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International Management

PESTEL Analysis of McDonald’s


Module Code: B9MG116
Student Name: GEO CHEMMANAM
Student Number: 10191143
Lecturer Name: Dr.PJ PAUL
Words: 3910

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INDEX
1) Introduction……………………………………………………………………………………………………….…………03

2) PESTEL ANALYSIS…………………………………………………………………………………………………..……..04

POLITICAL……………………………………………………………………………………………………………….…….05
ECONOMICAL…………………………………………………………………………………………………………..……07
SOCIOLOGICAL………………………………………………………………………………………………………..…….08
TECHNOLOGY…………………………………………………………………………………………………………..……09
ENVIRONMENTAL………………………………………………………………………………………………………….11
LEGAL……………………………………………………………………………………………………………………..…….13

3) The current position of the organization with respect to Ethics, Corporate Social
Responsibility and Corporate Governance……………………………………………………….. 14

4) Corporate Social Responsibility………………………………………………………………………… 15

5) BIBLIOGRAPHY…………………………………………………………………………………………………………….. 18

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Introduction

Mc Donald is one of the largest food service retailers in the world, started operating in over
100 countries and more than 1.9 Million people work in Mc Donald’s and its franchisees in
the Middle East and Africa, Asia pacific, Europe, Latin America and North America. The
brand owns more than 36,000 restaurants worldwide and out of which 80% of them are
franchised and the rest is company owned. They serve around 69 million people every day.
(Donald's, 2014)

To acquire a franchise it’s required to pay 40% of the cost if the restaurant is an new one and
25% if it’s an existing one and it is also mandatory for the revenue of purchase to come from
a non borrowed resource. The remaining amount can be financed for a period of less than
seven years. There is no direct financing offered to individuals from Mc Donald’s.
(McDonalds, 2014) , Mc Donald’s believes that they can be successful only if their franchises
/operators are doing great business. They believe in the connection and relationship between
all the chain working for them from owners to employees to suppliers. They provide the best
available training for this program.

They have 9 to 18 months of training in a Mc Donald’s close to their home along with this
they provide part time, conferences, seminars and individual training sessions too. (Mc
Donalds, 2014)

Richard and Maurice Mc Donald owned a drive-in restaurant which was really successful,
later after running it for 11 years, they introduced the fast assembly line method used in
automobile industry for preparation and this was a real big success called the Speedee Service
system. They replaced all the traditional cooking style methods and used grill where large
number of burgers can be cooked simultaneously, a dressing station to stuff the burgers, one
person to fry the French fries and introduced frozen meat products and hybrid potatoes to
bring in uniformity to the taste for all their outlets. ( (Edible Innovation, 2011)

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PESTEL ANALYSIS

A PESTEL analysis is a framework used to analyse and monitor the external marketing
environment factors that have an impact on an organisation. The end result of a Pestle
Analysis help in finding out the weakness and threats which are used in SWOT analysis
analysis.

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POLITICAL

Mc Donald’s enjoyed a good growth in shares after 2002; their share price had grown from $
12 to $100 in 10 years time. But things started changing after people started caring about
obesities and several health scares caused due to the fast food lifestyle.

In European countries the fast food industry became a common target for government, and
several initiatives were taken based on this to reduce the obesity problems faced and
improve health among people. (Economist, 2015)

According to a article by a leading newspaper it is said that in Ireland around 37% of the
adults were overweight and 24% near to obesity and 25 % of children are obese in Ireland
and there is a strong influence in government to tax more on unhealthy food, they feel this
can bring in a change in people behaviour like the same way plastic bag levy was introduced.

(Irish Times, 2014) Due to the increased rate of blood pressure patients, and finding that salt
is one of the major reason for this World Action on Salt and Health (WASH), has prompted
experts to call for the global food giants to cut the amount of sodium in their products.

In Europe, It was required for Mc Donald’s to reduce their sodium content in their foods that
they produce and based on this the salt content was reduced by 20 percentage in french-fries
and 14% in Chicken Mc Nuggets.

In Canada, it was a 45 percent reduction in the grilled chicken patty and around 50
percentage reductions in crispy grilled chicken and in Australia it was 20% reduction in its
American cheese slices.

