Business Environment Analysis: Mc Donald's Report - BUS101, Semester 1

This report provides a comprehensive analysis of the business environment, focusing on Mc Donald's as a case study. It begins with an overview of the business environment, defining different types of organizations and their characteristics. The report then delves into Mc Donald's, examining its size, scope, vision, mission, legal structure, and objectives. A significant portion of the report is dedicated to the organizational functions within Mc Donald's, including marketing, human resources, accounting, advertising, and research and development, and their interrelation with business objectives and structures. The report further explores the positive and negative impacts of the macro environment, including political and economic factors, on Mc Donald's operations. It also conducts internal and external analyses using PESTEL and SWOT frameworks, concluding with an understanding of how strengths, weaknesses, and external macro factors are interconnected, thereby influencing the development of Mc Donald's products and services.

THE BUSINESS ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Business Environment overview and different types of organisation..............................1
P2 Background information of Mc Donald............................................................................2
P3 Different organisational functions and their link with objectives and structures..............3
TASK 2............................................................................................................................................6
P4 Positive and negative impacts on macro environment has upon business operations......6
P5 Internal and external analysis of Mc Donald....................................................................8
P6 Strengths and weaknesses interrelate with external macro factors ................................11
CONCLUSION..............................................................................................................................12
REFRENCES.................................................................................................................................14

INTRODUCTION
Business environment is of dynamic nature that indicates that future of an enterprise is
uncertain. All factors related to business must be analysed effectively and efficiently such that
products and services catered for organizational growth and development must be provided to
them with relative marketing environment. Following report will discuss about different types of
organizations (private, public and voluntary organizations) that are present in business
surroundings and the way they operate. Their objectives and structure are studied in detail which
will help in distinguishing each from one another. (Klapper and Parker, 2011). Later in this
report it is discussed , how Mc Donald an multinational organization manages its operations by
dividing its whole business into different departments. Lastly, it will be studied how cited
company will be affected by various micro and macro factors through doing its PESTEL and
SWOT analysis along with their interrelation which will help Mc Donald in developing business
products and services.
TASK 1
P1 Business Environment overview and different types of organisation
Prominent Features of Business environment: Dynamic : Business environment changes according to need and change at marketplace
due to introduction of new products or technology. Various others factors are also
responsible that urge for alteration such as introduction or enhancement of technology,
new equipments, economic issues of the country and many more. Complex: Various sources are there from which varied forces arises that demand
modifications in existing terms and conditions of the venture. Thus, it is necessary to
identify and analyse elements that may affect operations of the firm. Multi facet: When a change and alterations are introduced in the venture, all the
observers have different viewpoints relative to that occurrence. Perceptions vary from
person to person and is required to be handled conveniently so that workings could not
get affected and objectives set by the company could be met effectively.
 Extent and impact of procedures: In any firm, its growth and success directly depends
on the working conditions of the business environment. Even if there is introduction of
small modification and change, its impact could be long lasting.
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The different types of organisation are provided below:
Private organizations- These types of organizations have main objective of profit maximization.
These can be continued in various forms like sole proprietorship, partnership, business
organizations and franchises. These are different in various aspects. In sole proprietorship all
business activities are run and managed by individual proprietor. While partnership are formed
by two or more persons who manage all enterprise activities and their main aim is to achieve
goals and objectives which can be jointly managed .For example- Mc Donald being a private
company provided various types of products and services to its buyers. In this, various
merchandised items are being provided to small franchises which helps to deliver various items
to different purchasers. In this unit, main source of finance is shareholders, venture capitalist and
angel investors. And their main source of finance is personal savings which is being invested by
various types of business owners of different franchises
Public Organizations- These firms are controlled and managed by Govt. at national and different
state levels. In these business units their main aim is to provide all types of products and services
to society as per their requirements. The funds in these ventures are allocated through various
types of taxes and fees which are being taken form citizens. These types of business units helps
them in developing various sectors of economy. In this firm main purpose is to provide services
to every customer. Their main source can be through taxes, fees and rents which Govt. gets from
various state authorities.
Voluntary organizations- It is entirely different sector of economy. These business firms work
towards developing societal requirements in terms of providing them proper care and support. IN
these business ventures main objective is to provide financial , legal and personal support to
various sectors and individuals who want to grow and develop as business personalities.
P2 Background information of Mc Donald
Size and scope of Mc Donald: The organisation is leading brand in global food service retailer
with more than 36000 location in approximately 100 countries. More than 81% of Mc Donald's
restaurants are operated by franchisees and local entrepreneurs worldwide. The scope of
company is very wide as it is the leading food service retailer. It includes some of the largest,
best resourced and most established markets in the system with strong and developed economies.
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Vision, Mission and Business objectives: The vision of Mc Donald is to become modern,
progressive burger organisation offering a contemporary customer experience. Mission of
company is to be customer favourite place to eat and drink and to become a symbol that trusted
all around the world.
Legal Structure: The organisation follow all the norms and regulation prescribed by the
government of the country and which benefits its shareholder and stakeholder at large. Policies
such as Data Protection Act, Children Private Policy, Consumer safety and welfare policy, etc. to
support healthy and legal working in the country.
