McDonald’s conglomerate is a regional as well as an International company that deals in food products. The string of companies competes in the fast food industry delivering French fries, hamburgers, bacon bugger, sausages and many other consumable products using branding, heavy expansion and standardization as the critical force behind their success. In addition to that, McDonald’s offers many hospitality services to the wide customer base in the regions the company has operational bases. For a close to actual figure in estimation, McDonald company has plants and distribution bases in more than a hundred and fifty countries commanding a restaurant line of over thirty thousand joints worldwide.
McDonald restaurant line had had a rapid expansion and growth to many domestic and international backyards. In that regard, the company did employ a rapid and intensive expansion strategy venturing into foreign countries through three prime methods: joint ventures, franchising and company-owned restaurants. For a great number or rather the majority of international restaurants joints did originate from franchising contracts and agreements. The top management of the McDonald restaurants joins did agree to rely on franchising to enable easy marketing and to facilitate acceptance of the then new eating patterns into the new markets that had no much exposure to the reliance on fast food as supplements to cooking at home. For today’s success story of the McDonalds, the management automatically attributes the maximum gains and the minimal risks, a mindset of most risk-averse investors, to the franchising approach.
The centralized nature of the McDonald’s international organizational structure is of great help to the institution. Thanks to the centralizing property, the McDonald restaurants keep a close watch on the operational cost, production, marketing and quality standards. The company has an ethnocentric management strategy. For that reason, the company indeed relies on the local breed of professionals and as well trains their members of staff for the major production sections and marketing. Hence, most of the restaurants’ products exhibit a close to similar characteristics in the sense that sugar, milk, and other ingredients are of similar concentration in the foods.
McDonald’s employs a two-dimensional management strategy to control the international subsidiaries. The necessity originates from the need to have uniformity and conformity to the rules and code of conducts of the organization. McDonald restaurant uses a rules approach to oversee the overseas operation. For that reason, the management control is only with the headquarters that is the only plant that creates rules, policies and procedures for the other entire affiliate restaurant. The management ensures a cultural approach prevails in the control of management structure. The primary trait of the approach is evident in the procedures and policies that the overseas affiliates conform to and implement in the course of their operations regardless of the major internalization undertaken by the headquarter plant.
Keywords: fast food, McDonald Corporation, tax, PESTEL analysis, Internal and external factors, fast food products
Restaurant refers to an enterprise that provides catering services. In most cases, these are joints that prepare and serve people ready food or rather they are just dine-ins. Restaurant classification takes root from their method of preparing food, serving, pricing and hospitality services available. Customers do change the outlook and status of a restaurant. For that reason, the changing purchasing power of the customers and the quality of brands does play a critical role in determining the status of a particular restaurant. In addition to that, the food industry does evolve at a quite fast pace. There has been a revolution in the methods of preparation and serving of food. For instance, many joints did evolve from preparing and serving using waiters to providing fast food and take away services leading to the emergence of restaurants notably, the famous McDonald Corporation. McDonald’s conglomerate is one of the largest and fastest growing fast food products supplier and service provider in the world today. The corporation operates in more than one hundred and fifty countries and boasts an outlet number of over thirty thousand joints. McDonald group of restaurants boasts the largest customer base for their fast food products. For that reason, the corporation has over two and a half million workers and provides services to about eighty-five percent of the World’s population in a single year. In addition to that, the company offers a wide range of fast food products and has more emerging brands than their industry competitors have. McDonald’s primary fast food products include bacon burgers, hamburgers’, and French fries. In addition to that, most of the McDonalds outlets offer salads, fish, and fish products as well as fried chicken.
McDonald chain of restaurants did start operations in the early twentieth century, around 1954. The growth of the company has been incredible as the managers and owners are more than willing to expand at any cost. The philosophy has indeed been to the advantage of the restaurant. The maxims of the philosophy refer to a situation whereby more outlets get into the market in different locations at any cost and compete considerably with other players in the market. For instance, the rapid growth rate of the McDonald chain of restaurants insinuates that there is at least a single outlet opening in a period of five hours in a day and in the overall year. Profits grow with a great number of outlets operating in different locations hence serving many customers. For that reason, the management and employees do operate in many areas and open more joints to rival their competitors and maximize profits. The expansion to new markets has been successful in all areas of the globe thanks to the great economists and businesspersons and other stakeholders who support the company. However, saturation issues have had a negative impact on the sales of the company. The saturation problem did hit the entire world from financial markets to consumable products services providers but the chain did experience a massive effect.
