Comparison of McDonald's and Pizza Hut: A PESTLE Analysis

This article provides a detailed comparison of McDonald's and Pizza Hut using a PESTLE analysis. It examines the political, economic, social, technological, legal, and environmental factors affecting both companies. The analysis also includes a comparison of their financial performance and organizational structures.

Introduction to Business and
Management

TABLE OF CONTENTS
TASK 1: INTRODUCTION............................................................................................................3
TASK 2 : PESTLE ANALYSIS......................................................................................................3
TASK 3: ORGANIZATIONAL STRUCTURE .............................................................................5
TASK 4 : COMPARING FINANCIAL PERFORMANCE ...........................................................6
TASK 5: CONCLUSION................................................................................................................7
REFERENCES................................................................................................................................1

TASK 1: INTRODUCTION
McDonalds corporation is an American fast food company which was founded in the
year 1949 by the founder Maurice McDonald, Richard McDonald. McDonald used to operate at
the global level and used to offer their product throughout the world in many different market.
Company is originated from the San Bernardino, California, United States. Pizza hurt is also
American Fast Food Company which was founded in the year 1958 by the founder Dan Carney
and Frank Carney. Pizza Hut also used to operate at the global level and used to offer product
throughout the world. First branch of company was founded in Wichita, Kansas by Dan and
Frank Carney.
Reason behind choosing this two firm for comparison is that both the firm are having
many similarity in them. One of such is that both the organization used to use franchise as a
primary technique to expand their business. Also both the company used to offer almost same
range of product in the market. At the same time there are many dissimilarities in them as well.
As Pizza hut is well known for their Pizza product in the market at the same time MacDonald has
earned good name in the market due to the variant of burger offered by company in the market.
Another reason behind choosing this two companies for comparison is that this two company
used to operate on the same level of scale in the market.
TASK 2: PESTLE ANALYSIS
Political factor- This factor indicates wide regulation that are framed by government for
each and every segment of the food industry. It involves the regulatory framework developed by
the government and stability or instability of government within the country. The actions of a
government and framing of policies clearly defines success of an organization in an overall
industry. The impact which is faced by companies is relating to the government norms. As every
country had different policies regarding promoting the products in market. The impact of
government is raised regarding forcing the companies to put the healthier products in their menu
(Zhao and Dou, 2019). So, that it improves the health condition of the person regarding availing
such products. In case of Mc Donald, the impact is raised regarding providing less healthy
products to the customer in such aspects as per government norms, they are facing negative
impact in their business. In respect of Pizza hut, the issues is raised carrying the business or
franchises of pizza hut at larger places (Achinas and et.al., 2019). The major impact which is

faced by pizza hut through government polices is relating to the contract laws which they are
facing while carrying their outlets in many countries.
Economic factor- Economy is one of the major impact on every country regarding facing
the inflation rates occurred due to expanding the business. The impact raised regarding
increasing the income of labour or demanding more prices to be spent on labour (Hamid, Said
and Meiria, 2019). In case of McDonald, the impact is faced regarding slower down of demand
of the McDonald product and also due to facing recession in respect of managing the
employment ratio in the country. In case of Pizza hut, the impact which they faced is relating to
facing issues regarding the exchange rate in country. This affects the profitability of the pizza hut
through facing inflation in the matters of trade.
Social factor- Social impact arises through healthier, lifestyle and culture difference of
people. As due to changes in time, most of the people are preferring the healthier products
instead of choosing the junk foods which having low calories. The impact also raised in respect
of culture as every culture had different priority to prefer the foods (Bessière and et.al., 2019).
Usually some culture not accept the fast food or the ingredients which are used in producing the
products. McDonald is affected in relation to not providing the healthier products in their menu.
Through this manner, they are not undertaking strategies to retain the customer for longer way
(PEST Analysis of McDonalds | Business Teacher, 2019). In case of Pizza hut, they are facing
impact on the bases of class distribution. As they are unable in promoting the premium products
to their customer which results in distracting their customer towards new products.
Technological factor- As food industry not only depends on attracting the person
towards the menu or preparation of the foods, they are attracted by seeing the convenience and
also the customer services through ordering the foods online (Velásquez and Meunier, 2017). In
this social media channels are playing the important role in enhancing the company’s sales
through attracting customer towards their products. In case of McDonald, the impact is raised
regarding not making changes in their websites on frequent bases which results in not building
the strong links with customer. For Pizza hut, they face impact in positive way regarding using
the advanced technology to attract the customer through providing innovative picture of their
products. They also use the feedback procedure once the customer avail their services.
Legal factor- The legal aspects such as food and safety laws or health related laws are
majorly causing impact to the business. Usually government imposed such norms to provide

