LSME504 - McDonald's: Impact of External Environment on Marketing

This essay provides an analysis of the external environmental factors affecting McDonald's strategic marketing planning in the international business context. It examines political, economic, socio-cultural, technological, legal, and ecological factors, detailing how each element presents both o...Read More

The external
environment and its
effect on strategic
marketing planning:
A case study for
McDonald’s

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Political Factors that affect McDonald’s restaurants internationally.....................................1
Economic considerations that affects the business of McDonald’s internationally...............2
Socio-cultural factors that affects international business of McDonald’s..............................3
Technological development effects on the international business of McDonald’s................4
Legal factors that affects international business of McDonald’s...........................................4
Ecological or environmental factors that affects international business of McDonald’s.......5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
External environment refers to those factors that influence the business from outside,
such as political, economic, social, cultural, technological, legal and ecological factors. In the
international business an organisation faces many issues related to external environment related
to government policies, trade laws, cultural exchange, changing technology etc. An
understanding of external environment helps the company to evaluate the potential threats and
opportunities in market. McDonald’s is an American fast food corporation with its franchise
branches across the globe, established in the year 1940 and headquartered at San Bernardino,
California, US. McDonald’s is present across more than 100 countries with its 30,000 local
restaurants serving 52 million people each day. This report will present an evaluation of how the
external environment factors affect the business strategic marketing of McDonald’s in the
internal market.
MAIN BODY
The external environment factors affect a business in many ways that operates
internationally. McDonald's is among the most successful global fast-food retail services which
operates in more than 100 countries and provide IT services to 52 million people each day. The
business of this company is affected by political, economic, sociocultural, technological, legal
and economic changes and dynamics that occur constantly in the international market.
Underlined are the various aspects that show how the business of McDonald's restaurants is
affected in the international market.
Political Factors that affect McDonald’s restaurants internationally
Political factors refer to those macro-environment influences that occur on the business of
McDonald's due to the effect of government policies and actions within a particular economy
(Arslan and et. al., 2021). The political factors or government influences determined the overall
action, rate and process of business development. Political factors include many laws,
regulations, rules, agencies and groups that influence and restrict actions of organisations and
individuals that may be negative for a particular economy. The most significant political factors
in the international market that affects the business of McDonald’s are as follows:
 Rising international trade agreements (opportunity as well as threat)
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 Government guidelines and regulations for diet and health (threat and opportunity)
 Changing public health practices and policies of the government (threat and opportunity)
The political factors have its important role in the formation of financial policies, foreign
market relation and bureaucratic control on the business in a given economy (Cherunilam, 2020).
The political factors are highly important aspects while determining the policy of a company in
the international market, its memorandum of association and article of association in a particular
country. The political factors help to determine the policies of the company regarding its trade
restrictions and standards, establishment, production, marketing, sales and distribution.
McDonald's is a multinational company and it should understand that with the change in location
the political background also changes that must be followed by the company in order to be
successful at that place.
Economic considerations that affects the business of McDonald’s internationally
It refers to those aspects that arise due to the economic changes and influences that directly
or indirectly affects business performance in the international market (Cook and et. al., 2018). It
consists of the impacts due to the global economy, regional economy and local economic
conditions that change constantly in the global market. Economic factors include those factors
that are impacted by the purchasing power, spending patterns, average earning of population and
other economic conditions of the customers. These economic factors affect McDonald's
international business through various external factors which are as follows:
 Slow but uniform growth of developing countries (opportunity)
 Slowdown and decline of Chinese Economy (threat)
 Rapid and Fast growth of economic countries (opportunity)
The McDonald has to face differences in economic conditions and adjust accordingly in the
various economic conditions for its development and strategic marketing activities (Enright,
Hogan and Rossi, 2020). The company has to focus on differences in income level, purchasing
power, inflation or deflation and other factors of the economy in order to gain the opportunity of
growth and sustainable business in the international market. There are various other factors that
are required to be assessed by McDonald's in order to enhance its marketing activities. Although,
the regions of low economic development would require McDonald to focus on cost effective
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methods of promotion and strategic marketing in order to reach maximum number of customers
and reduce its overall costs.
