Introduction
The strategy is the purpose and direction an organization takes to get to its future and achieve long-term goals. It involves motivating trustees in the organization to engage meaningfully with the external environment. The organization, thus, matches its diverse capabilities with the needs of the stakeholders. An organization and in this case the MacDonald has a strategy that determines how the business relates to the outside world. It also determines how the organization will take every opportunity to innovate, improvise as well as make improvements. MacDonald should have a strategy that concentrates on priorities, making sure that the organization’s resources are concentrated on delivering. MacDonald has done its best to change its basic organization strategy of just providing food and excellent service. Today it embraces the ideas such as helping out less fortunate kids by building hospitals and hosting their birthday parties as part of their corporate social responsibility (Greenspan, 2015). It has adjusted its mission and objectives to include the provision of fun activities for children and adults as well as supporting environmentally friendly courses. It has become a socially responsible fast food chain with the provision of quick, quality and effective service, generating good returns for their investors and ensuring that its customers get the best for their money (Meyer, 2015).
Market Environment
When evaluating a market, one must consider the buyers and sellers in the industry. The buyers include the customers, the target market and the prospective customers. On the other hand, the sellers are the competitors in the market. Before venturing into any market, a company must evaluate the needs of the market and discern the gaps it needs to fill (Meyer, 2015). There is a need to carry out the marketing management functions to evaluate, make plans and implement the plans necessary to design the proper market penetration strategies and the best way to reach the target market (Greenspan, 2015). A successful marketing management plan is propagated by the correct determination of the target market, the micro and the macro environment the organization intends to operate. The microenvironment comprises of the factors within an organization’s that affect its success. They include the customers, suppliers, the organization’s core competencies, the public such as the media and the organizations financiers.
Key macro environmental factors affecting MacDonald
There are some forces that provide opportunities and threats to the business entity. The organizations take every opportunity and face the dangers that rise up out of the business environment. This paper will evaluate the macro environment factors of McDonalds and how this environment affects its operations (Meyer, 2015).
The five forces Analysis
In this analysis, MacDonald gives insight about the company’s strategic direction. Macdonald needs to give priority to the competitions in the market as there are tough competitors since the customers at the restaurant experience low switching costs. The bargaining powers of the buyers and the suppliers is a strong force because of the low switching costs. The customers and the suppliers can easily impose their demands because of the market saturation. Substitution of MacDonald’s food is high on quality and consumer satisfaction, since even the customers can make food from their homes. The threat of a new entrant in the business can impact Macdonald’s market share. MacDonald can, therefore, address the issues of product innovation, maintain products that attract customers, implement quality standards to address competition and substitution in the saturated market (Gregory, 2015).
Social-cultural environment
This is a major factor which needs to be analyzed in any business entity. Macdonald should not ignore the customs, traditions, buy and consumption habits, tastes and preferences of its customers. The organization should thus be interrelated with the beliefs, norms, values and traditions of the society. MacDonald’s believe in standard and glamour, and this helps them to fulfil the psychogenic need of the people in the society. Their food is described as affordable, and convenience and this gives a direct benefit to the business. Their restaurants have eco-friendly culture and environment which influences the whole family to have food in these restaurants.
Political/Legal Factors
The political factors comprise the laws, the enforcement agencies and the civil and political groups that may affect the organizations performance and success. The government policies through the enforcement agencies and laws affect the entire industry and can be viewed as the standardizing factors in any given industry. Every organization within the industry has to comply with these laws which level the playing field for all the organizations. However, the government policies towards foreign markets, its stability and financial policies can be detrimental to an organization’s success. Changes in the policies may present setbacks in the organization’s operations to the extent where it fails to recover. It may also make it easier for new market entrants which will significantly reduce the existing organizations market share instead of facilitating market growth.
