Macro Analysis of MC Donald’s

Introduction

Macro Analysis of MC Donald’s has been conducted in this report. MC Donald’s is an American fast restaurant which is 2nd largest fast-food chain in the world (Thought Co., 2020). It is headquartered in Chicago, Illinois, U.S (Chicago Tribune, 2016). The signature products of the fast food chain are cheeseburgers, hamburgers, French fries, beef products, fish products, chicken products, desserts, soft drinks and breakfast items (MC Donald’s, 2019). MC Donald’s serves services in 119 countries across the world and has outstanding demand for its foods (Fox News, 2018). It has more than 38,000 restaurants all over the world and services 69 million customers each day (Thought Co., 2020). Around 210,000 employees work at MC Donald’s globally (Thought Co., 2020). The company generated revenue of $21.1 billion in 2019 (Thought Co., 2020). Key competitors of MC Donald’s are Subway with 40000 outlets, Starbucks with 30,000 outlets, Pizza Hut with 16000 outlets and many more local fast-food chains except these international players (Thought Co., 2020).

In this report, the recent history of MC Donald’s has been analyzed to identify the recent change initiatives of the company. Macro analysis has been conducted to identify the influence of external factors on the organization in order to represent how the company has interacted with the factors. Leadership styles and other factors of MC Donald’s have also been analyzed.

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Recent strategies of McDonald’s:

MC Donald’s provides food after considering customers’ demand: MC Donald’s studies the manners of clients across the world and customizes their menu for the host country’s clients. For example, India is the only one country on MC Donald’s list where the company serves a vegetarian menu by being aware of the manners of Indian people (NPR, 2012). The company eliminates pork, beef and mutton burgers from India after considering the manner of the people of that country. As a result, the company become able to generate higher revenue from the business of India.

The company shuttered 350 stores in Japan, U.S. and China: Because of poor performance, MC Donald’s has shuttered its 350 stores in Japan, US and China (Fortune, 2015). These outlets are not bringing desired profit for the company. MC Donald’s operating cost was increasing because these 350 stores needed huge investment to operate but did not bring a return on the investment. Therefore,

Earnings per share are 14%: MC Donald’s has successfully increased its earnings per share to 14% (MC Donald’s Corporation, 2020). By utilizing the investments effectively, the company have come to bring maximum earnings per share that make shareholders gratified. Therefore, shareholders repurchase the shares of MC Donald’s to get higher earnings per share. As a result, the company ensure the flow of capital and enhance business to be more successful.

Sales growth is 7.86%: MC Donald’s has had sales growth of 7.86% for the last five years (CSI Market, 2020). The company is unable to increase its sales growth for the past five years. MC Donald’s does not take any steps to increase its sales growth therefore new customers do not get attracted to the company. As a result, MC Donald’s cannot increase their revenue. The company should focus on developing its marketing strategies which will help them to increase its sales.

Expanded business in China: MC Donald’s has targeted huge expansion in China and Hong Kong. It will open new 2,000 outlets in China and Hong Kong by 2022 (GB Times, 2017). MC Donald’s has a target of achieving double-digit profit from the expansion. It will be the largest market of MC Donald’s outsider of the U.S. The company will be able to generate second higher revenue from the expansion of China and Hong by increasing its sales.

It ensures its presence in the place where customers can access the outlets easily: MC Donald’s makes sure that its outlets are located in areas where customers will be able to access their outlets easily. For example, in the UK, 50% of its outlets are 3 minutes away from the other outlet to ensure customers’ presence enormously (Marketing Slides, 2020). The strategy of locating in easily accessible areas also ensures a huge number of customers’ presence in their outlets across the world.