Based on the survey conducted by WASH out of the 35 countries they serve they
implemented the reduced sodium menu in 17 countries.(Mirror UK, 2014)

In 2014 August in China, there was a scandal on the meat products that were been supplied
by Shanghai Husi Food, OSI Group. The scandal was the company was serving 1 year old
meat products and tainted meat to their clients and Mc Donald’s along with few other major
fast food providers were their customers. The scandal brought down the sales in China. Mc
Donald’s has 2000 stores in China and unfortunately the Husi group was exporting chicken to
Japan as well. The ban on import and sales of Husi products affected the sales of Mc
Donald’s in Hong Kong as well. (CNN, 2014)

This combined market held around 10% of the total revenue of Mc Donald’s. It was reported
the overall sales in Asia dropped after the China food scandal.(Bloomberg, 2014) (Forbes,
2014)

In Russia, Russian food safety watchdog asked Mc Donald’s to shut seven of its outlets
temporarily due to sanitary violation, at the same time they harmonized with uplifted tensions
over the Ukraine crisis, in which the United States and European Union have forced
authorizes on Russia and Moscow has hit back by banning an extensive range of Western
food imports. (REUTERS, 09)

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(Moscow Times, 2014)

In India, Mc Donald had to open the restaurant with a special menu that included chicken and
fish and had to take of the beef from the menu as in India cows are considered sacred.

Mc Donald’s had to face global protest over restaurants near the religious temples, and Mc
Donald’s had to become all vegetarian, they served Indian style menu which included aloo
tikki and paneer wraps. Around 73% of Indians are Hindus and won’t eat pork and beef. (Lib
Guides, 2014)

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In the US, by examination, the fast food industry is much more safe, with practically no
government mediation by any means, regardless of numerous published reports on the
connection between fast food industry ads and obesity in children. (Wilson and Jannet, 2012).

One of the challenges in Middle East faced by the F&B industry is cultural adaptation. One
major thing Mc Donald’s had to stick was to the need of the food to be of halal standard.

In Saudi Arabia, when Mc Donald’s first restaurant was opened they had to go with the laws
of the company where banned from the restaurants unless been accompanied, and the
counters there also had separate counters for both men and women separated by a thick wall.
(Board, 2014)

In Malaysia, as a part of support to Palestinians there was a boycott Israel campaign


happening targeting the companies that contribute funds to Israel to fight. Malaysia being
which a Muslim-dominant country is, many have required a boycott of McDonald's since the
organization is blamed for offering funds to Israel. McDonald's has over and again denied
this charge. Ban on McDonald's was effectively composed national wide.

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Economical

The 2008 recession had disturbed the business in all the industries, the spending habits of
people had really come down, providing value for money services were the only business
which made money during this season, Fast food industry was one among them. McDonald's
worldwide deals went up 11.2% in 2008. Asian same-store deals were up by 10.5%—the
most since November 2008—and European same-store deals climbed 5.4%. (Business
Week, 2010)

The fast food chains saw a hike by 4.5% in Nov 2008,but many other Mc Donald’s
restaurants in America registered negative sales because of the global recession.

Mc Donald’s 1 Dollar Menu, which was a similar to the Price-Saver menu in UK but
McDonald's core Dollar Menu – the equivalent of the Price-Saver menu in the UK – and its
offer low-priced offerings appeared to work. Global sales went up by 7.7%. (Telegraph,
2014)

Burger King failed to provide double cheese burger for $1 and the franchisees sued the
company, this failed to the drop in profits for burger king in 2009 recession period, where in
Mc Donald’s focused on more standard menu choices. (NBC Business, 2011)

Sociological

While McDonald's and the fast food industry in the US has figure out how to evade most
proposed regulation to reduce the unhealthy things in their menu .Public in general became
more health conscious which has led to the decrease in sales in fast food industry

Morgan Spurlock documented a film Super Size Me, Mc Donald’s, in this Spurlock ate for 30
days from Mc Donald’s (Spurlock, 2010) . The film gave a big shock to the community and
people who were sticking to fast food diet, became more cautious. The documentary featured
a lot of things including liver disorder, depression, and loosing sexual interests.

