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McDonalds: External Environment

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External assessment on your selected department, group, division, function, or organization (for which you will create a strategic plan) that you began in week 2, including an assessment of the external remote, industry, and operating environments. Your environmental scan should describe the situation completely and accurately. You should identify any major changes that you expect to affect your remote, industry, or operating environments in the next 5-10 years. This will include the following subcomponents:
a. Utilize a macroeconomic forecast of economic indicators from the external remote environment that will affect your chosen organization in the future and should be considered part of strategic planning.
b. Analyze the non-economic factors in the external remote environment:
1) Social and Cultural
2) Political
3) Technological
4) Demographic
d. Develop an assessment of the organization's external industry environment using Porter's "Five Forces", including an assessment of the future forces and trends in the industry.
e. Identify strengths and weaknesses in the organization's operating environment that can be leveraged to capitalize on the emerging opportunities or minimize the threats that you identified thus far. Make sure to present a competitive assessment on how specific key competitors compare to the firm on the criteria you believe are most associated with marketplace success. Also be sure to assess the firm's key customer/market segments, and the key needs/demands of each (in particular look to see how these needs/demands might be evolving based upon some of your earlier research into future trends).
f. Considering all of your external assessment findings, summarize the top three to four strategic opportunities and/or threats that are most important to consider in your later development of long-term objectives.

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//Before writing about the environmental analysis of the firm, we have to understand the business operations and industry of the business. We should know that in what kind of industry this business is functioning and what kinds of services it is serving. So we will write about the business under the heading of introduction, for example: //

Introduction: About McDonalds

McDonald's...is one of the chief international retailers for providing food services. There are more than 30000 local restaurants, which cater to 52 million people with world class fast-food in more than 100 countries every day. McDonald's chain is spread worldwide; 70 % of its restaurants are local and independent franchisee, own and operate globally. Among the most precious and renowned brands of the world, McDonald's is one. Approximately on all the countries where the McDonald's operates its services, it holds a major share in the global renowned quick service restaurant industry of the informal eat out market.

//Above we have discussed about McDonalds, which is a part of fast food industry and have a good network all over the world. As per the directions, now will discuss about the external environmental analysis of the company. Instead of giving the factors of external environmental, we will also focus on giving a detail explanation of the external environment of the fast food industry. //

External environment

The external environment of a company consists of the opportunities and threats. It consists of the micro and the macro environment. The micro environment consists of an analysis of the industry and the competition while the macro environment comprises of the PESTEL analysis, that is, the political, economic, social, technological, environmental and legal environment. (Ramaswamy & Namakumari, 2005)

Environmental Analysis

Opportunities

The main factors that have determined the success of McDonald's are globalization, diversity and ethics.

Competition in the global market is very tough. (Bateman & Scott, 2004). McDonald's has joined the list of Fortune 500 corporations as a top food service retailer. The company requires very effective strategic planning for its marketing activities. There is no difference between the global marketing decisions and the decisions that are made domestically. These global marketing decisions may differ for each country.

McDonald's allows its employees to work in different cultural settings. This is because of its large scale working, which lays down the basis of an excellent marketing strategy for appointing new employees. The company also runs a global central set of courses for its restaurant management (McDonald's, 2005).

Diversity

McDonald believes that diversity is not just a moral or ethical issue; it is also a business issue (McDonald's, 2005). Nowadays, due to the global expansion of McDonald's business, diversity is an essential part of the internal culture of the company. The use of local suppliers is encouraged by the McDonald. Based on the policies of diversity, the company looks forward to hold on to suppliers, who have a diversified culture.

McDonald's has put up its business to know and understand the local customs and traditions of the people. It has integrated different people from different societies into the company and is becoming familiar to the tastes and cuisines of the community (External and Internal Factors Affecting McDonalds - Management, 2006).

Ethics

The proven success of McDonald's with leveraging the advantages of diversity can be attributed to their core value of ethics. McDonald's success is based on personal and professional integrity. McDonald's has always stood at top for its good reputation, trust and reliability among the customers and for the commitment to the community (External and Internal Factors Affecting McDonalds - Management, 2006)

Charity

It also founded a charity known as the Ronald McDonald House in 1974. Its purpose was to provide provisional housing for the families of seriously ill children. McDonalds is regarded as equal opportunity employer.

Market for dining out is growing significantly with almost all the families with more than one member earning. The increase in the level of income and living standard of people has created better scope for fast-food outlets. Most of the people, who are working or are students, want to freak out and relax on week-ends, prefer to visit McDonald's.

Threats

Mature Industry

The industry is already quite mature and over stored. It has many competitors and can incorporate many other new ones.

Competition

The competition is very intense in the fast food industry. McDonald's rivals are Burger King, Wendy's, Subway, KFC, and Pizza Hut in the burger as well as fast-food segment.

More health - conscious customers

Changing Demographics: The demographic factors such as density of population, age structure, family composition, family income and size, etc. pose a threat to the company.

Fluctuations of exchange rates

Since McDonald's a global company; therefore, it is facing the problem of foreign exchange fluctuations. These alterations might affect its revenues and profits.

//Above we explained about the external environment, now there is a need to conduct the internal analysis, which includes the strengths and weaknesses of the company. If you want, you can add more to the internal environment. I am just giving you an overview, so that you can complete your environmental analysis. //

Strengths and Weaknesses

Strengths

McDonald's is the largest food service company in the world. Franchisee of the company is highly successful as they are independent and there are full time operators. The key success factor is 'Plan to Win' strategy. The company focuses on product, price, place, distribution and people. It takes good care of its employees and treats them very well. There is not much stress on building up a formal organizational structure rather employees are expected to feel free without any control. Staff is provided hospitality training to have a customer focused people in the company. Another key factor is customer satisfaction. Fast food chain quickly responds to the changing preferences and trends of the customers; for example, it introduced Premium salads, McChicken.

McDonald's restaurants have a clean and modern environment. McDonalds renovate its buildings and has also the interiors to have a good atmosphere. Much effort is put on the price of the products as the customers are very price sensitive. It also emphasizes on brand loyalty and building trust.

McDonald's brought 'Fast Food Culture' - It was McDonald's, which brought the culture of fast food. This fast food chain has more than 30000 branches in 120 countries and it is an important part of U.S. culture. Some successful items of food chain are French Fries, Happy Meal etc.

Brand Image - The company has good brand image worldwide, which serves as a powerful ...

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Ashish Sharma, MBA (IP)
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  • BBA, University of Rajasthan
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