Mcdonald’s Internal and External Environments


In this course, I have written about the Yahoo Company, which operates in the technology industry. In this paper, the focus shifts to the fast-food industry. McDonald’s, which is a publicly-traded organization, forms the basis of discussion in this paper. The McDonald’s Corporation was listed in 1966 on the New York Stock Exchange. The business operates in the restaurant and bar industry. All publicly-traded companies are required to submit their public filings to the Securities and Exchange Agency.

Although compliance with the legal environment is one of the external factors that affect McDonald’s operations, the organization ensures that it complies with all legal requirements in all areas of its operations, including timely surrendering of all necessary forms to the Securities and Exchange Commission. This paper aims to analyze McDonald’s segments of the general environment, competition forces, mechanisms for improving its operations, external threats and opportunities, resources, capabilities, and core competencies. The paper will conclude by conducting the company’s value chain analysis.

Selection of Two Segments of the General Environment

A business environment constitutes all forces that shape or influence organizations’ operations within a given business industry. Internal and external factors make up the organizational environment. Some of the components that make up the external environment include the financial, legal, industrial, and intercontinental forces (Ronda-Pupo & Guerras-Martin, 2012). Besides, socio-cultural and political elements form part of the external environment. The second component of the external environment is the organization-specific atmosphere.

The McDonald’s operations are likely to be highly influenced by international and socio-cultural forces. Health professionals create intense awareness through public health programs on the need for eating low-calorie foods. High-calorie foods are associated with obesity. Thus, they are taken as a risk factor for ailments such as hypertension and diabetes and their associated health challenges. Consequently, organizations that operate in the fast-food sector face enormous challenges in the process of looking for new low-calorie products. This aspect constitutes a major socio-cultural challenge that fast-food organizations need to address sufficiently in a bid to remain profitable.

McDonald’s has encountered different challenges in its operational environments. This observation is perhaps the case in the wake of the increasing emphasis on the need to change eating behaviors to avoid the dangers of health risks that are associated with eating unhealthy foods. Health specialists regard foods that contain high calories as unhealthy. Such foods include fast foods that form one of the menus at McDonald’s.

Campaigns that are initiated by health organizations against such products result in the demand for fiber-rich foods. Therefore, competing organizations whose menus meet these socio-cultural needs are likely to pose a major threat to McDonald’s business activities.

Venturing into new markets, especially in Asia, constitutes one of the amicable ways of enhancing McDonald’s performance. For example, the company has opened various outlets in China and India. This strategic decision subjects the company to the effects of international forces on its business operations. Such forces include different tastes and preferences, legal matters, and political forces. McDonald’s is fully aware of these effects.

The organization has designed new menus to meet the international market needs. McDonald’s Corporation (2013) reveals how the organization offers substantiated and uniform menus that meet customers’ diverse geographical needs and preferences. Although McDonald’s has responded to the challenges of tastes and preferences in the Chinese market by developing chicken humbuggers, international forces concerning culturally dictated eating habits remain an essential factor that may affect the performance of McDonald’s in the international markets.

Porter’s Forces

Scholars have presented various ways of analyzing companies’ environments in terms of the elements that determine their productivity in the market. Different factors shape industry competition. Porter’s five-force method is one of the ways of analyzing these factors. These forces include competition in business, the pressure from new contestants, pressure from substitutes, clientele bargaining authority, and suppliers negotiation command (Porter, 2008). McDonald’s is the leading organization globally in the fast-food industry. However, the degree of competition comprises one of the most important factors that the company should consider in its operations.

Many emerging organizations are operating in the fast-food industry. This situation threatens to take up McDonald’s market share. Such organizations include Wendy’s, In and Out, Burger King, Jack in the Box, and Taco Bell among others. The increased rivalry in the industry makes the fast-food industry incredibly dynamic. Organizations keep on looking for mechanisms for enhancing their competitive advantage, including the innovation of new products that meet the emerging consumer needs (Hoskisson, Ireland, & Hitt, 2008). For McDonald’s, novelty and product differentiation are central mechanisms for ensuring that it dominates its rivals.

