Introduction External environment plays an important role in the survival and success of a business enterprise.

There is a constant need to analyze the external environment so as to find out the opportunities, and the threats. A proper analysis of the external environment will enable the firm to grab the opportunities and to defuse the threats. A business does not operate in a vacuum. It has to act and react to what happens outside the factory and office walls. These factors that happen outside the business are known as external factors or influences. These will affect the main internal functions of the business and possibly the objectives of the business and its strategies. Changing External Environment Markets are changing all the time. It does depend on the type of product the business produces, however a business needs to react or lose customers. Some of the main reasons why markets change rapidly:

Customers develop new needs and wants. New competitors enter a market. New technologies mean that new products can be made. A world or countrywide event happens e.g. Gulf War or foot and mouth disease. Government introduces new legislation e.g. increases minimum wage.

Business and Competition Though a business does not want competition from other businesses, inevitably most will face a degree of competition. The amount and type of competition depends on the market the business operates in:

Many small rival businesses e.g. a shopping mall or city centre arcade close rivalry.

A few large rival firms e.g. washing powder or Coke and Pepsi. A rapidly changing market e.g. where the technology is being developed very quickly the mobile phone market.

A business could react to an increase in competition (e.g. a launch of rival product) in the following ways:

Cut prices (but can reduce profits) Improve quality (but increases costs) Spend more on promotion (e.g. do more advertising, increase brand loyalty; but costs money)

Cut costs, e.g. use cheaper materials, make some workers redundant

External environment is divided into two groups

External environment
Micro environmrnt

Macro environmen t

MICRO ENVIRONMENT

Micro environment factors are factors close to a business that have a direct impact on its business operations and success. Before deciding corporate strategy businesses should carry out a full analysis of their micro environment. In this article we discuss common micro environment factors.

Customers

As all businesses need customers, they should be Centered (Orientated) around customers. The firm's marketing plan should aim to attract and retain customers through products that meets their "wants and needs" and excellent customer service. The customers influence most of the business decision. Therefore the customer needs,

wants preferences, and buying behavior must be studied. This will help to take decision in respect of product design, pricing, promotion, place of distribution, etc. Channel intermediaries Nowadays dealers recommendations play an important role to convince buyers tobuy products, especially in case of consumer durables. The firm has t motivate the dealers to push and promote its products and also to obtain timely feedback about consumers taste, preferences etc.
Suppliers

Suppliers provide businesses with the materials they need to carry out their business activities. A supplier's behavior will directly impact the business it supplies. For example if a supplier provides a poor service this could increase timescales or product quality. An increase in raw material prices will affect an organizations Marketing Mix strategy and may even force price increases. Close supplier relationships are an effective way to remain competitive and secure quality products.

Competitors

Competitor analysis and monitoring is crucial if an organization is to maintain or improve its position within the market. If a business is unaware of its competitor's activities they will find it very difficult to beat their competitors. The market can move very quickly for example through a change in trading conditions, consumer behavior or technological developments. As a business it is important to examine competitors' responses to these changes so that you can maximize the impact of your response.

Society The society may also affect company decisions. The society can either facilitate or make it difficult for a company to achieve its objectives. Therefore professional business firms maintain public relation department to handle complaints, grievances, and suggestions from the general public. Macro environment Political environment

The political environment of a country is influenced by the political organizations such as philosophy of political parties, ideology of government or party in power. This includes the political system, the government policies and attitude towards the business community and the unionism. All these aspects have a bearing on the strategies adopted by the business firms. The stability of the government also influences business and related activities to a great extent. It sends a signal of strength, confidence to various interest groups and investors. Further, ideology of the political party also influences the business organization and its operations. Strikes, lockouts and labor disputes etc. also adversely affect the business operations. However, with the competitive business environment, trade unions are now showing great maturity and started contributing positively to the success of the business organization and its operations through workers participation in management The political environment of a business has enormous influence on the business. The viability of a business depends upon the ability with which it can meet the challenges arising out of the political legal environment. The political system prevailing in a country promotes shelters, directs and controls the business

activities of the country. To ensure economic development of the country, the political system should be stable, honest, efficient and dynamic. The system must ensure political participation of people as well as personal security to the citizens. Legal and political environment provides a framework within which the business is to function and its existence depends upon the success with which it can face the various challenges constructed out of political and legal framework. Socio cultural environment Humans essentially create their own cultural and social environment. Customs, practices and traditions for survival and development are passed down from one generation to the next. In this way, the members of a particular society become conditioned to accept certain "truths" about life around them. The increasingly competitive international business environment calls upon exporters to tailor or adapt their business approach to the culture and traditions of specific foreign markets. The inability or unwillingness to do so could become a serious obstacle to success. The task of adjusting to a new cultural environment is probably one of the biggest challenges of export marketing. Export marketing attempts are frequently unsuccessful because the marketer - either consciously or unconsciously - makes decisions or evaluations from a frame of reference that is acceptable to his/her own culture but unacceptable in a foreign environment. Therefore, business practices which are successful in one group of countries may be entirely inappropriate in another group of countries. For example, the Marlboro Company took its famous lone cowboy advertisement to Hong Kong in the early 1960's.However, the image of the cowboy riding off in the distance by himself led the Chinese to wonder what he had done wrong.

