SPECIFIC AND GENERAL ENVIRONMENT OF MECHDONELS:

1Introduction
1.1McDonalds operations in international markets
McDonalds is the leading global foodservice retailer with more than 30,000
localrestaurants serving 52 million people in more than 100 countries each day. It is
one of theworlds most well-known and valuable brands and holds a leading share in
the globally branded quick service restaurant segment of the informal eating-out
market in virtuallyevery country in which it operates.
1

1.2Situation analysis and marketing planning. Atheoretical outlook

The importance of the internal and external environment and their effect on
the development and implementation of marketing planning is crucial and should be
highly considered by any organisation wishing to be profitable in the increasingly
competitive international marketing arena. Multinational companies that desire to
prosper, should develop a coherent international marketing plan having, as a
starting point,the analysis of the environment. Based on that, the company
objectives, strategies and tactics are drawn, aiming for organisational success and
profitability.Multinational companies should have in mind that effective marketing
strategies couldnot be developed without firstly analysing the

external and

internal environment in whichthe company operates.The external environment

for a company covers many aspects. It is suggested that theenvironment covers
two main areas:

Micro environment
the macro-environment

.The macro-environment consists of forces such social, cultural, legal, economic,

politicaland technological. Within this are included factors such as demographics,
green issues andlarger societal and environmental forces. The micro-environment

includes other environmental constraints, such as the structure of the market, the
suppliers, customers,trends of the market, the public and competition.Equally
important is the internal environment incorporating the examination of
thecompanys marketing mix (product, price, place, promotion) and service mix
(people, process management, physical evidence). An analysis of the internal
environment alsocovers other factors such as sales, profitability, market share and
customer loyalty.The internal audit examines the companys own resources and
supplies suggestions asto the companys strengths and weaknesses. Internal
considerations are mainlycontrollable by the company and, therefore, companies
should mostly avoid any problemsfrom this area. It is evidently proven that product
development and strategic formation is based upon the internal organisational
capabilities.
THE STRATIC PROCESS-marketing planning:
Every company, after considering both its
internal strengths and weaknesses and
theexternal environmental influences that
affect it (opportunities and threats) is in a
positionto develop an effective marketing plan.
Failure to understand the external and
internalcapabilities may lead to suboptimisation of the organisations strategy and
resourcesinvested.Multinational companies
must highly consider environmental auditing
and the
development of the SWOT (strengths,
weaknesses, opportunities and threats)
analysis. Thisis vital if they want to capitalise
on organisational strengths, minimise any
weaknesses,exploit market opportunities as
they arise and avoid, as far as possible, any
threats.

Environmental factors:
The climate and physical terrain of a country are important environmental
conditionswhich have a significant effect on the demand and the type of product
made available.Prior to entry into a new market, it is very important for McDonalds
to consider the physical terrain and climate in the appraisal. Altitude, relative
temperatures and humidityare some of the climatic conditions that can affect
products in foreign markets.Being environmentally friendly is another important

issue to consider. Environmentalgroups forced McDonalds to reduce its use of

plastic and styrofoam packing. WhileMcDonalds internal market research shows
that environmental issues will have neither a positive nor negative impact on sales,
they have agreed to work with the EnvironmentalDefence Fund, an environmental
pressure group, to reduce unnecessary and harmfulwaste.
2.

6Stakeholders:

It is important that multinational companies highly consider and value their general
publicor stakeholders their staff, suppliers, distributors, shareholders and the
consumer itself.How a consumer and, indeed, the other publics mentioned, view
the company and the products marketed is important, firstly in order to assess what
market you are in but,secondly, to assess whether the corporate image of the
company is functioning in a positive manner. Public perception of your product
allows it to be positioned or repositioned to reach the required target market and,
therefore, be successful. If you viewyour product as portraying a certain image that
is at odds with the public perception of it,obviously your marketing strategy is not
functioning properly. Likewise, if your businessitself is viewed in a negative light by
actors both internal and external to the company,steps need to be taken including
the design, quality, marketing and strategy of what isoffered to correct this and
therefore create a feel good factor. Having a good relationshipwith all publics is
highly considered by McDonalds.
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The external environment and its effect on strategic marketing planning
295

2.

7Customer tastes:

Customer tastes is another very important issue to consider. Every company

shouldundertake market research and understand consumers needs and wants.
Based on that, itshould design marketing strategies and tactics to meet the needs
and requirements of itstarget audience. This is crucial as, by undertaking necessary
adaptations, the company canmaintain its marketing orientation and go in line with
the marketing concept.McDonalds is not an advocate of global marketing where
this involves products andservices being treated as though the world is a single,
uniform entity, thus marketingstandardised offerings in the same way everywhere.
They follow an internationalisationmarketing strategy which involves customising
marketing strategies (this may also include pricing strategies) for different regions

of the world according to cultural, regional andnational differences in line with local
needs. Therefore, the concept of think global, actlocal has been clearly adopted by
McDonalds (Vignali, 2001). Below are some keyexamples of the Internationalisation
marketing strategy pursued by McDonalds.
2.8Product