more security to the person in respect of protecting them from any illegal terms (Tse and et.al.,
2017). McDonald undertakes the positive legal impact in respect of using the health regulation at
work places regarding securing the right of the employees during working at hazardous places.
In case of Pizza hut, the positive impact of legal factors is raised through providing the quality
products with setting the high standards in producing the products (PESTLE analysis of Pizza
hut, 2020).
Environmental factor- Sustainability or changes in climatic condition are the major
impact which reflects the smooth working of the companies in country. In food industry, the
major impact is faced due to using the meat in the products as usage of meat increase the carbon
footprints in products (Smith and et.al., 2019). In case of McDonald, the impact arises regarding
producing the eco friendly products and also not managing to deliver the products within the set
time period. In case of Pizza hut, the impact raised regarding changing in climatic condition
which results in making their products waste.
TASK 3: ORGANIZATIONAL STRUCTURE
McDonald corporation has a divisional organizational structure in the organization. In
this structure organization is divided into component and all the components of operational
requirement used to allotted the different roles and responsibility which they have to perform in
the organization (Organizational Structure, 2019). Organization used to follow Performance
based division in the organization. Team or group in the organization used to be divided on the
basis of function based group, in which the organization used to has People group for human
resource management, and a Supply Chain and Sustainability group for supply chain
management and sustainability endeavours as a example. McDonald also used to follow Global
Hierarchy to cover different operation worldwide (Dowling, 2017).
Pizza Hut on the same side used to use top to down organizational structure in the
organization. In which all the decision are being at the top level and being passed on to lower
level in the organization. Top level is managed by the president of the organization. Pizza Hut
used to use Geographical division basis in the organization. Reason behind the same is that
company used to change the product line of company on the basis of region needs and wants.
Pizza Hut in the organization used to divide the team in the organization on the basis of
operational team division method (Giannetti and Kahraman, 2018).

TASK 4 : COMPARING FINANCIAL PERFORMANCE
Financial ratio analysis Mc Donald's Pizza Hut
Liquidity ratio
Particulars Formula 2018 2018
Current assets 4053 1207
Current liabilities 2974 1301
Current ratio
Current
assets/Current
liabilities 1.36 0.93
Profitability ratio
Particulars Formula 2018 2018
Net profit 5924 1542
Net sales 21025 5688
Net profit margin
Net profit/Net
sales*100 28.18% 27.11%
Operating profit 8822 2296
Net sales 21025 5688
Operating profit ratio
operating profit/Net
sales*100 41.96% 40.37%
Solvency ratios
Particulars Formula 2018 2018
Long term debts 31075 9751
Total assets 32811 4130
Current liabilities 2974 1301
Capital employed
Total assets-Current
liabilities 29837 2829
Gearing ratio Long term 1.04 3.45