Economic environment Surveys have shown that the economic environment tends to receive the greatest amount of attention from export planners. The primary concern in analysing the economic environment is to assess opportunities for marketing the company's products abroad or possibly for locating some of the company's production and distribution facilities outside of South Africa. Indeed, when striving to identify potential countries to focus on, one of the major differentiating factors will be the differences in the economic environments that exist between potential target countries. Decisions about how much of a product people buy and which products they choose to buy are largely influenced by their purchasing power. If a large portion of a country's population is poor, the market potential for many products maybe lower than it would be if they were reasonable prosperous. If a country is expected to enjoy rapid economic growth and large sectors of the population are expected to share in the increased wealth, sales prospects for many products would clearly be more promising than if the economy were stagnating. Thus, if you are comparing potential countries to focus your export efforts on, you must consider factors such as the general economic outlook, employment levels, levels and distribution of income, growth trends, etc. It should be borne in mind, however, that when income levels drop, people will generally cut back on their purchases of luxury items before they cut back on necessities. Thus, poor countries which are allocating scarce foreign exchange reserves only to necessities (e.g. cheap clothing, simple agricultural tools, etc.) may prove to be more reliable markets than rich countries for certain export products.

Technological environment

Technology can be defined as the method or technique for converting inputs to outputs in accomplishing a specific task. Thus, the terms 'method' and 'technique' refer not only to the knowledge but also to the skills and the means for accomplishing a task. Technological innovation, then, refers to the increase in knowledge, the improvement in skills, or the discovery of a new or improved means that extends people's ability to achieve a given task. Technology can be classified in several ways. For example, blueprints, machinery, equipment and other capital goods are sometimes referred to as hard technology while soft technology includes management know-how, finance, marketing and administrative techniques. When a relatively primitive technology is used in the production process, the technology is usually referred to as labour-intensive. A highly advanced technology, on the other hand, is generally termed capitalintensive. Changes in the technological environment have had some of the most dramatic effects on business. A company may be thoroughly committed to a particular type of technology, and may have made major investments in equipment and training only to see a new, more innovative and cost-effective technology emerge. Indeed, the managing director of a multinational organisation manufacturing heavy machinery once said that the hardest part of his job had nothing to do with unions, pay or products, but with whether or not to spend money on the latest technologically improved equipment. Computer technology has had an enormous impact on education and health care, to name but two areas affected. The advancements in medical technology, for example, have contributed to longevity in many societies. In addition, the introduction of robots in many factories has reduced the need for labour, and the

use of VCR's and microcomputers has become commonplace in many homes and businesses. Unfortunately, there is a negative side to technological progress. The introduction of nuclear weapons, for example, has made the destruction of the human race a frightening possibility. In addition, factories using modern technologies have polluted both air and water and contributed to various environmental and healthrelated problems. Technology is a critical factor in economic development. Because of the advances of international communication, the increasing economic interdependence of nations, and the serious scarcity of vital natural resources, the transfer of technology has become an important preoccupation of both industrialised and developing countries. For many industrialised countries, the changes in the technological environment over the last 30 years have been immense particularly in such areas as chemicals, drugs, and electronics. It is vital that organisations stay abreast of these changes - not only because this will allow them to incorporate new and innovative designs into their products, but also because it will give them a firmer base from which to anticipate and counteract competition from other organisations. Legal environmrnt he legal environment is derived partly from the political climate in a country and has three distinct dimensions to it:

The domestic laws of your home country The domestic laws of each of your foreign markets International law in general

Legal systems vary from country to country. You are likely to find that the legal systems in operation in the buyers' country are in many respects different from that of South Africa. Domestic laws govern marketing within a country, e.g. the physical attributes of a product will be influenced by laws (designed to protect consumers) relating to the purity, safety or performance of the product. Domestic laws might also constrain marketers in the areas of product packaging, marking and labelling, and contracts with agents. Most countries also have certain laws regulating advertising, e.g. Britain does not permit any cigarette or liquor advertising on TV Different legal systems The legal systems of most of the non-socialist countries can be grouped into common law and code law. Common law is generally based on precedents or past practices while a code, which is a comprehensive set of volumes having statutory force and covering virtually the whole spectrum of the country's law, is established by arbitrary methods - e.g. a speed limit of 80 kph or a three-day period for cancelling a contract. South Africa's commercial legal system has been influenced by English law. English courts create and follow precedents just as South African courts do. Furthermore, English cases are regularly cited as authority in our courts in situations where there is no domestic decision on the point and the particular case concerns an area of our law (such as insurance or negotiable instruments) which derives from, or was considerably influenced by, English law.

