Strategic Management Report: McDonald's External Environment Analysis

This report provides a comprehensive analysis of McDonald's strategic management. It begins with an introduction to strategic decision-making and its importance for multinational businesses like McDonald's. The report explores various theoretical models applicable to strategic development, including planning and emergent approaches, and applies them to McDonald's operations. It examines the company's external environment, considering political, economic, and stakeholder factors, and analyzes the strategic planning process, including mission, environmental scanning, strategic formulation, implementation, and evaluation. The report also delves into risk management within the strategic planning process and critically evaluates the company's corporate social responsibility (CSR) framework and stakeholder theory. The analysis covers key aspects of McDonald's business strategy, offering insights into its market position and future development.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1...................................................................................................................................3
(a) Apply number of theoretical models and their potential for developing strategy and
supporting strategic decisions.....................................................................................................3
(b) What are the main areas of concern with regard to the organisation’s external environment
.....................................................................................................................................................4
Question 2........................................................................................................................................6
(a) Critically evaluate the company’s risk management in the strategic planning process.........6
Question 3......................................................................................................................................10
a. What is meant by stakeholder theory and provide justification for each of the stakeholders
...................................................................................................................................................10
(b) What is meant by Corporate Social Responsibility and Critically analyse in organisation’s
strategic framework...................................................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Strategic management is an area of management which deals with making of strategic
decision making and implementation to increase profits on the larger basis. Effective strategical
decision making always comes from strategic decision thinking and initiatives that will be taken
to implement or take long term decisions for benefits of the multinational business organisation.
In the current scenario, Various business operation have become market leader because of this
regulation of stigmatization or planning for business development or regulation. The major
objective of the strategic management is to make and take actions and long term profit decision
to facilitates business operation to expand their functioning and activity to higher profit for long
duration (Michael, Storey and Thomas, 2017). This report will analyse the strategy of
McDonald's which is the America's largest fast food chain and reputed all over the world. They
are well-known for premium service and tasty food items. This leading fast food chain is
specialised in various tasty food products such as burger, rolls, chicken burger, Egg puff,
combination of various meals at the one common prices.
This report will cover aspects of organisational external environment, theoretical models
and finding of the potential for developing strategy for supporting the strategic decision making.
Along with this, report will also cover aspects related to corporate social responsibilities and its
critical analysis in context with business strategic framework and stakeholder theories and its
critical analysis of business strategic framework.
QUESTION 1
(a) Apply number of theoretical models and their potential for developing strategy and
supporting strategic decisions
Business organisation has become more diverse and highly transformed through firm
business operation and regular research over its performance and resource management. Many
business organisation deals with in day to day similar business or functioning strategy, as a result
of this, some business are facing an issue of failure products or increased business loss into the
business as well as impact onto the brand image. In this knowledge, business entities are required
to evaluate their strategies to make their product more challenging and responsive towards the
market (Trigeorgis and Reuer, 2017). Also, it has been noted strategy should be made in

accordance with current scenario related to products & services and led effective and long term
growth for the business. In context with McDonald's which is the leading fast food chain needs
to take care of their efforts which are centric towards accomplishment of the common goals and
targets (Meyer, Neck and Meeks, 2017). Strategic manager recently saw various fluctuation over
external environment such as increased system of London, rise of inflation, ineffective politics
and economic factors etc. McDonald's needs to undertake management of the strategy through
the implementation of needs and desires which are centric towards development of new strategy
regarding initiation of new products or services.
Planning approach to strategic making: This strategic planning is based on Lewis's
change model which comprises of three different resistance to change. Unfreezing, moving and
refreezing. In unfreezing, readiness and willingness of the people to change has to be consider in
order to realise from moving to safe and comfort zone. In moving, where people are unfrozen, in
that situation, actual changes are implemented at a bigger proportion. In this careful planning,
effective communication needs to be consider in order to make change highly productive. On last
is refreezing, in which people accept the new way of change into the business organisation at an
optimised stage of time.
Emergent approach to strategic planning: One of the major critics of the planned
approach to strategy making is Mintzberg strategies, who argues that strategy formulation need
not to be separated from strategy implementation. In addition to this, strategy making consists of
deliberate and emergent elements and that purely planned strategy is the unlikely extreme of a
wide continuum. The idea of emergent strategies is that within an organization, strategy emerges
out of practice in a bottom-up or undirected way.
McDonald's needs to think over implementation of various approach and theories such as
planned approach to make plan over the development of new strategic product to accomplish
strategic position into the market, emerging approach to take action planning to make emerging
products or fast food items or incremental approach to increase business sustainability to gain
business functioning and strengths at the greater and optimised level. These needs to be control
through consideration of the strategic empowerment and taking strategic measures to led growth
to the business firm on the larger and optimised level.
Strategic planning process:

