McDonald’s had been a reputed brand across the Atlantic Ocean in the United States of America since it was launched in the year 1940 when they opened their Bar-B-Que in California. Then the company grew rapidly in the United States and in the year 1974 McDonald’s entered the United Kingdom with the opening of its 3000th store and the first in the United Kingdom this store was opened at Woolwich in South East London. And it had been successful in its operations in the United Kingdom since then by adding up close to two thousand five hundred stores in due course of time since their entry (www. mcspotlight.
org). AIM The aim of this paper is to understand the effect of macro environment on the operations of McDonalds in United Kingdom and the influence it has on its future operations. MACROENVIRONMENT Let us understand the macro environment in the United Kingdom from a fast food industry point of view. The analysis would be carried out using the PESTEL as proposed by Francis J Aguilar who discussed the concept in the earlier form which only contained the first four parts namely PEST. However, during the course of evolution further two terms were
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PESTEL stands for Political, Economic, Sociological, Technological, Environmental, and finally Legal this would be the key factors that affect the organisation from a macro environment standpoint. Let us now understand each of these factors in detail and how they affected organisation in the last one year of its operations. Political: This factor analyses the key criteria like tax policy, employment laws, environmental regulations, trade restrictions and reform, tariffs and political stability.
The major changes from a political point were the introduction of budget in the month of April 2009 (www. news. bbc. co. uk) which increased the petrol cost by 2 pence which would have an effect on the McDonald’s operations as the cost of transportation would increase and also the number of users of drive through may be affected by the increase in the cost of petrol. And the other factor that would have an impact would be reduction in public spending which would create less disposable income in the hands of people which would affect the sales at McDonalds accordingly.
Economic: what is happening within the economy, for example; economic growth/ decline, interest rates, exchange rates and inflation rate, wage rates, minimum wage, working hours, unemployment (local and national), credit availability, cost of living, etc. , The economy was still reeling under the effects of recession, there was a decline in the general economic conditions and the inflation was in the negative which had gradually inched into positive figures in the recent months.
The Consumer Price Index and the Retail Price Index were mostly in the decline during this period which would have had an impact on McDonald’s from this points as the general tendency of the people would be to be more cautious on spending their available and disposable funds. However, the company had an advantage as it was a necessity product and the pricing is relatively cheaper than the competitors which provided it with a competitive advantage and enabled it to gain from this particular downturn.
Sociological: what is occurring socially in the markets in which you operate or expect to operate, cultural norms and expectations, health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety, global warming. The major events during the last twelve months preceding this report from a sociological point of view are the outbreak of Swine Flu which hit our shores in the month of April and its intensity increased in the month of July as more than 100,000 were reported across the United Kingdom.
This would have had a major impact on the operations of McDonalds as the food industry in general suffered due to this outbreak and the people movement in general locations was affected due to this reason.
Technological: This means the impact technology on the operations that are carried out and what you do, technology is evolving at a very fast pace and the same needs to be assessed about how it impacts the organisations products and / or services, things that were not possible five years ago are now mainstream, for example mobile phone technology, web 2.0, blogs, social networking websites. New technologies are continually being developed and the rate of change itself is increasing. There are also changes to barriers to entry in given markets, and changes to financial decisions like outsourcing and in-sourcing. On a technological front there were not many inventions or impacts which would have considerably affected the food industry in general and McDonalds in particular.
However, there have been some minor improvements that the company would have achieved by the way of improving the quality of offerings and bringing down the time of service by pruning on the technology and also McDonalds has brought in a technological service offering to their stores by offering Wi-Fi in their stores for customers as a value added service. Environmental: This relates to the study of what is happening with respect to ecological and environmental aspects. Many of these factors will be economic or social in nature.
The environmental issues that happened during the previous year were the adverse climatic conditions that were experienced in winter which had put the life out of gear in United Kingdom due to which transport was adversely affected. The other serious factor was the global warming which was in the spotlight recently and is being discussed in various forums and at an international level. McDonald’s on its part has taken the cue and had been consistently working towards achieving a better and greener planet by bringing in different policies around this.
