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Introduction

McDonald's is the world's leading global food service retailer with over 36,000 locations serving
approximately 69 million customers in over 100 countries each day. More than 80% of
McDonald's restaurants worldwide are owned and operated by independent local business men
and women.
A global fast food chain with the company headquartered in America at Oak Brook, Illinois. It is
the worlds first largest fast food chain and the company has grown substantially in a move to
gain a competitive advantage over its competitors such as Burger King and Subway.
The business is managed as distinct geographic segments that include:
U.S.
Europe
Asia/Pacific, Middle East and Africa (APMEA)
Other Countries & Corporate (OCC) including Canada, Latin America and Corporate

McDonalds focusses on five pillars - People, Products, Place, Price and Promotion - to enhance
their customers' experience and build shareholder value over the long term.

Of the total McDonalds restaurants worldwide:


Over 57% are conventional franchisees.
Approximately 24% are licensed to foreign affiliates or developmental licensees.
Over 18% are Company-operated.

The Company continues to strive to find new ways to strengthen the nutritional profile of our
menu items while maintaining the great tastes our customers expect. And while nutrition
concepts vary around the world, some are nearly universal, such as the value of eating a variety
of foods from recommended food groups. McDonalds wants to help make it easier for
customers to eat from these food groups by serving more menu items that include fruits,
vegetables, and low-fat dairy and whole grains.
McDonalds restaurants offer a substantially uniform menu, although there are geographic
variations to suit local consumer preferences and tastes. In addition, McDonalds tests new
products on an ongoing basis.
McDonalds menu includes hamburgers and cheese burgers, Big Mac, Quarter Pounder with
cheese, several chicken sandwiches, chicken nuggets etc and various beverages. (McDonalds,
2017)
1.1) Discuss the role of strategic marketing in McDonalds?
Role of strategic marketing:
Marketing can be defined as analyzing, organizing, planning and control of the firms customer-
impinging resources, policies, and activities with a view to satisfying the needs and wants of
chosen customer groups at a profit (Kotler 1967, p. 12)
The American Marketing Association (2007) explains marketing is the activity, set of
institutions, and processes for creating, communicating, delivering, and exchanging offerings
that have value for customers, clients, partners, and society at large.
Strategic Marketing is the approach that any company can adopt to efficiently distinguish itself
from its opponents by leveraging on its strengths (both existing and potential), provide constantly
better value to customers and ultimately gain edge over its competitors.
The Role of Strategic Marketing is to identify:
1. The markets to compete.
2. The firms competitive advantage and how to compete.
3. The entry strategies.
Because of the introduction of franchising and continues development of creative and innovative
marketing, McDonalds is among most renowned, developed well-known brands holding a
leading share around the world. As a leader in the fast food industry, McDonalds is often
targeted. Some of the ways McDonalds handles the attacks of the media and competition is by
creating a marketing mix to highlight the positive impacts the organization. McDonalds must
keep the strategic nature of its marketing efforts to stay on top and provide what customers want.
McDonalds Strategic Marketing is focused on,
1) Achieving the most powerful brand image.
2) Product innovation and development.
3) Having the greatest market share in the hamburger industry.
1.2) Explain the processes involved in strategic marketing in origination?
Strategic marketing is a planning process that seeks to establish a clear direction and unified
purpose for all marketing efforts (Grewal & Levy, 2015). Its conclusions are documented in a
marketing plan that is regularly updated. The five steps in strategic marketing are: identifying a
mission; analyzing the situation; objectives; developing a marketing strategy; and planning for
evaluation.

1. Mission
The first step in strategic marketing is to articulate the reason why the enterprise exists
and how it can benefit target setting consumers over the long term (Grewal & Levy,
2015). In particular, mission statement is intended to anticipate the future and describe an
ongoing role for the organization's product, service or expertise. For example, the
mission of an airline might be to provide continuing innovation in global transportation.
A hospital could state a mission to take the lead in improving public health and education.

McDonald's brand mission is to be customers' favorite place and way to eat and drink.
Their worldwide operations are aligned around a global strategy called the Plan to Win,
which center on an exceptional customer experience People, Products, Place, Price and
Promotion.

