Business and the Business Environment: McDonald's Case Study Report

This report provides a comprehensive analysis of McDonald's business environment. It begins by exploring different organizational types, including public, private, and voluntary sectors, and then compares the size and scope of McDonald's and Burger King. The report delves into McDonald's organizational functions such as design and production, finance, human resources, sales and marketing, and administrative functions, linking them to the company's objectives and organizational structure. Furthermore, it examines the positive and negative impacts of the macro environment (PESTLE factors) on business operations. The report also includes internal and external analyses of McDonald's, including SWOT and PESTLE analyses, highlighting the interrelation of strengths and weaknesses with external macro factors. The report concludes with a summary of findings and recommendations for the company.

Business and the Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Different types and purpose of organisation..........................................................................1
P2 Size and scope of McDonald and Burger king......................................................................2
TASK 2............................................................................................................................................3
P3 Different organisational functions and their link between objective and structure...............3
TASK 3............................................................................................................................................5
P4 Positive and negative of macro environment on business operations....................................5
TASK 4............................................................................................................................................6
P5 Internal and external analysis of McDonald..........................................................................6
P6 Strengths and weaknesses interrelated with external macro factors......................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment is a vital part for an effective and efficient management of
enterprise. It includes two terms that is “business” and “environment”. Business includes human
activities that are carries out for earning profit while environment means the surroundings that
affects the operation of company. It can be stated that it is a set of uncontrollable factors that
affects the functions of an organisation (Klapper, Lewin and Delgado, 2011). This project report
is based on McDonald which is a multinational company and deals in fast food restaurant chain.
This report will explain about the different types of enterprise and their size or scope,
relationship between organisational objectives and structures in explained in detail. Furthermore,
positive and negative impact of macro environment on business, SWOT or PESTLE analysis of
an understanding is explained.
TASK 1
P1 Different types and purpose of organisation
There are many types of enterprises which are set up for the different objectives, are
given below-
 Public company- These organisations are those which can invite the public for taking the
shares. There are no restrictions on the number of shareholders, it can freely trade their
stocks throughout the market or stock exchange. It has to use “PLC” word after its name
and has to take decision related to business after consulting with its shareholders.
Generally, it is owned by government for the people which has main purpose is to
provide benefits to the public and to use resources in an effective and efficient manner for
giving the benefits to the society. It's rules and regulations are as follows-
◦ It has to publish its annual accounts to its investors or bankers.
◦ At the end of every year, it has to call a meeting that is known as “Annual General
meeting” in which shareholders vote on a certain issue etc.
◦ Must have at least two shareholders and should be registered at company’s house.
◦ Must have at least two directors in which one should be an individual who will be at
least 16 years of age (Chavis, Klapper and Love, 2011).
◦ All members have limited liability only up to unpaid amount on their shares.
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 Private company- Those enterprises which are controlled or owned by some private
people or has a small number of shareholders is known as private company. It cannot
offer their shares to the public and there is a specified limit on the number of
stakeholders. It can be known by the name of unlisted company or unquoted enterprise.
Its main purpose is to enhance profit, market share and sales by providing services to the
society. It' structure are as follows-
◦ It has to file its audited annual accounts on companies house.
◦ It has to make two documents which is “Memorandum of Association” and “Articles
of Association”.
◦ It does not need to appoint company secretary if it does then it has to give information
about it to the company’s house ( Welford, 2013).
 Voluntary sectors- These organisation is not owned only by an individual but is
controlled by a group of person. It can be known as “Non- profit organisation” which has
main objective to serve the society without any purpose of profit. It is willingly set up by
some person for doing social welfare. In this, there are numbers of members that provide
donation to it which can be used for the development of the society. Its main objective is
to improve living of standards of the people that also helps in the development and
growth of the country. Its legal structure are as follows-
◦ There should be some provisions related to continuing membership and future
existence of the group.
◦ It should set down the objects of association, it's membership and structure and the
the powers that assist in carry out its object (Commander and Svejnar, 2011).
P2 Size and scope of McDonald and Burger king
Size and scope of these organisations are as follows-
McDonald Burger king
Employees Approx 85000 in UK and one
million worldwide
34248 man power
Customers 68 million per month 54 million per month
Net income $104.42 billion $ 1.912 billion
Advertising budget $988 million $1000 million
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Area served Over 120 countries Over 100 countries
Products Burgers, French fries, soft
drinks, coffee, breakfast etc.
Salads, burgers, desserts, hot
dogs etc.
Market share 49.50% 13.30%
McDonald- It is the largest fast food restaurant chain throughout the world in terms of
customers base as well revenue generated. It is serving their services over 120 countries and has
employed 85000 employees in UK and one million thorough out the world and serves more than
65 million meals each year. It has captured 49.5 % market share globally and has customers base
around 68 million per month. It provides various types of products to their consumers like
burger, French fries, soft drink, breakfast etc. Approximately, it generates revenue $ 104.42
billion which is a beneficial for the company. For getting attention from the customers, it spends
$ 988 million on advertising which is done through, television, print media and so on. It does it
business through franchising agreement (Hamilton and Webster, 2015).