One of the aims of McDonalds is to create, where possible, a standardised set of

itemsthat taste the same whether in Singapore, Spain or South Africa. Vignali (2001)
notes thatadaptation is required for many reasons, including consumer
tastes/preferences andlaws/customs. There are many situations where McDonalds
adapted the product becauseof religious laws and customs in a country. For
example, in Israel, after initial protests, BigMacs are served without cheese in
several outlets, thereby permitting the separation of meat and dairy products
required of kosher restaurants. McDonalds restaurants in Indiaserve Vegetable
McNuggets and a mutton-based Maharaja Mac (Big Mac). Suchinnovations are
necessary in a country where Hindus do not eat beef, Muslims do not eat pork and
Jains (among others) do not eat meat of any type. In Malaysia and
Singapore,McDonalds underwent rigorous inspections by Muslim clerics to ensure
ritualcleanliness; the chain was rewarded with a halal (clean, acceptable)
certificate,indicating the total absence of pork products. There are also many
examples of howMcDonalds adapted the original menu to meet customer
needs/wants in differentcountries.In tropical markets, guava juice was added to the
McDonalds product line andBananafruit pies became popular in Latin America. In
Thailand, McDonalds introducedthe Samurai Pork Burger with sweet sauce. In
Germany the chain sells beer andMcCroissants, while wine is served in France.
Chilled yogurt drinks are available inTurkey, espresso and cold pasta in Italy. Teriyaki
burgers are sold in Japan and vegetarian burgers in The Netherlands. Australian
outlets used to offer mutton pot pie and, in thePhilippines, where noodle houses are
popular, natives go for McSpaghetti.The varied offerings also include banana fruit
pies in Latin America, kiwi burgers(served with beetroot sauce) in New Zealand,
noodle soup served in most Asian marketsand chilli sauce to go with fries in Mexico
and Singapore. McLaks (grilled salmonsandwich) are sold in Norway and McHuevo
(poached egg hamburger) in Uruguay. InThailand, McDonalds introduced the
Samurai Pork Burger with sweet sauce. Moreover,in France, McDonalds have
adapted the McDeluxe to have a delicate old mustard and pepper sauce, a slice of
cheddar cheese, fresh onions and a whole lettuce leaf to appeal to
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D. Vrontis and P. Pavlou

their tastes and in Greece and Cyprus the introduction of the Greek Mac has been a
hugesuccess.These are examples of how McDonalds has adopted its product offer
in internationalenvironments.
2.9Structure

of the market/competition:

The issue of the competitive environment must be seen as probably one of the
mostimportant issues. By gathering continuous data about competitors, such as
their strategicstrengths and weaknesses, their objectives, strategy, tactics and
reaction patterns and thesort of marketing activity/budget, a company can decide
its own position in relative termsand be prepared for what challenges are facing
them in terms of competitor attacks. Thisinformation also can be used to interpret
sudden moves by competitors and how they willrespond to a move you are
considering taking.Porter (1980) and Doyle (1983) are both proponents of
positioning strategy. Porter considers the external factors which impact upon a
firms competitive positioning. Doylerefers to the choice of target market segment
which describes the customers. A businesswill seek to serve and the choice of
differential advantage which defines how it willcompete with rivals in the
segment.Porter claims that competition is at the core of success or failure of the
firm and that asuccessful competitive strategy can establish a profitable and
sustainable industry position. He claims that there are two fundamental questions
underlying the choice of acompetitive strategy: firstly, how attractive is the industry
with regard to profitability andsecondly, what are the determinants of a competitive
position within an industry.According to Porter there are five competitive forces that
will govern the rules of competition and these rules will prevail in any industry both
in domestic and internationalmarkets. The five forces are:

the entry of new competition to the market

the threat of substitutes or replacement products

the bargaining power of buyers

the bargaining power of suppliers

the rivalry between firms of the same sector.

2.9.1Threat

of rivalry/competitors:

The concentration of firms within the fast food industry is low due to the established
presence of McDonalds, Burger King and KFC. However, in certain
markets,McDonalds will face competition from established domestic fast-food
outlets.
2.9.2Threat

of new/potential entrants:

The barriers to entry are quite high for new entrants, as the size of McDonalds
means theyhave achieved economies of scale and have preferential access to raw
materials anddistribution channels. New entrants may find that a high cost of
investment is required insecuring plant and machinery.
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Technology:
Technological advancements are affecting every aspect of the social and business
environment and McDonalds takes care to ensure appropriate use of technology for
achievement of organisational objectives and competitive advantage (Baldwin,
2013 n.p.). It works on technology constantly to enhance the optimisation of its
operations (Baldwin, 2013 n.p.). The preparation of a big Mac,for example,now takes
60 seconds and is processed in three stages, including packaging (Baldwin, 2013
n.p.). The organisation is making use of several types of technology for storage of
food, regulation of temperature, preparation of food, control of supply chain and
financial management and reporting (IncisiveMedia, 2004, n.p). McDonalds is
linking different responsibility centres through appropriate communication systems
in order to enhance optimisation of efficiency and productivity (IncisiveMedia, 2004,
n.p ).

3.6.

