Introduction
Owing to the increasing number of globalized operations among many international organizations, the extrinsic (external or environmental) factors have largely the key drivers of their success. For an organization to cope with and operate effectively in a global business environment, a comprehensive analysis of the environmental factors affecting its operations such as economic and trade practices; political and legal systems; ethics and social responsibility; demographics and physical infrastructure; and technology. Ideally, this paper presents a critical analysis of environmental factors affecting McDonald’s Corporation.
McDonald’s Corporation is the world’s largest retail chain of fast food restaurants (Schlosser 2012). Founded in 1940 by Maurice and Richard McDonald, the company has its headquarters in the U.S. at the end of last year, the company is approximately to have served 68 million clients per day in about 119 countries. The company’s key products include cheeseburgers, chicken, desserts, milkshakes, french-fries, soft drinks, salads, wraps, fish, smoothies and hamburgers. Financial estimates reveal that in 2012, the company’s revenue and net income amounted to approximately $ 27.56 billion and $ 5.46 billion respectively.
Economic factors largely determine the success of the marketing efforts of any international business organization. Analysts argue that international economic interdependence, and fair trade practices and agreements tend to encourage free trade among countries (Schaffer et al. 2009). For instance, fair trade practice and agreements removes of trade barriers such as quotas and tariffs, which help expand the market for McDonald’s products in the involved countries. In addition, international economic interdependence such as use of common currency will help to spearhead marketing and financial transactions of the company. Thus, it is crucial for the company to critically understand these forces for it to make rational marketing decisions.
The importance of demographics and physical infrastructure
Having adequate understanding of the key demographics and physical infrastructure of McDonald’s target market is vital in formulating appropriate marketing mix strategies. These include decisions associated with product, price, promotion and place. For instance, through the analysis of the target customers’ gender, age, ethnicity, race, religion, lifestyles, sex orientation, income and occupation, the company will be able to develop product features tailored to meet the needs of specific demographic market segment. Moreover, promotion tools such as will largely be pegged on the demographic characteristics of the target market in order to minimize wastage of resources and maximize promotional efficiency. An understanding of the physical infrastructure such as road networks is equally essential in determining McDonald’s distribution channels. This is primarily because of the inverse correlation between advanced infrastructure and a company’s distribution costs. This implies that McDonald’s will locate its outlets in areas with improved physical infrastructure facilities.
Analyzing the influence of cultural differences
Owing to a number studies, it is precise that culture is a key driver of organizational success. The influence of culture on organizational success is predominant in product development and marketing. Being a multinational company, McDonald’s serves customers from diverse cultural backgrounds. Since individual beliefs, perceptions, values and attributes towards the company’s products are largely based on their way of life (culture), McDonald’s products have been designed to fit the diverse cultural differences of its existing and potential customers. Here, adapting to different culture has forced the company to alter its marketing mix strategies tremendously. This is evidenced through variations in the company’s packaging, product ingredients, pricing and promotion in different cultures.
Examining the significance of social responsibility and ethics versus legal obligations
Every business enterprise has social obligations to its key stakeholders such as customers, the government, the society, shareholders, employees, and the environment. Analysis reveals that meeting the interests of each of McDonald’s stakeholders will help to reduce the possibility constant conflicts between them and the organization (Mallin 2009). McDonald’s understand the need to balance interest of its stakeholders. For instance, the company packs its products in environmentally friendly packets in an attempt to avoid environmental degradation, which results to violation of social ethics and environmental laws. Moreover, the company practices equally employment opportunity practices and fair treatment of its employees, and participation in community aid programs. This practiced has helped not only in improving the company’s employee productivity but also its perceived brand image among various communities, which is vital in marketing.
The effect of political systems and the influence of international relations
Political systems and international relations largely determine the peaceful coexistence among nations. In general, having adequate understanding of the political systems of different countries is vital. This is because; stable political systems create a favorable environment for successful business operations, particularly for security reasons. This implies that McDonald’s will locate its outlets in countries characterized by stable political and government systems, so as to reduce political or sovereign risks (Stosberg 2005). In addition, it can be argued that the creation of international relations will help strengthen both economic and political systems of countries, and thus making it easier for McDonald’s operations and marketing practices to process effectively in those countries.
The analysis of the effects of Foreign Corrupt Practices Act of 1977 and other local, national and international legislations
Having an adequate understanding of corporate local, national and international legislations is essential in ensuring that a business organization does not operate outside the law. The Foreign Corrupt Practices Act of 1977 has helped to promote justice, fairness and improved standards of business conduct in McDonald’s. The act prohibits, among other things, organizational practices associated with bribery, money laundering and transactions involving terrorist groups (Deming 2010). McDonald’s acknowledges the importance of complying with the act, and other standards. Each year, the company’s Global Compliance office conduct an audit to ensure that the conducts all its employees in different countries comply with different legislations, standards and company-specific policies. By operating with the stated legislations, McDonald’s has been able to avoid unnecessary expenses arising from legal claims against the company.
The effect of technology on the company
With the advancement in technology through research and development, McDonald’s food processing has significantly been improved. Ideally, technology has affected the company (positively) in a number of ways. First, the advancement in technology within the industry has enabled McDonald’s to produce high quality food products (Stretton 2000). Moreover, through the application of technology such as refrigeration systems, the company significantly reduced food spoilage over the past. In addition, research reveals that technology has improved the company’s resource utilization process resulting to efficiency and effectiveness in food production. This, in turn, has enabled the company to enjoy the benefits of large scale production of fast foods such as declining marginal cost of production (Gwartney 2009). In general, technology has helped to elevate McDonald’s global competitiveness over its rivals.
Conclusion
Based on the above discussions, it is clear that the success of business practices (such as marketing) of any multinational organization-where McDonald’s is a subset- significantly depends on the characteristics of its external environment. For McDonalds to remain competitive in the global business environment, the company’s marketing decisions must primarily be linked to a number of critical environmental factors ranging from economic, social, cultural, legal, and political to technological forces.
References
Deming, S. H. (2010). The Foreign Corrupt Practices Act and the new international norms. Chicago, Ill: American Bar Association.
Gwartney, J. D. (2009). Economics: Private and public choice. Australia: South-Western Cengage Learning.
Mallin, C. A. (2009). Corporate social responsibility: A case study approach. Cheltenham: Edward Elgar.
Schaffer, R., Agusti, F., & Earle, B. (2009). International business law and its environment. Mason, OH: South-Western Cengage Learning.
Schlosser, E. (2012). Fast food nation: The dark side of the all-American meal. Boston: Mariner Books/Houghton Mifflin Harcourt.
Stosberg, J. (2005). Political risk and the institutional environment for foreign direct investment in Latin America: An empirical analysis with a case study on Mexico. Frankfurt am Main: Lang.
Stretton, H. (2000). Economics: A new introduction. London: Pluto Press .
