qantas group performance

Record underlying profit	$1.53b
Statutory earnings per share(EPS)	49.4% per share
Return on invested capital	23%
Operating cash flow	$2.8b
Ex-fuel unit cost	3%
Net debt	$5.6b

(Qantas annual report, 2016)

External competition analysis

Singapore and Etihad airlines made an entry into the domestic markets of Australia increasing their share in Virgin Australia (Farabi, 2012, pp. 16). This increased indirect competition for the Qantas airlines through introduction of virgin Australia international low cost carrier capacity (Gordon, 2012, pp. 123). Virgin’s international direct flights to Thailand, Indonesia, New Zealand and other pacific islands created an impact on the Qantas airlines operation dues (Hanson, 2012, pp. 13).

Political and legal factors

These include government interventions in form of policies and measures delegated for a specific industry. In the airline industry, the governments intervene though deregulating the industry. Due to deregulation introduced in 1990s, it created an increased level of competition in the market (Gordon, 2012, pp. 125).  This resulted to a greater impact on the performance of airlines worldwide. The government intervention caused a significant impact to Qantas airlines’ performance. The political instability in Bangkok in 2010 had a great effect on the international revenues of Qantas (Gregson et al., 2015, pp. 606).

Annual reports in 2011 showed that new political and regulatory measures directly affected the performance of Qantas airlines (Hanson, 2012, pp. 14). Due to the political instability experienced in the Middle East regions, it highly affected the performance of airlines.

In order to cope with the above mentioned interventions by the government, Qantas airlines introduced management strategies into its strategic plan which ensured that the company effectively responded to the crisis (Hanson, 2012, pp. 15).

Economic factors

The factors directly affect the performance of a firm. The growth possibilities of a company depends on the economic performance  in terms of its rate of GDP, rate of unemployment, conditions of inflationary and the level of poverty in that economy (Diggines, 2010). The performance of Qantas airlines was also affected by roundabouts and swings in the international and national economic structures. The global financial crisis experience adversely impacted the performance of Qantas airlines (Gregson et al., 2015, pp. 608). These impacts were due to reduced airline load factors and high losses.

To cope up with the above problem, Qantas airline has put a plan to reduce its jobs by 1750 scale (Hanson, 2012, pp. 16). The crisis also led to increased prices of fuel. Thus, for the company to cope with this menace, it has increased its travelling charges

Technological factor

Technology effect on the performance of airlines led to the reduction of the cost of their services distribution (Brinker, 2010, pp. 17). This is because most of its services are done online, for example ticket booking and purchase of the ticket are done online instead of involving a middle man. Qantas airline has pursued innovation to encourage its workers to apply fresh and positive ideas in their activities. Qantas has been the first worldwide to perform the landing of aircrafts applying satellite technology. Additionally, the company used technology to advertise its business (Qantas, 2012).

Social factors

The performance of a business is highly affected by the behavior of the people in a society. The environmental performance of Qantas airlines was a major social concern due to the carbon footprint left by jet fuel (Hanson, 2012, pp. 17). Increased awareness among the people in the society about environmental performance has created a significant problem in the industry. Qantas faced a lot of environmental issues, because 95% of its carbon footprints were mainly from its flying operations. To deal with the above concerns of environment, Qantas airlines has undertaken initiatives to lower its emissions by 50% till 2050 (Gregson et al., 2015, pp. 611). This shows that the company has developed strategies to lower its carbon emissions future operations.

Environmental factors

Although Qantas has been ranked the safest airlines, report shows that among the 20 carriers flying the transpacific route shows that the Australian Qantas airline was the leading in pollution (Gregson et al., 2015, pp. 610). This poor performance was due to use of most fuel-inefficient aircraft. It included Boeing 747-400ER and the Airbus A380 which had lower passenger yields and lower freight shares (McGreal, 2010). Qantas airline operations resulted to pollution and thus the company has to incur a cost in activities of cleaning the environment (Hildebrand, 2011).

                                                          

                                                                                                                   (Qantas.com.au, 2015).

                                                             

                                                                                                             Billabong international limited

Billabong international limited is a clothing company with its headquarters in Queensland Australia. This company was established in 1980’s and its activities involve marketing, distributing, retailing and wholesaling clothes (Billabong Annual Report, 2013). Billabong is known of its sports and youths labels such as surjection and RVCA. The company expanded their brand image through sponsoring athletes and promotional events.

