mcdonalds-pestel-analysis

McDonald’s PESTEL Analysis

Background

The McDonald’s brand is instantly recognizable as a fast-food restaurant chain offering an affordable, fun, and family-oriented eating experience.

The company was the first such restaurant to incorporate drive-through ordering, and its consistency has seen it become a success in hundreds of countries.

However, the pillars McDonald’s was built on are no longer guaranteed to take the company forward. How will it expand and grow in face of changing consumer preferences?

We will attempt to answer this question and much more in the following PESTLE analysis.

Understanding the McDonald’s PESTLE analysis

Political

McDonald’s has approximately 34,000 restaurants in 118 countries, so political tension is almost guaranteed. The company is sensitive to hygiene regulations and increasingly, regulations around foods causing heart disease and obesity.

Countries with anti-American sentiment are also problematic for McDonald’s. For this reason, the company was banned from operating in Iran and North Korea to name a couple. McDonald’s was also banned from Bermuda because of long-held laws against foreign restaurant chains.

Economic

Global sales fell by 22% as a result of the coronavirus pandemic, with three-quarters of all McDonald’s stores operating in a limited capacity.

McDonald’s is also vulnerable to microeconomic factors. The company ceased operations in Iceland because of the prohibitive cost of acquiring meat, cheese, and vegetables.

Social

McDonald’s is supremely skilled at adapting its menu to suit local tastes. For example, it offers a McSpicy Paneer in India, a Panzerotti in Italy, and a Corn Pie in Thailand.

The company has also taken steps to make its menu more attractive to health-conscious consumers. However, this healthier menu is being seen as a less desirable option than similar menus in other restaurants. If it cannot strike the right balance, McDonald’s is also at risk of alienating the customers who prefer its traditional offerings.

Technological

To double down on its ethos of fast service, McDonald’s is in the process of rolling out self-serve kiosks in its restaurants. It has also invested in automated voice-technology to take drive-through orders.

In 2019, McDonald’s acquired tech company Dynamic Yield to deliver more responsive menus. Digital menus now show different items in response to regional preferences, time of day, and even current weather conditions.

Legal

The chain has been involved in many lawsuits over its seven-decade history. Most of these related to trademark infringements with many copycat restaurants using the “Mc” prefix in their name and branding.

Environmental

Although indirectly, McDonald’s contributes to greenhouse gas emissions and deforestation through its high demand for beef products. In some countries, it is also being pressured to phase out plastic straws and other harmful packaging.

In 2012, McDonald’s opened its first green restaurant in Australia. It features energy-efficient lighting, solar panels, rainwater harvesting, and was built from recycled steel and concrete. To reduce electricity demands, many restaurants are also using waste heat from the kitchen to heat water.

Key takeaways

  • McDonald’s is synonymous with cheap and cheerful family dining. However, it faces an uncertain future as consumer trends concerning healthy eating and climate change evolve.
  • Operating in 118 countries, political conflict seems inevitable. But it’s important to note that McDonald’s operates in several stable western countries which are also highly profitable.
  • Much of the global appeal of McDonald’s lies in its ability to integrate with foreign countries with innovative and culturally sensitive menu items.

Read Also: McDonald’s Business Model, McDonald’s SWOT Analysis.

Read Next: Pestel Analysis, SWOT Analysis, Porter’s Five Forces, STEEP Analysis, SOAR Analysis, BCG Matrix, Ansoff Matrix.

Read Next: Organizational Structure.

Related to McDonald’s

mcdonalds-business-model
McDonald’s is a heavy-franchised business model. In 2021, over 56% of the total revenues came from franchised restaurants. The long-term goal of the company is to transition toward 95% of franchised restaurants (in 2020 franchised restaurants were 93% of the total). The company generated over $23 billion in revenues in 2021, of which $9.78 billion from owned restaurants and $13 billion from franchised restaurants. 
disadvantages-of-franchising
Some of the most successful companies in America operate under a franchise business model. But for every success story, there is an instance where franchising caused a less than optimal outcome. The franchisor may have to open four or five franchises to get the equivalent financial gain of operating one store themselves. Franchising also carries an inherent litigation risk and relatively high set-up costs. For the franchisee, the main disadvantages are reduced profit margins, restrictive regulations, and the potential for conflict resulting from power imbalances.

Organizational Structure Case Studies

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Airbnb follows a holacracy model, or a sort of flat organizational structure, where teams are organized for projects, to move quickly and iterate fast, thus keeping a lean and flexible approach. Airbnb also moved to a hybrid model where employees can work from anywhere and meet on a quarterly basis to plan ahead, and connect to each other.
ebay-organizational-structure
eBay was until recently a multi-divisional (M-form) organization with semi-autonomous units grouped according to the services they provided. Today, eBay has a single division called Marketplace, which includes eBay and its international iterations.
ibm-organizational-structure
IBM has an organizational structure characterized by product-based divisions, enabling its strategy to develop innovative and competitive products in multiple markets. IBM is also characterized by function-based segments that support product development and innovation for each product-based division, which include Global Markets, Integrated Supply Chain, Research, Development, and Intellectual Property.
sony-organizational-structure
Sony has a matrix organizational structure primarily based on function-based groups and product/business divisions. The structure also incorporates geographical divisions. In 2021, Sony announced the overhauling of its organizational structure, changing its name from Sony Corporation to Sony Group Corporation to better identify itself as the headquarters of the Sony group of companies skewing the company toward product divisions.
facebook-organizational-structure
Facebook is characterized by a multi-faceted matrix organizational structure. The company utilizes a flat organizational structure in combination with corporate function-based teams and product-based or geographic divisions. The flat organization structure is organized around the leadership of Mark Zuckerberg, and the key executives around him. On the other hand, the function-based teams based on the main corporate functions (like HR, product management, investor relations, and so on).
tesla-organizational-structure
Tesla is characterized by a functional organizational structure with aspects of a hierarchical structureTesla does employ functional centers that cover all business activities, including finance, sales, marketing, technology, engineering, design, and the offices of the CEO and chairperson. Tesla’s headquarters in Austin, Texas, decide the strategic direction of the company, with international operations given little autonomy.
walmart-organizational-structure
Walmart has a hybrid hierarchical-functional organizational structure, otherwise referred to as a matrix structure that combines multiple approaches. On the one hand, Walmart follows a hierarchical structure, where the current CEO Doug McMillon is the only employee without a direct superior, and directives are sent from top-level management. On the other hand, the function-based structure of Walmart is used to categorize employees according to their particular skills and experience.

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