Abstract
This paper is the thorough external analysis of McDonald Corporation. In this analysis, first the short history of the foundation of McDonald has been described. The paper also focuses on some of the major factors that have made the company the largest food chain in the world. The paper also interprets the vision and mission of the company and how the company’s overall strategies are involved in their mission and vision statements. The PESTEL analysis of the company is done in the paper. The paper also discusses about the competitions in food chain industry and their threat to the company. The paper has given a statistical interpretation about the financial growth of the company which has slightly declined in last two years.
Keywords: McDonald Corporation, Analysis
Introduction
McDonald is one of the largest food chains in the United States as well as in the world. It was founded on 15th May 1940 in San Bernardino in California. Then it was called McDonald. In the year 1955, it was known as McDonald Corporation. McDonald was founded by Richard and Maurice McDonald while McDonald Corporation was founded by Ray Kroc. Ray Kroc was multi mixer salesman who came to know that Richard and Maurice McDonald wanted to spread their business nationwide. Kroc signed a franchise contract with McDonald brothers. Kroc opened his first restaurant in Des Plaines, Illinois (B, 2010). The head quarter of McDonald is located in Oak Brook Illinois in the United States. The popular menu items of McDonald are Hamburgers, Cheeseburgers, McNuggets and French Fries. McDonald has more than 32,000 restaurants functioning in more than 117 countries all over the world. Among these restaurants, around 75% of them are operated by independent owners (B, 2010). In 1957, the company made its motto and that is Q.S.C.V. (Quality, Service, Cleanliness, and Value). McDonald has been showing consistent growth since its foundation. The first franchisee of McDonald was Ray Kroc. As mentioned above, Kroc signed the contract with McDonald in 1954 within next five years that is in 1959, the company opened its 100th McDonald. It proves that the growth of the company was happening on a very rapid pace. McDonald also founded Hamburg University in 1961.
Setting Strategic Direction
Every organization designs a strategy for the growth and prosperity of their business. Setting strategic direction means taking actions to meet the goals of the organization’s strategy. As far as McDonald Corporation is concerned, the major key players of the company are its franchisees and suppliers. The company has been successful in controlling their system and thus they are successful in identifying and executing the plans that would be able to meet the customers’ changing needs. The business models set by McDonald has enabled it to deliver the customer a local feel in the restaurant. The company always strives to be the integral part of the respective culture in which the restaurant is located. The strategic direction of McDonald thus not just involves in the present situation, but the company also looks the potential changing needs of the customers in the future as well.
U.S. Market – It is the largest market for the company. The revenue generated in the USA is largest and the number of restaurants is also highest
International Market – In this segment, there are some largest, well-resourced and established markets.
High Growth Market – There are 8 key markets of McDonald in Asia and Europe as well. They are Korea, China, Russia, Poland, Italy, Spain, Netherlands and Switzerland. These all markets are growing consistently.
The Vision Statement of McDonald
The Vision Statement of the company is as follows:
“To become a modern, progressive burger company delivering a contemporary customer experience”
In this statement, being modern means getting the brand to where they need to be today and by progressive, it means doing those things which the customer will need tomorrow. It means to identify the future needs of the customer. And to make this statement true, the action plan of McDonald includes professionalism and high quality in delivering service and high quality food to the customers. They are also taking care to feel the customer good by providing them excellent and state-of-art experience. The attempt of the company has always been to value the customer.
If we look at the business statement of McDonald, we come to know that McDonald has covered several business elements in their vision statement. The company aims at executing innovations to meet the existing market needs when they say “contemporary customer” in their statement.
The McDonald Company is focusing on several different strategies to ensure prosperity in their business. The leading strategy in this is innovation. McDonald strives to be innovative in their products so that they can meet the customers’ demands. However they avoid compromising the quality of the product. Hence to conclude their main strategy is to deliver innovative, delicious and high quality food to their consumers. This modern and progressive vision is a leading part in their organizational development and has allowed them to maintain their position in the global market.
Mission Statement
The McDonald’s mission statement highlights many of the company’s objectives. It is as follows:
“Our mission is to be our customers’ favorite place and way to eat & drink. We’re dedicated to being a great place for our people to work; to being a strong, positive presence in your community; and to delivering the quality, service, cleanliness and value our customers have come to expect from the Golden Arches – a symbol that’s trusted around the world.”