2. Situation Analysis
Organizations conduct a situation analysis, also known as a SWOT, to assess and identify
their strengths, weaknesses, opportunities and threats. This second step in the strategic
marketing process helps managers understand the resources they can build on and the
challenges they face. Strengths and weaknesses are internal factors, under the firm's
control (Grewal & Levy, 2015).
For example, a good image in the fashion press would be a key strength for a dress
manufacturer, while a poor relationship with clothing retailers would be a weakness.
Opportunities and threats arise from the external environment, like a strong economy or
new payroll tax.

McDonalds SWOT analysis is very strong. They focus on their strengths, try to minimize
their weaknesses, look for opportunities and prepare themselves to fight with the threats
available in the competitive market.

3. Objectives
The third step in strategic marketing is to set marketing objectives. These are clear,
measurable goals that give decision makers a basis for making choices and assessing
progress. Objectives are typically expressed in terms of one or more quantitative targets
like revenue, profit, sales or market share. Importantly, each objective must be achievable
within a fixed period of time (Grewal & Levy, 2015).
For example, aiming for a five-percent increase in profits might be realistic within a
year, but probably not within one quarter.
Objectives communicate what marketers want to achieve, guide marketing actions and
are used to measure how well a plan is working. They can be related to market share,
sales, reaching the target audience and creating awareness in the marketplace. Long-term
objectives are broken down into shorter-term measurable targets, which McDonalds uses
as milestones along the way. Results can be analyzed regularly to see whether objectives
are being met. This type of feedback allows the company to change plans and allows
flexibility. Once marketing objectives have been established, the next stage is to define
how they will be achieved. The marketing strategy is the statement of how objectives will
be delivered. It explains what marketing actions and resources will be used and how they
will work together.
4. Strategy and Evaluation
The fourth step in strategic marketing is strategy development. This involves selecting a
target market, a distinct group of consumers who are highly likely to buy the firm's
product. Planners must also choose implementation tactics, specifically, effective ways to
use the marketing mix tools of product, promotion, price and distribution to reach and
influence prospective buyers (Grewal & Levy, 2015).

5. Evaluation
The fifth step, evaluation, means specifying how, when and by whom these tactics are to
be monitored and assessed over time.
By analyzing detailed information about their customers, as derived from research, the
McDonalds marketing department can ascertain information key to determining the
correct marketing mix.
a) Demand of product.
b) Prices consumers are willing to pay.
c) Marketing tools and materials are identified (TV programmes, newspapers
and advertising consumers read and view).
d) Most restaurants visited.
Accurate research is essential in creating the right marketing mix which will help to win
customer loyalty and increase sales. As the economy and social attitudes change, so do buying
patterns. McDonalds needs to identify whether the number of target customers is growing or
shrinking and whether their buying habits will change in the future.

1.3) Evaluate the links between strategic marketing and corporate strategy.
Strategic marketing can be defined as identification of one or more sustainable competitive
advantages a firm has in the markets it serves (or intends to serve), and allocation of resources to
exploit them.
Corporate strategy is the overall scope and direction of a corporation and the way in which its
various business operations work together to achieve particular goals. It is the direction an
organization takes with the objective of achieving business success in the long term.
Corporate strategy is based on knowing:
Where your organization is today.
Where you want it to be.
How you want to get there.

Corporate strategy is the long term strategy of an entire organization at a corporate level.
Strategic marketing forms part of it.
McDonalds corporate strategy in line with its marketing strategy focuses on two aspects:
1) Penetrating emerging markets
2) Expanding in developed markets
McDonalds strategic marketing involves making its stores more attractive to get customers in
along with delivering food to customers in places that demand it.
The links between strategic marketing and corporate strategy
Market Penetration: McDonalds uses market penetration as its primary intensive
strategy for growth. In applying this intensive strategy, McDonalds grows by
reaching more customers in markets where it already has operations. For example,
McDonalds opens new restaurants in North America and Europe by franchising, joint
ventures or corporate ownership (Gargasas, 2012; Gregory, 2015).
A strategic objective connected to this intensive growth strategy is global expansion
through new locations. McDonalds generic strategy supports this intensive growth
strategy because low costs and low prices empower the firm to easily penetrate
markets.