debts/Capital
Employed
Interpretation- From the above analysis it has been stated that the liquidity position of
Mc Donald's is better as compared to Pizza Hut because its current ratio is higher that is 1.36
than the ratio of Pizza Hut resulted as 0.93. This shows that Mc Donald's is making effective use
of its current assets and has adequate funds in meeting its current obligations. Similarly, Net
profit and operating profit ratio of Mc Donald's is greater in comparison to Pizza Hut (Annual
report of Mc-Donalds, 2019). This indicates that former company is earning higher profits than
the latter firm after meeting all its expenses, cost and the tax liabilities. Moreover, the gearing
ratio of Mc Donald's accounted as 1.04 as compared to Pizza Hut resulted as 3.45. It has been
presented that lower the gearing ratio better is the financial state of the company and lower risk.
Therefore, as the gearing ratio of Mc Donald's resulted as lower than Pizza Hut, it clearly means
that it long term debts of an entity is lower than its assets or equities that in turn results in low
financial burden or risk on the firm. This also shows that solvency position of Mc Donald's is
good as compared to Pizza Hut. Thus, overall the financial performance and position of Mc
Donald's is seen as good than Pizza Hut because its liquidity , profitability and solvency position
is better that its competitor.
Non financial ratio analysis
Particulars Mc Donald's Pizza Hut
2018 2018
Employee turnover ratio 44.00% Less than 50%
Interpretation- The above table shows that employee turnover rate of Mc Donald's is
high with higher profitability which means that the profit margin of the company is greater even
after the employees are leaving. As compared to Pizza Hut, staff turnover rate of Mc Donald's
seems as high because Pizza hut adopted a strategy of delivering the food through online
channels which leads to drop in its employee turnover rate by 50% . Thus overall, non-financial
performance of Pizza hut is seen as better than its rivalry.

TASK 5: CONCLUSION
By summing up the above report it has been summarized that pestle analysis is the major
tool that helps the company in making its marketing audit with respect to influence of external
factors. Concluding the organizational performance and structure, Mc Donald's is having follows
an appropriate divisional structure which enables in performing the task effectively and also
results in timely delivery. Referring to the financial performance, Mc Donald's is performing its
operations and marketing in a better way in comparison to Pizza Hut. The former company is
having a stable and sound position in the overall market than its competition or latter firm.
Moreover, non financial performance of Pizza hut is deemed as good because of it has adopted a
unique strategy of delivering the food by social networks. This resulted a drop of its employee
turnover rate by 50% as need of staff gets decline.

REFERENCES
Books and journals
Achinas, S. and et.al., 2019. A PESTLE Analysis of Biofuels Energy Industry in
Europe. Sustainability. 11(21). p.5981.
Bessière, D. and et.al., 2019. A vision of re-distributed manufacturing for the UK’s consumer
goods industry. Production Planning & Control. 30(7). pp.555-567.
Hamid, A., Said, M. and Meiria, E., 2019. Potency and Prospect of Halal Market in Global
Industry: An Empirical Analysis of Indonesia and United Kingdom. Business and
Management Studies. 5(2). pp.54-63.
Smith, E. and et.al., 2019. Insights into global food system risks and opportunities and their
implications for the FSA.
Tse, D. and et.al., 2017, December. Blockchain application in food supply information security.
In 2017 IEEE International Conference on Industrial Engineering and Engineering
Management (IEEM). (pp. 1357-1361). IEEE.
Velásquez, A. and Meunier, L., 2017. COMPARATIVE MARKETING ANALYSIS OF THE
UK AND GERMANY FOR GLOBAL SUSTAIN.
Zhao, J. and Dou, X., 2019. A Study of British Organic Food Market.
Dowling, J., 2017. Comparing Two Organizational Structures in Professional Ultimate.
Giannetti, M. and Kahraman, B., 2018. Open-end organizational structures and limits to
arbitrage. The Review of Financial Studies. 31(2).pp.773-810.
Online
PEST Analysis of McDonalds | Business Teacher. 2019. Online. Available through:
<https://businessteacher.org.uk/pestel/mcdonalds.php>.
PESTLE analysis of Pizza hut. 2020. Online. Available through:
<http://marketingdawn.com/pestle-analysis-of-pizza-hut/>.
Organizational Structure. 2019. [Online]. Available through: <ehttp://panmore.com/mcdonalds-
organizational-structure-analysis>.
Annual report of Mc-Donalds. 2019. [Online]. Available through:
<https://corporate.mcdonalds.com/content/dam/gwscorp/nfl/investor-relations-content/annual-
reports/McDonalds_2018_Annual_Report.pdf >.
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