Demographic environment The demography of a region includes population size and composition, as well as key socio-economic attributes such as literacy levels and wide or narrow disparities in a society's distribution of income. Theoretically, the larger the total population in a region, the larger the potential market that will exist. In addition, the composition of a population in terms of age and sex will also influence the potential demand for specific products. For example, if a company wishes to market disposable nappies abroad, the number of women in a particular target market who are of child-bearing age is an important influence on the potential demand for that product. In effect, demographic factors such as literacy levels serve to stratify the total population into two different segments - those people who are likely to be potential consumers and those who are not. An overall increase in population size is therefore relevant to potential demand. Stratification of the overall market by demographic characteristics also helps to identify significant changes in potential marketing opportunities. For example, the ageing of the post-War 'baby-boomers' is creating a growing worldwide market for products and services geared to affluent and middle-income families.\\

PORTERS FIVE FORCES MODEL

Threats of new entrants to the industry: The threat of new firms to enter an industry is always an important issue for businesses. If businesses fail to analyse it properly it may lose its market share. Usually industries that have low entrance barriers see more entrance of new players into the industry, thus proving more competitions to the existing players. However, industries with high entrance barriers must also not overlook the possibility of new players entering the industry. Threats of substitute products: Increasing availability of substitutes for an industrys product and services can harms organisations control over prices and terms of business. If the substitutes are equally useful for the purpose, it can pose serious threat to the product. Therefore firms must consider the threats from substitutes seriously. Power of buyers or customers: Buying power is the capability of the buyers, purchasing agents, and the customers of the industry to influence the price and the terms of purchase.(Stahl & Grigsby, 1997; p146) When the buyers are few in number and are well organised, the buying power may be high. If the bargaining power of buyers is high then the profit margin of firms becomes low. Power of suppliers (to businesses in the industry): Supplier power is the capability of suppliers and vendors to decide the prices and the terms of supply.(Stahl & Grigsby, 1997; p147) When the suppliers are few in number, the bargaining power of suppliers is high. When the bargaining power of suppliers is high, the profit margin of the firms tends to be low and viceversa.Example 16. For example, supermarket giant, Wal-Mart, source their products from suppliers who have low bargaining power, thus keeping its profit margin high. Competitive rivalry among businesses in the industry: Competitive rivalry among firms means the extent to which the firms respond to the competitive moves of the other firms in the same industry. There might be cut-throat competition between companies where the competitive moves of the competitors are monitored and countered closely or there might be live and let live principle followed within the industry where companies seem to respect each others market niches.

EXTERNAL ANALYSIS: OPPORTUNITIES AND THREATS

The external environment is the source of opportunities and threats facing the business, with scenarios encapsulating environmental issues. (Finlay,2000 p323) Formal reviews can help the organisation to identify the key opportunities open to the business and to highlight the possible threats. The potential opportunities and threats faced by business can be identified by a SWOT analysis matrix. The events and trends in the external environment have to be analysed carefully in order to formulate the organisational strategy. Identifying the Organisations opportunities. Opportunities: An opportunity is a favourable situation in the external environment that can be used to the organisations advantage. For example generation of some trends at the macro-economic level by the national economy which may prove to be an advantage to the organisation. Further, developments like identification of new markets or segments, faster market growth, technological changes, creation of new, related or complementary products, changes in competitive and regulatory circumstances etc are opportunities. (Stapleton & Thomas, 1998; Organisations must smell every opportunity, grab it and exploit it to the best of their capability; otherwise the competitors will grab the opportunity and this will beat the organisation badly. Threats: A threat is an unfavorable development in the external environment which can affect the organization in a negative way. Some of the major threats face by businesses are new competitors in the industry, rising sales of substitute products, slower market growth, adverse business policies, growing bargaining power of suppliers or customers, adverse demographic changes, technological changes, inhibiting regulations etc.

DIFFERENCE BETWEEN INTERNAL ENVIRONMENT AND

EXTERNAL ENVIRONMENT Internal environment involve within the organization, which are the employee attitudes, new equipment, strategy, workforce. The organization has the control of these matters because it happen within the organization unless like external environment. The external environment, is clearly stated with the word external itself which means outside of the organizations which effect the changes in the organization which the organization does not have the control of it.

Internal environment involves mission, policies, structure, culture etc External environment are involved by the PESTLE-Politic, Economy, Social, Technology, Legal and Environment.

The internal environment includes issues like, things, situations, or events that occur within the organization and are basically under the control of the organization, and effect the organization in either a positive or negative way. For example, is the organization working with the latest technology. If it is, it would be beneficial and should affect the organization in a positive way. If not, it may have a negative effect.

