McDonald's Corporation: Comprehensive Business Environment Analysis

This report provides a detailed environmental analysis of McDonald's Corporation within the fast-food industry. It examines both micro and macro factors, employing PESTEL analysis for external factors and SWOT analysis for internal evaluations. The report delves into core competencies, Porter's Five Forces, and competitive advantages, offering insights into McDonald's strategic positioning. It covers political, economic, social, technological, environmental, and legal factors impacting the company's operations, particularly in the UK market, and analyzes industry trends such as evolving lifestyles and integrated economic systems. The internal analysis highlights strengths, weaknesses, opportunities, and threats, alongside an assessment of core competencies and competitive dynamics within the fast-food sector. The report's conclusion summarizes key findings and strategic implications for McDonald's continued success.

External analysis

Executive Summary
The present report will provide the information regarding environmental analysis of
McDonalds corporation in the fast food industry. This will involve two types of elements
micro and macro. The macro factor will be used the PESTEL approach and internal
evaluation through SWOT analysis. Further, this report also talking about the various aspects
such as core competencies Porters five force method, competitive advantage and so on.

Table of Contents
Executive Summary.............................................................................................................................2
Introduction.........................................................................................................................................4
Company...........................................................................................................................................4
Industry.............................................................................................................................................4
External analysis..................................................................................................................................4
Trends................................................................................................................................................6
Key drivers........................................................................................................................................6
Internal analysis..................................................................................................................................7
Core competencies:..........................................................................................................................8
Competitive analysis........................................................................................................................8
Competitive advantage..................................................................................................................10
Conclusion..........................................................................................................................................11
References..........................................................................................................................................12

Introduction
Company
McDonalds corporation one of the leading company in ten fast food industry and provide a
wide range of products to its customers. The cited firm is operating more than 100 countries
in the different content of the world including America, Asia Pacific, Europe and Australia
(Filsecker and Hickey, 2014). At present time the market share is more than 40 percent which
is quite large as compare to other business organization. The main objectives of this
enterprise is to expand its present in the various nation which can help to increase market
share and meet their short and long term targets.
Industry
Fast food industry one of the attractive sectors and provide a consistent growth to a business
corporation. As par the given data, the global fast food revenue is more than $570 billion
which quite higher than any other country economic value (Thun and Hoenig, 2011). There
are various statistics shows that the growth rate of this sector is about 3 percent which will
increase in the next few years. There are more than 6,00,000 restaurants across the world and
also provide a large number of jobs to the people and support also economic growth.
External analysis
It is essential for a company to conduct environmental analysis and make their decision more
effective in order to provide a consistent growth to a company. The external factors affect a
business largely. In the context of McDonalds corporation operate its business in to the UK
which having a good performance. On other hand, there are various giant entities such as
Burger King, Subway, Dominoes etc. increase the competition level. It is not good for the
company and required to develop more effective decisions (Thorpe and et. al., 2012). Further,
there are also other factors which influence a business and its current and future position of
the company. Therefore, this is role of an organization is to evaluate these market so that they
can provide a long range success to the firm in an effective manner. McDonalds corporation
required to use PESTEL analysis which is mentioned below:
Political factor This is one of the major factor which should be managed by
the company to make their decision more effective in the near
future. UK is one of the country which having a strong
political system and it will provide a stable business policies

and structure. Fast food industry required to understand all
these elements and make their decision more effective.
Economic factor This is another aspect in the business environment and
influence the decision making and performance of the country.
In the case of UK, where economic growth is more than 2
percent which is higher in the EU and contribute $2.5 trillion
(Cabeza and et. al., 2014). This is one of the third largest
economy in the European nations. Fast food industry can use
these elements as a future opportunity in the near future.
Social Factor There are various social components which involves
population size, income groups, trends, norms, values
perception etc. UK is one of the multicultural society which
involves a large number of educated people helps to create
demand of products in the longer term. For example, the per
capita income of UK is attractive approx. $42200 which is
higher than any other country (Lewin, Massini and Peeters,
2011). It provides an opportunity for Fast food industry so that
they can generate sales and make their business successful in
the near future.
Technological factor The role of innovation and technology having a large
influence on the company decision making. There are various
technological aspects which involves digital media platform,
social media, integrated communication system, digital
payment system etc. These all aspects help to make a product
more effectiveness in the operational efficiency and increase
revenue and profitability.
Environmental factor There is emerging awareness on the climate issue in the mind
of customers. Because, today each and every firm is tries to
provide a sustainable development of their business which can
meet their long term growth and also satisfy the stakeholders
level of satisfaction (Liu and et. al., 2011). In the case of Fast
food industry, the firm having its own target which should be
managed by the company. For example, they using a wide