Brands on global platforms

Strategic objectives

Omni	Global sourcing	Global logistics “pipeline”	Concept to consumer	Emerging markets
Single view of the customer	Fewer deeper supplier relationship	Consolidation centers in china and Singapore	Merchant font end	Leverage global platforms
Single view of inventory and better turns	Improved product consistency	Lower cost distribution	Fewer “blind buys” due to the shorter order to delivery times	Globally coherent emerging market strategy
Seamless experience across channels; retail, ecommerce, social and B2B	Leverage global scale for cost, speed and quality	Appointed VP global operations to oversee logistics improvements	Gross margin expansion; faster inventory turns	Globally coherent emerging  market strategy
Growing social media footprint and customer database	Social and environmental compliance	Rationalize regional distribution footprints	Fewer, bigger, better merchandising philosophy	Global leadership and focus
Positive comp store sales	$20m+ per year sourcing benefits at maturity; $7m in 2017	$10m+ annual savings at maturity	Speed to market
Ecommerce to greater than $100m

Competition

There has been a rise in popularity among three companies; Billabong, Quicksilver and Rip Curl. The companies created a stiff competition to Billabong Company in the market. In the 1990s and 2000s, Billabong aggressively pursued international expansion by creating youths and sports labels such as Nixon watches and RVCA to gain a share in the market. However, loss of $287m was recorded in the year 2012 (Billabong Annual Report, 2013).

Suppliers’ power (weak)

Billabong is an internationally well-known brand.  They use smalls to mid-sized companies so that it can keep economies of scale. It uses Hong Kong as the central sourcing division in providing most of its products to New Zealand and Australia (Jerath, Netessine, & Veeraraghavan, 2010, pp. 433).

Product substitutes

According to the research, it indicated that Nike has emerged the top over Billabong having the best selections for Australian’s youths (Farabi, 2012, pp. 19).

Political factors

The rate of import duty was reduced from 17.5% in 2005 to 10% in 2010 (Billabong Annual Report, 2013). As the government of Australia wanted to maintain tariff barriers for protecting the domestic clothing and manufacturing industry. The introduction of bilateral trade agreements by the world trade organisation (WTO) significantly affected Billabong international limit. Due to requirement by the government for all Australian business to produce their financial reports to international financial reporting standards, made it easier for Australian accounting standards into global practices and cost of implementation became significant (Farabi, 2012, pp. 21). Changes in government policies in some countries also affected business activities of Billabong Company

Economic factors

Billabong products were being distributed in more than 100 countries and more of its income was generated from other regions (Billabong Annual Report, 2013). This caused the firm to continually be influenced by fluctuations in currency. These changes in economies of different countries affected the performance of their business.  It reported a loss in the value of earning each and every year. Billabong’s global expansion was mostly encouraged by its high incomes from Asia and South America that helped to create new markets (Grünhagen, Dant & Zhu, 2012, pp. 597).

Social factors

Billabongs popularity was growing which created brand awareness (Leekha Chhabra & Sharma, 2014, pp. 49). Typically, it depends on various types of customs and values of the society when identifying customer taste. For example bright colors are preferred in U.S while weather compacted and faded colors are preferred in Australia (Farabi, 2012, pp. 23).

Customs and beliefs of people in different countries affect the operations of Billabong business. In the year 2006, there was a growing responsiveness of climate change and an emergence of the need to reduce emissions. To respond to the concern, there was implementation of various initiatives intended to create a better understanding and analysing climate change risk, measure emissions produced and offer a standard from which future advancement could be established. There was a compilation of the group’s yearly carbon record.

Billabong has been undertaking separate initiatives which were considered beneficial to the environment. These initiatives include initiation or addition of recycling programs, supporting environmental groups, and reducing the use of packaging materials or the use of fabrics which were more environment-friendly.

Billabong has introduced greenhouse gas inventory according to strategies of the Australian greenhouse office factors and methods workbook in 2007 to 2008 (Farabi, 2012, pp. 24). Billabong international limited, under the compulsory reporting in the NGER Act, complied with related sections of the Act in the interests of comparability and transparency. There was approval that the group was well under the compulsory reporting thresholds. Due to this, confirmation of the group’s carbon inventory for the year 2008-2009 and 2009-2010 financial years was not undertaken (Billabong Annual Report, 2013).