The company employs four most important values and principles that enable the company to expand and grow to new markets and retain the positional power in the market as being the industry leader. McDonald has had a role in changing the feeding habits of millions of people in the world. The company manages the massive breakthrough by leveraging their vast cash flow, real estate, customer spending habits and brand power.
There are different factors that affect different industries. In most cases, though, most operating companies are under the influence of political, economic and even social issues in their immediate environment. However, today, technology, legal and even environmental factors are crucial determinants of market performance for most companies. Quality response to these factors that affect the profit of a company is determined by the institution’s strength, the approach in dealing with weaknesses, strategic management, and resource utilization. McDonald is the dominant fast food firm in the globe today. Flexibility is the foundation stone of the McDonald Corporation (Mishra, Dwivedi, 2013, Pg. 2). The diversity of the products on offer in all the outlets of the McDonald is the main reason for its dominion in the market. The company has had tremendous growth, despite the global financial crisis, due to its leadership and market management strategies. The quality of life among the middle-class populations did improve in the last millennium. Changes in the American society did lead to extraordinary growth in the fast food industry (Schlosser, 2012, Pg. 4). The improvement is an attribute to the increase in professionalism and income. In addition to that, a great number of people have come up with new ways of improving livelihood through improving their income. For these reasons, buying patterns did revolutionize and hence fast food companies did evolve and keep on evolving. New Yorkers did rank hamburgers to be their favorite meal as early as 1925 (Wilson, Schlosser, 2012, Pg. 17). Hamburgers have been a darling for the American societies and beyond. In addition to that, the companies, in this case, McDonald has to strategize on the best ways of maximizing profits and business.
The use of PESTEL to analyze the internal and external factors influencing a company helps to define the real picture of that particular company. For the case of McDonald Corporation, being a fast food company in a fast growing world along the lines of awareness, technology and changing political sceneries, the firm is under the influence of political, economic, legal, environmental, and even socio-cultural factors among other many external and internal factors.
Politics play an important role in business. The ruling class formulates rules, policies and regulations that govern the conduct and operations of the many corporations. For that reason, the McDonald Corporation is not an exception, as it has to conform to both federal policies and state laws governing the conduct of restaurants. Many rights groups and officials of the World Health Organization have in the recent past and even today lodging complaints directly to the federal government and the state law offices as well as the respective state governments against the operations of the McDonald. In a comprehensive, complain sheet, many of these groups claim the increasing obesity among the youths is an attribute to consuming cholesterol and other sugary carbohydrate elements that are the most abundant ingredients in fast food products.In addition to that, there are other influential factors like the varying taxation policies, inconsistent employment regulation in different countries and states, and many trade regulations like protectionism in Africa and Free Trade in the Northern America corridor. The NAFTA policies aid in the flow of fast food products from the US to other countries like Mexico (Hanssen, et al. 2012, Pg. 3). For instance, tax rates do affect the performance of a company. Hence, the same has had an adverse effect on the McDonald restaurant. In addition to that, there are regulations like the number of working hours in different countries and states that adversely affect the McDonald firm. Recently, there have been efforts for the legalization of regulations that constrain the content of the fast food products.
McDonald company did expand rapidly into international markets hence has a high international presence. For that reason, the firm faces the challenges of varying exchange rates and even inflation. Hence, the corporation has to adapt to these influential factors. The wage rates, cost of living in various cities and towns, and inflation capacities affect McDonald a great deal. Taxation regulations are harnessed and any possible loophole does not exist (Raabe, et al. 2015, Pg. 32). In addition to that, the economic factors do influence the relationship between the supply and demand of raw materials within the organization.