Because of this current, McDonald's has eliminated the super-size option which included
extra fries, extra cheese and burgers from all US Menu. In UK the super size meal was not a
great success and was removed from menu in 2001 and the company decided not to include
this meal in any other countries.

Mc Donald’s started offering more solid menu alternatives, including natural product
smoothies, servings of mixed greens salads, drain, water and natural product. They have
additionally dispatched various creative promoting battles went for highlighting the new
scope of alternative options, Mc Donald’s advertised focusing on the farmers from which
they take the potatoes for wedges etc.. Such a methodology seems to have been powerful,
with no business downtrend reported in any month. (Spurlock, 2010)

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In China people prefer rice than Mc Donald’s potato and burgers, so they introduced rice
burger.

Technological

The advantage of the web has opened up numerous opportunities doors for ease, high-effect
showcasing over a scope of firms and businesses. Progressively, firms are being judged more
strongly on their online presence. Showcasing open doors utilizing the web are numerous and
fluctuated and can extend from multifaceted, included, multi-layered viral battles, through
site outline and usefulness to a basic social networking presence. While the fast food industry
was moderate to catch on to the benefits of web advertising in the first place, most firms have
now grasped its potential and McDonald's is at the front line.

Mc Donald’s became more prominent on the internet and showed their presence in number of
social media like the Facebook, twitter and also McDonald have likewise run various
effective online campaigns, including an 'Ask McDonald's YouTube campaign in 2012,
where more than 20,000 inquiries from general society were replied, with most being based
around the quality and production network of McDonald's nourishment and burgers. A
significant number of the inquiries were replied through short YouTube features, some of
which have accumulated more than 10 million views, and a large portion of which were
gotten absolutely.

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Facebook Presence: they are active on FB from 2009 and have 56538766 likes as of April
2015.

Twitter: Mc Donald’s have 53k tweets and 2.79 million followers. All these are really
interactive with their customers.

Introduction of Mc Donald’s touch screen kiosks, improved more user interactions on touch
screen device kept in front of Mc Donald’s restaurant.

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Mc Donald’s Our Food Your Questions Campaign was also a good marketing approach from
the company using the technology to make it responsive to users. There were around 6000
interactions in the site, and their answers included using pictures, videos and texts.

Source: (Advertising, 2014)

All their questions were replied with videos on YouTube so it can be viewed to everyone.

However, as with most other firms, the internet has ended up being a double edged sword
regarding showcasing accomplishment for McDonald's. There have additionally been various
negative articles posted on Facebook and Twitter about the organization and its items,
including an undeniable fabrication post that asserted batch of McDonald's cheeseburgers in
Oklahoma had been found to have been fed with 'human meat'. (Huzlers, 2014)

(Snopes, 2014) Such false data is effortlessly spread online with practically no data
regulation; firms can be helpless before false allegations and web pranks. Additionally, in
direct complexity to the fruitful YouTube campaign was a maybe less effective Twitter battle,
where McDonald's advanced the #Mcdstories hash tag for twitter clients to post their stories
and positive encounters with the firm,as there was no capacity to either control or
appropriately cooperate with the reactions as with the YouTube battle, the crusade fallen very
quickly with an excess of negative hostile to McDonald's tweets. Cautious observing of the
organization's online presence and quick reaction to such incidence will go somehow to
relieving the potential harm.

Environmental

In recent times Environmental issues have become more focused with rise of more “Go
green” and eco friendly developments. Many organisations now include a lot of
environmental friendly activities Accordingly, numerous organizations now incorporate
some type of natural harm relief to balance the negative ecological parts of their regular
business creation systems; run of the mill strategies incorporate the replanting of trees to

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counterbalance carbon emanations created by the transportation of merchandise, a lessening
in the measure of paper utilized as a part of the regulatory side of the business, vitality
sparing activities, for example, the killing of lights, electrical apparatuses and PCs when
offices are not being used, and a decrease in the measure of bundling utilized as a part of the
generation process.