range of products which having less environmental impact.
Further, the organization also use electric vehicle for the
logistic and supply chain. The firm also participating different
climate program through their CSR activities. It builds a
strong corporate image of a company and which provide long
tern benefits.
Legal factor There are various legislation issue facing by the business
organization. In the context of Fast food industry, different
types of laws such as minimum wage rate, working hour
limitation and other elements. If UK government increase the
labour rate it will be reducing the profit and revenue which is
a common goal for each and every firm. Therefore, Fast food
industry to understand their legislation and make their more
effective in the near future.
Trends
Every industry is change over a period of time which required to make their decisions
according so that they can overcome any potential risk from the business. As par the given
case of fast food industry mentioned below:
Emerging new life style: Today every individual required to make their life very fast which
is very significant due to lack of time (Aghahosseini and Dincer, 2013). They need those
products which care ready to eat and save its time and money both. These trends are also
growing and helps to provide a long term success for McDonalds corporation.
Integrated economic system: Today, business is integrated with each other and it provide a
good opportunity for the McDonalds corporation. For example, UK is a part of EU which
having more than 28 countries and it will create a golden opportunity for a company in order
to make their business successful.
Key drivers
There are various drivers having large influence performance level of a company. There are
following elements which plays a prominent growth in the fast food and its future
development.

Increase in health awareness: Today, people are aware towards health issue and they try to
avoid fast food. Further, there are various countries who conducting such program. It will be
reducing sales and revenue which is not favourable for a company. Therefore, cited firm is
required to produce such products which can maintain its position in the market.
Government policies: The role of government is very crucial for a company because its
influence decision making (Baran, Correia and Thompson, 2011). For instance, increase in
the tax rate decrease profit and revenue of the company. There are various countries who not
allow fast food due to health related legislative issue which is one of the key barrier for
McDonalds corporation.
Global economic crisis: After economic crises in the year 2008, there are large influence on
the company performance and future growth. McDonalds corporation operate their business
across the world. If there are any crisis and uncertainty on the economy, it may be facing
huge losses for the company.
Increase in operational cost: This is another issue which create major problem for the
growth and development of a company. In the recent years UK government increase labour
changes which is not favourable for the enterprise (Lucky and Minai, 2011). Further, research
and development also increase the operational cost and need to be minimised in the near
future.
Internal analysis
This is another factors where various elements such as customers, competitors, employees,
government and public at large. McDonalds corporation can use SWOT analysis so that they
can develop their resources accordingly.
Strength McDonalds corporation one of the largest fast food producer and
operate its business in more than 90 countries.
There are approx. 35000 food outlets which is quite higher any other
firms and gain competitive position in the market.
Weakness There is intense competition in the fast food industry and reducing
its performance in an appropriate manner.
Opportunities Various Asia Pacific countries having large number of middle
income groups a good opportunity for a company.
Threats The global crisis and political uncertainty create a threat for the

