Impact of Macro Environment on McDonald's Business Operations Report

This report provides a comprehensive analysis of McDonald's business environment, focusing on the impact of macro-environmental factors on its operations. The report begins with an introduction that outlines the importance of understanding the external macro environment for business success. It then delves into a detailed case study of McDonald's, examining its size, scope, organizational functions, and objectives. The analysis includes an exploration of how the macro environment, including demographic, cultural, economic, and political factors, affects McDonald's business operations. The report highlights both the positive and negative impacts of these factors, using specific examples to illustrate the challenges and opportunities. Furthermore, the report utilizes PESTLE and SWOT analyses to provide a deeper understanding of the external environment and how it influences McDonald's decision-making processes. The report emphasizes how McDonald's adapts its strategies to different markets, such as India, to overcome cultural and economic challenges. Overall, the report aims to demonstrate a clear understanding of the business environment and its crucial role in shaping market behavior and organizational success.

BUSINESS AND BUSINESS
ENVIRONMENT

Abstract
I tried to demonstrate my understanding in this course by different examples and facts
which I got from internet. Macro environmental factors are essential to be taken under
consideration for sustainable progress and quality assurance. Since McDonald’s is a well-known
and well-studied organisation in the world, my job was easier in some way. Because available
data and details were there for the taking.
Doing business globally is a tough job to deliver. But by assessing the external macro
factors McDonald’s made it look easy. I studied Indian market strategy of McDonald’s and used
a lot of examples from there. In a whole, my primary objective is to deliver a quality
understanding on the topic and I developed a Pestle analysis by which we can understand how
important external macro factors are for making business decisions.

Table of Contents
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
P1 Information into the background of each organization.....................................................1
P2 size and scope of organization .........................................................................................2
P3 Relationship in between organizational functions, objectives and structure....................3
PART 2 ...........................................................................................................................................5
P4 impacts of the macro environment on the business operations, supported by specific
example...................................................................................................................................5
P5 internal and external analysis Internal analysis of McDonald’s.......................................7
P6 Strengths and weaknesses interrelate with external macro factors...................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Business Environment is the core element which shapes up the market behaviour and
operations. Every business gets affected by the changes of macro and micro environment both
internally and externally. The focus of this report is to have a clear understanding of external
macro environment in business. In this section of the assignment I will try to investigate more in
depth of the chosen case study of McDonald’s. Describe & identify the impacts of macro
environment on McDonald’s business operations. Then look up for their positive and negative
impacts in the business operations of McDonald’s and explain the reasons for such anomalies.
McDonald’s is a global organisation and facing different macro environment challenge is one of
the toughest job in their business operations. Different counties offer different macro
environment in their business. Since Macro environment consists of broader forces that shape
opportunity and pose threats. Another aim of this report is conducting analysis both internally
and externally to identify Mcdonald’s core strengths and weaknesses. Then explain how these
strengths and weaknesses are linked to the external environments like- demographic, economic,
natural, political, technological and cultural environment.
Finally, we will apply Pestle and SWOT analysis to get more in depth understanding the
effect of macro environment and justify how it affects the decision-making process of
McDonald’s. Which will help, us to understand the true impact of macro environment in a
business.
PART 1
P1 Information into the background of each organization
Bank of England: Founded in 1694 and nationalized in 1946, Bank of England is the central
bank of the UK. Owned by the UK government and overseen by the board of directors,
appointed by the Queen. The legal structure of the bank is based on the public sector and they are
offering services to the general public.
Purpose
Deliver Monetary Stability:
Monetary Stability objective of Bank of England is to deliver stable prices and
confidence in The UK’s currency. Monetary policy refers to the setting of interest rate according
to the Government’s targeted inflation rate.
Deliver Financial Stability:
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Bank of England is also responsible for the financial stability of UK. They try to make
sure that the system runs flawlessly.
They supervise to remove or reduce risks in the UK financial system and regulates several banks,
insurers and investment firms.
McDonald’s:
McDonald's is private organization founded in 1940 in the USA. It is a well known brand
throughout the world. The legal structure of the organization is public company The company is
offers services to everyone who like and eat the fast food.
Purpose:
By introducing new items, McDonald's tries to retain their number one position. On the
other hand, they have some flag ship products like- Hamburger, Big Mac are well established
items which do not need any further moderation. But country to country McDonald's tries to
implement local favorites in their signature menu. For example- In Greece , McDonald's uses
pita bread instead of bun in making Big Mac, since Greeks love pita over bun. Such innovative
implementation and such understanding of customer demand made McDonald's the number one
food retailer in the world. In one word, it can be said that the main motto of McDonald's is
“Innovate and Lead”.
The differences between these two organizations are barely wide. Both of the
organizations have different structures and culture. This structure and cultures making
differences between organizations.
P2 size and scope of organization
Size and scope of the McDonald's
McDonald's is the leading food chain retailer in the world employing around 420,000
people in around 120 countries and has a value of around $16 billion of total asset. The scope of
the company is very large as they are providing services at the International level. The company
is conducting its business operation in more than 80 countries.