Market Development: In its early years, McDonalds used market development as its
primary intensive strategy for growth. However, market development is now a
secondary intensive growth strategy because McDonalds already has restaurants in
most regions around the world (Gargasas, 2012; Gregory, 2015). A strategic objective
for this intensive growth strategy is to establish new locations in new markets, such as
new McDonalds restaurants in African or Middle Eastern countries where the
company currently has no operations. Based on its generic strategy of cost leadership,
McDonalds supports this intensive growth strategy by using low prices to compete in
new markets.

Product Development: McDonalds uses product development as its tertiary or


supporting intensive strategy for growth. In applying this intensive growth strategy,
McDonalds develops new products over time, such as new McCaf products
(Gargasas, 2012; Gregory, 2015). These new products may be variations of existing
products, or entirely new products. The strategic objective for this intensive growth
strategy is to capture more consumers by attracting them to new products. This
intensive growth strategy agrees with McDonalds broad differentiation generic
strategy in terms of new products that make the company distinct.

McDonalds Vision and Mission Statements:


The firm follows its mission statement to design and develop its goods and services. On the other
hand, it follows its vision statement to continue its top position in the global fast food restaurant
market (Gregory, 2015). With more than 36,000 locations worldwide, McDonalds has shown
resilience and success through innovation and aggressive marketing. McDonalds success is an
indicator of business effectiveness in attaining the aims in its mission statement and vision
statement.
McDonalds mission statement guides the companys strategies and strategic objectives for
developing business operations. McDonalds vision statement guides the companys overall
strategic direction toward its current leadership position in the global fast food restaurant
market.

McDonalds Vision Statement


McDonalds vision statement is as follows (McDonalds, 2017):
Our overall vision is for McDonalds to become a modern, progressive burger
company delivering a contemporary customer experience. Modern is about getting
the brand to where we need to be today and progressive is about doing what it takes
to be the McDonalds our customers will expect tomorrow. To realize this
commitment, we are focused on delivering great tasting; high-quality food to our
customers and providing a world-class experience that makes them feel welcome and
valued.
McDonalds vision statement covers a number of business aspects. The company
implies innovation to satisfy current market needs, as stated in the contemporary
customer experience component of the vision statement. Also, McDonalds
characterizes its products in the great-tasting, high-quality food component of the
vision statement (Meyer, 2015). In saying modern, progressive McDonalds shows
that its vision statement defines the kind of business approach it uses for
organizational development. A strategic objective linked to this vision statement is the
innovation of McDonalds goods and services to match consumer preferences and
expectations.

McDonalds Mission Statement


McDonalds mission statement is officially stated as follows (McDonalds, 2017):
Our mission is to be our customers favorite place and way to eat & drink. Were
dedicated to being a great place for our people to work; to being a strong, positive
presence in your community; and to delivering the quality, service, cleanliness and
value our customers have come to expect from the Golden Arches a symbol thats
trusted around the world.
In its mission statement, McDonalds includes details about its market position, as
shown in the favorite place and way to eat & drink component. Also, the human
resource management approach is highlighted in the great place for our people to
work component (Meyer, 2015). In addition, McDonalds mission statement covers
its corporate social responsibility position in the positive presence in your
community part. The rest of the mission statement indicates McDonalds brand
image and the character of its products. A strategic objective based on this mission
statement is global brand development to strengthen the companys ability to attract
customers and investors. A related financial objective based on McDonalds mission
statement is cost minimization to optimize value.
2.1) Assess the value of models used in strategic marketing planning?
Strategic marketing planning is the method that the operational and managerial staff of
McDonalds goes through to create and implement effective marketing strategies.
It is the process undertaken to develop a plan for achievement of its overall long-term
organizational goals.
Model
There is no one model of strategic planning. However, the strategic planning process in
McDonalds includes a situational analysis. This consists of looking at the current external and
internal environment the organization finds itself in, formulating organizational objectives and
strategies based upon the environmental assessment, and developing procedures to implement
and evaluate the strategic plan. Strategic plans for business organizations often cover a three-to-
five year period, but if the business or its environment is highly dynamic, a shorter period may
be advisable.