Macdonald is a multinational company with branches all across the world. This creates a diverse market which means that it has to consider the laws of the countries where it ventures and the restrictions and obstacles, it will encounter compared to the headquarters branch in the United States. Many multinational organizations have a tendency to assume that the laws are similar which leaves them vulnerable to sanctions and legal action for their actions (Vrontis & Pavlou, 2008). Many countries have different laws that govern the launch of new products in the market, the entry of foreign organizations in their markets, the marketing strategies employed by the foreign and local enterprises as well as the branding of the foreign organizations. MacDonald’s had to change its brand name when it entered the Russian market to comply with the Russian laws that require that any brand or enterprise name has to be translated in Russian or at least have Cyrillic characters. This was also the case when it launched in the Japanese market. Still in Russia, the government institutions have to be participants in the decisions made that will affect the company or the industry significantly this has hampered many of the organization’s ideas to expand and exploit the available opportunities (Vrontis & Pavlou, 2008).
When launching the company’s products in any foreign market, it is important that the company is ready to adjust its marketing mix in accordance with the new market properties and needs. It should also evaluate all the legal factors that may affect the launch and the laws that it needs to comply to ensure the smooth launch of the company into the foreign market. The organization also needs to evaluate the players in the industry in relation to the political entities and the lawmakers. This will prepare the company for any politically motivated obstacles. The political class is responsible for the law making, and they may make laws that may impede the success of MacDonald’s if they have a stake in the fast food industry. The organization should also consider the environmental laws formulated and implemented by the countries, environmental bodies this will ensure that it is compliant and reduce the number of issues that may affect its success. Some countries place restrictions on some promotional methods and activities. There is a need to ensure the promotional activities are compliant with the country’s regulations. The franchise has to accommodate the price regulations depending on the country, its launching (Greenspan, 2015). In some countries, the government regulates the prices set by the manufacturers and retailers as a consumer protection method. It may also limit the profit margins of the manufacturers which in turn controls the prices charged to consumers. Some governments use taxes expectations of local organizations in such countries it is recommended that MacDonald’s partner or franchise with local fast food franchises to enjoy these exceptions (Greenspan, 2015).
Economic Factors
These are the factors that limit or enhance the customers purchasing and spending patterns. The global economic trends and even the national economic trends are affected by the government policies in these countries this means that consumers spending patterns and purchasing powers are affected by the government policies (Greenspan, 2015). When deciding on which to venture an organization should evaluate its economic status of the country and the level of economic stability at the time of entry and the projected level of continued market stability. Countries with a relatively high level of market stability are likely to have a proportionate rate of disposable income. In addition, the level of economic growth of any country is also a determinant of the amount of money the customers are willing to part with for each product as such in countries with a low economic growth the disposable income is low. Therefore, the prices of the goods in low-income countries needs to be low for successful market penetration and the acquisition of a market share. MacDonald’s should apply this when setting its prices in low, middle and high-income countries. It has to adjust its prices accordingly with each country, it establishes its branches. It is advisable that it changes its prices with every country rather than having a standard price for all the countries (Vrontis & Pavlou, 2008). This can be done without any financial losses in its profits if it sources its raw material and labor supply from the local countries. This will reduce the expenses and at the same time garner the support for the local economy as well as generate a local market. The low income and middle-income countries are also characterized by low literacy levels which make it difficult to formulate effective and inexpensive promotional tools that will also accommodate the lower prices expected in these countries (Vrontis & Pavlou, 2008).
Technological Factors
This aspect of the macro environment of a company looks at how the technology within and outside the industry can affect or facilitate the growth of the organization. In the fast food industry, there is a moderate rate of research and development on which MacDonald’s can capitalize to emerge as the global leader in the fast food industry. In addition, today people are more appreciative of the automated ordering service system. It is accurate and fast, compared to human serves it is also entertaining to children who make up a significant part of the food chains clientele. The chain should also embrace the idea of having a mobile phone application where it can interact with its customers.
Environmental Factors
Today the external ecological factors have become part of the consumer's influence on whether or not they will purchase or be affiliated with an organization in any way. MacDonald’s needs to expand its corporate portfolio to include a broad range of environmental programs in line with these needs. The organization needs to address the environmental issues such as climate change that affect its supply chain. There is a need for the organization to diversify its sources of raw materials to cushion itself from the effects of global warming and climate change.