The external environment would include things, situations, and events that occur outside of the organization, basically not in control by the organization, but affects it is either a negative or positive way. For example, they might

include things like the economy, demographics, government intervention or interference, competition, etc.

Internal environments can be able to control and manage effectively. External environments, on the other hand, arent easy to control or manage.

Measures can be taken to deal with any problem that occurs as a result of issues with internal environment. It is hard to predict the risks related to external environment

Case study
EXTERNAL ENVIRONMENT of McDonalds
ANALYSIS OF MCDONALDS MACRO-ENVIRONMENT POLITICAL FACTORS The international operations of McDonalds are extreme under influence of a policy of the separate state put into practice by each government. For example, there are certain groups in Europe and the United States which demand the acts of governmental power concerning medical

values of meal of fast food. They have specified that harmful elements as cholesterol and negative influences as fatness are concerning consumption of products of fast food. On the other hand, the company operates the separate policy and instructions of operations. The certain markets concentrate on various areas of anxiety, such as various area of health, protection of the worker, and environment. All these elements are noticed in the state control of licensing of restaurants in the corresponding states. For example, there is a hung legal dispute in privilege McDonalds in India where certain infringement of rights and infringement of the religious laws concerning the maintenance of meal. Meat existence in their menu in India is obviously offensive to Indian religions in the mentioned market. There are also other researches which specifies in infringement of McDonald's Stores concerning existing laws on employment in the target market. As any business enterprise, these McDonald's stores should argue with problems of procedures of employment just as their tax obligations to succeed in the foreign market.

ECONOMIC FACTORS The organizations in the fast food industry aren't excused from any disputes and problems. Definitely, they really have the separate problems involving business factors. Branches and privileges of networks of the enterprises of fast service as McDonalds has a tendency to experience difficulty in cases where the economy of the corresponding states is amazed by inflation and changes in exchange rates. Clients hence face a survey stalemate through their separate budgets, whether they should spend more on these foreign networks of the enterprises of fast food. Hence, to these chains, possibly, it is necessary to take out problems of effects of economic environment. Especially, their problem depends on the answer of consumers to these main principles and how it could influence their general sales. In an estimation of operations of the company, food chains as McDonalds tend to import the biggest part of the raw materials to certain territory if there is a delivery lack. Exchange rate fluctuations will also play an essential role in companys operations.

The companys international supply as well as the existing exchange rates is merely a part of the overall components needed to guarantee success for the foreign operations of McDonalds. It is besides obligatory, that the company has been informed on the existing tax requirements needed by the separate governments on which they operate. It basically guarantees smooth operations of McDonalds privileges. In the same relation the company should consider also a state economic situation on which they influence on. Level at which the economy of special state grows, defines purchasing capacity of consumers in that country. Hence, if the privilege works in the especially economically weak state, then their products should cost above than other existing products in the market, these privileges should take certain regulators to support economy at the expense of manufacture growth.

SOCIO-CULTURAL FACTORS Articles about the international strategy of McDonalds, apparently, function on several areas to guarantee profitable returns for the organization. To illustrate, the organization changes to the best an establishment of positive thinking from their basic consumers. McDonalds indulges a special variety of consumers with certain types of persons. Also it has been noticed that the company has given the markets, such as the United Kingdom, a choice concerning their lunch requirements. Specified that McDonalds beginnings considerably valued set of meal which offers a reliable degree of quality for the corresponding market where it works. In addition, those who are elderly only below a bracket of thirty five as said are the most frequent consumers of McDonalds privileges. Many-sided character of business is reflected now in sharp value of the information about the existing market. This procedure is essentially identified in area as market research. Information concerning the reference and potential areas of the market would double as a barrier to success of the company if this area of operations neglected. In case of McDonalds they establish good system in determining of requirements of the market. The company uses concept of consumer individuality of a product of behaviour and decisions on purchase to its advantage. It is said, to have the main influence on understanding of prospective result of the organization in the particular market.

TECHNOLOGICAL FACTORS McDonalds makes a demand for their own products. The key tool of the company for marketing is by means of TV advertisings. There are some requirements that McDonalds is inclined to interest the younger population more. Existence of game stains also toys in the meal offered by the company shows this validity. Other demonstration of such marketing strategy is obvious in advertising they use. They use recovered descriptions of the characters as Grimace and Hamburglar. Other advertising operations employ popular celebrities to promote their products. Similar became endorsees for McDonalds all over the world loving it campaign. Besides, operations of McDonalds have considerably been infused with new technology. Elements as the system of stock and management of the value chain of companys creation consider easy payments for the suppliers and other sellers with which the person supplies in the corresponding agreement on the markets. Technology integration into operations of McDonalds tends to increase cost of their products. Basically it is shown in improvements on its chain of creation of value. Improvement of stock system just as its systems of deliveries allows the company to work in the international context.