Mission: Every business company's mission is the reason for being alive into the market.
The mission can be expressed in the manner of the defined mission statement, which basically
conveys the sense of specific purpose to every employees and clear structured projects a business
firm projects to its customer for the longer period of time. In context with McDonald's, they
actually needs to look over their mission at the frequent basis to add some of the valuable action
to raise business productivity (Bradley, 2017).
Environmental scan: This scanning involves the following elements:
 Internal analysis of business firm
 Analysis of the firm's business functioning.
 External environment of the business entity (Aguinis and et. Al, 2019).
An internal analysis will be identify to check out business strengths & weaknesses and
external environmental analysis which is helpful to reveals relevant opportunities and harmful
threats. SWOT analysis is one of the relevant option for to know relevant and productive strength
, weakness, opportunities and threats of the business in order to know the potential of McDonald
business.
Strategic formulation: Different organisation have different strategic alternatives as per
their situation. The company should use franchisee system as a strategic tool to gain business
success. It should allow an individual, who is interested in fast food business to take McDonald's
franchisee to use its brand by paying a fee.
Strategic implementation: McDonald's has gained business success by giving its
franchisee. It implemented this strategy on local vendors by giving them its franchisee. The
agreement allowed the company to enjoy faster growth and create its global identity. The
organisation also set its standard by its quality food and cleanliness.
Evaluation & Control: After implementing the strategy, the company need to measure
its performance. This will help the firm to take the necessary actions, which are required, in
order to meet the organisational goals. Thus, by this, McDonald's will able to gain brand loyalty
and profitability (Zhao, Fisher and Miller, 2017).
From the above strategic planning process, it is summarised that strategic planning is to
take care of risk into the business operation and led measures to control it down to accomplish
business effectiveness. Strategic risk management is a crucial, but often overlooked aspects of
ERM(enterprise risk management). Strategic risk management is the process of identifying,

qualifying and mitigating any risk that effects or which is inherent for a company business
strategies, strategic objectives and strategic execution. These risk can involves shifts in consumer
demand and supply, legal and regulatory change, competitive pressure, merger integration and
technological changes, senior management turnover and stakeholder pressure.
In response, McDonald's needs to innovative their fast food manufacturing in order to
make food production system more valid and responsive to rise business profitability.
(b) What are the main areas of concern with regard to the organisation’s external environment
McDonald,s is the largest fast food chain spread in all over the world and continuously
working in the area of increasing their potential and long standing customer which will stay with
them. In response to this, they are continuously focused on development of new food products
and making their customer service more reliable and profitable for the longer period of time.
During past many years, McDonald's has gone through various strategic changes in their firm's
structure, hiring new employee's over the time or sometimes various cases happened that they are
set their new location for effective operation of their business in an initial period (Hitt and Duane
Ireland, 2017). From point of view regarding this era, that is complete different, as McDonald's
has been recognised as most reputed fast food chain with different variety of fast food products
and with attractive pricing. McDonald's is new successful because not of their product or
price, but they are successful as a reason because speedy or delivery of fast food to the people.
But still, there are certain external environments which has impacted not only McDonald's, but
also other fast food chain business such as subway, burger king etc. These external environment
consist of: Politics and economics, tax, ethics technology etc. These external environment are
very much similar to PESTLE, but in reality it is not matching. These external environmental
factors have its own ideology and range of knowledge and resources. In the current competitive
business scenario and cut throat race, McDonald's is still tackling their slow decline to keep up
with competitors in in its own ever changing environment (Ansoff, Kipley and Ans-off, 2019)
The completely explanation of external environment of McDonald's will be discussed along with
intention to led strategic development and focal motive to raise its business profitability.
Politics and economics: McDonald's are currently dealing with an introduction of their
policies of the national wage & giving remuneration to their employee's. In past various time,
McDonald's has being indulged into ineffective labour management which has impacts them on
the larger basis. Living wage is an hourly rate which is calculated according to the basic cost of