Natural worries about a business' operations are especially declared in the food business, as
food production strategies are frequently connected with poor ecological controls, especially
in developing third world economy makers, and budget meat providers.

Without a doubt, various challenges have been levelled at numerous fast food firms when all
is said in done and McDonald's specifically –On October 16th 2014 is the annual Worldwide
Anti-McDonald's Day [UN World Food Day] - join a protest against the animal cruelty,
promotion of junk food, the dishonest targeting of children, abuse of workers, harm to the
environment and the worldwide domination of corporations over people's lives. (Mc
Spotlight, 2014)

In 1997, two of the protesters were sued by McDonald's for defamation, in the wake of
rehashing some of these cases in numerous McDonald's restaurants. The judge found for
McDonald's for a percentage of the charges of defamation, yet discovered others had some
truth to them and couldn't be viewed as slanderous, including cases that they "falsely
advertise their food as nutritious, risk the health of their long-term regular customers" (Mc
Spolight, 2014)

In response to this Mc Donald’s participated in Earth Hour, to reduce carbon footprint they
shut down their business for an hour and also used biodegradable packaging in their takeaway
products. (Enviornment, 2010)

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Legal

The particular legal environment in which McDonald's works is profoundly reliant on the
particular nation and market being referred to; be that as it may, the majority of the
businesses that McDonald's works in have some manifestation of a Health and Safety legal
system, especially concerning food processing planning.

Numerous, if not the majority of the nations McDonald's works in has some form of public
health examination framework concerning fast food makers - in the UK, it is the Food
Standards Agency, while in the US, it is the Food and Drug Administration. In both markets,
any workers with food handlings taking care of capacities must join in food cleanliness
preparing at the company’s cost. McDonald's has executed a framework that adds extra
controls to those needed by either health agency, and as their client confronting site states,
"there are no less than 70 security checks made on meat and chicken consistently. (Mc
Donalds, 2015)This can also be used as marketing strategy by the company as to they serve
quality food as per the rules of the law.

There are also various employment laws to consider in each market, including those
regulating the maximum length of an employee’s daily and weekly working hours, the
requirements for employee breaks and facilities, tax and payroll requirements, business
registration and accountancy standards for reporting profit and loss. McDonald’s tends to
adhere to the same legal standards across markets for each of these areas, even in markets
with less stringent regulations or legal requirements than those of the UK or US markets.
(Mc D Financial, 2014)

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The current position of the organization with respect to Ethics, Corporate
Social Responsibility and Corporate Governance

Mc Donald’s focus on improving the customer experience by following the 4 P’s, People,
Product, Place and Price. They believe in providing the best and quality service, cleanliness
and value for every individual customer.

They business model is a three legged stool of owner, suppliers and employees and their
system works balancing the interests of all three groups. (About Mc D, 2014)

Mc Donald’s through regular innovation and constant evolution strive to improve their
customer and employee experiences.

As per (Nelson, 2012) McDonald’s has an environmental division which goes to the green
house conference in Geneva yearly. These authorities are accountable for ensuring that
McDonalds keeps on consenting to the natural laws of different nations where it is built. A
large portion of the restaurants having a place with McDonalds have received the green
restaurant plan which helps in sparing energy. This has given McDonalds the chance to
partake in the diminishment of carbon emanation through putting resources into efficient
productive structures. A large portion of the restaurant chains have a place with McDonalds
have an open space which permits a lot of light to go into the building hence sparing the
utilization of power amid the day.

McDonald's CSR supports the protection of the earth through diminishment of carbon
emission and also the green restaurant plans.

McDonalds has likewise supported different group based projects, for example, supporting
the education of poor kids in India and Asia.

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COPERATE SOCIAL RESPONSIBILITY

In every single nation, McDonalds has flourishes to build up a menu that fits the tastes and
society of the individuals in those nations. This has made McDonalds one of a kind in its
giving of fine and quality fast food items. Its CSR methodologies have helped it to
distinguish the needs of the individuals inside these destinations and grow fast food
arrangements that best fits their needs. McDonalds is accordingly aware of its clients'
differing needs.

