Comparison of McDonald's and Pizza Hut: A PESTLE Analysis
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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.
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Introduction to Business and Management
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TASK 1: INTRODUCTION McDonalds corporation is an American fast food company which was founded in the year 1949 by the founderMaurice 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 theinflationratesoccurredduetoexpandingthebusiness. Theimpactraisedregarding 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 oftheMcDonaldproductandalsoduetofacingrecessioninrespectofmanagingthe 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
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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 structureorganization 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 hasPeople group for human resourcemanagement,andaSupplyChainandSustainabilitygroupforsupplychain 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 ofregion 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 analysisMc Donald'sPizza Hut Liquidity ratio ParticularsFormula20182018 Current assets40531207 Current liabilities29741301 Current ratio Current assets/Current liabilities1.360.93 Profitability ratio ParticularsFormula20182018 Net profit59241542 Net sales210255688 Net profit margin Net profit/Net sales*10028.18%27.11% Operating profit88222296 Net sales210255688 Operating profit ratio operating profit/Net sales*10041.96%40.37% Solvency ratios ParticularsFormula20182018 Long term debts310759751 Total assets328114130 Current liabilities29741301 Capital employed Total assets-Current liabilities298372829 Gearing ratioLong term1.043.45
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 thanits 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 ParticularsMc Donald'sPizza Hut 20182018 Employee turnover ratio44.00%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.
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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.
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