Closed its restaurants to stop spreading COVID-19: MC Donald’s has closed its 1270 restaurants in the UK (BBC News, 2020). Corona Virus is spreading dangerously across the world, and MC Donald’s has shuttered its UK stores to stop spreading the virus. The company also shuttered its outlets in 5 cities in China and other outlets in different countries of the deadly coronavirus (CNN Business, 2020). It will harm the profit level of the company enormously. The economic recession across the world which will be created in future because of the coronavirus will also affect MC Donald’s. The purchasing power of people will decrease therefore, the sales of MC Donald’s will decrease. As a result, the profit level of the company will decrease. The company would reduce the price of their foods in order to maintain sales which will help them to interact with the crisis.

Does not treat employees properly: MC Donald’s does not pay their employees for overtime. Therefore, the cooks and accountants of California raised their voices and claimed compensation for stealing their overtime payment. MC Donald’s has agreed to pay $26 million to close this battle with its employees (NPR, 2020). Even the company demands clean dress from employees but does not compensate for the dresses which get spoiled because of the smoke in the kitchen. Employees have to take new dresses from their own income, which is unfair. The unfair treatment creates employees dissatisfaction, and it harms the quality of MC Donald’

Generates lower profit than past history: MC Donald’s generated revenue of 21.08 U.S. dollars in 2019 and 21.03 U.S. dollars in 2018, which is lower than the profit of 2017 (Statista, 2020).

Macro Analysis of MC Donald’s: Revenues of MC Donald’s

From the above table, it is seen that MC Donald’s generated the highest profit in 2013, which was 28.11 U.S. dollars. The company generated revenue of 27.44 U.S. Dollars in 2014, which fallen down to 25.11 U.S. dollars in 2015. In 2016, the revenue fell to 24.62 U.S. dollars. After that year revenue of the company decreased gradually. This refers that MC Donald’s is not taking any effective steps to get back to the higher revenue of past years.

PESTLE Analysis of MC Donald’s

PESTLE analysis is a way of evaluating the impact of the external factors of a company which are out of control (Barkauskas, and Jasinskas, 2015). The six factors of PESTLE analysis are political environment, economic environment, social environment, technological environment, legal environment and ecological environment. Influence of these factors on MC Donald’s are analyzed below:

Macro Analysis of MC Donald’s: PESTLE Analysis of MC Donald’s

Political environment: Political environment refers to the influence of the political factors of the countries in which an organization operates its business, and organizations can find out the right way to interact with these influences (Durán, Córdova, and Palominos, 2016). MC Donald’s execute business in 119 countries across the world, and the company have to consider the political factors of the countries such as fiscal policies, trade regulations etcetera (Fox News, 2018). MC Donald’s considers the political factors of the US, including host countries. It maintains the rules and regulations of the host countries while operating a business in order to avoid government interference in the business. For example, India and China have made stiff rules for foreign companies, and it makes the operations of foreign companies harder in the country. Being a foreign company, MC Donald’s faces difficulties in executing business there, but they make sure that all rules are maintained properly. As a result, the company operates business in China and India without government interference and generates higher profits.

Economic environment: Economic environment refers to the impact of an economic factor on a company and assists companies in identifying the best way to minimize the impact of the factors (Feimi, Kume, and Pulaj, 2016). Interest rate, inflation rate, income per capita, the economic stability of a country, etcetera, economic factors influence MC Donald’s business. Local economy and global economy both impacts their business therefore, the company consider the economic factors of host countries to ensure growth. For example, the GDP per capita is $2,199 in India, which is lower than in the US therefore, MC Donald’s considers the price of their foods in the country (Statistics Times, 2019). It uses specific value pricing as well as bundling strategies like combo meals, family meals, happy price menus and happy meals in order to make its foods affordable for Indian people. As a result, sales of MC Donald’s remain high in the country, and the company gain higher profit from India.

Social environment: Social environment refers to the impact of social factors such as shared beliefs, lifestyle, culture etcetera that influence on an organization therefore, the organization can take significant steps to minimize the effects of the company (Kormishkina et al., 2015). Increasing health awareness among people has started avoiding fast food because fast food creates health risks such as heart attack, obesity, etcetera. As a result, sales of MC Donald’s are decreasing. The company have added fruits and vegetables to the adult food menu and announced that they will not serve less nutritional foods for children (The New York Times, 2013). MC Donald’s is working to bring meals below 500 calories in order to reduce their impacts on health (The Sun, 2019). All these steps will help them attract health-conscious people again and increase their sales.