Burger king- It is also a private firm 3G capital which has objective to focus on
franchising business structure. It has 34248 employees who are working world widely and
contributing in generating more revenue which is $ 1.912 billion. It serves various products to
their consumers like burger, salads, drinks etc. and capture 13.30 % market share globally. It is
serving their services more than 100 countries and has 54 million customers per month. For
capturing large customers base, it spends more amount on advertising which is $ 1000 million
approx. For giving the competition to McDonald, it introduced “Big King sandwich, two patties,
three buns and a special sauce” in the market but it can achieve its desired result.
TASK 2
P3 Different organisational functions and their link between objective and structure
McDonald, for generating more profit and sales, undertakes the following functions
which are helpful in achieving the desired outcome which are given below-
 Design and production- For satisfying the needs of customers, company should design
or produced the products as per their requirement. There are many factor of production
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like labour, capital, materials, information etc. McDonald produced their products as per
culture and taste of customers (McDonald and Wilson, 2011).
 Finance- It is very important function because without having it, no task will be
completed. It is directly connected with the profitability of the company. Billing process,
employees payroll, expenses can not be ignored by the company. It should control the
flow of money for getting the desired result. If there will no proper finance resources then
production will not be carried out.
 Human Resource functions- It's main responsibility is to recruit, select, training and
development of employees that are very important because without having man power,
McDonald can not serve the customers. Human resource also need to comply all rules
and regulation that are applicable to the country (Mojaveri and Fazlollahtabar, 2012).
 Sales and Marketing functions- It is another important function because it assists in
identifying the needs and wants of target market and also aids in serving them. If it will
not do then McDonald can not produce the products effectively and then will not achieve
to it's desired result.
 Administrative function- It includes many task like mail or complaints handling,
computer service etc. It also prepares documents for the organisation like newsletters,
forms etc. and aids in maintaining the organisation's premises and equipment.
An organisation structure in helpful in handling the operation of business and coordinates
all activities that aid in achieving the desired result or outcome. McDonald's organisation
structure helps in managing market which is based on performance level. It uses divisional
structure which has aim to support autonomy and organisational flexibility. According to it,
functions are divided either on the basis of products or geographical areas. It has the following
characteristics-
 Global hierarchy- McDonald has global hierarchy which is helpful in managing the
operation through out the world. For example- It's CEO guides or instructs all activities
of business that are passed to middle level managers, to the restaurant manager and at
last to the personnel.
 Performance based division- Earlier, McDonald used the geographic division that were
U.S., Europe, Asia, Middle East but after reorganisation, It uses performance based
division (Macdonald, 2012). Now it's structure is U.S., International Lead Market, High
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Growth Market, Foundation Market and corporate. U.S. Market produces more than 40%
revenue, lead market generates 40%, high growth market's revenue is 10% and
foundation market also generated 10% revenues. It's main benefits is that it is helpful in
formulating the strategies according to the market performance.
 Function based groups- In this organisation divides the groups on the basis of functions.
For example- company maintains different group like human resource management
group, franchising group etc. This characteristic assists the McDonald to address the all
basic functions in it's business.
This structure is very helpful in managing the operation of business through out the world
and also assists in monitoring and controlling of these activities. And it's main drawback is that it
is less flexible (Krishnan, 2013).
This structure supports in getting the specified objective of company and provides
competitive advantages over it's rivals.
TASK 3
P4 Positive and negative of macro environment on business operations
Macro environment is that condition which can not be controlled by an organisation. It
includes six component which are Political, Economical, Social, Technological, Legal,
Environmental [PESTLE]. These also affects the operation of business in both positive and
negative aspect which are given below-
 Political factor- This factors are growing day by day after financial crisis. McDonald
should consider this element in to their business. It includes government policy or action,
increasing international trade agreements, tax reforms etc. This factors affects the mode
of entry. For example-Russia gives priorities for increasing sales within their home
country then goes to international market.
 Economical factor- These component strongly affects the growth of business as well of
the country. It includes inflation rate, GDP [Gross Domestic Products], tax rates, foreign
investment etc. By using these elements, government can make many changes in the
growth of country. If governing body will increase the import tax rates then every
country will do less import activities. This may make changes in the buying behaviour of
businesses who are importing (Jayeoba, 2012).
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 Social factor- McDonald must consider this component which includes the following
things-
◦ Increasing cultural diversity
◦ changing lifestyle of target market etc.
If it will consider this factor then it will get specified objective.
 Technological factor- For providing the best services to it's target market, organisation
should adopt new technology so that it can serve the customers effectively and
efficiently. It should consider the following things-
◦ Increasing business automation
◦ Sales through wireless devices etc.
 Legal factors- There are many rules and regulation that should be complied by
McDonald for carry out their operation in an effective and efficient manner. These factors
are as follows-
◦ Local regulations related to health at workplace (Eisenberg and Miller, 2012).
◦ Animal welfare regulations
◦ Legal minimum wage levels where it is operating their business.
 Environmental factors- This element of analysis affects the consumers as well as
performance of the company. In McDonald, following are given the important ecological
factors that affects the business environment-
◦ Climate of society has changed
◦ People are showing interest in Corporate environmental programme etc.
