Impact of External Environment on McDonald's International Business

This report discusses the impact of external environment on McDonald's international business, including socio-economic cultures, technological developments, political environment considerations, and ecological considerations.

INTERNATIONAL
BUSINESS-
PROJECT 2

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Effect of socio- economic cultures on McDonald Restaurant in International Business............3
Impact of technological developments on McDonalds international business............................4
Impact of political environment considerations on McDonalds..................................................5
Ecological considerations taken by McDonald Restaurant affect their international business
decisions in the markets they operate..........................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
International trade refers to import and export of the good and services across the
different country in the world (Liao, 2018). International trade helps the company in increasing
its revenue and it will help in the access to export financing options of the country.
McDonald is the multinational chain of the fast food provider. It is holds the largest share
of the market across the globe in the restaurant chain (My McDonald’s app., 2022). The
customers are attracted towards its restaurant because of its brand value. It is operating its
business by the online and offline mode.
This report discusses international trade of the enterprises that has lead to increase in the
global economy. Additionally, the impact on the growth and development of the international
business for increasing the business across the world. For the improvement and development of
the businesses, the analysis of the external environment of the company is essential.
MAIN BODY
Effect of socio- economic cultures on McDonald Restaurant in International Business
Various socio demographic trends cause shifts in the spending power of the consumers.
The changing family patterns which involve moving towards one – person households indicate
the rise in demand for in- home products (Akpoviroro and Owotutu, 2018). In the past,
McDonalds has been impacted by the social forces such as the prevailing family structure of US
which comprised of children being the decision maker of place to eat. By giving special
emphasis to children and teenagers, McDonalds advertising was successful in capitalizing these
social trends. Culture also impacts McDonalds international business. Catering to the traditions
and religious beliefs while designing marketing and production activities prove to be a good
opportunity for organizations to become successful in the international market. For example,
while entering India, McDonalds had to decide to remove Big Mac burger from the menu as beef
was prohibited in Hindu Culture in India. In some countries, due to impact of the social factors,
the restaurant had to change its food preparation methods. For example, in Singapore and

Malaysia, the beef used in burgers was compulsorily need to be slaughtered (Jian and et.al.,
2021.).
McDonalds found that US society placed value on the time and favored consumption of
those food articles which could be consumed in least time. This tendency to save time created a
desire in the people to purchase meals from outside the home. It also led to the trend if impulse
buying of the food articles. As a result of this, the demand for low priced food available in the
minimum time increased manifold.
Economic factor such as consumers spending patterns, purchasing power, disposable
income etc. also impacts McDonalds to a great extent. When there is a period of relative
prosperity, the disposable income of the consumers is high which increases their willingness to
spend money. This impacts the marketing strategy of the organization (Ferraro, 2021). This is
because, price is no longer a sensitive issue for the consumers. However, during the time of
recession, there is decrease in the spending power of the consumers. As a result of this, price
becomes a sensitive issue for them and McDonalds is required to consumer this. This impacts the
organization as it has to adopted rigorous marketing strategies to attract and retain the customers.
The price setting by McDonalds is impacted by different stages of economic and
industrial development in various countries. Also, the differences in the income level are
suggestive of systemic price variations. Therefore, McDonalds is impacted as it has to set a
lower price in those countries which have lower stage of economic development. Further, the
developing countries are characterized by a lower purchasing power. The literacy level is also
low in these countries (Hamilton and Webster, 2018). Therefore, McDonalds is negatively
impacted as it faces several problems due to this. It has to choose effective promotional tools in
such countries. In this regard, McDonalds is required to use cost effective methods of promotion
as inability to do so would make the price of the product rise to a level which is beyond the reach
of the consumers.
Impact of technological developments on McDonalds international business
With the technological development, the accessibility of the international travel and
communication has increased. As a result of this, changes in the fashion and social habits take
place at a faster pace. The demand of products and their methods of selling are changed due to
the changes in attitude and lifestyle of people (Singireddy, 2020). The technological
developments include creation of new products and new technologies. McDonlads needs to

