McDonald's Strategic Analysis: PESTEL and Porter's Five Forces

Desklib provides past papers and solved assignments for students. This report analyzes McDonald's strategy using PESTEL and Porter's Five Forces.

STRATEGY, INNOVATION AND
ENTERPRISE
1

TABLE OF CONTENTS
USING THE PESTEL AND PORTER’S 5 MODEL STRATEGY CRICALLYCALLY ANALYSE THE STRATEGY
FORMULATION IN McDonald’s......................................................................................................3
ASSESSING THE USEFULNESS OF THE STRATEGY PURSUED...........................................................6
ANALYSING THE RANGE OF THE ALTERNATE STRATEGIES THAT MIGHT BE MONITORED BY THE
MCDONALD’S.................................................................................................................................7
REFERENCES...................................................................................................................................8
2

USING THE PESTEL AND PORTER’S 5 MODEL STRATEGY CRICALLYCALLY
ANALYSE THE STRATEGY FORMULATION IN McDonald’s
For the evaluation of the strategies used in the organization such as McDonald’s the PESTEL
analysis has been used that helps in better understanding of the of the organization by
analyzing all the macro environmental external factors. Porter's 5 model strategy has also been
used in the organization.
PESTEL ANALYSIS:
Political factors:
The political factors of the McDonald's have a great impact on the functioning of the
McDonald's, the political factors include the government involvement in the different issues of
the organization's functions (Nurmi and Niemelä, 2018). The political factors provide an
opportunity to the McDonald's by allowing the international trade and the various guiding
principles to the health prove to be the opportunity as well as the threat. Thus the McDonald's
has more benefits of the political factors despite the threat associated with it.
Economic factors:
To formulate the strategies for the McDonald’s the organization must also consider the
economic factors. There are many opportunities available for McDonald’s as the developing
countries are growing at a faster rate and they are the huge source of income for McDonald’s
(Nurmi and Niemelä, 2018). Whereas the slowdown in the Chinese economy is the drawback or
threat as this economy was the highest source of revenue generation.
Social factors:
McDonald's has a great opportunity in relation to this factor as the disposable income of the
people is increasing and because of that, they prefer to spend on fast food (Nurmi and Niemelä,
2018). The other social factor can be the busy schedule of the persons in urban areas that also
3

give more preference to the fast food rather than cooking at home and thus social factors also
provides many opportunities to the McDonald’s.
Technological factors:
With the improvement in technology, McDonald's also has many opportunities to grow. The
organization can make use of the mobile to increase its revenue by generating more sales
(Nurmi and Niemelä, 2018). The Technological Factors also provide with the developed R&D
facilities and thus the McDonald's technological factors are in favour and can help the
organization to increase its efficiency.
Environmental factors:
The environmental factors include the opportunity as well as the threat for the McDonald’s
(Nurmi and Niemelä, 2018). The increasing awareness of the ecological business strategies and
growing concern for the communal environmental programs has led to providing the change to
grow and fight with the competitors.
Legal factors:
There is a threat for the McDonald’s with the growing legal factors. Now people are more
concerned with the welfare of the animal regulations and the growth in the legal minimum
wages has created the threat for the company (Nurmi and Niemelä, 2018).
PORTER’S FIVE FORCES MODEL
1. Competitive rivalry:
The McDonald’s have the advantage of the five forces model it increases the rivalry among
the competitors (Nguyen,2017). The increasing number of businesses, the growing
aggressiveness among the competitors and the minimum moving cost are the strong
powers for the company.
4

2. Bargaining power of the customers:
As there are large numbers of the substitutes available for customers and the numbers of
providers are increasing (Nguyen,2017). This has led to the growth in the bargaining power
of the customers. Thus the McDonald’s has to formulate strategies accordingly.
3. Bargaining power of the suppliers:
There is the weak supply chain management of the suppliers and thus the McDonald’s has
to create strategies to improve their performance (Nguyen,2017).
4. The threat of substitutes:
The threat of the substitute is the strong point for the company as the people can switch to
substitutes but cannot compromise with the quality and thus this factor boost the morale of
the McDonald’s.
5. The threat of entry:
There is still the threat of the new entry of the companies in the market but it is not so easy
to enter hence the McDonald's do not has to focus much on formulating the strategies for
this factor (Nguyen,2017).
5

ASSESSING THE USEFULNESS OF THE STRATEGY PURSUED
In the era of the growing economies, McDonald's has achieved competitive advantage by
providing quality food and better services to the customers (Schmid and Gombert, 2018). The
McDonald's has been successful in gaining the opportunities available in the market as
discussed above and came up with the new products innovations and various other services for
customer satisfaction. The McDonald's have started providing the customization option to the
customers that helped the company in the overall increase in annual revenue (Schmid and
Gombert, 2018). The other new service to the customers is that the breakfast menu is served
the whole day and this has increased the number of buyers in the company. In the past few
years, the different strategies discussed above has led to the growth and expansion of the
organization. The McDonald's is able to maintain its brand value in the market and the
efficiency of productivity has increased (Schmid and Gombert, 2018).
The company has also decided to increase the wage of their employees, and in this manner,
they are not only increasing their sales but also getting the new opportunities to compete
(Schmid and Gombert, 2018).
6

ANALYSING THE RANGE OF THE ALTERNATE STRATEGIES THAT MIGHT
BE MONITORED BY THE MCDONALD’S
The above PESTEL Analysis done on the McDonald's company has shown the various
opportunities available for the company in the market. There is a change in the growth and
more expansion in the global scenario (Lynch, 2018). The increasing incomes and changing
preferences of the customers are also a strong force for the organization growth. Conversely,
there is also the threat of the new entry in the market and the availability of the other
competitive substitutes that can be the obstacles in the success of the organization (Howse et
al., 2018). The competitors such as the subway, Starbucks, burger king etc. these brands also
have the strong market share and thus competitive rivalry from these brands can lower the
profitability margin of the company (Lynch, 2018). For the improvement and development of
the brand, it is recommended to the company that they must formulate the strategies in
accordance with these forces. Aimed at attaining the McDonald’s objectives, the McDonald’s
strategy must fascinate more new buyers, inspire prevailing customers to visit McDonald’s
more frequently, construct brand trustworthiness and eventually, generate continuing
profitable progress for the McDonald’s (Lynch, 2018).
7

REFERENCES
Howse, E., Hankey, C., Allman-Farinelli, M., Bauman, A. and Freeman, B., 2018. ‘Buying Salad Is
a Lot More Expensive than Going to McDonalds’: Young Adults’ Views about What Influences
Their Food Choices. Nutrients, 10(8), p.996.
Lynch, C., 2018. Love, leadership and McDonald's. Journal of the European Pentecostal
Theological Association, 38(2), pp.113-125.
Nguyen, T.T., 2017. Management education as an industry and MBA as a product: revisiting
joint MBA programs using Porters five forces model. Global Business and Economics Review,
19(3), pp.356-377.
Nurmi, J. and Niemelä, M.S., 2018, November. PESTEL Analysis of Hacktivism Campaign
Motivations. In the Nordic Conference on Secure IT Systems (pp. 323-335). Springer, Cham.
Schmid, S. and Gombert, A., 2018. McDonald’s: Is the Fast Food Icon Reaching the Limits of
Growth?. In Internationalization of Business (pp. 155-171). Springer, Cham.
8