Environmental factors affecting McDonalds management functions

Environmental factors fall uponing McDonalds way functionsExecutive Summary This analytical study aims to investigate and analyse the divers(a)(a) surroundingsal factors that can affect the working of McDonalds Corporation and provide strategic recommendations for the enhancement of its systemal effectiveness, profitability and private-enterprise(a) advantage. The operations of the firm, especially the globalised nature of its working and its extensive geographical reach, go it subject to various environmental influences. The writer has accordingly shortlisted 12 important environmental factors, namely Customers, increases and Services, Competitors, Employees, Technology, semipolitical Factors, Economy, Environmental Factors, Culture and Religion, Globalisation, Legal Issues and Shareholders and analysed them in detail. The writer has there later made pulmonary tuberculosis of the TOWS framework to provide several strategic recommendations for the enhancement of the firm s productivity, profitability and competitive advantage. The main recommendations pertain to the workout of organisational resources for expansion of the nutritional determine of the firms products, the cr wipe oution products for elder age groups and the expansion of the guest base of the organisation. It is recommended that the organisational management of the firm should specifically heighten upon removing prevailing perceptions about the nutritious value of the firms products and thus remove important customer associated apprehensions to future growth. Table of confine S. No Contents Page Executive Summary 2 1. Introduction 4 2. Product Line 4 3. Environmental Analysis 6 3.1. Customers 7 3.2. Products and Services 7 3.3. Competitors 7 3.4. Employees 8 3.5. Technology 8 3.6. Political Factors 9 3.7. Economy 9 3.8. Environmental Factors 10 3.9. Culture and Religion 10 3.10. Globalisation 10 3.11. Legal Issues 11 3.12. Shareholde rs 11 4. strategic Analysis and Recommendations 11 4.1. SO Strategies 12 4.2. WO Strategies 12 4.3. ST Strategies 12 4.4. WT Strategies 13 5. Conclusions 13 References 14 1. Introduction This analytical study aims to investigate and analyse the diverse environmental factors that impact the management and securities industrying functions of McDonalds Corporation and thereafter provide strategic recommendations for the future. McDonalds Corporation, founded in 1940 as a barbeque restaurant, has grown over the years to become the elephantinest global chain of fast food restaurants (McDonalds Corporation, 2014, n.p. The organisation has operations in 119 countries, approximately 440,000 employees and more than 36,000 retail outlets (McDonalds Corporation, 2014, n.p.). McDonalds is one of the worlds most successful business corporations and its operations have been studied in detail by various researchers (McDonalds Corporation, 2014, .p. Kennedy, 2014). The or ganisation has become a symbol for American business enterprise and corporate globalisation (McDonalds Corporation, 2014, n.p. Kennedy, 2014, n.p.). The proportional price of a McDonalds burger has been used to compare the purchasing power of different countries (McDonalds Corporation, 2014, n.p.). The firm owns approximately 15% of its outlets and operates them directly, the balance being operated by others through diverse franchising and joint venture organisations (McDonalds Corporation, 2014, n.p.). The corporation operates in extremely challenging environmental conditions, characterised by intense competition from several large global food retail firms and differing environmental conditions in its various markets (McGrath, 2013, n.p.). The firm has faced criticism from various groups of activists for its products and HR strategies (McGrath, 2013, n.p.). The next section of this structured analytical study provides details about the organisations products this is followed by s ections on environmental analysis and strategic analysis and recommendations. The study ends with a summative conclusion. 2. Product Line McDonalds is known to be a hamburger fast food restaurant, which excessively sells soft drinks and a variety of sides (McDonalds Corporation, 2014, n.p.). The organisation has tho over the years developed a wide range of food products that can be categorised into six allots Burgers and Sandwiches Drinks Snacks and Sides Desserts and Shakes Salads Breakfast (McDonalds Corporation, 2014, n.p.) The following sidestep provides the details of its products and product mix for the US market. Table 1 Details of McDonalds Products and Product Mix Product Segments Details Product Segments Details Burgers and Sandwiches black Angus Snacks and Sides Wraps Big Mac Apple Slices Quarter Pounder Fruit Hamburger Fries Cheeseburger Desserts and Shakes Ice Cream Crispy Chicken Sundaes Grilled Chicken Mcflurry fish Shakes Mcribs Cookies Drinks and Beverages Milk Pies Water Salads Side Salad Juice Premium Salad Coffee Breakfast McMuffins Ice Tea McGriddles Coke Products Biscuits Cinnamon Melts Bagels Burritos (McDonalds Corporation, 2014, n.p.) McDonalds has likewise of late introduced Its McCafe range of coffees, chocolate drinks and smoothies (McDonalds Corporation, 2014, n.p.). The firm also provides meal bundles like favourites under 400 (calories) Dollar menus, Extra Value Meals, Happy Meals and Mighty Kids Meals (McDonalds Corporation, 2014, n.p.). The corporation is attempting to broad-base its food products to cater to diverse types of customer food inescapably (McGrath, 2013, n.p.). 