company.
Core competencies:
Each business firm wants to make their business competitive which required to develop core
competency in their business (Sugihara and et. al., 2012). It is a unique aspect which make a
business superior as compare to rival firms and make them competitive in the market. In the
case of McDonalds corporation, offers a wide range of product in a limited time. Their
products are up to the high quality and meet customer expectation. In the fast food industry
hygiene of the major issue which is also good as par the international standards.
Competitive analysis
1. Competitive rivalry or competition: - McDonald's faces their tough competition due
to their fast food cafe as well as the restaurants market which is the already saturated.
These five forces examine their effects of their competing firms in their industry of
the environment. In their McDonald's case, there is the strong force of the competitive
rivalry who is based on some outer elements: -
 High aggressiveness if firms
 High number of the firms
 Low switching of firms
This restaurant has different kind of sizes, and global chains. There is the most of the
channels and large firms aggressively market to their products.
2. bargaining power of Buyers or consumers: - This company must be address their
essential their power of their customers. This factor deals with their influence their
demands of the customers (Chiou Cand et. al., 2011). In this MacDonald case by
follow up their other external elements which is contribute their strong bargaining
power of the buyers: -
 large number of providers
 Low switching cost
 High availability of substitutes
This is ease of their modification from the one restaurateurs top the another one. The
consumer easily imposes their needs and demands on the MacDonald.

3. Bargaining power of the suppliers: - Suppliers also influences this company. It
depicts that the impact of their supplier of firm. In this case of MacDonald, the weak
bargaining power of their suppliers which is actually depend on their other external
elements: -
 Low forward vertical integration
 High overall supply
 Large number of the suppliers
The large number of the wakens suppliers effect to their individual suppliers on their
company. This is due to their lack of regional and other global alliances in between their
suppliers.
4. Threat of substitutes or substitution: - The substitute are very essential concern for
their MacDonald's. This factor depicts them examine deals with their other effects of
the potentially substitute on their firm growth (Rob, 2016). In this company their area
or of the outer components which make them threat of the substitution which is a very
strong forces: -
 Low switching cost
 High performance to cost ratio
 High substitute availability
There are actually various products of the MacDonald's such as their artisan al
producers of the food and other local bakeries. Customer sometimes cook food by their own
which is also shift their substitute from the company.

Source: (Rob, 2016)
5. Threat of new entrants of new entry: - The very new entrant which easily impact on
their market share of the MacDonald's. This element depicts their examined effect of
the new players and entrant in their business environment and it can be other existing
firms too (Thun and Hoenig, 2011). The MacDonald is very moderate towards their
new entry threat which is also rely on their some of the external elements are as
follows
 Moderate their capital cost
 High cost of brand development
 Low switching cost
Due to this ow switching cost the customer easily turn towards their MacDonald
company towards the other new restaurant based on fast food.
VIRO Framework on MacDonald company
Resource or
capability
Valuable Rare Inimitable Organized to
Exploit
Impact on
competitive
advantage
A wide range
of food
outlets across
Yes Yes Yes Yes Strong
competitive
Illustration 1: Porters Five force

UK. advantage
Quick order
to service
Yes Yes No Yes Realized
sustainable
competitive
advantage
An strong
liquidity
position
Yes No Yes Yes Yes. A strong
competitive
advantage
Competitive advantage
Each and every enterprise wants to develop competitive advantage over other. This required
an effective and integrated marketing communication plan so that they can meet their short
and long term targets. There are following strategies which can be used by McDonalds
corporation:
Cost advantage: This is one of the major strategy where a company is tries to develop their
product in a cost effective manner. Every company wants to become a cost leader by using
different approaches which can be used by the company to reducing its operational cost
(Filsecker and Hickey, 2014). McDonalds corporation having an integrated supply which
provide updated information of their stock so that they can make them competitive in the
industry.
Differentiation: This is another strategy where a company tries to produce unique products
and services. In the case of McDonalds corporation who provide different types of products
which are quite different in terms of taste, design and quality can gain competitive position in
the market.
Focus: Today, business organization are focused on the customer centric approach which is
very significant. McDonalds corporation can conduct feedback and customer survey in order
to understand the needs. So that they can provide product accordingly.
Conclusion
From the above mentioned report it has been concluded that, the role of situation awareness is
to significant to make decision effective. This report discussed about the various aspects of
internal and external environment which influence business current and future performance.
These factors having negative and positive effects and make their more competitive for the

upcoming challenges. This report also explained about the core competences, competitive
advantage by using various appropriate in order to gain superiority in the fast food industry in
the longer run.