LEGAL FACTORS There was a current roar against the fast food industry. It has forced McDonalds to apply more close examination on their corporate social responsibility. As a whole it has addressed to requirement of the company to generate its corporate reputation to more positive and the more socially responsible company. The reputation of McDonalds is obviously a huge question. Noticed on companys web site, seems, that they have got steps to take in hand the key social condemnation that they abused them in the last decades. The company gave to their clients the corresponding data in which they need the relation of food essence of their products. This is to attend to the arguments of obesity charged against the products of the company. In the same way consumers have provided freedom in a choice, whether they want to buy the meal.

It is connected with socio-cultural market signs which they influence. For example, operations in predominantly Muslim countries demand, that their meat corresponded to Halal requirements of the law. In the same regard, those that operate in countries in the European Union should correspond to the existing laws forbidding usage of genetically modified meat products in their meal. Other legal concepts as tax obligations, employment standards, and requirements to a degree of quality are only a few of important elements on which the company should consider. Otherwise, smooth operations should be difficult to reach.

Environmental factor Social responsibility of McDonalds on the state influences to company operations. They involve charges of harm to environment. Among the reasons why they are accused of such requirements, is that the work of substances is not decomposed by microorganisms for their drinks glasses and treasury of expanded polystyrene for meal. Some civil groups in Hong Kong have made actions to make McDonalds privileges in Hong Kong aware of the rather copious use of containers of expanded polystyrene and resulting abusing by environment. Further, has specified that in 1995, McDonalds Hong Kong ran through the expanded polystyrene used by both Australia and the incorporated United States.

Analysis of industry (five forces framework) A business has to understand the dynamics of its industries and markets in order to compete effectively and intensively in the marketplace. The forces which derive competition and attractiveness of a market, contending that the competitive environment is created by the interaction of these five different forces acting on a business. In addition to rivalry among existing firms and the threat of new entrants into themarket, there are also the forces of supplier power, the power of buyers, and the threat of substitute products or services (The Figure1 Porters Five Forces Framework). Michael E. Porter suggested that the intensity of competition is determined by the relative strengths of these forces.

The Five Forces directly are interconnected with the effect on the companys ability to serve its customers and to make a profit. A change in any of these forces generally requires a company to re-assess its competitive strategies. Competitive rivalry According to Porters Five Forces Model, if entry into a market is easy then rivalry is likely to be high. Considering McDonalds competitive rivalry, there is intense competition in fast food industry that many small fast food businesses fight with each other to improve their customer base. This makes a competition the major focus between businesses. Although, McDonalds, with more than 32,000 local restaurants serving more than 60 million people in 117 countries each day, has a number of fast food outlet competitors across the countries such as Burger King, Taco Bell, KFC, Wendys, it is currently the leader of the industry in market capitalization with a cap of $39.31 billion. The Threat of new entrants The threat of new entrants in the fast food industry is high because there are no legal barriers which would keep them from entering the industry. The economies of scale and the access of the distribution are the major barriers that firms face in the industry. Firms must spend a large amount of capital on advertising and marketing in order to enjoy successful existence and long life of a fast food outlet. Large established companies with strong brand names such as McDonalds make it more difficult to enter the market because new entrants are faced with price competition from existing chain restaurants. Thus, it takes a pretty much time for a new business to establish in the fast food industry.

Supplier bargaining power The bargaining power of suppliers of McDonalds is high because McDonalds restaurants use the same products from the same suppliers and it doesnt matter if you are in Rochester, MN or Beijing, China you can get the same Big Mac everywhere. This is a feature

McDonalds want to keep going on by encouraging consistency among its restaurants. Supplying these products to McDonalds across the globe is the whole business for the suppliers and, however, if McDonalds would lose even one supplier it would have to change one or more of its product lines and perhaps the whole menu what the McDonalds customers were used to. This gives the suppliers of McDonalds a high bargaining power.

Buyer bargaining power Buyers, in the fast food industry, are those who is ordering fast food at the local restaurant, over the telephone, or internet or just paying or consuming the products. Bargaining power of customers of McDonalds is low because of low customer switching costs which are nearly zero; however, for example, one-fifth of the USA population eats in a fast food restaurant every day. Thus, fast food industry does not worry about customers loyalty. Fast food products industry is differentiated which are usually or almost always promoted by advertising that is because of a vast competition between fast food firms. Product differentiation is very important in fast food industry to make your product stand out against the crowded fast food industry products. Furthermore, quality of the product or service in the fast food industry is very important as customers have full information of the products they buy and consume. The threat of substitutes Several factors determine if there is a threat of substitute products in an industry. First, if the consumers switching costs are low, which means that there is little of anything stopping the consumer from purchasing the substitute instead of the industrys product, then the threat of substitute products is high. Second, if the substitute product is cheaper than the industrys product there is a high risk of threat of substitutes. Third, if the substitute product is having equal or superior quality, functions, attributes, or performance compared to the industrys product, the threat of substitutes as well is high.