Technological environment: Technological environment shows the technological factors through which an organization can ensure their growth (Leijten, and Khademhosseini, 2016). By utilizing technological advancement, MC Donald’s has developed their own mobile apps through which people place an online order (MC Donald’s: 1, 2020). It has boosted their sales in huge numbers. They provide online payment services that increase customers’ satisfaction because customers do not need to carry cash for payment. Most the people use the internet across the world therefore MC Donald’s uses digital media marketing to attract customers toward them. Social media helps them to stay connected with customers and attracts them toward their foods that decreasing the promotional cost of the company (IBS Center for Management Research, 2020).

Legal environment: Legal environment assists organizations to know about the impact of legal factors therefore, companies can take significant steps to avoid the impact of the environment (Wang, and Shailer, 2015). MC Donald’s has denied paying their workers for overtime and did not give timely breaks which created trouble for the company. MC Donald’s had to pay $26 million to settle the battle with cooks and cashiers in California who accused the company did not pay them fairly (NPR, 2020). The company did not treat their employees fairly therefore, they has to compensate. The company is maintaining the employee payment laws, customers’ right law, and health-related law of host countries in order to avoid these types of compensation or another penalty in future.

Ecological environment: Ecological environment helps companies to know about their impact on the environment therefore, companies can take steps to reduce pollution that is created by them (Arnold, 2015). If MC Donald’s do not work on reducing its impact on the environment, it has to face penalty therefore the company have taken many steps to reduce global pollution. MC Donald’s is the first restaurant that targeted to reduce greenhouse gas emissions and collaborated with suppliers and farmers to reduce greenhouse gas emissions by about 150 metric tons by 2030 (BBC News, 2019). That will help the company to maintain its reputation, and customers will be loyal after seeing their concern about global pollution therefore, they will maintain purchases from MC Donald’s.

Concept of Change Management:

Change management refers to the systematic approach that helps companies to deal with the transformation of the company’s aims and processes (Anderson, and Anderson, 2010). It helps companies to make tangible strategies for effecting change, handling the change and helping people to adjust to the change of the company. Changes are conducted in different areas of an organization, such as the decoration of outlets, research and development strategies, leadership approaches, investment policies, products and services etcetera. Change management helps companies to align their resources to support the change, reduce the time of change implementation, manage the diverse cost of change, help employees to adjust the change process, etcetera (Cameron, and Green, 2012). MC Donald’s also conducted different types of changes to maintain its market share. For example, customers changing perception toward MC Donald’s food encouraged them to consider the price of MC Donald’s food and enhance the quality of food to ensure good health of the customers.

Models of Change Management on MC Donald’s

The process which associates the work process, employees, and companies to train the employees and system to make organizational change tangible is called Change management (Horne et al., 2014). It sets actions and movements that help companies to bring change within the company therefore, the company become able to achieve the targeted goals.

Macro Analysis of MC Donald’s-Model of Change Management on MC Donald’s

Change management model is the framework that explains the processes of conducting change within an organization to achieve the targeted aims (Kanter, 1983). The change management model has three-segment such: unfreeze, change and freeze. The first segment includes planning activities for the change, the second segment includes integrating the actions to implement the change, and the third stage includes implementing the actions and bringing changes. MC Donald’s has conducted many changes to cope with the competition of the market and maintain its demand. The company has applied a change management model to implement different changes.

Unfreeze: In the first segment of the change management model, organizations make plans for the change and set their mind (Kotter, 1990). Companies realize that change is essential and crucial for them, and this mind set allows the company to move forward with the change. For example, MC Donald’s realized that they should develop the quality of their food in order to reduce the impact on customers’ health. This realization helped them to go ahead toward the change they have made in their foods.