McDonalds Five Forces Analysis


In this Five Forces analysis, McDonalds experiences the effects of external factors at varying
intensities (Dobbs, 2014). The company must implement strategies to meet these external factors
and minimize negative impact. In summary, McDonalds Five Forces analysis yields the
following intensities of the five forces:
1. Competitive rivalry or competition (strong force)
2. Bargaining power of buyers or customers (strong force)
3. Bargaining power of suppliers (weak force)
4. Threat of substitutes or substitution (strong force)
5. Threat of new entrants or new entry (moderate force)
The results of the Five Forces analysis shows that McDonalds needs to prioritize the issues
related to competition, consumers, and substitutes, all of which exert a strong force on the
company. A possible course of action for McDonalds to address these issues is product
innovation. New McDonalds products can attract and keep more customers (Burke, Van Stel, &
Thurik, 2010). Also, this Five Forces analysis shows that McDonalds can implement higher
quality standards to address competition and substitution in this saturated market.

1. Competitive Rivalry or Competition with McDonalds (Strong Force)


McDonalds faces tough competition because the fast food restaurant market is already saturated.
This element of the Five Forces analysis tackles the effect of competing firms in the industry
environment (Dobbs, 2014). In McDonalds case, the strong force of competitive rivalry is based
on the following external factors:
High number of firms (strong force)
High aggressiveness of firms (strong force)
Low switching costs (strong force)
The fast food restaurant industry has many firms of various sizes, such as global chains like
McDonalds and local mom-and-pop fast food restaurants. Also, most medium and large firms
aggressively market their products (United States Department of Agriculture Economics
Research Service, 2015). In addition, McDonalds customers experience low switching costs,
which means that they can easily transfer to other restaurants, such as Wendys. Thus, this
element of the Five Forces analysis of McDonalds shows that competition is among the most
significant external forces on the business.

2. Bargaining Power of McDonalds Customers/Buyers (Strong Force)


McDonalds must address the significant power of customers. This element of the Five Forces
analysis deals with the influence and demands of consumers (Dobbs, 2014). In McDonalds case,
the following are the external factors that contribute to the strong bargaining power of buyers:
Low switching costs (strong force)
Large number of providers (strong force)
High availability of substitutes (strong force)
Because of the ease of changing from one restaurant to another (low switching costs), customers
can easily impose their demands on McDonalds. In relation, because of market saturation,
consumers can choose from many fast food restaurants other than McDonalds. Also, there are
many substitutes to firms like McDonalds (United States Department of Agriculture Economics
Research Service, 2015). These substitutes include food outlets, artisanal bakeries, as well as
foods that one could cook at home. Based on this element of the Five Forces analysis,
McDonalds must develop strategies to increase customer loyalty.

3. Bargaining Power of McDonalds Suppliers (Weak Force)


Suppliers also influence McDonalds. This element of the Five Forces analysis shows the impact
of suppliers on firms (Dobbs, 2014). In McDonalds case, the weak bargaining power of
suppliers is based on the following external factors:
Large number of suppliers (weak force)
Low forward vertical integration (weak force)
High overall supply (weak force)
The large number of suppliers weakens the effect of individual suppliers on McDonalds. This is
especially so because of the lack of regional or global alliances among suppliers. In relation,
most of McDonalds suppliers are not vertically integrated. This means that they do not control
the distribution network linked to McDonalds facilities. Also, the relative abundance of
materials like flour and meat reduces suppliers influence on McDonalds. Thus, this element of
the Five Forces analysis shows that supplier power is a minimal issue for McDonalds.

4. Threat of Substitutes or Substitution (Strong Force)


Substitutes are a significant concern for McDonalds. This element of the Five Forces analysis
deals with the potential effects of substitutes on firm growth (Dobbs, 2014). In McDonalds case,
the following external factors make the threat of substitution a strong force:
High substitute availability (strong force)
Low switching costs (strong force)
High performance-to-cost ratio (strong force)
There are many substitutes to McDonalds products, such as products from artisanal food
producers and local bakeries. Consumers can also cook their food at home. It is also easy to shift
from McDonalds to these substitutes (low switching costs). In addition, these substitutes are
competitive in terms of quality and consumer satisfaction. In this element of the Five Forces
analysis of McDonalds, substitutes are a major issue that the company must address through
approaches like product quality improvement.