Political Factors:

McDonalds operates in several countries, many of which have different political

systems (Han, 2008, p 73). It thus has to cater to various types of political pressures
in order to ensure the meeting of its objectives (Han, 2008, p 73). Various
governments are currently attempting to increase their control over the fast food
sector on account of health associated issues; some of them are restricting the
issuances of licences to franchisees (Han, 2008, p 74). Local political pressure has
also been applied on the firm from time to time for its perceived role in the dilution
of local culture (Han, 2008, p 75).

The corporation thus has to constantly anticipate the political environments of the
different locations in which it works and take appropriate proactive or reactive
action.

3.7.

Economy:

The general economic environment plays an important role in shaping the

organisations business strategies and policies (Thompson, 2002, p 36). The
economic climate can affect discretionary incomes, customer footsteps, market
brand, availability of labour and the prices and availability of materials (Gasparo,
2012, n.p; Gould, 2012, p 608).

The organisational management of McDonalds, both local and central has to thus
constantly work towards anticipating and overcoming diverse types of economic
challenges (Gasparo, 2012, n.p; Gould, 2012, p 608). It is important to however
appreciate that the demand for affordable food products is by and large inelastic
and stays high, regardless of the health of the economy (Gasparo, 2012, n.p; Gould,
2012, p 608).

McDonalds makes use of this benefit by ensuring that people can come to its
outlets when they wish and purchase affordable meals for themselves and their
families (Gasparo, 2012, n.p). The organisation has shown remarkable resilience
during the recent recession and has protected its profit margin by balancing its low
priced menus with premium products (Gasparo, 2012, n.p; Gould, 2012, p 608).

3.8.

Environmental Factors:

McDonalds, as the largest food retailing chain in the world, has to deal with several
types of environmental factors (McDonalds Corporation, 2014, n.p; McDonalds
Corporation, 2010, n.p.). The firm makes significant use of beef, packaging
materials, napkins, carry bags, oil, water and power. Its operations also result in
generation of substantial amounts of solid waste (McDonalds Corporation, 2014,
n.p; McDonalds Corporation, 2010, n.p.).

The firm has over the years worked towards the enhancement of operational
sustainability and improving the ecological soundness of its operations (McDonalds
Corporation, 2014, n.p). It has tied up with the Environmental Defence Fund (EDF)

to ease the companys environmental burden (McDonalds Corporation, 2014,n.p;

McDonalds Corporation, 2010, n.p.). It has introduced policies for enhancing the
recycled content of its packaging material and for reducing the use of polystyrene
(McDonalds Corporation, 2014,n.p). It has developed a rain forest policy and
adopted beef purchasing practices that do not lead to deforestation (McDonalds
Corporation, 2014,n.p;).

3.9. Culture and Religion

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CONCLUSION:
It is argued that effective marketing strategies and tactics cannot be developed
withoutfirstly analysing the environment in which the company operates. A number
of uncontrollable elements affect McDonalds international marketing strategy and
tacticalimplementation. These groups of elements include the PESTLE (political,
economic,social, technological, legal and environmental), structure of the market
and competition being faced (Porters (1980) five forces analysis) as well as analysis
of its stakeholders,customers and product adaptation within its internationalisation
strategy. All of theseaspects are crucial to a companys strategic decision making.
The level of understandingthat exists in these relationships will determine the
success of a company.McDonalds is not making a one-time standardised global
choice but it is striking tofind a balance. This is not a straightforward task, as
identifying the balance betweenstandardisation and adaptation is a challenge and
very difficult to achieve. The goals of reducing costs and complexity lead
McDonalds to consider standardisation, whilecustomer orientation sways it towards
adaptation. It is evident through the analysis thatMcDonalds is adapting its
marketing mix elements in order to go in line with the externalenvironment. At the
same time, it should be noted that the company is also standardisingwhen and

where possible in its desire to achieve economies of scale and global uniformityand
image.With respect to McDonalds internationalisation strategy, the companys
effectivenessand profitability is obviously well supported by their strong competitive
position andmarket share in their primary product market. Its international success
is achieved by thecompanys strategy and tactics, which complement each other
and work in harmony, providing the optimum return bounded by efficiency. The
company is thriving as it is botheffective (doing things right) and efficient (doing the
right thing).McDonalds portfolio of products is well managed and ensures the best
fit between thecompanys strengths and weaknesses and for offsetting the threats
found in its competitiveenvironment. In considering the strong competitive position
of the firm in a highlyattractive market, it is suggested that McDonalds should
protect its position (Mckinseymatrix). This can be achieved by concentrating efforts
on maintaining its existing strength by investing to grow at maximum digestible
rate.It is recommended that McDonalds continue this approach, that is:
simultaneouslyfocus its attention on aspects of the business that require global
standardisation and aspectsthat demand local responsiveness. When appropriate,
processes should be standardised,however, operation in local markets necessitates
the maintenance of the appropriate localflexibility.McDonalds is adopting
differentiation and cost leadership strategies (genericstrategies). In terms of
differentiation, the firm attempts to be diverse from its competitors by adding
something to its product that will provide a unique value to its customers. This
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D. Vrontis and P. Pavlou