Elements of Business: McDonald’s Corporation
Organizations thrive under different market conditions, encountering varying challenges and points of success. McDonald’s is a fast food company that has operated since 1955 under the name McDonald’s Corporation. The firm is subject to various legal, economic and social issues in the external environment. It also encounters different issues in operations and financial management. This business paper seeks to analyze various elements of McDonald’s as a business, forming a basis for the assessment of the impact of different factors in the industry.
◈ Legal Environment
The legal context of any industry composes of factors such as regulations, political entities, and government agencies that may interfere with the functioning of the firm (Cravens, 2011). For McDonald’s, its legal environment is relatively stable in comparison to other industries. The company relies on strict checks from authorities such as the Food and Drug Administration. Lobbying efforts in the USA have managed to reduce the impositions placed on the fast food industry in the country, offering a relatively relaxed operation atmosphere (“Financial Times”, 2015).
Regardless, the firm faces several legal issues on a global scale. For instance, the firm had to change its name to a Russian version due to the requirements of the government for all entities to make this shift. Also, McDonald’s has been subject to various legal suits, including one for fraud in its labeling of the Happy Meal (Gasparro & Jargon, 2012).
◈ Economic Environment
Unlike most industries, the fast food industry seems to remain unaffected by significant shifts in global income. For instance, most businesses encountered serious financial problems during the global economic recession (“Financial Times”, 2015). McDonald’s, on the other hand, remained unaffected in most parts of the globe. Its sales in the USA remained relatively constant. In the UK and Japan, the sales of the entity increased by about 14 % during this period (Badenhausen, 2015).
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However, the firm is affected by limited purchasing power in some of the countries where it operates. McDonald’s has to offer affordable products in countries like India, ensuring they sustain a market-wide range (“McDonald’s”, 2014).
◈ Social Environment
While the legal and economic environments tend to be friendly for the fast food market, the social environment is constantly offering challenges in the market. The perceptions of people, especially in the Western world, are shifting towards adopting healthier eating. In this regard, fast food products may begin losing popularity as people seek food products with fewer fats or salts (“Financial Times”, 2015). McDonald’s has realized the impact of such social change and began steps to cope with the shifting perceptions. This change is visible in the elimination of the supersized options from the market, and the idea to introduce vegetarian products in their range (Gensler, 2015).
The highest level in its management is the CEO, a position currently held by Steve Easterbrook. The company is divided into segments that all have presidents in charge. Following the presidents are the heads of various departments, which may further be divided into various divisions for efficiency (“McDonald’s”, 2014).
◈ Operational Issues
Some of the operational issues facing McDonald’s come from its global operations. In 2014, the firm was plunged in a food scandal in China, eliciting feelings of mistrust among consumers (Badenhausen, 2015). While the company has increased transparency in its western branches, it has not made sufficient efforts to do the same in other regions. Further issues have included the range of products it offers. For instance, India prompted the firm to discard its core product, the beef burger, as it is a taboo to eat meat in the country (“Financial Times”, 2015).
◈ Financial Issues
McDonald’s is at a point where its revenues are experiencing consistent slumps. For instance, in 2015, the firm’s revenue fell 11 % in the first quarter due to declines in sales globally (Gensler, 2015). This decrease was an average, with the Asian and Pacific Region reporting the highest declines in sales due to operational scandals.
The firm is also experiencing a decline in profits, which fell from 1.2 billion to 812 billion within a similar quarter in 2014. This change has decreased the EPS of the firm to only 84 cents, despite previous forecasts placing it at 1.06 dollars (Gensler, 2015).
Impact of Potential Change Factors
Various change factors have influenced the progress in McDonald’s. Technology, for instance, has revolutionized the approach to promotional strategies and sales. McDonald’s invests in the low-cost but high-impact online campaigns, using forums such as YouTube and Facebook (“McDonald’s”, 2014). Other change factors for the firm include the society. McDonald’s has to respond to change in dining habits among various nations, offering meals that are healthier or fit preferences. Also, the firm must invest in corporate social responsibility to ensure minimized encounters with aggressive environmental activists (“Financial Times”, 2015).
McDonald’s has been a dominant brand for many years. It operates in a favorable economic and legal environment, but it requires creating strategic responses to social change. The entity has some operational issues, especially in its branches in Asia. Its financial performance is also stumbling, with sales and profits failing in recent quarters. Consequently, the firm must recognize the impact of factors such as technology and social change, and strive to take advantage of the opportunities they create.