5. Threat of New Entrants or New Entry (Moderate Force)


New entrants can impact McDonalds market share. This element of the Five Forces analysis
refers to the effects of new players on existing firms (Dobbs, 2014). In McDonalds case, the
moderate threat of new entry is based on the following external factors:
Low switching costs (strong force)
Moderate capital cost (moderate force)
High cost of brand development (weak force)
Because of the low switching costs, consumers can easily move from McDonalds toward new
fast food restaurant companies. Also, the moderate capital costs of establishing a new restaurant
makes it moderately easy for small or medium-sized firms to affect McDonalds. However, it is
expensive to build a strong brand that could match the McDonalds brand. Thus, this element of
the Five Forces analysis shows that the threat of new entrants is a considerable issue for
McDonalds.

2.2 Discuss the links between strategic positioning and marketing tactics
Positioning drives strategy and marketing because it creates the target audience. "Positioning is
not what you do to a product; it is what you do to the mind of a prospect." Positioning defines
your product according to the needs and buying characteristics of people who will buy the
product. It also locates the market venue where you will find your target customers.
Strategic Positioning establishes where you are and where you want to be as a result of your
strategic marketing. It creates a brand concept that marketing places in the minds of the target
customer.
Marketing tactics are specific elements that support the marketing strategy. Strong tactics take
planning and resources aimed at generating new customer relationships or building current ones.
Tactics are also actions that can be changed as needed within the structure of an unchanging
strategy.
McDonalds focusses really hard to accomplish a balance between strategic positioning of its
brand in the minds of its customers through various marketing tactics.
2.3. Merits of relationship marketing in a given marketing strategy
Relationship marketing is very important when it comes to the success of an organization.
McDonalds also produces many surveys and factors which account in details of consumers
needs and wants. This enables to build the know, like and trust factor.
When an organization builds relationship marketing skills, it also opens the door to more
business opportunities because a personal connection experience leaves a long lasting
impression. This also benefits McDonalds strategically.
In general terms, relationship marketing is strategies used by business to generate good, long
term relationships with customers to increase the loyalty and the possibility of word of mouth
promotion and report sales. McDonalds therefore emphasizes in relationship marketing to help
them build with their customers long term relationship and making them business highly
profitable.
Since McDonalds is well aware that due to immense competition in the market, retention of
customers is a very important factor to succeed. Getting more new customers can be difficult and
less favorable sometimes than retaining the existing chunk.
Strategic Marketing Techniques
3.1. Use of Appropriate marketing techniques
How does the company decide on which products to become its main menu and the rest as
limited time promotions? Carol Sagers, McDonalds Director of US Marketing, provides us some
insight:
There are two core strategies that all marketers should use. The first is target marketing: i.e.
who are you talking to? The second is product positioning: i.e. what do you want them to think?
(Youtube, 2013).
This section will focus on Segmentation Targeting and Positioning of a companys
products/services using McDonalds as an example.

1. Segmentation
Segmentation is the dividing of a population into groups according to certain characteristics.
claims that McDonalds uses these segmentations and segmentation criteria:
Geographical; region, density.
Demographical; age, gender, life-cycle stage, income, occupation.
Behavioral; degrees of loyalty, benefits sought, personality, user status.
Psychographic; social class, lifestyle.
However, maintain that McDonalds only uses demographic segmentation strategy with age as the
criteria.

2. Targeting
Targeting implies choosing specific groups identified as a result of segmentation to sell
products. How does McDonalds select/target the right segments? (Iacobucci, 2014) advices that
marketers iterate between understanding corporate fit and having information about segment size
and likely profitability. (Dudovskiy, 2016), supplies the targets for the segments he proposed
earlier (Figure 4).

Type of Segmentatio
McDonalds target segment
segmentation n criteria

Region Domestic/international

Geographic Density Urban/rural

Age 8 45
Gender Males & Females

Bachelor Stage: young, single people not living at home

Life-cycle Newly Married Couples: young, no children


stage
Demographic
Full Nest II: youngest child six or over

Income Low and middle

Occupation Students, employees, professionals

Degree of
Hard core loyals and Switchers
loyalty

Benefits
Cost benefits, time efficiency
Behavioral sought

Personality Easygoing & careless

User status Potential and regular fast food eaters

Social class Lower, working and middle classes


Psychographi
McDonalds targets Resigned, Struggler and Mainstreamer individuals
c
Lifestyle according to Cross Cultural Consumer Characterization developed by
Young & Rubican
Figure 4: Targets for McDonalds customers (Source: (Dudovskiy, 2016))