Size and scope of the Bank of England
BOE is one of the oldest bank in the London and there are more than 3000 workers are
working at present. It has reserve more than £408 billion and providing regular services. The
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scope of the organization is limited to providing services only to people of UK. It services are
includes to provide low rate interest loan to public and maintain financial stability within UK.
It has clear indication about the size and scope of these two organization. In terms of
employee numbers, it has been understandable McDonald’s has to deal with much more
employee relation and control. Obviously, functionality of these organizations depends on their
different activities.
P3 Relationship in between organizational functions, objectives and structure
“Innovate and Lead”.
As described in the earlier presentation, McDonald’s follows this motto throughout the
organization. We can see this in their planning and decision making in different part of the
world. They target and treat markets by their nature. In cost sensitive markets, they lower the
price significantly. On the other hand, metros like London and New York their product price is
higher than usual.
We will first try to analyse different organizational functions to explain the connection
with McDonald’s objective and structure. Then we will try to find the impact of different
organizational functions in organizational structure.
Organizational functions of McDonald’s
In order to produce and sell the products, an organisation must have the functions like-
 Design and Production
 Finance
 Human Resources
 Sales and Marketing
 Administration
 Research and Development.
Relationship in between organisational functions and objectives of McDonald
As the leader of their sector, McDonald’s undertakes these functions like no one else. To
remain the best they always enhance new tricks in their sleeves. Their design and packaging is
exemplary to other competitors. Their research and development team always be one step ahead
of the time. Their consumer-friendly outlets, kiosk and drive thru restaurants shows the
effectiveness of sales and marketing department. McDonald’s always trains their employees at
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such a manner that customers can get service of the highest quality from them. Acquiring and
retaining human resources are the standardized quality of McDonald’s.
The objectives of McDonald’s are to get a sustainable growth. They try to retain their
customers by assuring them the quality and by building a sustainable relation with the customers.
To do this they recently changed their organizational structure in 2015. They shifted from
geographic divisions to strategic division method. They emphasizing on the growing market
throughout the world. For example- India, Vietnam.
The impact of different organisational functions in organisational structure
Operating around the world is a very firm challenge to face. Thus, McDonald’s has a
global hierarchy to cover its operations throughout the world. Organizational functions are not
equally easy in every country. For example- India is a lucrative market for all the global
organizations in the world. But for McDonald’s it’s a challenging place to exploit the profit due
to the cultural environment. Since many of the McDonald’s products are made of beef which is
really sacred in India. Thus, they had to assess new ideas and implement them in the Indian
market.
To give such feedback to the country McDonald’s changed their organizational structure
in the Asian region. And gave India a high growth market status in the organization. Then they
introduced Mc-veggie, Maharajah Big Mac in the country to lure the market by their brand value
and quality. McDonald’s also maintains function based groups in its organizational structure. For
example- under corporate operation, the company has human resource group, supply chain and
franchising group and legal group. This type of organizational structure enables McDonald’s to
address the basic functions in its business.
Relationship in between organizational functions, objectives and structure in Bank of England
Bank of England is one of the successful the UK. The objectives of the bank to provide
the best services to their customers and along to maintained financial stability in the country. If,
the function of the company that is HR, IT and finance are effectively managed then it helpful
for the company to achieve their targets.
There is also close link in between organizational functions and structure. Structure of the
company is based on the hierarchy level. Each information is take place from top to bottom.
Function of the company is HR, finance and other function. As per the requirement of structure
function of the company make perform.
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PART 2
P4 impacts of the macro environment on the business operations, supported by specific example
McDonald’s is the leading food service retailer in the world with more than thirty-five
thousand restaurants serving more than sixty million people every day. Such number shows us
the capability of McDonald’s to face the challenge of macro environment. We will now evaluate
the positive and negative aspects of some macro environment elements in the business operations
of McDonald’s.
Demographic Environment:
Demographic environment states to the level of population growth, sex, age, education
patterns, family influences etc. For McDonald’s, demographic environment is very important
aspect and they try to recognize the environment to maximize their profit.
Positive impacts
By having a good knowledge and understanding of the demographic environment, an
organisation can shape up its operation methods. For example: By understanding the scarcity of
the playground for the children, many McDonald’s restaurants have included a playground for
children since they targeted the advertising to the parents and children.
Negative impacts:
In many-way, demographic environment making the business difficult for the
McDonald’s. For example- Though India in a fast growing market in the world, they are still way
behind to achieve the target of fully educated people. Very low percentage of people uses
internet. Thus, in India, people are hard to get attracted to a foreign fast food chain like
McDonald’s. Because people think about them as a high priced company and don’t rely on the
brand name since they didn’t hear about McDonald’s in their life.
Cultural Environment
Caste structure, cultural heritage, customs, mobility of labor etc. can be referred as the
cultural environment. The positive and negative impacts of such factors are illustrated below.
Positive impacts:
McDonald’s is a global company, thus, working in different cultural environment is a
regular part of McDonald’s. Different cultural environment made McDonald’s business
operation more innovative and diversified. For example: operating in the USA and Middle East
is quite different. But this kind of experience helped them to recognize the true potential of the
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inner management of McDonald’s. They practiced several innovative ideas from the Middle East
to the USA and succeeded.
