The Firm McDonald Competitive Advantage - Case Study Example

Academia-Research d 21st Nov 09 Topic: analyse the external environment (macro environment) using an appropriate tool of fast foodindustry and what are the firm MacDonald competitive advantage. give reason for your answer and the limitation of the one tool Abstract Macro environmental factors are important considerations for a business venture to succeed in any country. These macro environmental factors are political, economic, social, environmental, and legal commonly known as Pestel. McDonald had to keep these macro environmental factors in active consideration in order to expand and establish itself successfully. Sometimes these factors become very burdensome but success demands its fulfilment. McDonald has shown great business acumen, flexibility and commitment to these values to stand solid and gain competitive advantage through creating differential advantages in every segment. PESTEL explains the macro environment factors that affect a business - Political, economical, sociological, technological, environmental and legal forces. Political factors: government policy can have impact on the economy and business. By imposing higher tax on fast food industry government can influence the business and its profitability in a country where the business is situated. Government can fix up minimum wages or bonus for workers in chin stores that can inflate the wage bills of a fast food chain like McDonald. Economic factors: interest rates, taxation changes, economic growth, inflation and exchange rates ruling in the country of operation always affect the business. Many governments consider fast food stores as luxurious segment of business and impose higher taxes. Higher interest rates often deter investment because of higher costs for borrowing funds. Inflation keeps the fast food prices higher and deters youths the target customers to eat in McDonalds. Social factors: Changes in social trends can have impact on the demand for a McDonald's products. Workers may not be sufficiently available or not willing to work for the prescribed wage and benefit structure. The aging population in UK and Japan have made the labour cost higher. Young Turks who visit fast food chains more frequently prefer young faces to serve. Older workers claim longer and higher pension. Technological factors: new technologies create new products and new processes that can reduce costs, improve quality and lead to innovation. These new developments always benefit consumers as well as the organisations providing the products. McDonald can afford introducing these newer technologies better and provide benefits to its consumers. Environmental factors: The growing desire to protect the environment is having an impact on many industries and fast food is one of those. Government imposes many rules in order to protect environment. Environmentalists always campaign and raise issues on this external factor that is gaining importance everyday. Legal factors: legal environment in which firms operate is very vital. Significant legal changes in UK have affected McDonald. For example an increase in the minimum wage and greater requirements for firms to recycle. Legal changes usually affect a firm's costs. The planning and prosperity of a venture abroad is guaranteed only when the macro environment of the country where the business is operating is congenial enough to promote the business. For example the political system of the country is smooth enough to let the investment fructify and provide appreciable returns. The nature of government whether democratic or communist or military or dictatorship is a determinant factor. The political scenario, its local government, labour profile, leadership, media industry profile and general populace are important considerations. The social and cultural system of the country should also enable the local populace to accept the product for consumption. Global expansion made Mc Donald giant and truly multinational but had had to face many controversial issues on health, environment and labour. Global expansion through understanding and adopting the local culture and the food menu proved to be right strategy. The continuous and persistent success story of the company promoted McDonalization for many to adopt it for expansion beyond the boundary but it was not beyond criticism from many quarters for lacking flexibility (Smart 1999) The biggest environmental nightmare for the company was its waste material and the packaging used (Fabricant. 1989) besides the criticism from animal rights activists. The company had to change its cheaper and better substitute clamshell foam to paper to. (Holusha,1990b) and change disposable wares such as spoons, cups napkins to reduce wastes that were detrimental to environment. The local cultural or religious factors have to be taken into consideration to satisfy the local test, religious and social norms. MacDonald menu in India doesn't include beef because the majority of Hindu clients do not consume it. Similarly in Pakistan Pork is not served because their religion does not allow eating pork.