However, according to Carol Sagers (McDonalds Director of US Marketing) the company seeks
specific segments of its target population and then customizes or positions their products to each
segment. Unlike other big package goods companies that have brand managers for their various
brands, McDonalds does not have a Big Mac manager or a salad group. Their marketing
department consists of consumer segments; there can be a Director of Young Adults, a Director
of Moms, a Director of African Americans, Hispanics etc (Youtube, 2013).
Of course, there is limited time promotional meals where customers can be extracted from the
existing customer segments e.g. young adults for AFL promotion, mums buying for their kids for
Kung Fu Panda promotion etc.

3. Positioning
Positioning refers to the selection of the marketing mix the most suitable for the target customer
segment. Positioning is achieved via a manipulation of the marketing mix 4Ps, and the
positioning matrix demonstrates that certain combinations make more sense than
others (Iacobucci, 2014). McDonalds uses adaptive type of product positioning and accordingly,
the company is engaged in periodical re-positioning of products and services according to
changes in the segment (Dudovskiy, 2016). The following is a direct quote from McDonalds
franchise strategy document:
McDonalds has made itself to be the family friendly low cost restaurant in the fast food
business. We have a narrow scope for a customer base and a low cost strategy (McDonalds,
2017).

3.2. How to use marketing strategy


McDonalds generic strategy determines its basic approach to developing its business and
competitive advantage. As the biggest fast food restaurant chain in the world, McDonalds uses
its intensive growth strategies to support continued business development and expansion. The
related strategic objectives dictate the companys operational activities, especially in responding
to economic changes and the actions of competing firms. Variations in market conditions impose
pressure on the business to adapt or reform its strategies. As such, McDonalds generic strategy
and intensive growth strategies change over time to ensure long-term business viability
(Merchant, 2014).
McDonalds generic strategy defines the firms overall business approach. The intensive
strategies determine McDonalds approach to growing its business in the global fast food
restaurant industry.

McDonalds Generic Strategy (Porters Model)


McDonalds primary generic strategy is cost leadership. In Porters model, this generic strategy
involves minimizing costs to offer products at low prices. As a low-cost provider, McDonalds
offers products that are relatively cheaper compared to competitors like Arbys. However, the
company also uses broad differentiation as a secondary or supporting generic strategy. This
secondary generic strategy involves developing the business and its products to make them
distinct from competitors (Merchant, 2014). For example, through McCaf products,
McDonalds applies the broad differentiation generic strategy.
Vertical integration is a strategic objective linked to McDonalds cost-leadership generic strategy
(Merchant, 2014). For example, McDonalds owns facilities that produce standardized mixtures
of ingredients. Also, cost minimization is a financial strategic objective based on the cost
leadership generic strategy. In addition, product innovation is related to McDonalds broad
differentiation generic strategy.

Strategic Analysis and Recommendation for McDonalds


McDonalds generic strategy of cost leadership enables the company to sustain its market
leadership. The companys broad differentiation strategy also helps. However, a possible
strategic direction for McDonalds continued growth is to establish more locations in developing
economies and in countries where the firm has no market presence. The recommended strategic
goal is to fuel business growth through a combination of the market penetration and market
development intensive strategies.

3.3 Create appropriate strategic marketing objectives for a market?


McDonalds have been focusing on building relationships with their customers. Relationships
are key to remain sustainable in any emerging environment.
The key strategic marketing objective is to remain loyal with your customers, their tastes,
their cultural values, etc. It is highly important to strategize this for long run.
Brand positioning is another key aspect. You need to position your brand in the minds of the
customers to target them strategically for long run.
McDonalds breakfast in recent times has been the most well sold strategic marketing piece of
business wherein customers love to be served at the time when they are most hungry and are
craving for breakfast of this taste.
Changes in the market environment
4.1. Impact of changes in the external environment on a marketing strategy
PESTEL Analysis of McDonalds
This PESTEL/PESTLE analysis of McDonalds shows that there are many opportunities and
considerable threats that the firm must address to keep its viability in the rapidly changing
global economy.