Buyers’ bargaining command tops the list of McDonald’s most significant competition forces. McDonald’s success depends on the strength of its consumer base. Therefore, apart from retaining the existing clientele, it also seeks mechanisms for attracting new patrons who are loyal to the competing brands. McDonald’s encounters major challenges while attempting to attract and keep customers whose influence on their bargaining power base rests on the raised concerns about eating healthy diets. This issue forces fast-food consumers to demand healthier products. In response to the clients’ demands, McDonald’s has not only added salads into its menus but also altered its cooking oils to reflect healthier food demands.

Even though McDonald’s leads other organizations in adopting healthier diets in their menus, negative profiling from books such as A Fast Food Nation and the film Super Size Me may have a negative influence on the company. McDonald’s has created a strong fast-food brand image. Consequently, people always think about McDonald’s whenever fast foods are mentioned. Based on the mentality that fast foods are unhealthy, buyers are more likely to attribute any negative effects of fast foods to McDonald’s, as opposed to any other fast-food retailer, whenever a McDonald’s advertisement runs over the media.

Improving the Ability to Deal with the Two Forces

McDonald’s has several options that it can adapt to deal with the negative effects of the above two forces. The organization can continue with its strategic efforts of innovating and creating new products that do not resemble its traditional products. The creation of new products such as McFlurry and Big Mac is not adequate. The company should invest more in the alteration of buyers’ mental cognition about the nature of its products.

Conventionally, McDonald’s has created a strong brand image by positioning its trademark as the only option for people who do not have time to prepare foods at home. When such people are hungry, they often turn to McDonald’s for convenience purposes. However, with the current profiling of fast foods as unhealthy, hungry customers think of what they have been accustomed to as the means of satisfying their needs. What comes to their mind is the issue of fast food, although the negative feelings of its impacts on their health follow.

McDonald’s has to complete the above chain of information processing as utilized by consumers before deciding to buy fast-food products, especially among consumers who have embraced the concerns of healthy meals. This goal is achievable through a strong positioning of their new salad products and fiber-rich foods rich. Consequently, when people think of buying fast foods, the concept of unhealthiness comes into play.

However, they immediately realize other options, which can satisfy the definition of healthy fast foods that are offered at McDonald’s. This move changes McDonald’s brand image from a fast-food center to a healthy meal base. Hence, it is perhaps possible to improve McDonald’s ability to deal with the identified Porter’s forces that shape the fast-food industry.

External Threats and Opportunities

Threats refer to the external elements that influence the performance of an organization (Ronda-Pupo & Guerras-Martin, 2012). The primary threat to McDonald’s is competition. Despite the presence of this threat, McDonald’s has opportunities, which it can capitalize on to yield continued success in its industry of operation. Opportunities denote the existing external elements, which when utilized well, can make an organization improve its performance (Dobbs, 2014). The increasing concerns for healthy eating present a primary opportunity for the firm. Another opportunity is its expansion into global markets, especially in regions where McDonald’s has no stores such as Africa and other Asian nations, apart from China and India.

The justification of the above threat is that other companies are taking leadership in some products. For instance, Wendy’s is dominating the industry in terms of chicken products. With the liking of such products at the expense of beef products in the international markets such as China, the domination of Wendy’s presents primary challenges in case it (Wendy’s) decides to open outlets in the Asian markets.

Wendy’s is also likely to develop a strong brand image as a chicken products outlet in the UK and the American markets. McDonald’s may fail to overcome such brand positioning. However, by studying the weakness of Wendy’s chicken products, especially in terms of health, McDonald’s can develop healthier chicken products. This aspect can help it to gain immense success in the chicken products market across all operational centers globally.