Business Objectives: The main objective of Mc Donald is to provide its consumers with high
quality and standard of food, rapid service and value for money. They also provide efficient
returns to its stakeholders and shareholders.
Stakeholders: Mc Donald's classified its stakeholders in two parts, internal and external.
Employees, managers, directors and owners are internal stakeholders, whereas suppliers, society,
government, creditors, shareholders and customers are external stakeholder of the company that
influence its business and market growth.
P3 Different organisational functions and their link with objectives and structures
Mc Donalad's have various organisational functions which may include production,
accounts, marketing and many more which all together handles working of a venture.
Functioning is divided into various parts and each of the firm have associated manager as well.
There are various business functions that need to be analysed for purpose of generating business
objectives and structures effectively and efficiently. An organizational structure refers to
activities which are to be directed towards achievement of aims . These activities can be task
allocation, supervision and coordination. (Trimers, 2011.)It needs to be efficient , flexible and
caring in order to provide sustainable competitive advantage. It can also be classified as glass or
perspective through which individuals can see their business and its environment thoroughly.
The structure of an organization depends on its major functions which needs to be performed in
order to provide effective strategies and objectives. The various functions identified in Mc
Donald's are provided below with help of chart:
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 Marketing :- In Mc Donald various elements of marketing must be analysed such that
goods must be produced according to neds of customers. It is a social process by which
individuals and business firms obtain what they need and want through creating and
delivering values with others. In this function there are 4 basic functions which needs to
be analysed in order to perform effective and efficient results. (Arasti, Zandi and
Bahmani, 2014).
 Human Resources:- Mc Donald companies recruits and select employees in such a way
that various benefits can be generated according to neds of market. Human resource are
the most important assets of any venture. They are responsible in success and failure of
any organisation. Efforts made by them helps in growth of it. This is an important
function which helps business organisation to develop and appoint certain resources
which will be considered effective and efficient in order to provide positive results for
business firms. (Kian, Shafaghi and Leing, 2011). In. Innovative and productive ideas
suggested by them could bring revolution in the work. They also prove to be beneficial in
developing distinctive products in the market. Efforts made by workers should not be
wasted. They play significant role in acquiring business objectives and targets set by
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Illustration 1: Organisational Functions
(Source: Harper. B., 2017)

company. Thus, economic conditions get affected in absence of employees within an
organisation.
 Accounting and Finance:- In Mc Donald financial team will analyse all the funds
needed to develop different departments so that they can provide goods and services
effectively. In this function, every company tries to analyse various resources needed to
produce effective goods and services. In this department every element of business must
cater to provide relevant resource for generating requirements of customers.
 Advertising:- Mc Donald advertising in an important element as it helps company to
generate various methods of developing goods needed by buyers. There are various
sources which are used by company like Television, commercials, Billboards and
Facebook for advertising its products and services. It refers to a process by which
products and services are being provided to targeted consumers. In this operation various
sources are needed to provide complete information about goods to customers such that
they can be influenced to buy that merchandised item(Palo and Tähtinen, 2011). These
helps in delivering complete information about that item through which customers can
analyse all content related to products. For
 Research and Development :- For Mc Donald it is an important function as every
product and service needs to be researched and then developed according to
requirements of customers. The Research and Development (R&D) function is concerned
with developing new products or processes and improving existing products/processes.
R&D activities must be closely coordinated with the organisation’s marketing activities
to ensure that the organisation is providing exactly what its customers want in the most
efficient, effective and economical way (Chen Chiang and Storey, 2012).
Relation of these functions with business objectives: Mc Donald's main business
objective is to satisfy customer need by providing high quality and standardise products. All
these functions enables the management to accomplish its goals and objectives. Research and
development function assist the organisation to continuous improvement, Human resource fills
the organisation with efficient and effective manpower which provide excellent services to
customers, accounts and finance shows the balance sheet of company and provide information to
stakeholders and shareholders about growth of organisation and marketing function assist the
organisation to attract and retain more and more customers.
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TASK 2
P4 Positive and negative impacts on macro environment has upon business operations
There are various external and uncontrollable factors that influence an organisation's
decision making, and also affects its performance and strategies directly. These are
1. Political Factors- All factors that affects legal, political systems and processes needed to
generate intervention in an economy. It must provide proper and effective policies
beneficial for products and services development. These include various elements like
government policies, trading and economic restrictions and foreign trade systems. For
Mc Donald it is important to know all political systems which will help in generating
product's performance in different countries. McD is available in various countries
therefore, political factors of each of the nation directly affects working of the
organisation. Various regulations are there which needed to be adopted by the venture in
order to maintain food hygiene and safety to keep people eating their food products
healthy. In many countries, government forces fast food companies to minimize
production as these are considered as junk foods which is not safe and healthy for people.
They do not provide nutritions rather they affect health.
 Positive Effects: Due to easy and efficient tax policy framed by government, it is
become easy for company to pay taxes on time and get equal benefits from it.