Political Factors:
McDonalds considers the impacts of the political environment on its industry. This aspect of the
PESTEL/PESTLE analysis refers to the effects of governmental action on the remote or macro-
environment of businesses (Roper, 2012).

In McDonalds case, the most significant political external factors are as follows (United States
Department of Agriculture Economics Research Service, 2015):
1. Increasing international trade agreements (opportunity)
2. Pending tax reform (opportunity)
3. Evolving public health policies (threat and opportunity)
McDonalds has the opportunity to expand its business based on improved international trade,
which can enhance global supply chains. McDonalds also has the opportunity to reform its
practices and strategies to lessen the impact of taxation on the business without violating the law.
However, public health policy increasingly tends to discourage people from consuming fast foods
from firms like McDonalds. Nonetheless, the company has the opportunity to address this
external factor by improving the healthfulness of its products. In this aspect of the
PESTEL/PESTLE analysis of McDonalds, the political external factors present opportunities that
outweigh threats.

Economic Factors:
Economic changes around the world influence McDonalds industry environment, considering its
global nature. This aspect of the PESTEL/PESTLE analysis pertains to the effects of economic
conditions and trends on the remote or macro-environment of firms (Roper, 2012).

In McDonalds case, the following are the most notable economic external factors (United States
Department of Agriculture Economics Research Service, 2015):
1. Slow but stable growth of the U.S. economy (opportunity)
2. Stable but risky European economies (threat)
3. Slowdown of the Chinese economy (threat)
McDonalds has the opportunity to grow, even slowly, in the American economy, which is the
firms biggest market. However, the current economic conditions in Europe could threaten
McDonalds growth in the region. Also, the slowdown of the Chinese economy threatens the
companys growth in Asia. In this aspect of the PESTEL/PESTLE analysis of McDonalds, the
economic external factors mainly threaten the business.

Social Factors:
McDonalds must respond to socio-cultural changes in its remote or macro-environment. This
aspect of the PESTEL/PESTLE analysis refers to the social conditions that support or limit
businesses (Roper, 2012).

In McDonalds case, the most significant socio-cultural external factors are as follows (United
States Department of Agriculture Economics Research Service, 2015):
1. Widening wealth gap (opportunity)
2. Increasing cultural diversity (opportunity)
3. Healthy lifestyle trend (threat & opportunity)
Based on the external factor of the widening wealth gap, McDonalds has the opportunity to
grow because the companys target consumers are mostly from medium and low-income
households. Also, McDonalds has the opportunity to improve its products mix to satisfy a more
diverse target market. However, the healthy lifestyle trend is a threat because many of
McDonalds products are often criticized for their negative health effects. Nonetheless, the
company has the opportunity to improve the healthfulness of its products. In this aspect of the
PESTEL/PESTLE analysis of McDonalds, the social external factors create mostly
opportunities for business development.

Technological Factors:
McDonalds success partly depends on technological applications. This aspect of the
PESTEL/PESTLE analysis pertains to the impact of technologies and related trends on the
remote or macro-environment of companies (Roper, 2012).

McDonalds must address the following technological external factors (United States Department
of Agriculture Economics Research Service, 2015):
1. Moderate R&D activity in the industry (opportunity)
2. Increasing business automation (opportunity)
3. Increasing sales through mobile devices (opportunity)
McDonalds has the opportunity to increase its research and development investments to improve
business effectiveness and efficiency. Also, McDonalds can apply more automation to maximize
productivity, based on the external factor of increasing business automation. Furthermore,
McDonalds can improve its mobile services to tap more consumers via its website or mobile
app. In the technological aspect of the PESTEL/PESTLE analysis, McDonalds has major
opportunities for growth.

Ecological/Environmental Factors
Ecological external factors affect McDonalds consumers and, thus, the companys performance.
This aspect of the PESTEL/PESTLE analysis refers to the environmental issues in firms remote
or macro-environment (Roper, 2012).