If observed the mission statement carefully, it is clear that in the statement, the company is detailing about the market position McDonald has. In the statement, the company has also focused on the approach of their human resource activities when they say that the company is the great place for the people to work. The company also has covered the Corporate Social Responsibility approach of the company when they say “positive presence in your community”. They focus that they are keen to develop positive image of the company in the minds of the customers. They also focus on the image building approach of the company through quality service. Cleanliness is the key factor in any food products and the company always has to be careful about the maintaining cleanliness and hygiene in product making process. Hence in the mission statement, McDonald felt it important to mention about the cleanliness. The customer service is also one of the major determinants for the success of any organization. The approach of the company is minimizing the cost and maximizing the value through the quality product and service.
Strategic Objectives
Strategy Objectives are the objectives that are necessary for the organization to achieve to make any strategy a successful one. They are very crucial for the present and future growth of the business organization. There are different strategic objectives, they are as follows:
Financial Strategic Objectives
Customer Strategic Objectives
People Learning Strategic Objectives (Sage, 2015).
McDonald serves around 28 million people. The Hamburg chain of McDonald operates in around 119 countries. It employs around 1.7 million people and it has around 33,000 restaurants all over the world. The prominent presence of the company is in Europe. The company gains 40% of the revenue from Europe. Since 2005 to 2013, the revenue of the company was consistent in its growth ("McDonald's: revenue 2015 | Statistic", n.d.). For last 2 years it has been declining slightly. The chart shows the growth rate of the company in generating revenue.
Source: Statista 2016.
If we look at the above chart, we will find that the company was slightly down in generating revenue in the last two years. For example in the year 2005, it was 19.12 billion U.S. dollars It may be because of the fierce competition going on in food chain market.
PESTEL Analysis of McDonald
PESTEL analysis is one of the marketing concepts. The system of PESTEL is used by the company to identify the environment in which the company is operating. It is very important guide to introduce new product/service or settle down business in the respective environment. PESTEL is a abbreviation in which P stands for Political, E for Economic, S for Social, T for Technological, E for Environmental and L for Legal. These are the six major factors that influence the business of any organization. If any of these factors is not favorable, it may hamper the company’s performance or the company has to tune itself to all these factors of the region in which it wants to settle down its business. Being a global or multinational company, McDonald has its operation all over the world; in different countries.
The Political Factor: The political environment is not same in every country. As mentioned above McDonald is operating in 119 countries as of now. Like other countries, McDonald also has to comply with the rules and regulations of the respective governments of the company. The rules generally are related to the health of its citizens (Greenspan, 2015). The major concern here is that McDonald is a fast food industry and fast food or junk food is not good for health which is medically proven. Because of its inclusion of high cholesterol, it may increase the possibility of cardiovascular difficulties and obesity among the consumers. Moreover the company’s establishment and growth is also determined by the political relationship with the two nations. For example McDonald is an American company. The political relations between Russia and America are not that much good. For many years, till the disintegration of Soviet Union, both of these countries have been engaged in severe cold war. The current political situation is also not that much favorable. In such situation, Russian political scenario may be a menace to McDonald while expanding their business in the country. The same situation is in china as well. China is a communist country like Russia.
Economic Factors: Economic factors are the major important factor. It is not easy to operate the company in different countries. In economic factors, one important economic decision is whether to import the raw material from outside or whether to purchase them locally (Greenspan, 2015). The tax system of respective government is another economic factor. In case of McDonald there are some notable economic external factors that can be sometimes threat and sometimes opportunity for the company. In opportunity, it can be said that the slow but stable growth of the United States economy may be the opportunity to the company to grow. The European economy is stable butt risky so it may be the threat for McDonald. In Asia, China is the major market for McDonald. Recently China has to suffer due to the slowdown of their economy. McDonald’s largest market is the USA. Hence the company can take the advantage of the slow and steady economy of the USA.
Social and Socio Cultural Factors: The social and cultural condition of the respective nature is also one of the key factors; and it influences the company significantly. The social and cultural diversity of the respective country impacts the growth of McDonald. For example; one of the major markets of McDonald in Asia is India. Before establishing the company in India, McDonald has to think about the social and cultural diversity of the country. India is a diverse country as far as social, cultural and geographical factors are concerned. Every state or province of India has its unique culture and cuisine as well. They have variety of traditional and local dishes, sweets available. In such situation, absorbing the culture of each of the states and expanding business considering the local food industry is a great challenge for McDonald. The image of McDonald’s product is not good just for not being healthy. It is important for McDonald to think of making their product healthy and remove the tag of junk food. Today in every society, there is a trend of healthy food and to stay away from junk food. Even doctors also give advice of avoiding junk food. Hence this trend can be a threat to the company’s product in near future in almost all the countries of the world. McDonald should consider it seriously and make healthy food rather than junk food.