Billabong international limited has put target for the five years such as 15% reduction in emissions for that period (Billabong Annual Report, 2013). This target can be largely achieved by introducing more energy efficient lighting technologies. The company has put various programs in operation at a work place level. The programs include reduced packaging, recycling and also including targets for environment performance in separate staff performance plans. The company is exploring using new materials and fabrics that gave the ability to create more maintainable finished goods. It involves using recycled stock for swig tags, using organic cotton, and use of fabrics 

                                                                                                                        McDonalds Corporation

                                                           

McDonalds Corporation is the top food services firm in the world. This corporation was started in 1948 by two brothers, Dick and Mac McDonald. They expanded their operations and opened new restaurants after realising that there was a great opportunity in food industry (McDonald & Thompson, 2016, pp. 70). By 1967, the corporation had expanded it business operations to other countries leading it to have 23000 McDonald restaurants in 110 countries in 1994, making annual revenue of $3.4billion (Ater, 2015, pp. 621). MacDonald has created a twice the market share of its closest competitors, Burger king, which has 7% of U.S eating-out sales. MacDonald serves around 1% of the world’s population every day in its 23,000 restaurants internationally (DiPietro, Gregory, & Jackson, 2013, pp. 140). The corporation maintains its competitive advantage through having news items in its menu.  It mostly practices an analyser type of strategy by introducing new products and defending the ones existed before. The corporation gets its revenues from sales, fee paid by the franchisees, rent and royalties.  Its revenues had grown by 27% from 2005-2007 to $22.8billion, and operating income had a growth of 9% to $3.9 billion (DiPietro, Gregory, & Jackson, 2013, pp. 142).

Customers

The corporation was especially targeting young people for many years but it has currently changed (Mcdonalds.com, 2015). It has directed its target towards the family, targeting a diverse market with consumers ranging from children to elderly people.  Changes are occurring in the world which also leads to variations in the demand of McDonald products (Bowie & Buttle, 2013, pp. 24). There is a rise in demand for healthier food due to ever changing demographic group, where they demand fast, top quality food with low calories (Ater, 2015, pp. 623). McDonald responded to the opportunity by introducing a new and a more innovative product. The corporation introduced a regular hamburger which tasted similar but made of plant material like soya beans. The innovation was also a target for demographic group of vegetarians (Gibbs, MacDonald & MacKay, 2015, pp. 172).

Competitors

These are the firms that compete with the organisation for resources. McDonald has two types of competitors, direct competitors and indirect competitors in Lebanese market. Indirect competitor is the firm that produces one or two products that is competing with products from Macdonald Corporation (Heizer & Barry, 2013, pp. 12). The companies which indirectly compete with McDonalds Corporation were K.F.C, Henry J. Beans, Popeye’s and T.I.G Friday. Henry J. Beans produced hamburgers and fries which created a competition with McDonalds. It has also a restaurant with a hang out place which targets middle and upper class customers. T.G.I Friday also competes with McDonald to produce hamburgers and fries. K.F.C and Popeye’s compete with McDonalds to produce chicken nuggets and fries (Padhi  & Aggarwal, 2011, pp. 727).

Direct competitors are the firms that produce the same products or services like that McDonald produce. The corporation has three direct competitors; Burger king, Hardee’s and Wendy’s.  Its closest competitor is burger king which has 9,644 restaurants in 110 countries. Wendy is the second competitor with 6, 776 restaurants in 32 countries. Hardee’s is involved in fast food business with 3, 080 restaurants in 20 countries. These three companies give a stiff competition to McDonald Corporation. The corporation is facing a very intense competition in the industry of fast food as its competitors are also concentrating in burger production and fast food segment (Gibbs, MacDonald & MacKay, 2015, pp. 174).

Economic factors

When income of a consumer is high it increases the willingness to spend more. When price becomes a less sensitive issue to the consumers it affects marketing strategy (Bowie & Buttle, 2013, pp. 27). Since McDonald is a global corporate, the differences in economic stages and industrial development has made it hard to set prices. Differences in the level of incomes may make prices to vary.  This forces McDonald Corporation to set low prices for the countries with lower level of economic development. Low purchasing power and education has created a special challenge for marketers on promotion. McDonald should use cost effective methods of promotion, so as the final prices will be reachable for most customers (Bowie & Buttle, 2013, pp. 29).