Socio-cultural factors that affects international business of McDonald’s
The socio-cultural factors refer to those influences of the social and cultural conditions that
may benefit or restrict the business of McDonald in the international market (Gaganis, Pasiouras
and Voulgari, 2019). Social factors influence the behavior of people towards a certain product or
service due to the taste and preference, choice, earnings, ethical and moral values, tradition and
many other factors due to the cultural and societal tendency of the human brain. The most
affluent social-cultural external influences on the business of McDonald's corporation in the
international market are as follows:
 Increasing disposable incomes of population (opportunity)
 Busy and fast lifestyles in highly urbanised areas (opportunity)
 Rapid growth of inter-cultural mix and diversification (threat and opportunity)
 Concentration towards healthy and fit lifestyle trend (threat)
 Concept of veganism (threat)
In the case of McDonald's, several social forces have been a major influencer of its
marketing strategies in the International market but such as the trend of fast food among the
teenage, youth and young children. The demographic factors in the society also played an
important role in featuring the composition of meals and implementation of adequate low-cost
pricing strategy to conquer the international market. The culture can be defined as the basics of
any society that include common values, beliefs, perception, behavior and preferences of people
that affect their choices (Vrontis, and 2008). In regards to McDonald's it has been observed that
the rapid advancement in technology has brought the consumers together and homogenized their
taste, preference, cultures and beliefs that intervene the marketing strategies of McDonald's. The
marketing strategy by McDonald's has also been affected by the language barriers and showed a
considerable rise in its profits by eliminating and decoding the language barriers in its marketing
strategies.
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Technological development effects on the international business of McDonald’s
Technological factors refers to those aspects that influences the technical aspects of the
business such as development of online shopping, phone banking, big data, automated
technology, drone delivery etc. Technological factors impacts the business in many ways and
affects the ways a company can communicate to its customers (Hamilton and Webster, 2018).
The changes in technology has affected the marketing strategies of McDonald’s in many ways
such as easy access of customers through online shopping, social media promotions, online
advertisements and many more. McDonald’s need to focus on these macro-environment
technology aspects that it is more likely to witness the international market.
 Increasing advancements in technology (opportunity)
 Moderated research and development opportunity in this industry (opportunity)
 Constantly rising automation activities (opportunity)
 Rise of mobile phone technology and online business (opportunity)
The various factors of technological developments lead to various changes in the
international market such as communication, wide access to the customers and automation of
activities. The technological factor has affected the ways in which the company markets its
products and promotes its brand with the use of various technologies such as television, radio,
online advertisements, social media, websites and other sources. The McDonald’s faced many
technological problems while internationalising regarding its franchising in the various countries.
For enhancing their marketing and promotions strategically the company has focused over
strategically placing its technologies with its franchise to maintain high standards (McDonald’s
Corpioration – Form 10-K, 2017). Moreover, McDonald’s has acquired latest technologies from
international markets and focused on research and development to elevate its performance.
Legal factors that affects international business of McDonald’s
Legal factors refer to those aspects that are made mandatory by the laws of a particular
country, which are to be followed religiously by the residents irrespective of their diversity. The
laws are made in order to maintain harmonious environment and create a suitable condition for
everyone to exist in a particular area. The legal policies are similar to the political factors, with a
difference that they are compulsory by the law and undermining or violation of these laws is
punishable. With the change in the location, laws also changes which must be followed by
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McDonald’s in order to continue its business smoothly. The company faces challenges related to
rapidly changing laws and legislations across the international market which are as follows:
 Increasing health and hygiene regulations at the workplace (threat)
 Rising animal welfare regulations (threat and opportunity)
 Employee rights and laws for increasing remuneration (threat)
The legal factors are highly important in order to formulate policy for the company to exist
in the international market. The laws and regulations affect the industry as a whole by certain
regulations such as environmental laws, trade laws, employment laws, income tax and various
other regulation that are to be followed by McDonald's in the international market (McDonald’s
Corporation – Company Overview, 2021). The process of marketing in the international market
is very complicated because each and every country has their own legal structure that must be
followed and well understood to the company's which want to Internationalize. McDonald has to
face certain legal challenges such as a law regarding taking the important decisions for marketing
must be approved by the government. Another legal compliance that was faced by McDonald's
was related to converting the names of company in the regional language or at least rewriting the
names but translating them into regional language alphabets. The company has to assess and
determine the legal environment of the foreign location while creating its product design and a
marketing strategy for its product. The company should comply with all the laws and regulations
so that its product can be strategically marketed in the international market (Singireddy, 2020).
