Strategy Part 3

External environmental scan of McDonald’s

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External environmental scan of McDonald’s

Introduction

McDonald's Corporation is the world biggest chain of fast food eating place and franchises system in the globally. The organization was found or established in 1940 east of Pasadena, California by two brothers Richard and Maurice McDonald. Presently the organization has 35,000 braches across the world in 125 countries with an estimated daily customer of 69 million. In the year 2013 the organization recorded an operating income of approximately US$ 9 billion which is a clear indication of the success since the establishment in 1940. Due tot hat fact that its the biggest food chain across the globe its gets affected by all the external factors such as political situation in the countries, economical circumstance, local competition, buyer behavior, legal rules and regulation across the nations and societal factors.

The organization faces two major external factors including the substitution of new products that are healthier as compared to fast food and the entrant of new competitors in the market. This essay does the study of these external aspects that are affecting or can affect the McDonald in a constructive or unconstructive manner. The paper also comprises five force examination of fast food analysis to cover all features of external factors impacting this commerce.

Porter's Five Forces Analysis

Porter's five force analysis is a type of structure that is utilized by the organization to determine the competition levels in the market and provided vital information that will be used to developed strategies that leads to competitive advantages (Burks, 2015). This analysis provide the evaluation or information that can be used by new entrant or existing organization as the negative and positive market current and future conditions are exploited. Higher competition levels are presented in the industry of fast food.

Threat of New entrant - At the present time there is no much competition due to new entrant in the market that can have the significant effects to McDonald as they have already established brand name in the market. Due to that fact that McDonald has invested more on their employees and the products hence providing acceptable standards in the market there has been a barrier blocking some of the new small entrant to the market. Creating a good image and provision of better services to the client is one of the main aspects to consider in the food industry to win the customer loyalty.

The existing major competitors of McDonald are Burger King and KFC. However individuals are having high preference to McDonald products as they are high quality and within the affordable prices. So at this time for McDonald there is no new admission threat for McDonalds in the fast food market. The existing competitor and the small entrant are trying to other product differentiation to the customer but this strategy is also embraces by McDonald to the diverse branches across the globe.

Threat of Substitute Products or Services – The availability of healthier food substitutes in the market has been a major threat to McDonald as new organization are providing more healthy products at an affordable cost. But in the fast food industry the main criteria that are used to choose the most effectual product from the customer point of view are the time of preparation, conveniences in eating or take away and the health benefits to some extent. In order to achieve this, McDonald is frequently introducing new products that are differentiated, high end services and have some healthy aspects to the customer in order to ensure that they remain competitive and maintain the customer loyalty. According to Mourdoukoutas (2012) McDonald’s in the past few years has constantly expand and developed its product portfolio by offering high quality coffee and healthy drinks.

McDonald ensure the faster and good service to their client which facilitate the customers to stick to their products in the menu including McDonalds Burgers, Beverages, dairy products and many more which comes at an affordable prices.

Bargaining Power of Customers (buyers) - in any given industry it’s within the supply ability to choose the competitor that they wish to purchase from in the market. Within the fast food industry there is room for differentiation of the products but not to bigger extent therefore most of the products are almost the same. This competitors organization control the pricing mechanisms in the market hence this limits the bargaining power of the client. Therefore, there is a very low bargaining influence of buyers in the industry.

Bargaining power of Suppliers - Due to that fact there are dominance of not many suppliers in the fast food industry there is high bargaining power by the suppliers. For instance like soft drinks are dominated ands supplied by coca cola and PepsiCo which provide them with high bargaining power in the market. This industry is directly depended on the providers as they are responsible to provide the necessary products or gears for the fast food companies.

Intensity of Competitive/Industry Rivalry - The fast food industry is highly competitive market with various competitors that are developing strategies to ensure that hey provide high quality services, innovation and affordable prices to the customers. Brands like McDonald, KFC and Burger king are unswerving competitors (McDonald & Wilson, 2016). The geographical settings, advertising and branding of the organization also provides some pointers to the competitors in the market. Even though McDonald is far ahead of other two major competitors but along with these two McDonald also has to face the local completion across all countries. Cost competition is the main completion category in the industry. Consequently, McDonalds ought to progress strategies and be aware of client taste and preferences to compete with this gigantic restaurant industry.

Key Factors and Trends in any other areas affecting your industry (PESTEL)

Economic condition of the countries that the organization operates affects the general operational functions of the organization like increase or decrease of customer purchasing power, interest rates of finances among others. The social setting in the countries across the globe provides McDonald with a better environment to attract the large customer based via strategic social joints developments. The use of technology in improvement of customer service like Wi-Fi enabled fast food restaurant, online order and delivery service, online payment options, new equipment for quick and effective food preparations are the major other factors that are affecting this industry. The government regulation and other legal provision among the diverse nation also posses some threats to the organization operations. Political condition of the countries especially in African nations affects the operation of majority of the McDonald braches.

External Factors as either Opportunities or Threats

Some of the external factors that affect McDonald operations positively by providing adequate opportunities are advancing technological incorporation, changing customer needs, new geographical location diversity, high end services and healthier development of products (Barra, 2012). The use of technology platform like social media in advertisement and provision of orders will provide the effective online operation that can boost the organization productivity.

Some of the threats that affect the organization include the introduction or people shifting to products that are healthier and affordable in the market. On the other hand the unstable economic condition and political status in the diverse geographical location affects the operations significantly.

References

Barra, D. (2012, May 19). How does McDonald’s use technology development to lower cost of production? Retrieved from https://economicsofmcdonalds.wordpress.com/2012/05/19/how-does-mcdonalds-use-technology-development-to-lower-cost-of-production/

Burks, F. (2015). Types of Economic Factors That Can Affect the Fast Food Industry. Retrieved from http://smallbusiness.chron.com/types-economic-factors-can-affect-fast-food-industry-36923.html

McDonald, M., & Wilson, H. (2016). Marketing Plans: How to prepare them, how to profit from them. John Wiley & Sons.

Mourdoukoutas, P. (2012, April 20). McDonald's Winning Strategy, At Home And Abroad. Retrieved from http://www.forbes.com/sites/panosmourdoukoutas/2012/04/20/mcdonalds-winning-strategy-at-home-and-abroad/