These all above factors affects the business in both positive as well negative aspect. With
the help of PESTLE analysis, McDonald can know about the external factors that may affect the
business and timely can take necessary action that will assist in preventing these component's
negative impact on the operation of business. This analysis aids the company to know about the
availability of opportunities and threats. These factors supports the organisation in increasing
efficiency and effectiveness.
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TASK 4
P5 Internal and external analysis of McDonald
Internal analysis can be done with the support of SWOT analysis which is very helpful in
knowing about the strengths, weaknesses, opportunities and threats. In this analysis, company
analyses those factors that affects the operation of business and conduct research with in the
organisation. After conducting this survey, McDonald can use it's full potential and can focus on
the opportunities that are available ion the market. This research is helpful in achieving the
competitive advantages over it's competitors like Burger King etc. (Rankin, Windsor and
Wahyuni, 2011) SWOT analysis of McDonald is as follows-
 Strengths-
◦ It is an established and growing entity in the market.
◦ It has good brand name and well reputed company through out the world.
◦ It's logo is one of the recognised sign in the whole world specially amongst children.
◦ It has good quality and various types of offers.
◦ It was the one first food outlet that provides nutritional facts on their products.
◦ It involves in various types of projects which does social welfare. So it is treated as a
socially responsible firm.
 Weaknesses-
◦ More employees turnover that leads to more amount being spent on hire new
employees and providing them training.
◦ Less development of products.
◦ Decrease market share continuously.
◦ Reducing revenue and income growth.
◦ It has high initial cost.
 Opportunities-
◦ It can increase it's business by providing more organic food to those target market
who are health conscious.
◦ It can adopt various offers or discounts for attracting the customers.
◦ It should organise many events or programmes for getting attention from children
and adults.
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◦ It can provide various services like free internet and can open new branch in untapped
area (Eckardt, 2012).
 Threats-
◦ It's revenue is totally depend on the economy of the country. If there is recession then
it's income will also decrease.
◦ There are more number of competitors through out the world like Burger King,
Greppe Plc, Starbucks etc.
◦ At present time, mostly people are health conscious and they don't want to eat junk
food or fast food.
◦ Changing demographics etc.(Myers and Korsmo, 2014)
By conducting this analysis successfully, McDonald can overcome from it's weakness
and can focus on the opportunities and threats that are available in the market. It can use their
strengths in an effective and efficient manner that will aid in getting the competitive advantages
over it's competitors. From the above analysis it can be concluded that strengths and weaknesses
are the internal factors that can be maintained by organisation while opportunities and threats are
the external factors that can not be controlled by company.
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P6 Strengths and weaknesses interrelated with external macro factors
It is right statement that strengths and weaknesses are interrelated with external macro
factors. McDonald has many factors that influence the capability and weakness of it. These
factors are interrelated with each other in the following manner-
Strength- McDonald has many strengths that supports in achieving the competitive
advantages over it's competitors. But this strengths are affected by macro environment like
political, social, technological etc. that may impact it in negative as well in positive aspect
(Love, 2011).
 In political environment, government changes rules and regulation related to business
which may influence the operation of company in positive as well in negative aspect. If
there is any changes in laws and legislation then McDonald has to follow it and has to
make their strategies accordingly. Sometime to adopt new strategies is resisted by
employees because they only want to work with their comfort. At last it may result that
it will decrease the strengths of the company.
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 If there is any change in the technology then it has to adopt new technology that increases
the efficiency and effectiveness of the entire company. If it's strengths will be strong then
it can easily adopt these changes and can get the desired result.
 If taste of target market has changed then it will affect negatively to McDonald. It will
decrease the revenue and sales of the company. So for retaining the customers, it should
identify the needs and wants of the customers if it will not do so then it will fail in the
market.
 For running in the market successfully, it should keep in mind the environment while
operating it's business. It should use that equipment that will protect the environment.
If McDonald will keep in mind all above changes then it will assist in maintaining the strengths
through out the life.
Weaknesses- If organisation wants to achieve it's desired result or success then it should
remove it's weaknesses that will support in attaining the competitive advantages over it's rivals.
These weaknesses are also influenced by external factors like-
 Legal factors like rules and regulations related to employment [Minimum Wage Act,
Equal Right Act etc.] should be followed by it because it may help in removing all
drawbacks from the company. If it will not follow it then it will become an weaknesses
for an enterprise because when employees will not get equal rights then their morale will
be decreased and will not work effectively and may be it will increase the employees
turnover (Macdonald, 2012).
 Economical factors also related with weakness because if economic condition of the
company will not be good the it will decrease the revenue or sales of McDonald because
it's sales is totally depends on the economic condition of the country. If there is recession
then it's profit will also decrease (Madsen, 2016).
CONCLUSION
For attaining the competitive advantages or specified objective then company should
maintaining good environment at the workplace. From the above study it is concluded that there
are various types of organisation like public company, private enterprise etc. which are running
with different objective. In a company, there are various types of functions that aids in serving
the customers in an effective and accurately. McDonald follows divisional structure that are
helpful in managing and controlling the business operation globally and provides best result and
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