3. Environmental Analysis McDonalds has to operate in an extremely complex environment on account of the internationalisation of its operations and the intense competition it faces from diverse firms in the fast food business. The business environment of an organisation has several inhering and external environmental factors that can influence and impact its working and shape its organisational strategies and policies. McDonalds environment contains various elements, the more important of which are depicted in the following chart. Each of these factors is taken up for detailed analysis below. 3.1. Customers McDonalds has retail operations in 119 countries and serves the needs of millions of customers (McDonalds Corporation, 2014). Whilst researchers have tried to segment McDonalds customer base in various ways, the organisation primarily caters to the needs of children, young bulk, parents, and business customers (McDonalds Corporation, 2008). Each of these customer segments has specific needs and the organisation has to fulfil them as much as possible (McDonalds Corporation, 2008, p 2). Children, for example love to visit McDonalds because it is a fun repose and McDonalds responds to their needs with various toys, special facilities for birthday parties and other fun things for children (McDonalds Corporation, 2008, p 3). It aims to provide nutritious meals for parents with children and has affordable menus for teenagers (McDonalds Corporation, 2008, p 4). pipeline customers are provided with quick and affordable meals that fit in with their working schedules (McDonalds Corporation, 2008, p 3). The organisation is unceasingly focusing upon the enhancement of customer satisfaction (McDonalds Corporation, 2014 n.p.). 3.2. Products and Services McDonalds provides a range of food products to its customers in clean, well designed and attractively laid out retailing environments (Frenchman, 2014 n.p.). The organisation aims to provide customers with a range of tasty and nutritious food, delivered swiftly and at affordable prices (McDonalds, 2008, p 4). The organisations products and services constitute its difficultest attraction for customers and the organisation very evidently has to encounter that they meet customer needs and continue to delig ht them (Frenchman, 2014 n.p.). 3.3. Competitors McDonalds has several competitors, each of which is constantly seeking a capitaler share of the market (Raphel, 2014 n.p.). It is important to recognise that the organisation faces competition from various large organisations, like for example Burger King, Wendys, KFC and Subway and also numerous small fish and chip and heat up chicken establishments (Raphel, 2014 n.p.). It also faces competition from fortified firms like Starbucks, Taco Bell, Dunkin Donuts, Pizza Hut and Dominos Pizza (Raphel, 2014 n.p.). Each of these competitors is constantly working on its property of food and service, as well as on diverse other options and strategies to attract customers (Jargon, 2014b, n.p.). It is important to appreciate that competition for McDonalds has increased significantly in the erstwhile(prenominal) two decades, which in turn has resulted in the slowing of the organisations growth and several(prenominal) reduction in its market share (Jargon, 2014b, n.p.). The nature and intensity of the competition faced by the organisation very clearly shapes its organisational strategies. 3.4. Employees McDonalds is overly reliant upon its employees for both the preparation of its food and for the quality of its customer service (Lovewell-Tuck, 2013 n.p.). Restaurant workers form the largest group in the companys employment structure (Lovewell-Tuck, 2013 n.p.). Each McDonalds restaurant has average manpower strength of 50 employees many of these employees join at the entry level and as part-time workers (McDonalds, 2008, p 3). McDonalds has been subjected to substantial criticism in the past for its low wages, as well as for the high turnover of its restaurant employees, who comprise teenagers, transitional workers, students and working mothers (Lovewell-Tuck, 2013 n.p.). The effective deployment and marshalling of its employees constitutes one of its most important organisational objectives (Lovewell-Tuck, 2013 n.p .). The organisation provides vocational training to all of its employees as well as the opportunity for securing promotions to higher positions, including executive positions in the organisational hierarchy (Lovewell-Tuck, 2013 n.p.). McDonalds has constantly worked upon its HR management strategies and attempts to motivate its staff with diverse rewards and incentives (McDonalds, 2008, p 3). All employees in the top 10% of McDonalds restaurants receive bonuses on the basis of mystery shopper scores. The organisation also rewards its outstanding employees with awards and trophies at Gala functions. Neal Blackshire, a senior official at McDonalds, states that the organisation recognises employee behaviours, ensures that recognition and reward are right for the workforce and understands what employees wish and value (Lovewell-Tuck, 2013 n.p.). 