Ecological or environmental factors that affects international business of McDonald’s
Environmental factors are those factors that determine the good health of nature and the
well-being of the environment (Sun and Lee, 2021). The climatic conditions and physical
environment of a country are important external factors that have important impact on the choice
of product and its demand among the customers. The company should examine the influences of
environmental causes and ecological conditions prevailing in the external environment of the
international business. The major environmental trends that should be evaluated my McDonald's
in the international market are as follows:
 Increasing trend for corporate environmental programmes (opportunity)
 Changing behaviour of people towards animal welfare (threat)
 Rise in awareness about sustainable business practices (opportunity)
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 Increasing awareness about climate change (threat)
McDonald's can improve its environmental programs in order to enhance its sustainable
practices and effectively market its products and services across the International market.
McDonald's should emphasize on creating environment friendly products for its customers so
they can improve their marketing strategy in the international market. This will also help
McDonald's to entrench higher values for the customers towards its products by working with
EDF and reduce unnecessary wastage to create better ecological conditions.
CONCLUSION
From the above report it had been concluded that the external environment factors have a
great impact on the strategic marketing and international business. It had been obtained that
various political factors such as international trade agreements, government polies and public
health regulations affects the strategic marketing planning of the business. Moreover, there had
been a discussion of socio-economic aspects such as rapid growth or development of economies
and improving lifestyle of people also influences a business in international market. Further, it
had been explained that various other factors like technological, legal and ecological factors
affects the international business of a company. It had been identified that the effects of these
external influences such as environment laws, advancing technology, employee welfare, socio-
cultural influences and many more, have positive or negative impacts on the international
business.
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REFERENCES
Books and Journals
Arslan, F. and et. al., 2021, March. Optimization Technique Approach to Resolve Food
Sustainability Problems. In 2021 International Conference on Computational Intelligence
and Knowledge Economy (ICCIKE) (pp. 25-30). IEEE.
Cherunilam, F., 2020. International business. PHI Learning Pvt. Ltd..
Cook, G. and et. al., 2018. The routledge companion to the geography of international business.
Routledge.
Enright, E., Hogan, A. and Rossi, T., 2020. The commercial school heterarchy. Discourse:
Studies in the Cultural Politics of Education, 41(2), pp.187-205.
Gaganis, C., Pasiouras, F. and Voulgari, F., 2019. Culture, business environment and SMEs'
profitability: Evidence from European Countries. Economic Modelling, 78. pp.275-292.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
McDonald’s Corpioration – Form 10-K, 2017. [Online] Available through <
https://www.sec.gov/ix?doc=/Archives/edgar/data/63908/000006390818000010/mcd-
12312017x10k.htm>
McDonald’s Corporation – Company Overview, 2021. [Online] Available Through <
https://corporate.mcdonalds.com/corpmcd/investors.html>
Singireddy, M., 2020. Mcdonald's: Global Marketing. International Journal of Health and
Economic Development, 6(2). pp.16-27.
Sun, K.A. and Lee, S., 2021. How does franchising alter competition in the restaurant
industry?. Journal of Hospitality and Tourism Management, 46. pp.468-475.
Vrontis, D., and P. (2008) Journal of International Business and Entrepreneurship Development,
Vol. 3, (3/4). p 289-307
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