With so many firms in the fast food industry with low switching costs, vide variety of similar products that people can chose, and healthier alternatives, the threat of substitutes is very high. As there is intense competition between rival sellers in the fast food industry, the competition between firms selling substitute products is intense as well. One very important issue is that the customer always tends to find another product comparable or better in terms of the quality of fast food products. Another thing is that fast food industry is unhealthy to its customers health. The majority of the public think that fast food restaurants primarily serve high in fat content foods which are unhealthy and as a consequence they tend to look elsewhere for healthier alternatives. While fast food products are not always associated with health and quality, fast food restaurants keeps a major advantage over other firms selling substitute products through the lower prices of their products and a quick, convenient service.

Key strategic factors in the industry (strategic groups, market segments, critical success factors) 1 Strategic groups McDonalds company is one of the leading companies in the fast food industry with over 32000 of restaurants in 117 countries around the globe. McDonalds is also worlds first fast food company by sales, which gives for them advantage over their competitors in terms of profit. The main competitors of McDonalds in the global market are:

YUM! Brands; Burger King Holdings; Dominos Pizza; Triarc Companies.

All of these companies serve fast food around the world and are focused on providing a product that is based on low price convenience. Their strategic group is associated with many geographic locations and low price and quality. Even though these companies could be considered the biggest players in the global market, they face in each country local fast food restaurants, but bigger influence on them these local competitors are not able to do. The Figure 2 below represents the strategic group mapping of the fast food industry. The graph represents fast food companies, which were divided into different groups according to their price level and product line variety. As was stated before and we can see in the graph, all of the main and biggest fast food companies have limited menu with low prices for their products. This way all of them can compete on the same basis, according to these specifications. There are always competitive pressures and driving forces which adversely affect the firms in strategic groups. Therefore, some firms may try to shift to a more favorably situated group. This shifting is however difficult if the entry barriers of the target strategic group are high. . 2. Market segments Demographic segmentation - divides the market into groups based on demographic variables including age, gender, family size and life cycle. Life cycle. McDonalds has targeted children, youth singles and the young urban families. It is attracting the young urban families wanting to spend some quality time while their children have fun at the outlet.

Age. Mostly youngsters and kids are target, so to attract children McDonalds has Happy Meal with which toys ranging from hot wheels to various Walt Disney characters are given. Sometimes it also provides special facilities like Play Place where children can play arcade games, air hockey, etc. Mostly target is under age 5-6, 12-15, 15-20 and over.

Gender. McDonalds have segmented its services to males as well as females.

Occupation. McDonalds has mostly segmented its market to the school and college going students.

Income. McDonalds has targeted mostly middle class and upper class urban families who can afford its luxury meal.

Psychographic segmentation. - sometimes also referred to as behavioural segmentation. This type of segmentation divides the market into groups according to customers lifestyles. It considers a number of potential influences on buying behaviour, including the attitudes, expectations and activities of consumers. If these are known, then products and marketing campaigns can be customized so that they appeal more specifically to customer motivations.26

Needs-motivation. The luxury services of McDonalds fulfil the needs of self-worth. Personality. McDonalds mostly segments is market to extrovert people who usually hang out with friends and family in restaurants and other enjoyment places.

Motivation slogans. McDonalds provides motivate slogans to attract its customers and make a good image in the minds of the customers like IM LOVING IT, EVERY TIME A GOOD TIME, PUT A SMILE ON, ENJOY MORE, MY MCDONALDS WHAT YOU WANT IS WHAT YOU GET and others.

These are one of the famous slogans of McDonalds through these slogans McDonalds is attracting its customers and making a good image in the minds of the customers. Company has segmented on basis of making relationship with the customers and making them believe that they are on the right place.

Region. Worldwide McDonalds is giving its services to almost more than 110 countries. This means they must much into each tradition of different cultures, religions and views, thats why in every country McDonalds has updated their menus according to local customers, but still saves their main products. Use-related segmentation - popular and effective form of segmentation that categorizes

consumers in terms of product, service, or brand usage characteristics, such as usage rate, awareness status, and degree of brand loyalty.

Use rate: medium users Awareness status: mostly people are aware of McDonalds and are interested to have services of McDonalds.

Brand Loyalty: McDonalds have strong loyal customers. Use-situation segmentation - involves segmenting consumers on the basis of time,

objective, location, and person.

