The analysis of the external and internal environment is essential for any company’s growth and development. It is especially essential for large corporations, including McDonald’s, that operate in a highly competitive environment to be aware of their potential, major threats, and opportunities. This paper aims to evaluate this fast food corporation’s general environment, its main competitive forces and threats, strengths and weaknesses, core competencies, resources, capabilities, and strategies for improvement.
As the general environment and its impact on industries and companies that operate in them are highly complex, it may be divided into seven segments. While corporations cannot control how they will be influenced by the general environment, they nevertheless may predict certain tendencies within their segments to prepare for efficient response (Hitt, 2020). For McDonald’s and other fast food companies, sociocultural and sustainable physical environment segments have a major impact. The sociocultural segment refers to social changes that indicate the shift in customers’ preferences related to the product (Hitt, 2020). In turn, the sustainable physical environment segment refers to sustainable manufacturing and the consumption of resources for the minimization of an industry’s environmental footprint.
McDonald’s and other fast food corporations have faced people’s changing tastes. While past consumers did not pay considerable attention to the food’s healthy and nutritional value, it has become highly important to modern customers, especially due to the improved level of education (Xiao et al., 2018). In addition, health care organizations create awareness of obesity and multiple diseases caused by the consumption of high calories foods. As a result, in the present day, fast food companies, including McDonald’s, have to consider the changes in menu and introduce healthier and quality products to address consumers’ changed eating habits.
Sustainable Physical Environment Segment
The fast food industry is impacted by the necessity to review its business practices to meet the modern standards of ecological sustainability as the negative impact of fast food companies on the environment is considerable. As the food industry is closely connected with agriculture, it contributes to the deforestation of fields, the contamination of soil, and the excessive use of water. In addition, as a leading company, McDonald’s may be regarded as one of the largest users of beef and dairy, while their manufacturing is responsible for 70% of livestock greenhouse gas emissions and related climate change (Cusack et al., 2021). Moreover, fast food companies produce tons of waste and unnecessary packaging, polluting landfill sites.
Five Forces of Competition
Although a company traditionally recognizes its rivals in order to stay competitive, the scope of its competitive analysis should be enlarged to identify five forces of competition that should be addressed for stable growth and development. In general, they indicate that not only other companies but buyers and suppliers may be regarded as competitors as well (Hitt, 2020). For McDonald’s, the most significant forces of competition are the rivalry among competing firms and the bargaining power of buyers. They are determined by the fact that McDonald’s already exists in the competitive environment along with other large corporations that introduce innovations, new products, and services to gain its market share and attract consumers who, in turn, expect the highest quality and affordable prices.
Rivalry Among Competitive Firms
McDonald’s operates in the fast food market along with other large competitive and equally balanced companies, including KFC, Burger King, Taco Bell, Starbucks, Subway, Pizza Hut, and many others. The continuously increasing rivalry between them makes the industry highly dynamic – corporations focus on new strategies and mechanisms to receive competitive advantages, especially within the framework of low switching costs and poor differentiation (Hitt, 2020). In the past, Mcdonald’s relied on innovations and the differentiation of products as it was the first company that introduced products that may be currently regarded as the core of the fast food menu. In addition, it focused on the expansion and entering new markets across the globe paying attention to consumers’ culture-based needs to increase their loyalty.
Bargaining Power of Buyers
McDonald’s clients contribute to the development of the company as the sales of its products constitute the major part of annual revenues. In addition, due to poor differentiation, consumers may easily switch to competitive companies’ products (Hitt, 2020). As a result, they expect to receive the highest quality of products and services along with affordable prices to stay loyal to the company. Thus, McDonald’s has to introduce new mechanisms to meet consumers’ demands and attract people. In the past, it based its reputation on its history of respecting honesty, community support, and family values (“Our mission and values,” 2022). In addition, it introduced new healthier meals, online orders, and delivery options.
First of all, McDonald’s should improve the quality of its products to increase their nutritional value to meet consumers’ requirements concerning healthy dieting. In addition, the company may introduce new products to differentiate its menu and gain a competitive advantage in comparison with its rivals. Moreover, after a thorough analysis of competitors’ offers, new different products may be introduced every several months to sparkle consumers’ interest. At the same time, the most popular products from temporary lines may stay on the core menu to contribute to the loyalty of consumers attached to them. Finally, McDonald’s should improve its services for online orders and delivery in close contact with consumers on social media platforms and its customer service. In this case, any complaint should be immediately addressed for the reputation of a consumer-oriented and respectable company.