living in an entire United kingdom. Also, it has been considered as voluntary wage, as this is
stated under in UK judicial regulation, but after major conflicts McDonald's have structured their
living wage structure or pay roll policy. These are large cost factors for fast food leader's like
McDonald's. In response, they should follow an economies of scale to cope with an introduction
that is nationwide. It has to be noted that worker's are being offered fixed contracts instead of
temporary contracts or zero hour, 80 percent of staff takes up the offers.
Tax: In various recent period, McDonald's has faced various issues in context with tax
concerns which was being investigated by an European commission. This is the regulatory body
of an entire EU. This body is superior to national governments and responsible for proposing
legislations, implementing decision, upholding EU treaties and managing day to day business of
an entire UK. The negative impact was rise in the cost of obtaining resources and lower down of
the purchasing parity.
Stakeholders: It is necessary for multinational organisation like McDonald's which are
highly considers and value their general public or respective stakeholders, whether their staff,
suppliers, distributors, shareholders and consumer itself. In this leading fast food chain, major
stakeholders are its suppliers and renowned customer, which they are focused up to keep them
safe and one place to raise their business functioning and activities. In positive manner, this has
changed customer perception towards their defined products or services with creation of the trust
and reputation into the minds of customer or selected suppliers. To maintain external relationship
with suppliers.
Customer outlook: These external environment is one of the leading factor, which tells
about what customer perceives about products or services of the company as well as what will be
their future perception for long duration. Customer tastes is another important issues to consider
for analysing their individual needs and wants taking consideration of extensive pricing factors.
McDonald's is not an advocate of global marketing where this involves products and services
being treated as though the world is a single, uniform unity, thus marketing standardised offering
in the same way elsewhere.
Brief summary: It has been noticed that these external environment needs to be
regulated along with structuring of the strategic decision making and rules and regulation related
to the management of supply chain in order to retain supplier to maintain the lower cost of the

resources and enhances purchasing parity of the customer's. Also, strategic implementation must
be their while allotting or deciding supplier to have long term relations with them.
Question 2
(a) Critically evaluate the company’s risk management in the strategic planning process
Strategic planning is an organisation's process of defining its strategy, direction or make
decisions on allocating its resources to pursue this strategy (Rauter, 2017) Strategy includes
processes of formulation and implementation, in which strategic planning help to co-ordinate
others. In this leading fast food chain, risks also are very huge related to customer loss as well as
loss of the brand image. Global entity needs to be effective and responsive towards
accomplishment of defined goals or targets. For future growth to the business, it is necessary for
McDonald's to continue their risk through its complete identification and steps that will be taken
to implement to check and control the defined risks or targets.
Sources: Strategic planning process, 2018
Illustration 1: Strategic planning process

The major purpose of this diagram is to know and do analyse of strategical planning in
context of McDonald's to survive to generate growth productivity.
In context with McDonald's, this can effect brand image and work flow of the company
to operate at the higher level. Strategic manager are responsible, because they are one who
simply connected to company decision making and deciding the best action planning to
accomplish their desired goals and defined targets (Ryall, 2017). In context with McDonald's,
company can measure and manage their strategic risk by considering two metrics named as
economic capital and risk adjusted return on capital.
They need to evaluate their business functioning by analysing their annual cost to
ascertaining the budget making in order to save higher cost & control operational expenses.
Given two elements are considered as measures to identify the risk to the business. In response to
manage it, there will be consideration for management of the strategic risk for McDonald's are
as follows:
For McDonald's, there are various which are identified are as given under:
Risk about customer engagement: This is one major risk for McDonald's in which
firms needs to spend more to attract customer at one place or point of time. This deals with
increasing cost for McDonald's, in order to overcome this price ultimately will go up. This risk
may results into a loss of business. Hence, this risk needs to be evolved.
Risk of change: Change in organisational structure is a need, but this can be considered
as major risk which in reality to overcome to maintain employee's of McDonald's for longer time
period. Also, risk of break down of the policies are major threat, which can impact profit
capabilities of McDonald's. Change in customer eatery has become major challenges for
McDonald's to get strategic planning to adapt healthy and suitable eating for customers.
Risk of system alteration: From this, McDonald's have major threat of business failure,
suppose, if they would change their business system than in that situation, it will be higher threat
for McDonald's to continue business operation at an optimised platform.
Define business strategy & defined objectives: To make this step being accomplished,
it is necessary for McDonald's to identify their strength & weaknesses and decides the potential
opportunities and weakness to accomplish the same. Also, external environment analysis will be

suitable option to get role into the process. This would help McDonald's to structure their
business strategies accordingly (Gans, 2014).
Establish key performance indicators to measure high results: In order to control
business KPI's offer hints as to the levers the company can pull to improve them. This would
help this leading fast food chain to accomplish their targeted sales and business operation to
reach at the higher level or status. In accordance to accomplish strategic targets, McDonald's
needs to identify their key performer in order to grow their business at the greater level.
Identify risks that can be drive: These kind of risks are majorly unknown, such as the
future customer's demand, that will determines the results. McDonald's needs to identify their
risk which they have threats out of it and also they can solve to bring common understanding
among their goals & objectives to be accomplished.
Establishes key risk indicators(KRI): In context with business operation, where KPI is
useful to measure historical performance, KRI are forward-looking leading pointers which is
basically estimates the potential roadblocks (Madsen, 2017). In context with McDonald's, this
leading fast food chain needs to establish the key indicator that will be useful to find indicator
that would use to protect business firm from being threat from launching of the new products or
services.
Providing integrated reporting and monitoring: In this last phase, McDonald's should
monitor various results and relevant KRI on a continuous basis in order tom avoid risk on larger
basis and taking valuable measures to achieve even estimate results or opportunities for future
based development of the business. McDonald's should focus on achieving desired goals and
targets through structured planning, control & business organising.
Brief summary: From above analysis, it has been concluded that, every business firm
needs to have measures to overcome their risk certainty to protect business for any kind of
misshapenness and unknown threats (Kasemsap, 2017). In order to do this effectively, it is
required to have tools which would help to find any kind of threats and burden from the business
operation.
Effective implementation is necessary to uphold decision making production of effective
products and services to increase brand loyalty & image to led fast food brand at the higher
extent along with the facilitation of higher level resources to make products more effective and