Time: leisure Objective: fun Person: self, family members, friends, peer

3 Critical success factors Critical success factors are limited number (usually between 3 to 8) of characteristics, conditions, or variables that have a direct and serious impact on the effectiveness, efficiency, and viability of anorganization, program, or project. Activities associated with CSF must be performed at the highest possible level of excellence to achieve the intended overall objectives. The research about McDonalds company has led to the following success factors:

Standardization Environment oriented Willingness to innovate One dollar menu Following healthy food trends

Standardization In order to maintain the highest quality of their products McDonalds standardized the production methods and processes. The company just adjusts to different culinary differences in different countries, for example McDonalds offered vegetarian burgers to practicing Buddhists or Asian countries preferring spicy taste saw the introduction of spicy burgers, chicken and seasoning. This gives for people possibility to try either original US or their local taste. McDonalds achieves balance by maintaining standardization in products but adjusting to the local taste.

Environment oriented One of the main companys orientations now is the development of a strong companywide environmental policy declaring that McDonalds is committed to protecting the environment for future generations, and that it believes that business leaders must also be environmental leaders. The policy takes a total lifecycle approach to reducing and managing solid waste: a sizable challenge, considering that each of McDonalds 8,600 U.S. restaurants 3 238 pounds of waste per day and each of its 34 U.S. regional distribution centres disposes of another 900 pounds of waste per day. Willingness to innovate McDonalds is all the time trying to be on time with new trends, demand or technology, even while striving to achieve consistency in the operation of its many outlets. The breakfast menu, salads, Chicken McNuggets, and the McLean Deluxe sandwich were all examples of how the company tried to appeal to a wider range of consumers.

Following healthy food trends

In response to obesity trends in Western nations and in the face of criticism over the healthiness of its products, the company has modified its menu to include healthier alternatives such as salads, wraps and fruit.

4. Future scenarios McDonald's developed its future scenarios around three strategies customer convenience, customer value, and optimal operations. More than ever, McDonalds is focused on and committed to doing the right thing for the local communities in which the company operates and for the customers it serves. This philosophy of doing good and giving back has always been at the heart and soul of the McDonald's business -like fries and hamburgers - and started with founder, Ray Kroc. Before there was even a name for "social responsibility," McDonald's was setting the standard, and theyve been the leader ever since. As we deal with challenging economic and political climates around the world, McDonalds role as an employer and local business becomes even more important. The company remains steadfastly committed to addressing various social responsibility issues, policies, and practices within the McDonald's system that affect local communities and customers. McDonalds has made significant progress toward becoming a more socially responsible organization, but there is always work to be done. Through its 30,000 restaurants, its owner/operators and suppliers, the company continues to drive so.

5 Identification of opportunities and threats McDonalds is a huge industry of franchise companies all over the world. It is diversified almost in all countries of the world and has a huge power in the market because of its responsiveness to customers and substantial quality of a product. As it is the only one brand in

this company, it serves actually many segments of the customers. The product diversity is quite high and serves the widest segments of a society. The product diversifies not only for different groups of customers with different tastes and needs but also for different groups of customers in different countries. This makes segmentation more complex, as a matrix and contributes to business huge successes. The example of a segmentation of McDonalds would be different kind of meet served in burgers in different countries. There are some Muslim countries, where pork is not accepted and there are other European countries where such kind of meat is really desirable. The new segment of a customer has been found recently, when the boom of healthy food came into society, people became more aware of unhealthy fast food, which McDonalds is serving. So its production of McFeast of whole bread burgers attracted more people with different tastes and lifestyle, not as fast food eaters.

Opportunities
As we identified some characteristics of this successful company, we can draw out the opportunities that this company can achieve in the nearest future: The first opportunity that can be realized in this company is new segments identification. Of course there are no limits in business to expand and there is no business that could survive without any growth or promotion. It is a very good opportunity to define some new needs or tastes of customers, despite all those diet cokes or healthy bread burgers that McDonalds already included, there are so many other different needs that people have. The other more specific opportunity for McDonalds would be new technology adoption. Not talking about those new high technology cash-registers that are based on computer programs, McDonalds could include new technological ways in product making, that could make the process itself more fast or special products more tasty and with higher quality (like for example ice-cream or fresh juice machines). The internal strategy improvement has never gone to bad. As McDonalds already has a good strategy and employees training and promotion, it can make it more efficient and

more productive by applying some new ways of motivation or work organization. As the food is made in lines, it can be somehow more diversified to achieve the more efficient operation. Provide optional allergen free food items, such as gluten free and peanut free. That would be a great success of concentration to people, who have serious health problems and have to avoid fast food. Also McDonalds could consider new brands development. As it is a franchise, it doesnt mean that it hasnt opportunity of brands extent. It could make another niche where it would sell some other kind of products, like chocolate bars or other kind of sweats.

Weaknesses
As there are many opportunities that can be fulfilled in the future, however McDonalds has also some weaknesses and threats. Talking about weaknesses McDonalds had some bad luck or unsuccessful projects in the past that manifested some weaknesses and also there are some disadvantages of fast food industry:

Their test marketing for pizza failed to yield a substantial product. Leaving them much less able to compete with fast food pizza chains.