Greatest External Threat
From a personal perspective, the greatest external threat for McDonald’s is its failure to address social changes that may create certain public concerns in relation to the company’s operation. As people currently focus on sustainability, they may pay attention to the corporation’s environmental footprint and ethical aspects related to the workforce and manufacturing. Thus, for instance, if influential people or organizations start to mention workers’ exploitation, the promotion of unhealthy food, contribution to climate change, or unethical farming and animal murder related to McDonald’s, regardless of the validity of these statements, they may cause public response and result in the company’s boycott within the framework of the cancel culture.
This threat may be regarded as more significant in comparison with others, including rivalry, new competitors, or people’s changing tastes and habits, as it targets the company directly. While in the competitive environment, consumers choose from proposed products, the public’s negative attitude to the company leads to the loss of the majority of its profits. In this case, it is highly essential for McDonald’s to be honest and transparent in relation to its business practices. Moreover, it should constantly monitor the tendencies of public opinion to address them in advance. In turn, in the case of negative comments occurrence, it should be ready for public response and the solution of a problem if it really exists in order to prevent more devastating consequences.
At the same time, the global expansion of McDonald’s may be regarded as its greatest opportunity. First of all, the company’s successful operation on all continents indicates the awareness of millions of customers across the globe. In addition, the paramount significance of this opportunity is determined by the fact that it has the potential to outweigh almost any threat due to the absence of global homogeneity in people’s attitudes, opinions and tastes. In this case, the company will not face complete failure until it is supported by consumers from one country, even if people in other countries change their attitude toward the company. In order to use this opportunity to the fullest extent, McDonald’s should continue its development within the framework of two major strategies. First of all, the company should constantly search for new participants and focus on partnership and franchising for expansion in the market. Moreover, the company should monitor the peculiarities of consumers, such as tastes, preferences, and purchasing behavior, on the basis of their cultures and countries’ economic welfare. In this case, the presence in the majority of countries with consideration to people’s tastes in every one of them may guarantee the corporation’s long-lasting stability.
Strengths and Weaknesses
McDonald’s main strengths include strong brand awareness and reputation on the basis of long-lasting performance, stable income due to the strategy of franchising, global presence, technology development, and focus on innovations. In addition, the company is distinguished by its quality customer service, targeting all population groups, and attachment to traditional values of family, honesty, and respect (“Our mission and values,” 2022). In turn, McDonald’s major weaknesses are a lack of control over franchises that frequently leads to supply chain disruptions, mismanagement, and customer dissatisfaction, the menu that remains unbalanced from the position of nutritional value, public concerns related to its environmental sustainability, and a lack of employee satisfaction that causes high turnover.
Strategy or Tactic
In order to take advantage of its strengths, McDonald’s should keep its global expansion, taking into consideration people’s culture-based preferences to keep its position in the area of excellent customer service. In addition, the company should promote its attitude to consumers and its values through advertisement in mass and digital media. At the same time, in order to minimize its weaknesses, McDonald’s should review its menu and continue including healthy meals, work to create a network of multi-unit franchises to strengthen control and increase the responsibilities of their owners, review its human resource practices to attract and retain employees, and improve its sustainable practice. All in all, the company should continue its global expansion with respect to its consumers and workers, introduce healthy foods, and apply modern technologies to become more environmentally friendly and gain competitive advantages.
Resources, Capabilities, and Core Competencies
McDonald’s tangible resources include a global network of restaurants with the latest equipment for cooking and serving customers, stable income and a solid reputation that allows borrowing from financial institutions, a well-defined management structure, technological advancements for quality service, and training for employees to improve their skills and productivity. In turn, the company’s intangible resources are a brand’s name and reputation, experience, and organizational culture on the basis of mutual support.
The combination of McDonald’s tangible and intangible resources creates its capabilities, especially in the areas of marketing research and development. By applying new technologies, providing training for employees, and executing the economies of scale on the basis of its facilities and equipment, the company is able to provide the best experience and meals for its consumers at affordable prices, expand its chain, and advertise products more efficiently. Finally, the core competencies of McDonald’s include franchising, product development, excellent customer service, competitive price policy, advanced technologies, and trained employees.
Michael A. Hitt. 2020. Strategic Management: Concepts and Cases: Competitiveness and Globalization 13th ed. Cengage Learning.
Cusack, D. F., Kazanski, C. E., Hedgpeth, A., Chow, K., Cordeiro, A. L., Karpman, J., & Ryals, R. (2021). Reducing climate impacts of beef production: A synthesis of life cycle assessments across management systems and global regions. Global Change Biology, 27(9), 1721-1736.
Xiao, A., Yang, S., & Iqbal, Q. (2018). Factors affecting purchase intentions in generation Y: An empirical evidence from fast food industry in Malaysia. Administrative Sciences, 9(4), 1-16.
Our mission and values. (2022).