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Porters and pestel for McDonalds

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Political Factor: Generally, McDonalds are affected by government policy on the regulations of Fast Food Company such as health and hygiene policy. Government realized health problem have been a big concern for everyone, people are having diseases such as cardiovascular and cholesterol because they are eating too much fast food. Furthermore, hygiene policy also is a big concern for a fast food company. Good relationship with government will bring McDonald on a better position to service in this industry. Economic Factor: McDonalds have to consider the effect of economic. Organizational performance is usually affected economic factors such as tax rate, exchange rate and unemployment rate. Running a Business in local market, a company must be facing government regulation on tax or profit. Especially McDonald is an international company, and its business is successfully running over the world. Every country also has its own regulation on tax or other else that affect the business. Moreover, McDonald needs to import food and drink in local market, which mean the exchange rate and people living standard also affect the cost of running a business and productivity. Social Factor: The changing lifestyle will affect the sales performance of McDonalds. Nowadays, people are willing to eat more expensively. They want to have quality services and food more than fast food. Moreover, different country has different eating behavior. In western country such as USA, people are willing to eat potato and hamburger. But in China, people prefer rice more than hamburger and potato.

Few years ago, McDonald promoted rice burger, and now is promoting rice for dinner. For my point of view, it is really strange and hardly to say it is delicious. Technological Factor: In Fast food industry, technology seems not affect so much to the company. However, high technology will help organization improve its management and performance of productivity. Technology is used in so many ways, for instance, advertising on internet, providing easy payment for the sales service, providing Wi-Fi and internet devices to satisfy the needs of customers. Environmental Factor: Recently, people start concern environmental problems such as air pollution and too much waste of row material. Take McDonald as example, it faced a lot of criticize of the waste production.

Before the pager packaging was produced, McDonalds were using polystyrene for packaging for foods. As I mentioned at the beginning, there are around 49 million customers daily buy the food from McDonald. Can you imagine how much food waste and the waste of polystyrene package are produced? There are some pressure groups against McDonald as the largest waste fast food company and it is a company that killing animals. McDonald should base on environment factors to change its strategy. Legal Factor: Regulation always is the biggest concern to a company. As a company in fast-food industry, there are many legal requirements that McDonald should achieve in different countries, such as the labor and employment law, company law and tax requirement. In conclusion, McDonald is still facing different threat from the macro environment. McDonald will be affected by each of the factors.

POTERS Five Forces:
Threat of New Entrants: The threat of new entrants is relatively low. Although it is not too expensive to start up a fast food restaurant, it is difficult to compete with established leaders in the industry such as McDonald’s, Burger King, and Wendy’s. With their standardized products and services at low prices, combined with a very strong brand, it is extremely difficult for a new entrant to compete directly with these existing businesses. The risk of new entrants is always there and there are local fast food places that are created every year. However, it will take a significant amount of capital investment and many years of operations to build up a recognizable name and be able to compete with the well-known brands.

Bargaining Power of Buyers: The bargaining power of buyers is low in the industry as well. McDonald’s, Burger King, Wendy’s, among others, are highly competitive with their product pricing as it stands. Price floors are already being experimented with through dollar menus at McDonald’s and Burger King, and 99¢ menu at Wendy’s, at which some of these companies actually operate at a loss for each sale from this value menu. Therefore, with low prices already established in the industry, the bargaining power of buyers will be low because fast food restaurants already offer selections at various price points that cater to all budgets.

Bargaining Power of Suppliers: The bargaining power of suppliers is moderate. Based on the good relationship that McDonald’s has with suppliers, the bargaining power is fairly stable currently. The reliance that McDonald’s has on suppliers is equal to the reliance suppliers have on McDonald’s. On one hand, McDonald’s has a good supply chain of quality materials at fair prices. On the other hand, suppliers are surely content with supplying to a large consuming company such as McDonald’s. However, there are many substitute suppliers out there that can replace current suppliers (i.e., Pepsi could replace Coca Cola) without a significant drop in quality, should there be a rift in the buyer-supplier relationship.

Threat of Substitute Products and Services: The threat of substitute products and services is high. Since McDonald’s can be categorized as a fast food service franchise, we have to take into account other fast food restaurants’ products and classify them as substitute products. Restaurants with similar hamburger substitutes include nationwide chains Burger King, Wendy’s, White Castle, and Sonic Drive-In, to name a few. Regional chains with similar hamburger substitutes include the West Coast’s In-N-Out Burger, the Midwest’s Culver’s, and the East Coast’s Five Guys. Diverse fast food substitutes include fried chicken from Kentucky Fried Chicken, sandwiches and subs from Subway, and fish from Long John Silver’s. As we can see, substantial substitute products exist, whether they are similar in nature or completely different, yet still classifiable as fast food.

Intensity of Rivalry among Competitors in an Industry: The intensity of rivalry among competitors in the fast food industry is at a high level. Over the years, fast food restaurants have done more to compete not only with similar quick service institutions, but with high end food and beverage companies as well. For example, McDonald’s introduced premium customizable coffee beverages recently to compete with higher-end Starbucks Coffee. Along with Burger King and many other fast food chains, they added a breakfast menu in the 1970s, to compete with the breakfast chains every morning. There are multiple reports on the number of fast food restaurants in the US, ranging from 85,000 – 300,000. With so many fast food establishments around, as well as competition with non-fast food restaurants, it is logical that rivalry is high and intense in the industry.



‘s+Five+Forces (PORTERS)

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