High employee turnover in their restaurants leads to more money being spent on training. They have yet to capitalize on the trend towards organic foods. McDonald's have problems with fluctuations in operating and net profits which ultimately impact investor relations. Operating profit was $3,984 million (2005) $4,433 million (2006) and $3,879 million (2007). Net profits were $2,602 million (2005), $3,544 million (2006) and $2,395 million (2007)

Threats

The threats, that exist in all the markets, that have some features as perfect competition and of course in the franchising companies, are such:

The industry of fast food restaurants is huge and so do the competition in it. Some companies get old and boring in time and so can happen to McDonalds if it wont get adapt to new changes in trends and lifestyles. Major competitors, like Burger King, Starbucks, Taco Bell, Wendy's, KFC and any mid-range sit-down restaurants.34

Another huge threat is the threat of human health deterioration. The industry of fat food is huge in the world and especially in most developed countries. People become more aware of unhealthy additives and processed foods that are included in McDonalds food production. Also the extreme rate of fat people in some countries can raise some disciplines in fast food making or prevent it at all.

Another threat of going into franchising is reputation. It is essential to maintain a good reputation of your name; otherwise no one will buy your franchise.

3. DEVELOPMENT and RECOMMENDATIONS FOR IMPLEMENTATION OF STRATEGIC OPTIONS Strategic options: Reduction of employee training spending (lowering employee turnover); Taking advantage of organic food industry popularity (develop new products for new segments); Advantage of human health problems (improvement of products). Reduction of employee training spending (lowering employee turnover).

In order to reduce of employee training spending and to lower turnover, we would like to suggest: To give the job just for highly motivated people. It means, that they are going to be loyal and not to leave job so fast; To train new employees using Big Brother principle. New employees would be trained by employees, who are working longer. In this way, company reduces training spending, new employees are trained by the people, who are working inside the company and do the same things every day. To motivate employees and always take care about their expectations. It can be money premiums for good working in the end of the month (or year), some employees parties, Employee of the week (month) competition and etc.; also employer should take a look of what employee is expected from employer and try to solve that, ex. Maybe employee is not expected to get premium every month, but for good and loyal working he would like that the company would pay his child studies fee after 5 years. Taking advantage of organic food industry popularity (develop new products for new segments); McDonalds is not that company, who suggest the most organic food, so they can try: To make a line of organic food in their menu and take a look what is more popular and healthy for their customers. If it is going more popular than usual menu food, it is more worth to make all food in organic way, even it is more expensive. First of all, people like what is natural, and then they are interested in the price. To be in a partnership with scientists and doctors in order to take care of their customers heath. Everybody knows that organic food makes people feel better and healthier; also it affects nature in a good way. McDonalds declares that everything is for customer, so it must take an advantage of organic food popularity and make their customers to live healthier and in more natural way. To make big advertisement companies declaring organic food pluses and make it more popular in such way. Many people loves McDonalds food, so it has an authority and can

show good example of necessity of organic food in people life and compare how organic and usual McDonalds food effect customers health and all the nature about them. Advantage of human health problems (improvement of products) McDonalds is big food supplying company, and all of us know, how food affects our health. It is one of the main factors, what built our body and strength our brains. Knowing that, McDonalds should:

Suggest just high quality, improved products, which is full of vitamins and minerals. So, it means that the company must improve their products, all the food must be certificated and fit for all healthy food standards.

Be in a contact with suppliers, who supply products for McDonalds food and always check if the products is natural, high standard and healthy for all of age customers.

Contact with doctors, scientist and improve their products to fit for all of age customers, even they have some problems with their stomach. It means to make measures and find what is the best for all possible customers.

CONCLUSIONS
Therefore, in order to formulate an effective strategy for an organisation, environmental analysis is must. However, one may observe that the main significance of external environmental analysis lies in predicting the future external environment and not the present. If the firms are correct in predicting how the future external environment is likely to be, they can design strategy well in advance to adjust to external environment. Therefore, here it understood that forecasting is a key issue while analysing the external environment. Further one may also conclude that the PEST analysis and analysis of external opportunities and threats is also an important tool of analysing the macro-environment and micro-environment respectively. However, due to rapid changes in the external environment, firms must use these tools on a regular basis, so that the firms are not dealing with outdated information. Last but not the least; one cannot ignore the models suggested by Michael E. Porter, that is, Porters Five forces model and Generic Strategy Model in order to craft an effective strategy. Porters five forces framework is important because it directs manager's towards those aspects most significant to long-term advantage. It serves as a checklist for getting started and also highlights the possible sources that could e the driving forces in businesses. The Generic strategy model is useful as helps in characterising the strategic positions at the simplest and broadest level. Business must try and use as many tools as possible in order to come out with the best strategy for the organisation. However, firms must try and evade the limitations of these tools so as to formulate the best strategy.