The factors also include international, national and local environments since McDonald was a global company. The company was mostly affected by the economic recession of 2008 which had a significant impact on the USA and Europe and led to fall of disposable income, unemployment increased and there was wage inaction (Gibbs, MacDonald & MacKay, 2015, pp. 177).  The corporation mostly relied on a strong economy with low unemployment; this helped the company. Increased competition in the market and change in tastes of the consumer may lead to fall of sales of the corporation (Chon & Yu, 2012, pp. 19).

McDonald is a global corporation and thus makes the corporation to face the problem of foreign exchange. These fluctuations affect the revenues and profits of McDonald Corporation. McDonald is obliged to pay taxes like payroll and sales tax to the government (Mcdonalds.com, 2015). Tax obligations differ with countries. Some of the countries which have strict consumer protection laws, firms make sure that the quality is always maintained and delivered in the right way.

Political and legal factors

The policies made by the government affects business operations in different ways, the way products are produced, promoted and sold. Corporations which are multinational face different political backgrounds across different countries in the world. In central organised economies, they are protected by the administration. The legal consequence in marketing products internationally differs from one country to another because each country has its own legal system. The government regulations and policies are different in different countries. McDonald had to study the political and legal status of the country before moving their business to those countries such as Australia (DiPietro, Gregory, & Jackson, 2013, pp. 144).

Some of the policies put by the government toward matters such as public health and trade causes a significant impact on the operations of the firm increasing the cost (Chon & Yu, 2012, pp. 21).  Some trade agreements made in some countries makes it easier or hard to carrying out business activities. There are some health problems like obesity has made the corporate business activities very expensive. Some other policies employed were concerned in issues such as holiday, sick pay and minimum wage which led to an increased cost for the business. In UK, organisations have been using zero hour contracts to create a more flexible working force. This was very useful in for the food industry, which is a 24 hour system (Bowie & Buttle, 2013, pp. 31).

Before investing in a country, the corporation should assess the legal environment in that particular country in order to determine whether launching a product in that country will be affected. The law sets minimum and standards of a certain products, this necessitate the kind, shape, component and brand name of a product. The law also restricts the freedom of the advertiser, especially on the advertisement message and visual presentation (DiPietro, Gregory, & Jackson, 2013, pp. 147). Some government regulates prices of some products which causes a significant impact on the corporation.

Technological factors

When attitude and lifestyle of people changes it leads to a change in demand for the products. If the local market sufficiently develops technology, it will take full advantage of the product (Potter & Hotchkiss, 2012, pp.24). Technological developments have made it easy to access international markets. It has quickly changed habits and fashions of people. The corporation has been mostly doing its marketing through advertisements in television and on billboards (Chikweche & Fletcher, 2012, pp. 508). A claim had risen that the company only targeted children in their advertisements. This was through use of play spots, toys and animated descriptions of their character like grimace and hamburger and this attracted children mostly.

Change in technology improved the method of re-ordering and decreasing waste. It also created greater connections between the corporations with its customers. These changes in technology have strengthened McDonald’s brand through providing ordering channels for their customers such as collection, ordering online and in-store self-service. The online ordering helped the corporation in getting information about their customers and hence carries out modified marketing through promotions (Chikweche & Fletcher, 2012, pp. 510). The corporation also used popular celebrities to advertise their goods. Use of technology in the operation of business activities has led to additional quality to their products (Lee & Johnson, 2013, pp. 17).  After the corporation improved its inventory system and supply chain it has helped the company to do well in global markets. McDonalds has succeeded internationally because of the way the company has overcome technological problems. The company has systematically substituted equipment for people and has carefully planned use and positioned technology. This has made franchise to have the same high standard (Gibbs, MacDonald & MacKay, 2015, pp. 179).

Social factors

McDonald Corporation emphasised especially on teenagers and children in advertising largely succeeded because this strategy was exploiting on these social movements. US society prefers taking meals with minimum time effort. In order to save time, there was desire to purchase meal outside home on an unplanned basis. It resulted to a quick demand for cheap meal that was available any time and acquired with least shopping effort.  The corporation is trying hard to understand local customs and beliefs of their customers.  The company has integrated people from different societies into their corporation and has familiarised with the taste of the community. McDonald Corporation has its location outlets in different countries which have diverse cultures. The corporation must keep in mind the cultural and religious beliefs as they decide meals menu in different outlets (Stern, 2010)

Social factors affect society’s basic values, preference, behaviors and perception. It includes habits, traditions, art, religion, language, family, education, and reference groups. Some of deep traditional and religion beliefs conflicts with international media messages (Zannierah Syed Marzuki, Hall & Ballantine, 2012, pp. 47). McDonald Corporation decided not to launch a big mac burger due to the beliefs of Hindu on prohibition of beef consumption (McDonald, 2014). The corporation had to change its methods of food preparation as well. In countries like Malaysia and Singapore, Muslim laws are followed in slaughtering for the beef that is used in preparation of burger (Gibbs, MacDonald & MacKay, 2015, pp. 182).