Change: In the second segment, companies bring changes by integrating all the crucial actions (Paton, and McCalman, 2008). Companies remain about the change that the change will work or not. Leaders focus on communicating with employees and keep encouraging them to adjust to the changes by informing them why the change is important. MC Donald’s has added fruits and vegetables to the adult food menu and started to serve nutritional foods for children (The New York Times, 2013). Adopting customers’ changing perceptions helped the company to conduct these changes.

Unfreeze: In the third segment, companies take the changes easily, and employees become normal to the change (Stewart, 1991). The changes become normal standards, and employees feel comfortable with the changes. MC Donald’s has developed the quality of its food to reduce the impact on customers’ health. These nutritional foods have become the standard of the company, and they serve quality foods, including vegetables and foods, to maintain the standard. As a result, it helps them to attract the health-conscious customers they have loosed because of the less nutritional food of MC Donald’s.

Planned vs Unplanned change on MC Donald’s:

Companies conduct changes within their processes to improve their business model. Companies bring change to achieve the targeted goals that changes are planned changes. Except for planned change, some changes are conducted because of the influence of external factors that are unplanned changes. Planned and unplanned changes are evaluated below:

Planned change on MC Donald’s

MC Donald’s conduct planned changes to develop their business and maintain their market share. For example, the company found that it has started to lose its attraction because competitors are matching the offer of MC Donald’s and offering attractive prices that encouraged them to plan change to recreate attraction in customers’ minds. Therefore, MC Donald’s has taken steps to develop its key product, hamburger. As a result, the company have become able to deliver the best burgers in terms of best price and value, that enhances its competitive advantage.

Companies are compelled to conduct many internal changes because of the influence of external sources which are defined as planned external changes of an organization (Chee et a., 2016). People’s awareness of saving the environment is increasing, and they support the companies which contribute to reducing global pollution. These changing perceptions of customers compelled MC Donald’s to conduct environment-friendly steps. MC Donald’s has taken steps to reduce greenhouse gas emissions by about 31% form per metric ton of food and packaging by 2030 (Inc, 2020). It will help MC Donald’s to increase customers’ loyalty toward them, and they will maintain repeatable purchases from the company. Therefore, MC Donald’s will be profitable by maintaining customers’ loyalty and satisfaction.

Unplanned change on MC Donald’s:

Companies have to conduct unplanned changes in their process because of the pressure of external factors which are out of control, and companies have to conduct these types of changes faster (FRANCIS, 2018). MC Donald’s are also compelled to conduct these types of unplanned changes. For example, competitors are increasing enormously, and both international and local players provide lower costs foods of better quality therefore, many customers switch to the competitors. To bring these customers back, MC Donald’s has brought combo meals, family meals, a happy price menu and a happy meal which are affordable packages. Customers can afford these packages easily and purchase increases MC Donald’s sales. Customers are becoming health conscious and avoiding fast food because of the high calories. To deal with this, MC Donald’s offers more nutritional food and brings food under 500 calories (The Sun, 2019). As a result, the company will be able to increase its sales again by providing foods that do not cause health diseases like obesity.

Change management and leadership approaches of McDonald’s

The role of leadership in change management is significant because appropriate leadership helps companies to implement change effectively. With the application of the right leadership approach, companies become able to clarify the vision of the change toward the employees by communicating effectively. It helps employees to realize the importance of change, and they become aware of their responsibilities to implement the change. Companies stay tuned with their employees, which helps to understand the feelings of employees. As a result, the alignment of change management becomes easier by utilizing the capabilities of employees. It seems that leaders make sure that human resources and other aspects of organizations, such as culture, processes, management etcetera are functioning well that brings the best outcome from the change.

Leaders of MC Donald’s apply an appropriate leadership approach that helps the company to implement the changes with less complication. The company become able to communicate with employees and helps them understand the effectiveness of the change and encourages them to fulfil their responsibilities. MC Donald’s uses effective leadership approaches such as transformational and servant leadership (Kane, 2016). Transformational leadership is change-oriented which makes the change implementation easier at MC Donald’s. In the servant leadership approach, leaders provide the required support to the employees that ensure the best result from the changes.

