A PESTEL Analysis is a strategic tool which has been utilized by the strategists and marketers to determine and analyze the external or Macro-environmental factors that could have positive and negative impact on Organization. This article covers the PESTEL or PEST analysis of of McDonalds to perform analysis of external factors ( Political, Economic, Social, Technological, Environmental and Legal ) that have impact on the company.
Introduction
McDonald’s first started its operations in U.S. in 1940. Since then it has expanded by leaps and bounds and is now present in 119 countries managing more than 36000 outlets, making McDonald’s either the largest or the second largest restaurant chain in the world. It is famous worldwide for its burgers but its initial product wasn’t a hamburger, it was a hot dog. Today McDonald’s is employing every one in eight Americans. Its total number of employees is more than the population of Philadelphia and customer base is more than the population of France and UK. The strawberry milkshake that they offer contains 50 kinds of chemicals but not actual strawberries. (95 Interesting Facts About McDonald’s food, 2014)
Political
Fast food industry has always been on the target of dieticians who believe that more people are dying of obesity and heart problems, which are the result of obesity and fat, than smoking and lung cancer. When tobacco companies are not allowed to market their products than fast food restaurants should be treated the same way. McDonald’s all over the world has taken huge hit as health consciousness is increasing and more and more people have become concerned about a balanced diet. Denmark put restricts and limits on the amount of Transfer that can be used by any fast food chain in their meals. In UK there are restrictions on the amount of salt to be used in food. In Germany they are instructed by law to put labels on their food, mentioning nutritional value of the meal. These situations require being dynamic and responsive.
McDonald’s announces to increase the wages by 10% in order to stop the employees from protesting and going on a strike.
Economic
McDonald’s is operating in domain where economic crisis actually benefits it, being cheaper alternative to fine dining. During 2008 crisis McDonald’s grew by 4.5% in revenues and increase their marketing spending by 7% when all other companies were cutting their budgets. Burger King sold hamburgers below their cost as a result of which their profitability declined and their franchisers sued them for forcing them to sell at a price which lowered their profits. Except for America sales grew in all markets.
Social
McDonald’s has taken hit worldwide for providing unhealthy food options and the situation is getting worse for them as people are more health conscious now than before. Organic food market is expanding. McDonald’s had to make some healthy changes in its menu by offering fruits, salads, milk and smoothies. They have also spend millions of dollars in marketing trying to shape their image around fun and joy in order to take consumer’s mind off the junk food. In a holly movie Super-Size Me the main character lived on nothing but McDonald’s for 30 days, consuming it 3 times a day and at the end of this period he had gained considerable amount of body fat which could lead to heart diseases and other illness. After this movie McDonald’s faced huge problems in gaining back the confidence of its consumers. (PESTEL analysis of McDonalds and the food industry)
Technological
With the passage of time internet is becoming part and parcel of our lives, some people cannot imagine their life without the presence of internet. It not only connects people but also is a great source of entertainment. This is also how consumers judge their favorite brands these days. If their brand is tech savvy, has a catchy website, interactive and social on social media websites, then consumers tended to have a positive view of them. McDonald’s interacts with its customers on all relevant mediums. It posts videos of it s kitchens where it shows how food is prepared there. It also responds to customers queries online and has a very prompt complaint action system. The deliveries are also managed through a high tech system in place where on call orders are taken by a centralized team and then placed in respective franchises which is closest in proximity to delivery area. The internet facility has also created problems for them as pictures of McDonald’s meat carrying different insects were made public and everybody started sharing those pictures, they were also accused of selling human meat. The power of social media also renders companies helpless as they have less and less control over content that is created.
Environmental
McDonald’s is accused of damaging the environment on a number of grounds: mistreating animals, misleading children, underpaying employees and for McDonalization, which refers to the injecting unhealthy food in the market to the extent that people no longer feel guilty in consuming them and forcing suppliers to sell them on their agreed prices and on their conditions, by taking advantage of their market size. Environmentalists all over the world protest against McDonald’s on 19th July for all the above reasons. In order to counter this negative sentiment McDonald’s has taken a lot of CSR initiatives. They use environment friendly packaging for their food and participate in saving energy by shutting off their electricity for an hour each year.
Law/Legal
Although it is subjective to the country of operations but one law in general that is applied to them all over the world is Health and Safety Law, according to which they have to maintain high standards in preparing and packaging food and also in procurement. The chicken that they are using should be healthy, free of any diseases. Apart from health checks there are certain employment laws that they have to abide by in order to remain in a country of interest. Minimum wage law is a classic example of employment law that they have to adhere to, besides this employee safety and health insurance plans have to be taken care of in case of any accident happening as they are in the industry where accidents happen all the time.
Bibliography
95 Interesting Facts About McDonald’s food. (2014, October 20). Retrieved December 17, 2015, from Random facts: http://facts.randomhistory.com/mcdonalds-food-facts.html
PESTEL analysis of McDonalds and the food industry. (n.d.). Retrieved December 17, 2015, from UK Essays: http://www.ukessays.com/essays/marketing/pestel-analysis-of-mcdonalds-and-the-food-industry-marketing-essay.php