consider the level of development of the local market and determine if it has sufficiently
developed technologies to be able to take the advantage of the product. McDonalds was
successful in overcoming technological issues. It systematically substituted equipment for people
and also planned the use of technology in a careful manner. The positioning of the technology
was also done in a manner which assisted in maintaining the high standards for each franchise of
the restaurant. While moving to Russia, McDonalds found that soviet machinery lagged behind
the western technology. Therefore, it imported machinery from Holland which was used in the
harvesting of potatoes. This indicates that McDonalds took the appropriate actions to maintain
the quality of its products when expanding to other countries.
Impact of political environment considerations on McDonalds
Political factors comprise of agencies, laws and government groups which pose
limitations on the individuals and organizations within a society. This includes studying the
attitude of the government to the foreign markets and its stability. It is highly important for
McDonalds to consider the political factors. The whole industry is affected by the government
policy. Various regulatory departments such as department of environment and department of
trade and industry impact the operations of McDonalds where it operates. The policies developed
by these bodies on the trading as well as the restrictions and standards set by them have to be
followed by the organization (Rajawat and et.al., 2020).
When McDonalds operated in Russia, there was law which required all the organizations
to have Russian name. this required McDonnlds to translate its brand name. similarly, in Japan,
McDonalds changed the pronunciation of its name to MaKudonaldo. Further, there is a law in
Russia according to which all important decisions can only be approved if they have at least
three quarters majority vote. This made it important for the city council and the representatives
of McDonalds to agree on the major decisions. As a result of this, the company would be unable
to tap the various opportunities available to it. In this way, political factors impact the working of
McDonalds in international markets to a great extent.
Price regulations imposed by the government is another aspect that needs to be
considered by McDonalds when operating in international markets. There are various countries
where the price for certain products is controlled by the government. For example, the profit
margin of the manufacturers is controlled by Ghana. This indirectly impacts the price paid by the
customers. Hence McDonalds has to adapt to these regulations and adopt suitable strategies for

incurring profits. While operating in international markets, McDonalds is also required to
understand the difference existing between the political background in various regions of the
world. The economies which are centrally planned get heavy protection by the government. This
type of a climate makes it a possibility for the approval of proposals of joint venture (Langert,
2019). This will impact the strategy of the companies like McDonalds while operating globally.
There are various policies of the government which impact the production as well as
promotion by McDonalds. The advertisements have to be designed considering the government
rules and regulations. This may limit the activity of the organization (Akpoviroro and Owotutu,
2018). Also, various promotional activities which are to be undertaken by McDonalds need to be
done in accordance with the government rules. The content of the promotion is regulated by the
government rules and regulations. McDonalds has to ensure that the promotional content meets
the criteria set by the government of the particular country. In France and China, there is
prohibition on door – to – door selling. Similarly, Germany has placed restriction on superlatives
and comparative claims. Therefore, while promoting Germany, McDonalds has to ensure that
words such as ‘Better’ and ‘Best’ are not used.
Ecological considerations taken by McDonald Restaurant affect their international business
decisions in the markets they operate
Ecological consideration refers to the concern of the society regarding the ecological
balance and loss of biodiversity (Amankwah‐Amoah, and Syllias, 2020). The increase in the
awareness of the negative impact on the environment due to the development industry has lead to
the formation of new laws and regulations. The change in the climate has impact on the
environmental conditions in such a way that it will affect the trading of the business at the global
level (Tur-Porcar, and et.al., 2018). For entering the international markets the company analyse
the environmental factors of the countries for its sustainable development. Environmental factors
that can affect the operations of the McDonald such as temperature, pollutants, population
density, food, light, sound and parasites. The climate change is the major factor that can affect
the sale of the products of the company (Sarooghi, and et.al., 2015). McDonald is the first
restaurant that has undertaken global climate change by targeting the areas that has impact the
environment. For reducing its impact, the restaurant has set targets for the greenhouse gas
emission, that has been approval of science based targets initiative. For increasing the business of
the industry, it is important to conduct its business in environmental friendly way. Various