Decline of the Market
Among the factors that led to the decline of the fast-food chains market and sales were the growth or its target market. There was the instantaneous growth that led to its expansion and the sprout of many of its branches that competed among themselves. In addition, the service of the growth of new market entrants that either specialized in beverages and pastries or solely on a wide range of fast food. There was also a rise in the number of civil society groups that advocated for an environmental friendly food chain. Today’s customer buying decisions are not influenced by high quality, but also the corporate social responsibility portfolio of any food chain that they associate with. The customers are also now very concerned about eating healthy. Today it is not just a matter of convenience, the food they want to consume has to be healthy with some degree of proof. The fast food industry is dynamic, and it keeps changing based on the changing social beliefs and values about the healthy living and fast food consumption. These changing beliefs require a fast food chain to keep up with the trends and conduct research on how to make healthy foods while at the same time maintaining its basic brand image.
Strategies for these Problems
The chain has sought to expand its environmental friendly portfolio by advertising its environmental campaigns. This strategy is expected to resonate with the customer’s concerned snout the chains environmental carelessness. It now sources, seventy percent of its supply locally in the areas where it has restaurants.
As an advertisement and promotion campaign, it has started a brand of children’s toys. These toys are sold or given to the customer’s children are gifts which are meant to build customer loyalty in children. The chain should create a new menu that will cater for its health conscious clients, in addition to the adult burgers set up to cater for the baby boomers. This will help them maintain their customer bases despite their changing needs, tastes and preferences. The chain prides itself on being a family based franchise, therefore, creating a menu that caters for all will reinforce this image (Greenspan, 2015).
The chain has lost its market share to small emerging chains that either specialize in sandwiches or coffee or other very specific menus. Rather than aim at driving these food chains out of business or creating a competing menu for themselves MacDonald’s would be more successful in buying the chains out. This will allow the food chain to enjoy the new customer base as well as new profits without having to start from scratch. It should aim at making the new acquisitions successful rather than competing with them (Greenspan, 2015). The new acquisitions do not have to bear the brand name rather they can operate as subsidiaries. This will prevent the loss of customers due to the change of ownership or the protests from civil groups who are against the values of the food chain. These subsidiaries would continue to operate independently, but with the support and unlimited financial and supply chain of MacDonald’s.
Another strategy would be for McDonalds to start its competing food chain that provides healthier food options. At the moment, it is quite difficult to change the consumers and the public’s attitude about the chain providing fast unhealthy choices. Trying to modify this perception would ‘dilute’ the chain's brand image as a fast food global leader.
The continued development and improvement in its provision of the best customer service is another strategy that the company has employed, which has yielded significant results in the increase of the chain’s profits and the development of a loyal customer base. ("Marketing Mix of McDonalds - 4p of McDonalds - Service marketing mix of McDonalds", 2010) The chain provides a wide range of services and menus that are tailored for each target group. It targets children by offering them toys and other children’s entertainment activities. It offers the parents a chance to relax while at the same time offering them the opportunity to please their children. It offers teenagers and college students a cheap dining option while enjoying its restaurants Internet services. The company also provides an alternative, affordable and convenient option for businessmen. They can dine at any time of the day or night at an affordable and cozy setting with a variety of menu options that allow them to have a variety of feeding options on a daily basis.
Competitive Strategies in the Coffee Market
Already the company has a strong, loyal customer base on their coffee. A large number of the Starbucks and Costa coffee customers admitted to sometimes buying their coffee from MacDonald’s. This shows that despite having a newer, less established coffee brand-McCafe – the company has managed to gain popularity.
The company should target and formulate promotional strategies that will attract and ultimately poach the portion of Costa and Starbucks customers who are once in a while tempted to buy their coffee from MacDonald’s. This will strengthen and grow its customer base. Simple tactics such as the issuance of redeemable coupons and punch cards have proven successful in developing a loyal customer base. These tactics compounded with television commercials and celebrity endorsements will help the company launch and maintain its position as a coffee provider.