Weaknesses and Strengths

McDonald’s has several strengths, including domestic and international leadership in the fast-food industry, utilization of economies of scale to pursue the low-cost strategy, the ability to adjust its ingredients to develop new product lines, and a strong brand portfolio among others. Economies of scale present the foremost strength of the company. Compared to any other company, McDonald’s faced challenges in its operations due to its weaknesses. One of the weaknesses of the company entails its bureaucratic culture. Employees complain about the denial of the freedom to raise their concerns via unions. McDonald’s has a negative perception that its products are unhealthy. For example, people believe that the company is the main contributor to the problem of obesity.

Opinion on Strengths and Weaknesses of the Organization

In my opinion, customers’ healthy eating concerns present the biggest weakness for McDonald’s. This challenge can be justified via the fact that people are increasingly concerned about how they can live free from ailments such as hypertension and diabetes among other obesity-associated diseases. Therefore, they are likely to stop consuming any product that may pose the risk of becoming obese. With the increased media attention on the effects of fast foods on consumers’ health, the question of the relationship between McDonald’s fast foods and obesity becomes even more imperative in influencing the success of the organization.

Dealing with the weakness proactively requires McDonald’s to utilize its strengths such as its strong positioning ability and high financial base to introduce various products that meet customers’ perception and definition of healthy foods. Through its financial capability, it can invest heavily in the marketing of healthy foods via both traditional and new media while abandoning products that are considered unhealthy.

Resources, Capabilities, and Core Competencies

Resources are indefinable or concrete (Hoskisson et al., 2008). McDonald’s tangible resources include monetary possessions, organizational property, physical wealth, and technological resources. In terms of financial possessions, it has a strong borrowing capability.

The company has a large global asset base. It can also generate funds internally through huge sales. McDonald’s can maintain strong planning, controlling, and coordinating procedures in its operations to deliver high-quality products. These aspects constitute vital organizational resources. McDonald’s has patented its brand and products. It has also established other technological resources such as the protection of its products through trademarks. In terms of physical resources, McDonald’s can source raw materials from across the world.

McDonald’s intangible capital includes resources such as brand name, consistency, the superiority of its products, and first-rate supplier status on the corporation. The company is highly innovative. It generates not only ideas but also new products that meet emerging consumer needs. The company’s capacity includes producing high-quality products, its ability to conduct intensive market studies to determine the appropriate success strategies, consumer perceptions of its products, and the capability to position its products. Quality, which is defined as the ability to manufacture and distribute with both speed and germ-free manner, forms McDonald’s core competency.

Conclusion: Value Chain Analysis

Resources act as core competencies and capabilities, which help McDonald’s to realize its value chain. McDonald’s stands out as one of the biggest global fast-food retailers. It offers fast foods close to 120 countries worldwide. McDonald’s restaurants and franchises, which stood at approximately 34, 500 by the end of 2012 continue to grow as the organization penetrates new markets in Asia (The McDonald’s Corporation, 2013).

This immense success is attributed to several factors such as the company’s effort to emphasize consumer engagement, appropriate leadership that fits the business of the organization, and the exceptional investments of the organizational resources in brand management. The deployment of core competencies, resources, and capabilities to create value forms the pillar for McDonald’s market capitalization.

The corporation offers low prices and diverse products to average consumers. McDonald’s workers emphasize quality and speed. The faster the customers receive services, the faster they leave the organization to accommodate new clients. Therefore, they are satisfied with the company’s services. McDonald’s has been using the same suppliers throughout its history of operation. This strategy has led to the establishment of good relationships with its suppliers. Thus, the company benefits through the suppliers’ reliability to provide quality and enough raw materials.

Reference List

Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

Hoskisson, R., Ireland, D., & Hitt, M. (2008). Strategic Management: Competitiveness, Globalization and Concepts. New York, NY: Cengage Learning.

Porter, M. (2008).The five forces that shape strategy. Harvard Business Review, 3(1), 56-63.

Ronda-Pupo, A., & Guerras-Martin, L. (2012). Dynamics of the evolution of the strategy concept 1962-2008: a co-word analysis. Strategic Management Journal, 33(2), 162-188.

The McDonald’s Corporation. (2013). Corporate Info. Web.