Impacts of the organizational culture and values of McDonald’s on its change management process

The culture and values that facilitate the change management are analyzed below:

Progressiveness: MC Donald’s is a restless company and always works to move forward and innovates to move forward (MC Donald’s: 2, 2020). The company tries to work well and provide better services that encourage them to conduct changes because without adopting change, the company will not be able to cope up with the changing business world. The company tend to hold on to progressiveness and encourages MC Donald’s to bring change to their process and systems that help them to maintain progress.

Fast customer service: MC Donald’s works to provide fast customer service and inspire them to conduct new concepts of customer service. The company emphasize providing fast customer service therefore, they conducted many changes such as the company developed their own mobile app to ensure fast customer service’ (MC Donald’s: 1, 2020). Customers can place an order through mobile apps, which attracts technology sounded customers toward them and increase their sales. The company provide fast home delivery services and receives online payment also. All these changes are implemented to deliver fast services to the customers.

Food safety: The company considers food safety to ensure the good health of customers. MC Donald’s food causes obesity and other diseases therefore, the company conduct innovation to bring healthy foods that foster change (Telang, and Deshpande, 2016). They have brought foods with more nutritional features for children and adults and added vegetables and fruits to their menu. MC Donald’s also became successful to innovate foods with less than 500 calories (The sun, 2019). The food safety culture of the company has encouraged to develop of the quality of food and conduct changes in foods.

Well-built teams: MC Donald’s has well-built teams that help them to conduct the changes they target. Well-built team members always work cooperatively by avoiding conflict and helping each other. As a result, when MC Donald’s decides on any change, the teams try to adjust to the changes and fulfil their responsibilities by helping each other (Howse et a., 2018). Therefore, the company take decisions about change and teams cooperate with the company to make the change successful.

Training and development: MC Donald’s arranges training and development for the employees that enhance their capabilities. When employees’ capabilities are enhanced through training and development, it makes employees more loyal and proactive. Continuous development help employees learn new thing, and that helps the company to easily implement changes (Wijaya, and Nurcaya, 2018). For example, training of chefs makes them capable of making more nutritional foods for customers.

The leadership styles that help to implement the change process at MC Donald’s:

Leadership refers to the process of encouraging employees to achieve the targeted goals of an organization by giving the best performance. Applying suitable leadership approach help companies achieve their targeted goals easily by increasing employees engagement. MC Donald’s uses transformational and servant leadership to lead their employees.

Transformational leadership: The leadership style in which leaders identify the required change, create a vision to implement the change through inspiring employees and execute the change with the commitment of the group members (Donkor, 2016). MC Donald’s become able to make their employees more proactive, and they become able to adjust to the change of an organization easily. Leaders of the company motivate the employees highly which helps employees to work with positivity. The positivity of employees builds their confidence, and they take changes as a challenge and work to bring the best result from the change. As a result, MC Donald’s become able to implement the changes easily.

Servant leadership: Servant leadership helps companies to boost employee engagement, increase trust and build better employee relations (Lampinen, 2017). It helps leaders to inspire their employees to give a better performance that makes the goals achievement of an organization easier. MC Donald’s applies servant leadership approach to lead their employees. The company allows its employees to take part in decision making. Therefore, it helps them increase employees’ loyalty. Employees feel valued, and they become more loyal after seeing that MC Donald’s considers them as a valuable asset of them. It increases employee retention in the company. Therefore, their experience increases within the company and change become easier for the company because employees can adjust to the changes. Employees of MC Donald’s can share their opinions in this leadership approach that helps the company to take better decisions because employees know customers’ demands better. It helps MC Donald’s to deliver better services and food to their customers.