Also, McDonald’s endeavours to advance solid restaurant regimens that advantage its client.
Examination uncovers that fast food items are bad for the wellbeing, particularly for the heart
and the liver. In any case, McDonalds question this by creating and making fast food items
that are free from cholesterol, fat that causes cardiovascular diseases.

McDonald's primary qualities are all away for promoting the Corporate Social Responsibility
of the firm. This is increased through giving quality to the customers, the network and supply
main business assistants with whom McDonalds cooperates. McDonalds doubtlessly
perceives the way that its customers are the reason for its success and presence. Thus, the
customers are all that abundantly regarded inside the association. The association in this way
attempts to make a warm and welcoming environment for its customers.

McDonalds being an open organization qualities doing profit business with every one of its
partners. The organization thusly lays much accentuation on beneficial business while

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upholding its business ethics over every one of its auxiliaries. This is attained to through
keeping up high ethical benchmarks.

Source: (Mc Donalds, 2013)

McDonalds is constantly dedicated to the wellbeing of its clients through delivering fast food
items that have no bad effects for the customers. The organization takes after the strict check
of its nutrition specialists. There have been worries about obesities that McDonalds has
considered important and strived to abstain from delivering fast food items that may prompt
weight among its regular customers.

McDonald’s advices client to settle on quality decisions in regards to its fast food items that
will advantage their health. The firm discourages eating for the purpose of it and demands
supporting solid living. McDonalds keeps on developing astounding and a very much
balanced eating habits that serves the needs of its customers extensively. The firm has
likewise built up an extensive variety of decisions to empower its clients to browse in their
menu, along these lines expand consumer loyalty.

According to, (Energy Star, 2014) McDonalds has won the Energy Star Partner of the Year
honour which is typically recompensed by the Environmental Protection Agency (EPA).
McDonalds has been perceived for its gigantic endeavours in decreasing greenhouse
emissions. The firm is connected to nature and concerned all the more about the unnatural
weather change. This has elevated the firm to save money on vitality and accordingly deflect
carbon emission.

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The organization has kept on focussing on enhancing its dedication towards nature. The
extent that McDonalds CSR in regards to nature is concerned, the fast food titan has in the
different times concentrated on three fundamental ranges in particular; Energy productivity,
economical packaging and waste management and green restaurants plan. McDonalds has
sort to utilize more vitality effective methods, for example, the utilization of regular gas in
the fast food restaurants. Using of cooked oil converted to gas. McDonalds keeps on seeking
methods for expanding vitality effectiveness. Moreover, the fast food goliath likewise looks
to decrease the effect of its operations on the ecological effect. Along with this 30% of the
electricity used in Mc Donald’s comes from renewable credits from U.S wind sources.
(Green House, 2012)

Along with this they reuse the condensation of air-condition for cleaning external areas and
watering the plants and thus reducing the water usage by 15%.

In UAE, Mc Donald’s complete trucks runs on 100% biodiesel made from vegetable oil
reused from Mc Donald’s kitchen.

For a really long time, McDonalds has been supporting the Olympic Games through
sustaining system went for encouraging the games. McDonalds is likewise included in
different foundations furthermore underpins training in the creating nations where it has its
establishments and fast food restaurants. As a feature of its offered to return back to the
general public, McDonalds has supported a few youngsters projects including removing of
illiteracy and poverty.

(Mc Donalds, 2014) states the board believes that great administration is a journey, not a
destination. In like manner, they are focused on looking into our administration standards at
any rate every year with a perspective to constant change. One thing that won't change, then
again, is their dedication to guaranteeing the honesty of the McDonald's System in every one
of its dealings with partners. The board believes that good corporate governance is required
to fulfil the organisational obligation to share holders. The board believes in honesty, ethical
manner and being fair. They build the trust by being ethical and dependable and truthful to its
customers and employees.

Along these lines, McDonald's has developed to turn into the world's biggest fast food chain
of restaurants through its dedication towards accomplishing its CSR and additionally keeping
up great business ethics.

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The company gains its success mostly from its employees. McDonalds also recruits quality
and highly valuable employee's making sure continued success for the company.

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