McDonald Corporation has founded a charity called Ronald McDonald House in 1974 (Schlosser, 2012, pp. 9). The charity provided provisional housing to the families who had seriously sick children. The corporation is also known as an equal opportunity employer (Zeng, Go & dae Vries, 2012, pp. 1095). The corporation has also shown an image of a socially responsive company as they are involved in projects that help disadvantaged part of the community. The corporation has announced to support the Rainforest Alliance. In some areas where people have anti American feeling, affected the sales of the corporation due to boycotting of American products (Grünhagen, Dant & Zhu, 2012, pp. 599).

Environmental factors

The weather and physical topography of a country have significant impact on the demand of the product. Before entering into a new market, McDonald Corporation should consider the physical topography climate of that particular country (Bowie & Buttle, 2013, pp. 32). Some of the climatic conditions that can affects business in foreign countries are humidity, altitude and temperatures. It is also important for a corporation also to be environmentally friendly. McDonald Corporation was forced by environmental groups to reduce use of plastic and packaging (DiPietro, Gregory, & Jackson, 2013, pp. 149). Environmental issues can have a positive or a negative impact on the operations of the firm. McDonald has decided to work with the environmental groups to reduce harmful and unnecessary waste (Seo & Jang, 2013, pp. 200).

McDonalds deals with fast-food purveyors, which makes it a great garbage producer in the world.  The corporation has worked to reduce its contribution to the problem of garbage. McDonald is using a rule known: REDUCE, RE-USE, RECYCLE, and DISPOSE in that order internationally (DiPietro, Gregory, & Jackson, 2013, pp. 150). The corporation has put waste reduction programs under the Golden Arches. The company shipped orange juice to its restaurants ready to serve containers which have reduced orange juice packaging by75%.  The company has reduced use of polystyrene burger container, cold drink lids and straws at an average of 12%. The above added up to one million pounds less plastic in 1988 (DiPietro, Gregory, & Jackson, 2013, pp. 152). The company promoted recycling by not generating recycled material but instead become a market the product. The corporation also used recycled paper in it napkins and paper bags.

Conclusion

In conclusion, there are several external environmental factors that affect the operation of an organisation. These factors have significant impacts on the running of the business which varies depending on the nature of the aspect and the type of the organisation. External environment factors have been categorised into two; micro environment and macro environment. The micro environment includes; financiers, suppliers, market intermediaries, customers and public perception. The macro environment includes; economic, political and legal, technology environmental and social factors

External environment factors have a significant impact on the operations of the organisations. They affect the whole process of conducting business in a firm. The magnitude of the impacts of the external environment varies depending on the nature of the factor and the type of the firm. Different organisations put different measure to try to solve the challenges caused by external environments. And so, firms have little control over the external environment.

Qantas airline is one of the best corporations in Australia but it is ranked as the most pollutant corporation in the region. This was due to the company use of less-efficient aircrafts. The company also faced steady competition from its rival. Political instability also affected the company most. The company had to improve its product to be able to compete with its competitors in the market

Billabong company, which is a clothing company based in Australia has encountered various effects from external environment. The corporation faced stiff competition from its rivals. Economically, the business was affected by fluctuations of exchange rates since it operated across nations (Farabi, 2012, pp. 25). Government policies in different countries also affected its business operations. Similarly, customs and beliefs affected the performance of the company.

McDonald Corporation, a food firm operating internationally is also affected by external environment factors. The company is facing a lot of competition from its rivals in the market.  Because the company is working internationally, economic fluctuations affect its business operations.  Different government regulations in different countries affected the performance of an organisation. The corporation performance was also affected by the customers and beliefs of different people in diverse nations. The magnitude of the impact of the external environment will depend on the type of the firm. It is worth noting many firms have different measures to handle the challenges from external environment.