 Negative Effects: Government interventions like shifts in interest rates and
increase in foreign direct investment add risk of establishment of competitive
environment.
2. Economic Factors- All those processes which helps in generating growth of business
products and services in any country. It includes various factors like tax rates, economic
policies and inflation systems. It also comprises foreign exchange rates and interest rates
that have huge impact on workings of an organisation. (Haider, 2012.) The Mc Donald
will help in providing effective and efficient impacts that will help in generating
organizational benefits in long run. Raw materials required for food production are
needed to be identified that from where it should be imported. It is necessary to analyse
suppliers from which it could be supplied at effective cost. Tariffs associated with raw
products greatly impacts production process and profitability. If the cost incurred into
development process is high, then profit margin would decrease.
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 Positive Effects: The economic environment of country is stable which provide
benefits to the company as customer purchase more in this kind of economy.
 Negative Effects: Economic crises in European markets affects the economy of UK
which leads to creating a situation of recession.
3. Socio- Cultural Factors- Lifestyle of people have changed over the years which directly
impacts sales of food products of McD. Every region of people have different taste and
demands. In United Kingdom and US people prefer burgers and French fries whereas in
Asian countries Rice is preferred by them. Rules and regulations pertaining in a society
where products and services are being provided. These restrictions may be cultural,
societal or personal based on different norms and values prevailing. So an organization
must develop all ethics and standards prevailing in a society which helps in developing
goods and merchandised items. In companies like Mc Donald its very essential to
provide effective and efficient commodities that will help them in developing cultural
benefited acceptable for society.
 Positive Effects: Modernisation in thoughts and mindset of society and community
assist in growth of business.
 Negative Effects: Change in taste and preferences of consumers troubles organisation,
as consumer prefer alternatives if company unable to satisfy them.
4. Technological Factors- An important factor which needs to be analysed at every stage in
such a way that company can develop effective products and services beneficial for
customers. (Lee, 2012). Not only goods and items are produced by their distribution and
promotions must be technically implemented in such a way that value chain must be
systematically developed based on latest methods of technology. For Mc Donald it is
necessary to have proper knowledge of latest inventory systems that will generate benefit
for consumers in terms of providing latest quality items.
5. Environmental Factors- It is a strategic tool which helps in identifying all external and
internal elements which can affect firm's performance . The analysis is done on assessing
opportunities which can be generated and level of threats which any company develops
on part of providing effective and efficient results. ( Reed, 2013). For Mc Donald it is an
important to analyse all macro and micro elements which will help in generating growth
and development of business possibilities either positive or negative.
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 Positive Effects: Easy availabilty of resources provide benefits to organisation.
 Negative Effects: Company faces various issues and problems by continuously
depleting natural resources.
6. Legal Factors- Policies, rules and legal laws which must be analysed by an organization
in order to provide products internationally. Being a multinational organization its very
important for Mc Donald to analyse all legal laws and obligations which are to be
provided in order to attain judicial systems of goods and services. In this process every
law and order pertaining in an organization needs to be analysed so that both can be
benefited positively.
 Positive Effects: Company works smoothly and efficiently by following all the laws
and policies governed by government of country.
 Negative Effects: Due to rise in technology, company continuously have to upgrade
their database which cost huge to organisation.
P5 Internal and external analysis of Mc Donald
Internal Analysis
For internal analysis Porter 5 force model will be used that assist in describing the micro
environment, McD is composed of, which is described below: Threat of New Entry: The threat of new entry is always frighten any organisation. It
affects the economies of scale of company and influence its overall business. There are
many new start ups which work at small scale but create big impact on internal
environment of Mc Donald's Customer Power: Mc Donald is leading food retailer and consist major share of
customers. Customer impact the business of Mc Donald in several ways. If company
unable to meet their demand, they will shift to alternatives and which results in
diminishing in growth of company. Competitive Rivalry: Mc Donalad is surrounded with competition. Big retailers like KFC,
Pizza Hut and Domino's influence the organisation in great extent. Threats of Substitutions: Mc Donald's face lack of threat of substitution, as most of the
consumers prefer quality of food which is served by the organisation.
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 Supplier Power: Mc Donald's does not influence by suppliers as most of the resources are
developed in the organisation itself and limited resources are purchased from outside
suppliers.
External Analysis
S.W.O.T. Analysis is an important tool used to discuss internal and external factors. The
strength and weaknesses possessed by Mc Donald's are provided below:
Strengths Weaknesses
 Strong Global Brand  Negative Publicity
 Diversified Income  High Employee Turnover
 Food is consistent over the years.  Market share has declined in recent
years.
 Market across the world.  Product development is weak.
Opportunities Threats
 Upgraded Menu  Competition
 Expansion Plans  More Healthy Conscious Customer
 They are serving only 1% of the
population which could be grown up by
proper planning and execution of
strategy.
 They could joint with the ventures such
as supermarkets which could also make
available food products of McD.
 Changing demographics.
 Consumers are nowadays more health
conscious.
 Fluctuations in economies of various
nations along with foreign exchange
rates.
Strengths
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