M RahmanPESTEL analysis of McDonald’s
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 in 118 countries and territories, and therefore, come under many rules (McDonald’s, 2023). In some countries such as the UK and USA, health and hygiene regulations are strict, and the restaurant must adhere to them appropriately.
Any changes in the political climate can affect McDonald’s. For instance, if there is a change in the government in a country, it could lead to stricter regulations on the food industry, which could have a negative impact on it.
It is worth noting that McDonald’s operates in all the largest countries in the world. Some of those countries have very stable political environments making it easier for it to operate and make profits. Operating in politically stable countries enables it to focus on what it does best without any concern for immediate adaptation to changes.
Economic factors affecting McDonald’s
Economic discussion is a key part in the PESTEL analysis of McDonald’s. McDonald’s performance can be affected by economic crisis. Likewise, it can skyrocket due to good economic conditions. Maidenberg (2020) reports that its global sales fell by 22% due to economic shut down around the world.
High unemployment rate of each country and territory where McDonald’s operates may affect it badly as many people may decide to eat at home rather than going out for ‘Big Mac’. However, it can also be argued that in similar situations, some people will rather go to McDonald’s more than going to fine dining and full-service restaurants.
Likewise, high rental charges in countries such as the UK, and USA affect McDonald’s profit margins. However, it is worth noting that it is positioned well to fend off economic challenges due to its value and affordable pricing strategies.
Social factors affecting McDonald’s
McDonald’s has around 38,000 that serve more than 69 million people every day worldwide (McDonald’s, 2023). This shows how high massive the demand of its products are. Consumer behaviour has changed dramatically with many global customers opting for fast food. This has benefitted McDonalds very well.
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.
Although fries and hamburgers are popular in the West, they face hard times in some Asian countries. It is worth mentioning that McDonald’s in India does not serve beef or pork for religious reasons.
Likewise, the restaurant does not serve pork in Dubai and other Middle Eastern countries for the same reason. In fact, all its meat used in Saudi Arabia is halal and subject to strict standards, inspections, and control (McDonald’s, 2023).
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
Another important element in the PESTEL analysis of McDonald’s is technological environment. 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 must take the changing attitudes of consumers towards environmental issues. For instance, as there is a growing concern about the impact of fast food on the environment, it must invest in more sustainable practices in order to remain competitive.
Webb (2022) reports that McDonald’s is a massive producer of plastic waste. It has also been reported that only half of its packaging is made from sustainable materials and shockingly only 10% of its stores recycle. This is certainly very concerning for many customers.
It should be mentioned that 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, 2023).
Likewise, the restaurant 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
The last part of discussion in this PESTEL analysis of McDonald’s is the legal environment. 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, the restaurant 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.
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 hundreds of thousands of pounds because of lawsuits.
Similarly, McDonald’s agreed to pay $26 million 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.
Summary of the PESTEL analysis of McDonald’s
In conclusion, McDonald’s takes the political, economic, social, technological, environmental, and legal factors seriously that affect its operations. By understanding these factors, it makes better decisions about its operations and remains competitive in the global market.
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Last update: 05 February 2023
References:
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 02 February 2023)
McDonald’s (2023) Our plannet, available at: https://corporate.mcdonalds.com/corpmcd/scale-for-good/our-planet.html (accessed 05 February 2023)
Webb, S. (2022) Macron’s loving it: French PM hails McDonald’s reusables as EU goes after single-use plastics, available at: https://www.independent.co.uk/climate-change/news/mcdonalds-reusable-containers-eu-law-b2236933.html (accessed 05 February 2023)
Author: M Rahman
M Rahman writes extensively online and offline with an emphasis on business management, marketing, and tourism. He is a lecturer in Management and Marketing. He holds an MSc in Tourism & Hospitality from the University of Sunderland. Also, graduated from Leeds Metropolitan University with a BA in Business & Management Studies and completed a DTLLS (Diploma in Teaching in the Life-Long Learning Sector) from London South Bank University.