The impact of organizational vision, and mission on the change process of MC Donald’s:

Mission of MC Donald’s: MC Donald’s mission is to be the favourite brand of their customer (Comparably, 2020). To be customers’ favourite the company provides the best drinks and fast food to their customers. To maintain the quality of food MC Donald’s conducts innovation. That helps them to enhance the quality of their food and invent newness in foods. The mission of being customers’ favourite encourages the company to conduct changes in foods and their quality. As a result, MC Donald’s has become able to provide good food and drink. The quality and taste of MC Donald’s food help them to create an outstanding image in customers’ minds.

Vision of MC Donald’s: The vision of MC Donald’ is to deliver delicious foods to customers every day across the world and attain outstanding profitability (Comparably, 2020). To make the foods delicious, the company bring change in the tastes of their food to increase their demand. It also conducts changes in marketing strategy to attract more customers toward them. By changing its marketing strategy, it becomes able to increase sales across the world. As a result, MC Donald’s becomes more profitable by increasing its sales.

Benefits of the changes MC Donald’s has made:

MC Donald’s implements a different kind of change in order to bring development in the business model. It helps them to strengthen their competitive advantage. If MC Donald’s did not adopt changes in its processes, the company could lose its leading position in the global fast food chain. The changes MC Donald’s conducted in past years are:

Decreasing calories from food: MC Donald’s has taken steps to reduce calories from their foods. It will bring foods with calories under 500 (The sun, 2019). The customers who avoid MC Donald’s because of the destructive effect on health will come again to the restaurant. It will increase its sales, and customers’ gratification will also increase.

Adding vegetables and fruits: MC Donald’s has added vegetables and fruits to the adult food menu that, creates customer satisfaction (The New York Times, 2013). Health-conscious people have become satisfied because of this new healthy addition to MC Donald’s menu. It has increased their sales also. MC Donald’s has started to serve nutritional foods to children, which also makes the company profitable.

Reducing green-house emission: MC Donald’s has taken steps to reduce greenhouse emissions by about 150 metric tons by 2030 (BBC News, 2019). The company will be able to reduce its impact on the environment. These environment friendly steps have increased the reputation of MC Donald’s across the world because they are the first restaurant that has taken scientific steps to reduce global pollution.

Developing hamburger: MC Donald’s has developed the quality of its key product, and hamburger increased its demand again (Brook, 2018). Because of the lower price of substitute products, the demand for a hamburger decreased. MC Donald’s developed the hamburger to maintain their demand and did not need to consider the price. The development of other products also helped them to maintain their position in the industry.

Recommendations for MC Donald’s:

Customer focused: MC Donald’s should focus on their customers more in order to deliver more customer-focused services. The company have to find out customers’ unfulfilled demand to take steps to fulfil them. It will create high customer gratification that will make the company more successful.

Food quality: MC Donald’s fast food causes obesity, diabetes, heart problems and other diseases because of higher calories, sugar, oil and spices. The company have to develop their food quality more to prevent the harmful impact of their foods on human health. Otherwise, the company will lose its leading position in future.

More items and organic food: MC Donald’s should add more items to their menu in order to create more demand. Customers are bored with the same menu, and it decreases their demand. Health awareness makes people interested in organic food therefore, the company can focus on bringing organic foods to customers. It will make the company highly beneficial across the world.

Attractive interior design: Interior design of MC Donald’s is old, and competitors use attractive interiors that attract many customers. MC Donald’s should change the interior design of the outlets to make their outlets more attractive. As a result, the customers will love to spend time in MC Donald’s, and they will come often which will boost sales enormously.

Conclusion

MC Donald’s is the most demanding fast-food industry chain in the world. All of their products, such as fish products, beef products, chicken products, drinks and other foods, have great demand. Because of the taste and quality of their foods, customers pay higher prices which makes them profitable. But the company has been generating the same revenue for the last two years. MC Donald’s should bring more products, including presents that will help them to attract more customers. Changing interior design will also attract customers because they will be able to spend a great time in a great place. Delivering organic food will also play an outstanding role in increasing the sales of MC Donald’s. All of these changes may help the company to generate higher profits like past history.

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