3.5. Technology Technological advancements are affecting every aspect of the social and business environment and McDonalds takes care to ensu re appropriate use of technology for achievement of organisational objectives and competitive advantage (Baldwin, 2013 n.p.). It works on technology constantly to enhance the optimisation of its operations (Baldwin, 2013 n.p.). The preparation of a big Mac,for example,now takes 60 seconds and is affect in three stages, including packaging (Baldwin, 2013 n.p.). The organisation is making use of several types of technology for storage of food, regulation of temperature, preparation of food, control of supply chain and fiscal management and reporting (IncisiveMedia, 2004, n.p). McDonalds is linking different responsibility centres through appropriate communication systems in order to enhance optimisation of efficiency and productivity (IncisiveMedia, 2004, n.p ). 3.6. Political Factors McDonalds operates in several countries, many of which have different political systems (Han, 2008, p 73). It thus has to cater to various types of political pressures in order to ensure the meeting of its objectives (Han, 2008, p 73). Various governments are currently attempting to increase their control over the fast food sector on account of health associated issues some of them are restricting the issuances of licences to franchisees (Han, 2008, p 74). Local political pressure has also been applied on the firm from time to time for its perceived role in the dilution of local culture (Han, 2008, p 75). The corporation thus has to constantly anticipate the political environments of the different locations in which it works and take appropriate proactive or reactive action. 3.7. Economy The general economic environment plays an important role in shaping the organisations business strategies and policies (Thompson, 2002, p 36). The economic mode can affect discretionary incomes, customer footsteps, market brand, availability of labour and the prices and availability of materials (Gasparo, 2012, n.p Gould, 2012, p 608). The organisational management of McDonalds, both local and central has to thus constantly work towards anticipating and overcoming diverse types of economic challenges (Gasparo, 2012, n.p Gould, 2012, p 608). It is important to however appreciate that the demand for affordable food products is by and large inelastic and stays high, no matter of the health of the economy (Gasparo, 2012, n.p Gould, 2012, p 608). McDonalds makes use of this benefit by ensuring that people can come to its outlets when they wish and purchase affordable meals for themselves and their families (Gasparo, 2012, n.p). The organisation has shown rare resilience during the recent recession and has protected its profit margin by balancing its low priced menus with premium products (Gasparo, 2012, n.p Gould, 2012, p 608). 3.8. Environmental Factors McDonalds, as the largest food retailing chain in the world, has to deal with several types of environmental factors (McDonalds Corporation, 2014, n.p McDonalds Corporation, 2010, n.p.). The firm makes significant use of b eef, packaging materials, napkins, carry bags, oil, water and power. Its operations also result in generation of substantial amounts of solid waste (McDonalds Corporation, 2014, n.p McDonalds Corporation, 2010, n.p.). The firm has over the years worked towards the enhancement of operational sustainability and improving the bionomic soundness of its operations (McDonalds Corporation, 2014, n.p). It has tied up with the Environmental Defence Fund (EDF) to ease the companys environmental burden (McDonalds Corporation, 2014,n.p McDonalds Corporation, 2010, n.p.). It has introduced policies for enhancing the recycled content of its packaging material and for reducing the use of polystyrene (McDonalds Corporation, 2014,n.p). It has developed a rain forest policy and adopted beef purchasing practices that do not lead to deforestation (McDonalds Corporation, 2014,n.p). 3.9. Culture and Religion McDonalds has to necessarily work in diverse countries with different cultural and religious env ironments. It has taken the lead in offering customers taste and appearance variations in accordance with the demands of local cultures and religious customs (Cheek, 2014,n.p). It followed up its entry into India, where Hindus do not eat beef and Muslims do not eat pork, by introducing vegetable McNuggets and a Maharaja Mac with lamb meat (Cheek, 2014,n.p.). It has furthermore obtained certification for Halaal food for Islamic countries like Pakistan, Malaysia and Morocco and has advertised it on its menus (Cheek, 2014,n.p.). The firms menu in Morocco offers dates, milk and cookies during the holy month of Ramadan (Cheek, 2014,n.p.). The organisation has taken care to ensure the valuate structure of its menu, even though it has provided for several local variations (McDonalds Corporation, 2014,n.p.). 