In McDonalds industry, the following are the most significant ecological external factors
(United States Department of Agriculture Economics Research Service, 2015):
1. Rising interest for corporate environmental programs (opportunity)
2. Increasing emphasis on sustainable business strategies (opportunity)
3. Climate change (threat)
McDonalds can expand its corporate social responsibility strategies to reach even high
performance in addressing environmental concerns. However, climate change remains a threat
because of its negative effects on farms and, thus, McDonalds supply chain. In this aspect of the
PESTEL/PESTLE analysis, the ecological external factors highlight corporate social
responsibility opportunities, although McDonalds also needs to further diversify its supply chain
to address the effects of climate change.

Legal Factors
McDonalds must follow legal requirements imposed on its remote or macro-environment. This
aspect of the PESTEL/PESTLE analysis pertains to the impact of laws or regulations on firms
(Roper, 2012).

The most significant legal external factors for McDonalds are as follows (United States
Department of Agriculture Economics Research Service, 2015):
1. New legal minimum wage levels in the U.S. (threat)
2. Local health regulations in workplaces and schools (threat)
3. Animal welfare regulation (threat & opportunity)
McDonalds faces the threat of higher minimum wages, which lead to higher costs and prices.
Also, local health regulations impacting food service in workplaces and schools could reduce the
companys revenues from these areas. In addition, McDonalds must address animal welfare
regulatory effects on its supply chain. For example, the company can implement new policies to
ensure animal welfare among meat producers. McDonalds faces mainly threats based on legal
external factors in this aspect of the PESTEL/PESTLE analysis.

McDonalds PESTEL/PESTLE Analysis Recommendations


This PESTEL/PESTLE analysis of McDonalds Corporation shows that there are significant
opportunities for business growth. The company can capitalize on technological strategies to
enhance efficiency and productivity. McDonalds can also improve product quality to address
sociocultural and political external factors about health. This PESTEL/PESTLE analysis also
indicates that the company must deal with a number of significant threats. McDonalds can
address economic external factors by expanding into other high-growth economies, such as
Southeast Asian countries.
4.2. Internal analysis to identify strengths and weaknesses

SWOT Analysis of McDonalds


This SWOT analysis of McDonalds Corporation shows that the company must address
diversification and process flexibility, as well as expansion and innovation (Greenspan, 2015).

McDonalds Strengths (Internal Strategic Factors)


McDonalds strengths make it a leading contender in the fast food restaurant market. This aspect
of the SWOT analysis shows the internal strategic factors that contribute to organizational
viability. McDonalds main strengths are as follows (Greenspan, 2015):
1. Strong brand image
2. Moderate market diversification
3. Standardized processes
McDonalds has a brand image that makes the business competitively strong. Another major
strength is market diversification based on the firms presence in most regions around the world.
This factor reduces market-based risks. In addition, McDonalds has a comprehensive system of
standardized processes, which is a strength that contributes to business efficiency and product
consistency. This aspect of McDonalds SWOT analysis shows that the company has the
capability to maintain effective operations.

McDonalds Weaknesses (Internal Strategic Factors)


McDonalds weaknesses are linked to the companys market focus, products and processes. This
aspect of the SWOT analysis indicates the internal strategic factors that limit firm performance.
McDonalds main weaknesses are as follows (Greenspan, 2015):
1. Limited process flexibility
2. Low product diversification
3. Vulnerability to Western market decline
McDonalds standardization ensures consistency but also reduces the companys flexibility in
responding to market variations. Low product diversification corresponds to the firms focus on
food and beverage products, which is a weakness that makes the business highly vulnerable to
slowdowns in the restaurant industry. In addition, majority of McDonalds revenues are from the
U.S. and other Western economies. This is a weakness because it makes the firm easily
vulnerable to economic decline in the Western world. This aspect of McDonalds SWOT analysis
shows that the company needs to globally expand, improve flexibility, and widen its product
mix.

4.3. Proposed strategic marketing responses


In pursuing an advantage over its rivals, McDonalds choses the below from several competitive
moves:
Changing prices - lowering prices to gain a temporary advantage. On a timely
basis, McDonalds try to gain competitive advantage over its rivals by comprising on
product prices.
Improving product differentiation - improving features, implementing
innovations in the manufacturing process and in the product itself. This is also a
key feature at McDonalds wherein they differentiate their product with their rivals.
Creatively using channels of distribution - using a distribution channel that is novel
to the industry.
Franchising is the major strategic marketing technique for McDonalds which helps in
generating great revenue.
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