( Macro environment McDonald) Thus important strategic decision taking into internal and external factors is key to the success in that market. A very good example of microenvironment problem McDonald had to face in USA and UK is public attack on the restaurant on the issue of serving Super size food that caused obesity to Americans and Europeans. The firm had to face countless lawsuits and tackle the issue by changing the food contents and fighting hard and firmly in the court. (Yahoo answers 2007) Global Demand Spurs McDonald's Q1 sales up 4.3% McDonald's has solid operating results for the first quarter ended March 31, 2009, driven by strong global comparable sales increase of 4.3%. .Sales in US is up by 4.7%, in Europe up by 3.2% and Asia/Pacific, Middle East and Africa up by 5.5%. The first quarter operating income of McDonald U.S. increased to 6% fuelled by strong comparable sales. The U.S. business continues to gain market share. Asia/Pacific, Middle East and Africa (APMEA) reported strong first quarter sale with strong operating income of 11%. In India Nirurla tried to stand close by giving price competition but McDonald faced it courageously and declared that they were delivering values and not simply the price. . Competitive Advantage of McDonald: The competitive advantage of McDonald's are the quality menu choices, affordable prices, unmatched convenience of locations, operating hours, and super value across the menu, affordability, convenience. Sales of chicken, breakfast and beverages contributed to higher performance. Seasonal food events, Tiered-pricing menus, expansion in the morning and late night hours that connects more with customers added to better sales that increased the market share. These are the main differential advantages McDonald had there that competitors could not match. . It is one of the oldest and successful fast chain outlets in the world. The company targeted youths and made them fans of McDonalds. These youths became the pillars of the strong McDonald. The company believed in ethos and service. They always performed to the highest order, faced problems firmly of whatever magnitude it was and geared themselves to the level of acceptance. According to Jim Skinner the senior most executive in the company "McDonald's continues to demonstrate its ongoing commitment to driving shareholder value. Through first quarter 2009, the Company returned $12.9 billion toward the $15 billion to $17 billion targeted cash return to shareholders by the end of 2009. Given our strong balance sheet and operating performance, we fully expect to meet the target this year." "Our well-known value proposition and unparalleled convenience continue to resonate with customers"( Equity Bulls) References 1. Fabricant, F. (1989), "A faintly amused answer to fast food", The New York Times, Section C; Column 3; Living Desk, November 15, Wednesday, Late Edition - Final, p. 10. Cantalupo's Revival Plan, www.icmrindia.org/casestudies/catalogue/Business Strategy3/BSTA069.htm Holusha, J. (1989a), "McDonald's contribution to recycling", The New York Times, Section D; Column 4; Financial Desk, April 18, Wednesday, Late Edition - Final, p. 14. Human Resource Management in McDonald's www.jpkc.szpt.edu.cn/english/article/ visited on 21st Nov 09 Equity Bulls Global Demand Spurs McDonald's Q1 sales up 4.3% - www.EquityBulls.com Visited on 21st Nov 09 www.equitybulls.com/admin/news2006/news_det.aspid=50060 - 32k Macro Environment Mcdonald's - Research Paper - Kaogg www.oppapers.com/...Macro-Environment-Mcdonalds/164536 -visited on 21st Nov 09 McDonald's: Cantalupo's Challenge | Business Strategy Case Studies... PESTEL analysis of the macro-environment www.oup.com/uk/orc/bin/9780199296378/.../page_12.htm visited on 21st Nov 09 2.McLibel to McLettuce: childhood, spin and re-branding Jacqueline Botterill, University of East London, London, UK, and Stephen Kline 3. Ritzer, G. (2004), The McDonaldization of Society, Pine Forge Press, Thousand Oaks, CA, Revised New Century Edition. Roberts, J. (2003), "'The manufacture of corporate social responsibility: constructing corporate 5. Smart, B. (1999), Resisting McDonaldization, Sage, Thousand Oaks, CA. Smith, J. (2001), "'Globalising resistance'", Mobilisation, Vol. 6 No. 1, pp. 1-20. 6. Taylor, Stephen Lyon, Phil Paradigm lost: the rise and fall of McDonaldization (PP64-68), International Journal of Contemporary Hospitality Management (1995) volume 7 Yahoo Answers McDonald and its macroenvironment - answers.yahoo.com > Business & Finance > Small Business - 6 Nov 2007 - - Strategy Driver for global business www.ravenwerks.com/global/global3.htm - visited on 16th April 2008 United nation Chronicle , weaving the global compact. www.un.org/Pubs/chronicle/2000/issue2/0200p42.htm - 15k visited on 17yh April 2008-04-17 www.booksites.net/brooks visited on 16th April 2008 Read More