3.10. Globalisation Economic and cultural globalisation essentially involves the economic and cultural intermingling of different cultures (Salisbury, 2014,n.p.). McDonalds, as an em inent food retailing organisation, is a leader of globalisation and has spread the American food culture crossways the world (Salisbury, 2014,n.p.). It has, whilst doing so, had to take account of various social, cultural and global issues and respond to them with sensitivity, cultural sensibility, economic foresight and wisdom (Salisbury, 2014, n.p). The adoption of such carefully thought out approaches have helped it to overcome strong resistance in various areas of the world and establish successful operations (Salisbury, 2014, n.p). 3.11. Legal Issues McDonalds has over the years been challenged by various legal issues in different countries. Its success has led many businesses to copy its name and logo and the firm has responded by taking legal action in several mark associated cases (Petersen, 2014, n.p). The organisation has also been involved in several litigations involving its employees and worker rights (ABC News, 2007, n.p). Some of these cases have gone against the or ganisation, leading to penalties and fines (ABC News, 2007, n.p). One customer was awarded several million dollars after suffering from third degree burns because of spilling a hot cup of McDonalds coffee on herself (Petersen, 2014, n.p). The corporation very clearly has to pay great attention to the legal aspects of its operations (Petersen, 2014, n.p). 3.12. Shareholders Shareholders comprise one of the most important stakeholders of the firm. McDonalds has rewarded its shareholders well over the years in terms of market sense of taste and dividends (Jargon, 2014a, n.p). The firm plans to increase its payout to shareholders by 10 to 20% over the next three years, even when it is under pressure to enhance sales performance (Jargon, 2014a, n.p). 4. Strategic Analysis and Recommendations This section entails the conduct of a strategic analysis and the provisioning of appropriate recommendations. A TOWS analysis involves the analysis of organisational strengths, weaknesses, opportun ities and threats and the subsequent utilisation of strengths and minimisation of weaknesses for the exploitation of opportunities and countering of threats. 4.1. SO Strategies SO strategies entail the utilisation of strengths for exploitation of opportunities (Henry, 2008, p 42). McDonalds is a global brand with a strong global presence (Lesser et al., 442). It has economies of scale, a strong real estate portfolio, branded menu items and one of the worlds most recognised logos (Research and Markets, 2013, n.p.). It also paradoxically has high employee turnover, a customer base that mainly comprises children and young people and is yet to develop a reputation for healthy and nutritious food (Research and Markets, 2013, n.p.). The firm should thus very clearly use its resources for expanding its customer base and for enhancing the nutritious value of its products (Lesser et al., 442). It should focus on developing a range of food products that are crisscrossed at elderly people w ho are likely to have health conditions associated with blood pressure, blood sugar and the heart (Lesser et al., 443). The development of products for this customer segment will help McDonalds in opening up a completely new customer segment and in the development of truly healthy products (Lesser et al., 443). 4.2. WO Strategies McDonalds has numerous opportunities for enhancing its organisational effectiveness, success and competitive advantage (Research and Markets, 2013, n.p.). The growing population of the world, along with changing lifestyles and improving economies provides the organisation with significant opportunities for greater growth (Jurevicius, 2013, n.p.). It can reduce the weaknesses in areas of nutrition to target customers across its different segments (Jurevicius, 2013, n.p.). McDonalds does have some salads on its menu, which offer health eating options to customers. The organisation however continues to be perceived as a purveyor of high calorie products that can lead to obesity and other health problems (Lesser et al., 445). It can take several more steps, like the introduction of hummus and tahini paste, feta cheese, and chromatic oil in its product range (Research and Markets, 2013, n.p.). Such efforts will certainly help the organisation in attracting more customers and enhancing sales. 4.3. ST Strategies ST strategies involve the utilisation of strengths for the reduction of threats (Williamson et al., 2003, p 109). McDonalds currently faces threats on account of the continuance of economic difficulties, foreign currency fluctuations, intensifying competition, nutrition associated issues of its products and perceptions about the unhealthy attributes of its food(Lesser et al., 445). The firm can use its organisational strengths to enhance its supply chain management and improve its operating margins (Jurevicius, 2013, n.p.). It can engage in significant and focused advertising and outreach campaigns to focus upon its commitment to various customer segments (Jurevicius, 2013, n.p.). 4.4. WT Strategies WT strategies involve the reduction of weaknesses for the avoidance of threats (Thompson, 2002, p 32). The firm can engage in specific advertising to reiterate its commitment to health, fitness and sports (Lesser et al., 445). The sponsorship of sports programmes across schools, college and universities can assist the firm in enhancing th