led an initiative to make operation and production facilities more reliable and profitable for the
McDonald's.
Question 3
a. What is meant by stakeholder theory and provide justification for each of the stakeholders
In every multinational organisation, stakeholders are considered as major entity who need
to be maintained & keep safe for future success of the business entities or accomplishing long
term goals of every business organisation. Stakeholders can be customers, investors, suppliers
and global business entities. In context with McDonald's, stakeholder theory states that business
entity owes a responsibility to a wider group of stakeholders, rather than shareholders. Corporate
governance states stakeholder as any person or groups of the people which can affect or effected
by business action (Durand, 2016). This theory has recognised important elements of CSR, a
concept which recognises responsibilities of corporations in the business today, whether it would
be economic, legal, ethical or even the philanthropic. Major business entity including
McDonald's claim that to have effective CSR at the centre of their corporate strategy. Freeman
theory of stakeholder analysis says that company;'s stakeholders include just about anyone which
is being affected by the company or its workings. Also, “ those groups would include customer',
employees, suppliers , political action or environmental groups etc. Majorly customer, investor,
owners, suppliers are some of the major examples of the stakeholder theory.
In context with McDonald's, its major stakeholder is suppliers, investor and customer,
which they think as their major entity to be taken care of. This leading fast food chain has good
relationship with their stakeholder which will definitely assist them in their strategic decision
making (Grant, 2015). Edward Freeman has been stated that stakeholder theory is even more
important in the new global economy. He also told that identification of stakeholder is necessary
to pursue ho all they are, what will be major impact on business activities of this leading fast
food chain. In this assessment, identification and pure justification of the stakeholders will be
done to know the profitable relationship among stakeholders and McDonald's. For company,
various major stakeholders are as given under:
Suppliers: The major reason behind for taking suppliers being as major stakeholder is its
continuous impact over an operation through frequent flux in pricing of supplying or storing of

the raw material, which is responsible for price deregulation. In simple language, supplier's
decision making has huge impact over the business regulation of the McDonald's and can also
lead to huge impact over operation or profitability of the McDonald's. The relationship between
supplier and McDonald's is positive and also they have common co-ordination in together to led
facilitation of raw material on early basis to facilitates availability of cooked fast food more ease
and with regulation over the pricing (Naser, 2017). Suppliers as major stakeholder are basically
effected, if McDonald's will go for new fast food pricing. In that situation, suppliers also needs to
cut down their margin, which severe impact on them.
Customer: McDonald's considers their prospective customer's as strategic asset, on the
basis of which they are under competition. They have customer's from different age level or
segment, which they would like to retain with developing new fast food product and doing brief
research over identification of new set of customer. For this leading fast food chain, customer are
another obvious stakeholder to be consider in the ecosystem of the business operation. In the
very beginning, it was mentioned that stakeholder is one who has direct impact on business
function (Al Shobaki, 2015). In this regard, McDonald's needs to do analysis of their customer
needs & wants and plan for development of new product or services to get strategic strength into
their business operations. McDonald's is currently wants to increase their product pricing from
low to high, which is a cause of customer shift to other fast food seller. This can impact over
purchasing parity of customer to buy fast food in the future.
Investor: These person are simply responsible for pumping money into McDonald's
profit generation process. They mainly considers as the angel investors who used to pump money
on frequent basis, in case, if keep faces any kind of issues to continue their business operations
(Demir, Wennberg and McKelvie, 2017) Thus, it is important to control and regulate investors
and look out their specific needs and wants to retain them for excess to the funds or investment.
These stakeholders are use to put major influences on operations of the McDonald's by putting
matter of common interest in case of any new and defined strategies by getting complete
understanding what will be its impacts and also this what influences these will put influences on
business functioning of the McDonald's. These stakeholders are majorly enough to put critical
force on McDonald's new strategy to enhance operational efficiency at a greater level.