The initiative was called as the ‘Working towards a greener future’ as part of this initiative the company has launched various measures to bring in effective control by way of following methods namely ‘Litter’ through which they provide bins outside their restaurants and are one of the biggest sponsors of council provided litter bins in the United Kingdom. ‘Waste’ they effectively manage their oil waste i. e. , the used cooking oil which represents 10% of a restaurant’s total waste, the same is recycled into biodiesel, with which they run their delivery fleet.
‘Packaging’ as part of this process they have replaced their salad containers with a paper card base thereby reducing the amount of plastic purchased by sixty nine tonnes as a company. ‘Energy’ all the McDonald restaurants use low energy lamps and have light level sensors installed in them to control external lighting. All new lighting systems also have high frequency fittings. Legal: The changes that are happening to legislation. This may impact employment, access to materials, quotas, resources, imports/ exports, taxation etc.
The legal issues are concerned with employability factors, restrictions if any imposed in the local markets like quotas or restrictions on availability of materials etc. , In the previous twelve months there have been no changes as per available information. However, there were some minor skirmishes on the legal front like the pull out of Iceland as it is too expensive for the franchisee due the financial crisis affecting the country (www. dw-world. de). Future Strategies of McDonald’s
Based on the above factors it can be assessed that the company has undergone lots of pulls during the last twelve month period and has learnt a lot and can plan their strategies keeping a tab on the below issues: – On the political front the cost of petrol has increased and the same is expected to continue the organisation would require to consider the factor of adding up more drive-in stores as more and more customers may opt for walk-ins rather than a drive-in and may move the drive-in restaurants to sub-urban locations to achieve efficiency.
– On the economical front there seems to some good news as the economy is recovering from the recession and the company can leverage from this by aggressively targeting their customers who have moved in to opt their services during the recession as part of curtailing their budgets. The same can be retained by offering more quality products or restaurants to target the niche market through differential marketing techniques or targeted marketing.
– The sociological factors like health epidemics forced the company to readjust its strategies and hence a customised build up of business continuity plan on these scenarios would ensure that the organisation can reach out its customers with an effective plan to counter these kinds of threats. – On a technological front the provision of Wi-Fi can be extended to include tie-ups with online community networks by providing gaming stations and large screen televisions to attract and retain new customers and old customers respectively.
– From an environmental perspective the implementation of LEED (Leadership in Energy and Environmental Design) designs across all the stores which would enable McDonalds to achieve goodwill marketing through green marketing. – The legal aspects and the impact of the McLibel case (Haig, 2003) explain the implications of legal issues on brand value. Hence, a coordinated and concerted effort would be required on this front to avoid such pitfalls in future. McDonald’s Marketing Mix
McDonald’s has been at the forefront in relation to marketing globally and that has been one of the key advantages for it to capture the world markets and it had an impact on globalisation wherein at times globalisation is also referred to as McDonalisation (Ritzer, 2004). With such an efficient process of operations the next big target for the organisation is to market their products. The same is carried out by them through the effective utilisation of the 4P’s model (www. mcdonalds. co. uk). The same would be evaluated to get an understanding how this model was implemented by McDonald’s in their organisation.
The 4Ps model has evolved over period and this one of the marketing mix strategies adopted by different organisations has been proposed by (McCarthy. J. E, 1960, as cited by Mercer, 1996) The marketing mix consists of the Product, Price, Place, and Promotion. Let us have a look at how this were analysed and utilised for the growth of McDonalds in their marketing mix strategy. Product A product can be defined as a tangible or intangible product or service that is mass produced on a large scale in batch lots or individually. A base product will involve product variation, product differentiation, product innovation, product elimination.
Taking the above into consideration McDonalds puts lots of efforts in the design of its menu (product) to suit the requirements of the customers. Simultaneously, they understand that customer taste’s changes over time and considering the same they reinvent their products depending upon the product life cycle which is also monitored on regular basis. A typical product life cycle illustration is given below (www. mcdonalds. co. uk). McDonalds has to ensure that it does not introduce a new product before the maturity phase of a similar product to avoid cannibalisation in sales.
As the new product may affect the sales of a similar product which is reaching its maturity level this is to be monitored on a continuous basis by the strategist to plan the new product launches in sync with the maturity levels of older similar products. Due to this continuous cycle of phasing out and introduction of new products the products availability are suited to meet the requirements of the customers and the range of products on offer ensures that they have different products at different stages of their product life cycle which will enable continuous rollover of products.