McDonald Company relies on television advertisements as the sole method of reaching out to its vast customer base. The management of the value chain of the company and the inventory system allows the firm to pay for the services. Digital transformation power and strategy do improve company performance in the market (Kane, et al. 2015, Pg. 3).The Integration of technology in the operations and business conduct of the McDonald has had a value addition in reaching out to the customers. For that reason, the firm has had tremendous growth in its profits. In addition to that, technology enables the company to oversee operations in its overseas affiliates.
Regulations like tax remittance and employment policies vary from region to region. For that reason, McDonald Corporation has to adapt and operate differently in its various branches. Nutrition specific policies influence food supply and consumption (Friel, et al. 2015, Pg. 2). For that reason, health agencies have been a roadblock in expanding food joints. In addition to that, governments are always at loggerheads with the company because of the use of non-biodegradable substances like glass in distributing its products.
McDonald Corporation faces the threat of stiff competition from rival companies. Statistics reveal that there is always the possibility of a new competing fast food firm opening in the market area to rival a McDonald restaurant. For these reasons, there is the need to focus on the many internal factors that do put the McDonald Company above the rest in the market.
Customer satisfaction is the purpose of all companies so that they retain and enlarge their customer bases. McDonald commits itself to maintain and improve customer satisfaction. For purposes of improving its service delivery, McDonald Corporation did incorporate the PDA systems that ensure fast order placement and delivery. In addition to that, customer requests for special products have indeed lead to product diversification.
The strategic management of important departments in the McDonald structure is mainly on an Information Technology platform. Information technology does help the company to process requests or orders and present invoices quickly to suppliers and customers. The workers employ an open and supportive strategy to enhance and achieve a common goal (Abid, Khan, and Ahmed, Pg. 10). Management supports and motivates the employees. For that reason, the company has been successful in handling internal matters.
McDonald Corporation boasts of having the best innovative minds at its disposal. For that reason, the company sees new food products being introduced that help them to remain the industry grand leaders. In addition to that, the management is flexible and approves new additions in foods with appropriate insight into the final products design and quality.
For future developments, the following points are good to consider for expanding and exploiting new markets:
Abid, G. Khan, B., and Ahmed, a. (2015). Elite Hall Publishing House. International Journal of
Information, Business and Management, Vol. 7, No.3.
Friel, S. Hattersley, L. Ford, L., and O’Rourke, K. (2015). Addressing Inequities in Healthy
Eating. Health Promotion International Journal, Vol. 30, No. S2, Pp. 77-88.
Hanssen, K. K. Murphy, S., and Wallinga, D. (2012). Exporting Obesity: How US Farm and
Trade Policy is Transforming the Mexican Food Environment. Journal of Occupational and Environmental Health, Vol. 4, No.4. Available at: http://www.iatp.org/files/2012_04_04_ExportingObesity_KHK_SM_DW.pdf.
Kane, G. C. Palmer, D. Nguyen, A.P. Kiron, D., and Buckley, N. (2015). Strategy, Not
Technology, Drives Digital Transformation. MITS Loan Management Review, Available at: http://sloanreview.mit.edu/projects/strategy-drives-digital-transformation/.
Kelly, M., Williams, C. (2014). BUSN: Introduction to Business. Stamford: Cengage Learning.
Kluyver, W. (2010). Fundamentals of Global Strategy: A Business Model Approach. New York:
Business Expert Press.
Mishra, B., Dwivedi, S. (2013). Success Story of McDonald in India: Story of its Struggle in
Indian Market. Asian Journal of Science and Technology, Vol. 4, Issue No. 7, Pp.66-70.
Raabe, W. A. Maloney, D. M. Young, J.C. Smith, J. E., and Nellen, A. (2015). South-Western
Federal Taxation 2016: Essentials of Taxation: Individuals and Business Entities. Boston: Cengage Learning.
Schlosser, E. (2012). Fast Food Nation: The Dark Side of the All-American Meal. Boston:
Wilson, C. Schlosser, E. (2012). Chew On This: Everything You Don’t Want to Know About Fast
Food. Boston: Houghton Mifflin Company.