environmental groups have laid emphasis on the reduction of use of plastic and Styrofoam. For
growing and increasing their scale of the business across the world, McDonald has undertaken
corrective measures under which they have started testing new packaging and has started
recycling the packaging items. They are using those materials that are sustainable that has helped
the customers encourage recycling and reuse of the materials. They are collaborating with the
Nextgen Consortium are focusing on the recoverable solutions and providing reusable cup for
the drinks. The McDonald is trying to manage its food waste by donating the edibles good to the
various citizens of the country. They have made policies to deliver its product in a smarter way.
They have started providing deliveries through trucks and then recycling them for the different
use. The distribution channels of the McDonald has adopted the more efficient way of generating
energy which is solar installation. The use of the solar panels has helped in the reduction of the
electricity charges and has helped in complying with the environmental related laws and
regulations. For more sustainability and protecting the environment from the waste generated by
the McDonald, it has started rethinking for its packaging. As the packaging of the products has
increased the cost of the production of the McDonald, for this they have reduced the use of
plastic cups and weight of sundae cups. By implementing these small changes the McDonald has
reduced the use of the plastic and started offering fibre cups to the customers. Use of the plastic
is the major concern for the customers of the McDonald. So, for the sustainable development of
the restaurant. It has reduced the use of the use of plastic straws in its outlets. In the
accomplishing the waste reduction goals. The McDonald has collaborated with various suppliers
of the raw material of the McDonald. All the decision taken for the maintenance of the
ecological balance of the country across the world. This has helped in the promoting the business
and increasing the market share of the restaurant.
CONCLUSION
The report concluded that effective marketing strategies can not be formed without
analysing the impact of the external environment on the McDonald. There are number of
uncontrollable factors that affect the functioning of the McDonald in the international market.
For surviving and growing in the international market the restaurant has undertaken various
waste management measures. And for increasing its brand value it has adopted various socio

culture factors by providing corporate responsibility activities to the society. The technological
factors has made the distribution channel of the restaurant much easier than before. In the same
way the political factors of the country has its impact on the productivity of the firm as well.

REFERENCES
Books and journals
Akpoviroro, K.S. and Owotutu, S.O., 2018. Impact of external business environment on
organizational performance. International Journal of Advance Research and Innovative
Ideas in Education. 4(3). pp.498-505.
Amankwah‐Amoah, J. and Syllias, J., 2020. Can adopting ambitious environmental
sustainability initiatives lead to business failures? An analytical framework. Business
Strategy and the Environment. 29(1). pp.240-249.
Ferraro, G.P., 2021. The cultural dimension of international business. Prentice Hall.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Jian, O.Z. and et.al., 2021. Effective Marketing Strategies of McDonald’s in Malaysia and
Indonesia. International Journal of Applied Business and International Management
(IJABIM). 6(2). pp.33-46.
Langert, B., 2019. The battle to do good: Inside McDonald’s sustainability journey. Emerald
Group Publishing.
Liao, Z., 2018. Social capital and firms' environmental innovations: The moderating role of
environmental scanning. Business Strategy and the Environment. 27(8). pp.1493-1501.
Rajawat, A. and et.al., 2020. Factors: responsible for McDonald's performance. Journal of the
Community Development in Asia (JCDA). 3(2). pp.11-17.
Sarooghi, H. and et.al., 2015. Examining the relationship between creativity and innovation: A
meta-analysis of organizational, cultural, and environmental factors. Journal of business
venturing. 30(5). pp.714-731.
Singireddy, M., 2020. Mcdonald's: Global Marketing. International Journal of Health and
Economic Development. 6(2). pp.16-27.
Tur-Porcar, A. and et.al., 2018. Factors affecting entrepreneurship and business sustainability.
Sustainability. 10(2). p.452.
Online reference
My McDonald’s app., 2022. [Online]. Available through: <https://www.mcdonalds.com/gb/en-
gb.html>
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