The company can also partner with large corporations and conglomerates to have their carts in their office buildings where their employees do not have to market their coffee or go for coffee runs. This will reduce the time spent by employees looking for coffee stores on their way to work and during the work day (Lutz, 2016). The coffee stands could also offer a few choice meals depending on the agreements made by the companies. The meals and coffee prices would be subsidized for the employees, allowing the food chain to build a new market within these corporations.
At the moment the coffee brand by Macdonald’s is carried into the MacDonald restaurants, this means that the customer’s order their coffee at the same counters as those looking to buy other food items. The company should look to develop separate shops, cards or counters for the coffee customers. This will allow the brand to compete with the coffee giants Costa Coffee and Starbucks. It will also allow the brand to grow by itself rather than under the shadow of the big fast food chain (Lutz, 2016). This does not mean that the restaurants will no longer carry the coffee brand it is intended as an expansion and brand development strategy. The company is looking to diversify their restaurants to accommodate coffee customers this will enhance and endorse its coffee brand. In the UK the company has also implemented the use of touch screen kiosks and iPads where the coffee customers can order their coffee.
The company should also look to produce its instant coffee under the McCafe brand name which will be carried by most major retail outlets. This brand will allow customers to enjoy their coffee at home on cold days or on days when they are not going to the office. It will also increase its market share compared to brands like Starbucks and Costa coffee. This brand will be carried and exported globally in countries with or without the MacDonald’s restaurants. In countries where the corporation has not ventured its success will be used as a measure of how well the corporation would do if it started a restaurant chain.
The company should also look into offering healthier coffee options as compared to the coffee market giants. Already it boasts as having the lowest caffeine levels, which most of the customers appreciate as being healthier. This option also resonates well with insomnia as well as blood pressure and those who have been asked to reduce their caffeine intake capitalize on its network of restaurants globally to create a market for its coffee brand. Despite the need to establish the coffee by itself, this might be beneficial in countries and economies that have yet to develop a taste for specialized coffee brands.
Recommendations
MacDonald’s macro environment is diverse based on its huge global presence. The company needs to use this global presence to formulate a strategy that will allow it to remain competitive despite the local players in that fast food industry and the economic status in each country. It also needs to use this global outlook to market its coffee brand and establish a thriving coffee market despite the significant market shares taken up by already established brands such as Starbucks, Costa Coffee.
References
Greenspan, R. (2015). McDonald’s PESTEL/PESTLE Analysis & Recommendations - Panmore Institute. Panmore Institute. Retrieved 5 June 2016, from http://panmore.com/mcdonalds-pestel-pestle-analysis-recommendations
Gregory, L. (2015). McDonald’s Five Forces Analysis (Porter’s Model) Panmore Institute. Retrieved 11 June 2016, from http://panmore.com/mcdonalds-five-forces-analysis-porters-model
Lutz, A. (2016). I started going to McDonald's instead of Starbucks for my coffee — here's why. Business Insider. Retrieved 5 June 2016, from http://www.businessinsider.com/i-started-going-to-mcdonalds-instead-of-starbucks-for-my-coffee-here-are-4-reasons-why-2015-10
Marketing Mix of McDonalds - 4p of Mcdonalds - Service marketing mix of Mcdonalds. (2010). Marketing91.com. Retrieved 5 June 2016, from http://www.marketing91.com/marketing-mix-mcdonalds/
Meyer, P. (2015). McDonald’s Marketing Mix (4Ps) Analysis - Panmore Institute. Panmore Institute. Retrieved 5 June 2016, from http://panmore.com/mcdonalds-marketing-mix-4ps-analysis
Vrontis, D. & Pavlou, P. (2008). The external environment and its effect on strategic marketing planning: a case study for McDonald's. J. For International Business And Entrepreneurship Development, 3(3/4), 289. http://dx.doi.org/10.1504/jibed.2008.019163