Negative impacts:
Different cultures demand different measures. In India, eating beef is accounted as a sin
by the Hindus. Thus, products like Big Mac can’t be launched in there. McDonald’s had
to drop beef from thier food menu to survive and flourish in India.
M3
Economic & Political Environment:
Economic environment comprises the nature of economy of a country, the structured
anatomy of the economy, the economic policy of the government, the nature of factor
endowment and markets.
Positive impacts:
Economic environment ensures the stability of the business in a country. Companies like
McDonald’s is completely volatile in a week economic environment. Because the sales of the
company directly linked with the people’s economy.
Negative impacts:
Doing business in different region is different and a hard job. Economic effects can
change the total business operation at a time. For example: India has a very cost sensitive market.
They always want the lowest price. Thus, they have to rearrange the operations to minimize the
cost and many time struggle to cope with the process. McDonald’s used to sell a chicken burger
at $2 or $3 in the USA. But in India they had to reconcile their price to only 60 or 70 cents.
Technological Environment:
Technology shapes the future of any business. McDonald’s always watches over the
changes in the technology for keeping track of competitors and customer needs.
Positive impacts:
Change in technology make the business easier to operate for McDonald’s. It helps
McDonald’s to recognize the customer demands easier and can take sufficient measures to cover
them up. Due to internet and other technological changes, the sales of McDonald’s have
increased immensely. Kiosks are huge hit in the Europe and North America. Also using up to
date technology gives McDonald’s an edge over the other competitors.
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Negative impacts:
Implementing new technologies are costly for business. Marketers always try to
maximize the shareholders' wealth. But due to the fierce challenge in the market, McDonald’s
has to invest a heck of money to keep its technologies up to date.
P5 internal and external analysis Internal analysis of McDonald’s
the internal environment of the company is always promoting the innovation. The main
focuses of the company is always focused on statement of Quality, Service, Convenience, and
Value (QSCV), McDonalds corporate culture is a shared value system that forms the basis of all
company decisions. Mc-Donalds has and provides the best employees-business relationship via
providing an equal opportunity to employees. Employees are regarded as members of a team
where everyone's opinion is valued and respected.
External analysis of the company
The external environment can be analyzed by the pestle analysis.
Political Factors:
 Increasing international trade agreements (Opportunity)
 Pending tax reform ( Opportunity)
 Evolving Public health policies (Threat and opportunity)
 Refugee crisis in Europe( Threat)
 Uprising tension between Russia and the West in Syria crisis (Threat)
Economic factors:
 Reforming in some important countries like the UK Brexit (Threat)
 Stable growth of the US economy(opportunity)
 Slowdown in Chinese economy(threat)
 Uprising Indian economy(opportunity)
 Risky European economies(Threat)
Social factors:
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 Widening wealth gap. And increase in the number of medium and low-medium level
households. (opportunity)
 Increasing cultural diversity(opportunity)
 Healthy life style trend(Threat and opportunity)
Technological factors:
 Moderate Research & Development activity in the industry(opportunity)
 Increase in business automation(opportunity)
 Increasing sales through internet and mobile devices(opportunity)
Environmental Factors:
 Rising interest in corporate environmental programs(opportunity)
 Emphasis on sustainable strategies(opportunity)
P6 Strengths and weaknesses interrelate with external macro factors.
Link of McDonald’s strengths with the external macro factors: McDonald’s has a great
insight of the external environment. Therefore, McDonald’s never faced any tough challenge in
its operations. External macro factors like- political, economic, legal, technological and
environmental factors are taken under consideration by McDonald’s governing body before
giving any license to franchise or open an outlet by the parent company. Thus, any chance of
facing problem after investment minimizes.
Link of McDonald’s weaknesses with the external macro factors:
McDonald’s is the leader in its trade. Thus, new competitors are always there to grab any
opportunities out there in the market. Therefore, McDonald’s every now and then has to launch
new products to test the taste of the customers. And then evaluate the product performance and
take next step. This kind of initiatives demand a heck of money and time. Thus, macro factors
directly linked with the weaknesses of McDonald’s. As an established brand, the existing sales
can be accounted as a great strength of the organization. And which certainly impacts the
opportunities of the organization.
To reach people easily and cost efficiently is a primary concern for all the organizations.
Reduced labor cost can cover up the increased production cost, and can buy a sustainable image
for the McDonald’s services in the near future. Which can be an opportunity to grab for the
organization. On the other hand, lack of diversification in production line can threaten the future
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of the company. Category extension in the product line can offer opportunity for the
organization.
CONCLUSION
In general, an organization tries to make up the challenges of the market by their existing
organizational structure. But McDonald’s always assesses their organizational structure by the
nature of the market. To cope with the modern global marketing and organizing challenges they
reorganized its structure in July,2015. The performance based division in the most distinct
feature of McDonald’s organizational structure. They analyzed the impact of the web of
interrelationship between organizational functions and implemented new ideas in their
organizational structure.
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