McDonald's Marketing Project

Strategic management is a key area in business and can help to decide the fate of a company when
analysing where its strengths, and perhaps more importantly, where its weaknesses lie. A company
that can successfully identify these characteristics will certainly have an advantage over its
competitors. One example of such a strategy is PESTEL analysis.

PESTEL Analysis

There are many factors in the macro-environment that will effect the decisions of the managers of
any organisation. Tax changes, new laws, trade barriers, demographic change and government
policy changes . To help analyse these factors managers can categorise them using the PESTEL
model.

When looking specifically at McDonald's we can see that a PESTEL analysis may look like this:

Political Factors

McDonald's as a company in the fast food market has taken, both internationally and more
specifically from a UK perspective, most of the blow when it comes to the fast food clampdown
and was under both media and political pressure from various groups to alter both its selection of
food it provides and perhaps more importantly the fat and salt values within the menu it already
offered. The intense political pressure was backed by research into the fat and salt values of
McDonald's meals and together with the rising levels of obesity in the country it pushed
McDonald's to make a significant change.

The result of this pressure led to a few changes in the way the company operated and the most
noticeable change was in the form of a wider menu range and nutritional values being printed on
most meals.

Aside from being criticised for being a typically unhealthy and damaging company to the health
interests, McDonald's has been involved with the new UK health policy that tackles issues such as
obesity. This is a clear example of McDonald's adaptability to pressure from the media and political
parties and this may play a key part of McDonald's marketing strategy.

Economic Factors

McDonald's economic factors range internationally but in terms of the UK economic outlook
McDonalds is currently strong with high sales and profits resulting from the recession because of its
image of cheap and fast food earning itself a boost in sales from an initial drop a few years ago.

As a result of this boost in sales, McDonald's has emphasised this perceived image of itself and
launched television adverts portraying several images of McDonald's being a convenient food stop
that is both available to everyone and enjoyed by all.

Socio-Cultural Factors

McDonald's have aimed to improve their workforce's education and hence their efficiency by
providing a degree accredited by Manchester Metropolitan University. From a socio-cultural point
of view this degree may give access to education to those who would normally just partake in low
level skilled work instead of attending university and complementing the workplace with businesses
theory.

As previously mentioned, the main social factor concerned with McDonald's would be the issue of
obesity and the impact McDonald's has both negatively and its propositions to help combat the
problems.

http://newsfeed.time.com/2010/11/27/u-k-university-to-offer-mcdonalds-degree/

Technological Factors

McDonald's is very in touch with technology with countless examples from their clever television
adverts to the toys that feature in “happy meals”. McDonald's is clearly a company that lives in the
modern era and puts technology high on its priority list.

McDonald's also incorporates a sophisticated inventory system together with its international supply
chain help McDonald's to us technology as a means to add value to their products and provide a low
cost system which then passes these costs down to the customers.

Environment

McDonalds is very keen to promote its attitude towards helping the environment by drawing up a
comprehensive environmental policy that states that its aims to reduce energy emissions, reduce
odour and noise pollution and minimise the solid waste produced by the company.

All of these help to market McDonald's as a company that is not only helping to reduce its impact
on the environment but to be proactive in showing that it wants to do as much as it can.

http://www.mcdonalds.co.uk/ourworld/environment/policy.shtml

Legal Factors

The legal factors surrounding McDonald's tend to link to its social responsibilities and the issue of
fast food and obesity in general, although no specific legal action has been formally made against
McDonald's its clear that the pressure put on the company has certainly had a clear effect on the
way in which it operates and the response it has given to show that it is proactive in its social
responsibilities.

http://ivythesis.typepad.com/term_paper_topics/2009/02/pestle-analysis-of-mcdonalds.html

Relevance of Michael Porter.

Porters 5 Forces:

Michael Porter provided a framework that models an industry as being influenced by five forces.
Companies can use this model to better understand the industry context in which the firm operates
and identify the areas in which it needs to

http://www.quickmba.com/strategy/porter.shtml
Diagram of Porter's 5 Forces

SUPPLIER POWER
Supplier concentration
Importance of volume to supplier
Differentiation of inputs
Impact of inputs on cost or differentiation
Switching costs of firms in the industry
Presence of substitute inputs
Threat of forward integration
Cost relative to total purchases in industry
BARRIERS
TO ENTRY
Absolute cost advantages
THREAT OF
Proprietary learning curve
SUBSTITUTES
Access to inputs
-Switching costs
Government policy
-Buyer inclination to
Economies of scale
substitute
Capital requirements
-Price-performance
Brand identity
trade-off of
Switching costs
substitutes
Access to distribution
Expected retaliation
Proprietary products
BUYER POWER DEGREE OF
Bargaining leverage RIVALRY
Buyer volume -Exit barriers
Buyer information -Industry
Brand identity concentration
Price sensitivity -Fixed costs/Value
Threat of backward integration added
Product differentiation -Industry growth
Buyer concentration vs. industry -Intermittent
Substitutes available overcapacity
Buyers' incentives -Product differences
-Switching costs
-Brand identity
-Diversity of rivals
-Corporate stakes

Degree Of Rivalry

The degree of rivalry in the fast food and restaurant industry is very high especially within the UK
and the economic climate. To help ensure that McDonald's has an advantage over its competitors
McDonald's has diversified itself into broader food markets. These range from offering breakfast
items to competing with sandwich companies such as Subway by offering a deli sandwich meal.

These decisions by McDonald's help to make it a dominant force by directly competing with a wide
range of company's and such offering a low price to keep its sales high.

Barriers To Entry

Barriers to entry in the fast food and restaurant market is extremely difficult, especially for larger
companies that are in national competition with McDonald's and other well established fast food
chains.
However, on a small scale small restaurants or cafes may be able to compete on a local basis and
may draw away some of the consumers from the larger chains but in terms of the regional and
national markets there are huge barriers to entry simply because of McDonalds excellent supply
chain, very low cost production and massive marketing budgets.

Threat Of Substitutes

There are various substitutes in the industry because of the sheer number of fast food chains and
smaller restaurants. These include small fast food vendors, sandwich shop, coffee shops, and other
large chains.

Supplier Power

The power of suppliers will be quite low in the industry because the products needed by the
industry are in abundance and often the fast food chains can simply select the cheapest suppliers
available to them.

Buyer Power

Similarly the buyer power is low in the fast food industry as the volume of buyers are so high and
the prices of the meals so low that buyer power does affect the market that much.