Technological Factors: Being a food industry, McDonald is not that much dependent on technological application. However there are some technological factors which the company needs to take into consideration. To improve the efficiency of the business, the company has an opportunity to raise investment in Research and Development (R&D). More automation needs to apply for maximizing the productivity. McDonald also has a wide scope to use mobile service to reach to the maximum number of customers. The company can do it through local media sites and other internet sites. The mobile devices can also be used to reach to the maximum number of customers. The launching of mobile apps is one of the smartest ways of increasing business.
Environmental or Ecological Factors: We are living in an era where we are experiencing the adverse impact of environmental degradation. Deforestation, air pollution, water pollution, sound pollution and the global warming are some of the major consequences of the environmental degradation. Excessive use of chemicals in manufacturing process is also harmful to the environment as well as human life. To save the environment, the sustainable approach has become the major factor. In such case it has been mandatory for every business organization to make their sustainability programs and execute it properly. It is important for the food industry like McDonald to use sustainable material while making their products. The use of preservatives is one of the things that can be harmful to the individual health. The external environmental factors for McDonald can be as follows:
Increasing interest for corporate environment programs; is one of the beneficial program to increase and expand business.
Moreover; it is essential to focus on sustainable business strategies. It will help to build the image of the company as the sustainable company.
The third ecological factor that can be the threat of McDonald is the climate change. It is because the climate change has been leaving its impact on hampering the quality of the crops and food in the farm. Too much use of pesticides can badly affect the quality of the crops, vegetables. Consequently it hampers the quality of the food products manufactured by the company. This threat can be considered and effective machineries should be used to solve the problem.
Legal Factors
The last factor in PESTEL Analysis is the legal factor. It includes various laws that are active in the country in which the company wants to establish. There are several laws. In some countries the laws are influenced by the religion as well. The company needs to know these laws. There are different labor laws, company laws that the company has to know. Sometimes some laws are favorable for the business while sometimes they can be the major obstacle in the growth of the company. For example the new legal minimum wage level in the US can be the threat to McDonald. It is because the minimum wage level may maximize the cost of manufacturing and consequently the profit margin of the company is likely to get minimized. One more legal factor that can hamper the growth of McDonald and that is the strict laws regarding the health of the citizens, especially the health laws and regulations at workplace as well as in schools. Third legal issue is the animal welfare regulation. It can both be the opportunity as well as threat to McDonald (Greenspan, 2015). It is because, McDonald products contain flesh of animals. Maintaining quality and especially the health of the animals is very important. In some countries, they have to be cautious about the animal welfare laws as well. In every country the people have different habits of eating non-veg. accordingly the laws of the countries have been formed. McDonald needs to be aware of those laws.
New Entrants: The market has been being competitive day by day with the entry of several food chains. Some of the popular food chain industries that have been competing McDonald are Pizza Hut, Subway, KFC, Yum, Domino, Sandwich Group, Sonic, Burger King etc. These are becoming popular in the market along with McDonald. They are becoming popular sometimes because of better taste, cheap price or many other causes. In case of Yum, the company has around 41,000 locations in more than 125 countries; hence it is one of the major competitors to the McDonald. To survive in the fierce competition and to overcome the competitors, McDonald should consistently monitor the market situation and accordingly they should design new strategy to penetrate more and more market.
Power of Buyers: In case of McDonald the buyers’ bargaining power is low because fast food restaurants like McDonald offer selections at various prices and thus satisfy the customers of all economic background.
Bargaining power of the suppliers: In case of McDonald, we can say that the bargaining power of McDonald suppliers is moderate and stable. McDonald is dependent upon the suppliers and at the same time, the suppliers also have to depend upon McDonald. The company has a very strong supply chain ("UICCreativeSolutions - McDonald's Five Forces", n.d.). Moreover the company offers quality product at a very reasonable price ("UICCreativeSolutions - McDonald's Five Forces", n.d.). The suppliers are satisfied with supplying the product of such a big company like McDonald.
Power of Competitors: As mentioned above, the fast food industry, like other industries has also been facing a fierce competition due to the new entrance and the same quality product with reasonable rates they are giving to their customers. KFC, Pizza Huts, Yum are some of the competitors establishing in the market and expanding the market on a rapid pace. The consumers take decisions on price and quality of the product. Hence, in near future, McDonald should change its strategy to keep number one position intact in food industry.
Conclusion
References
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