PESTEL analysis of McDonald’s (McDonald’s external environment analysis)
This detailed PESTEL analysis of McDonald’s aims to provide readers with insights into some of the key political, economic, social, technological, environmental, and legal factors that impact on the current and future success of McDonald’s. McDonald’s is the largest fast-food restaurant chain in the world. It has shown its strengths very well in adapting to changes in its business environment.
Political factors affecting McDonald’s
Political factors can provide companies with both opportunities and threats. These factors play a crucial role in their operations and performance as well. McDonald’s has presence across 120 countries and territories, and therefore, come under many rules. In some countries such as the UK and USA, health and hygiene regulations are strict, and the restaurant must adhere to them.
Two major consequences of breaching relevant rules and regulations are the loss of money, and damages to brand reputation. In the UK, McDonald’s was fined £200,000 for health and safety breaches in 2018. An employee at Lakeside Retail Park branch (West Thurrock) suffered a fractured knee when he was hit by a car while he was directing traffic in the restaurant’s drive-thru and car park. The court found that the restaurant had not provided the staff with adequate training to direct traffic (Liversedge, 2018). Similarly, Selyukh (2019) reports that the restaurant agreed to pay $26 million in 2019 to settle a legal battle with California cooks and cashiers. The lawsuit represented tens of thousands of workers who had accused the restaurant of failing to pay them appropriately.
However, it is worth noting that McDonald’s operates in all of the largest countries in the world. Some of those countries have very stable political environments making it easier for the restaurant operate and make profits. Operating in politically stable countries enables the restaurant to focus on what it does best without any concern of immediate adaptation to changes.
Economic factors affecting McDonald’s
McDonald’s performance can be affected by economic crisis. Likewise, it can skyrocket due to good economic conditions. Maidenberg (2020) reports that the restaurant’s global sales fell by 22% due to economic shut down around the world. High unemployment rate of each country and territory where the restaurant operates hits it badly as many people may decide to eat at home rather than going out for ‘Big Mac’. Likewise, high rental charges in countries such as the UK, and USA affect its profit margins. However, it is worth noting that McDonald’s is positioned well to fend off economic challenges due to its value and affordable pricing strategies.
Social factors affecting McDonald’s
McDonald’s caters to local tastes with regional variations. For example, McSpicy Paneer in India, Ebi burger in Hong Kong, Panzerotti in Italy, McVegan in Finland and Sweden, and Corn Pie in Thailand are some examples of the restaurant’s efforts to address regional demands. It is noteworthy to mention that although fries and hamburgers are popular in the West, they face hard times in some Asian countries.
Consumers are becoming more and more health conscious and concerned about what the are putting into their bodies. Many people are now-a-days looking for food products and beverages containing low-carb and low-sugar. Though McDonald’s has been trying hard to address these demands, its menu is a less desirable option for many healthy eaters.
Technological factors affecting McDonald’s
McDonald’s has changed some of its processes with the help of advanced technologies. For instance, self-service ordering kiosks are being placed at all U.S. locations, and hundreds of locations across the UK, Ireland and worldwide. Likewise, the acquisition of Apprente is to help the restaurant replace human servers with voice-based technology in its drive-throughs. However, it is worth mentioning that use of technology may render many of McDonald’s employees redundant.
Environmental factors affecting McDonald’s
McDonald’s has taken a number of steps to respond to environmental concerns. For instance, it installed recycling units in over 1000 restaurants in the UK so that consumers are able to separate cups and plastics for recycling (McDonald’s, 2020). Likewise, it has measures in place to reduce its greenhouse gas emissions, and the amount of paper and plastic packaging it uses daily. It is also currently working on protecting water resources.
Legal factors affecting McDonald’s
McDonald’s works under legal systems of all the countries and territories in which it operates. For instance, it pays business rates to local councils in the UK. Likewise, it must abide by relevant food safety standards and hygiene regulations. However, relaxed and flexible regulations in some places make it easier for McDonald’s to run its operations.
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Last update: 25 July 2020
Liversedge, B. (2018) McDonalds fined £200k for employee’s Drive-thru injury, available at: https://www.britsafe.org/publications/safety-management-magazine/safety-management-magazine/2018/news-mcdonalds-fined-200k-for-employee-s-drive-thru-injury/ (accessed 20 July 2020)
Maidenberg, M. (2020) McDonald’s Warns Of Difficult Decisions Ahead as Coronavirus Hurts Sales, https://www.wsj.com/articles/mcdonalds-warns-of-difficult-decisions-ahead-as-coronavirus-hurts-sales-11586360801 (Accessed 25 July 2020)
McDonald’s (2020) Our Plannet, available at: https://corporate.mcdonalds.com/corpmcd/scale-for-good/our-planet.html (accessed 25 July 2020)
Selyukh, A. (2019) McDonald’s Agrees To Pay $26 Million To Settle Accusations Of Wage Theft, available at: https://www.npr.org/2019/11/25/782580843/mcdonalds-agrees-to-pay-26-million-to-settle-accusations-of-wage-theft?t=1595268873842 (accessed 18 July 2020)
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Author: M Rahman
M Rahman writes extensively online with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He is a graduate of Leeds Metropolitan University and London South Bank University.