McDonald’s PESTEL/PESTLE Analysis & Recommendations

McDonald’s PESTEL PESTLE analysis, political economic social sociocultural technological ecological environmental legal external factors case study
A McDonald’s in Zell am See, Austria. McDonald’s Corporation continues adapting to the issues and external factors based on its PESTEL/PESTLE analysis. (Photo: Public Domain)

McDonald’s Corporation’s strategies address issues identified in this PESTEL/PESTLE analysis. The PESTEL/PESTLE analysis model determines the various external factors that present opportunities or threats to the business, based on its remote or macro-environment. In the global fast food restaurant market, McDonald’s is focused on economic and sociocultural factors. Nonetheless, the company’s success is indicative of its effective strategies to deal with all of such external factors. As the biggest fast food restaurant chain in the world, McDonald’s must keep adapting its strategies based on the conditions of its industry environment.

This PESTEL/PESTLE analysis of McDonald’s shows that there are many opportunities and considerable threats that the firm must address to keep its viability in the rapidly changing global economy.

Political Factors Affecting McDonald’s Business

McDonald’s considers the impacts of the political environment on its industry. This aspect of the PESTEL/PESTLE analysis refers to the effects of governmental action on the remote or macro-environment of businesses. In McDonald’s case, the most significant political external factors are as follows:

  1. Increasing international trade agreements (opportunity)
  2. Pending tax reform (opportunity)
  3. Evolving public health policies (threat and opportunity)

McDonald’s has the opportunity to expand its business based on improved international trade, which can enhance global supply chains. McDonald’s also has the opportunity to reform its practices and strategies to lessen the impact of taxation on the business without violating the law. However, public health policy increasingly tends to discourage people from consuming fast foods from firms like McDonald’s. Nonetheless, the company has the opportunity to address this external factor by improving the healthfulness of its products. In this aspect of the PESTEL/PESTLE analysis of McDonald’s, the political external factors present opportunities that outweigh threats.

Economic Factors Important to McDonald’s

Economic changes around the world influence McDonald’s industry environment, considering its global nature. This aspect of the PESTEL/PESTLE analysis pertains to the effects of economic conditions and trends on the remote or macro-environment of firms. In McDonald’s case, the following are the most notable economic external factors:

  1. Slow but stable growth of the U.S. economy (opportunity)
  2. Stable but risky European economies (threat)
  3. Slowdown of the Chinese economy (threat)

McDonald’s has the opportunity to grow, even slowly, in the American economy, which is the firm’s biggest market. However, the current economic conditions in Europe could threaten McDonald’s growth in the region. Also, the slowdown of the Chinese economy threatens the company’s growth in Asia. In this aspect of the PESTEL/PESTLE analysis of McDonald’s, the economic external factors mainly threaten the business.

Social/Sociocultural Factors Influencing McDonald’s Business Environment

McDonald’s must respond to sociocultural changes in its remote or macro-environment. This aspect of the PESTEL/PESTLE analysis refers to the social conditions that support or limit businesses. In McDonald’s case, the most significant sociocultural external factors are as follows:

  1. Widening wealth gap (opportunity)
  2. Increasing cultural diversity (opportunity)
  3. Healthy lifestyle trend (threat & opportunity)

Based on the external factor of the widening wealth gap, McDonald’s has the opportunity to grow because the company’s target consumers are mostly from medium and low-income households. Also, McDonald’s has the opportunity to improve its products mix to satisfy a more diverse target market. However, the healthy lifestyle trend is a threat because many of McDonald’s products are often criticized for their negative health effects. Nonetheless, the company has the opportunity to improve the healthfulness of its products. In this aspect of the PESTEL/PESTLE analysis of McDonald’s, the social external factors create mostly opportunities for business development.

Technological Factors in McDonald’s Business

McDonald’s success partly depends on technological applications. This aspect of the PESTEL/PESTLE analysis pertains to the impact of technologies and related trends on the remote or macro-environment of companies. McDonald’s must address the following technological external factors:

  1. Moderate R&D activity in the industry (opportunity)
  2. Increasing business automation (opportunity)
  3. Increasing sales through mobile devices (opportunity)

McDonald’s has the opportunity to increase its research and development investments to improve business effectiveness and efficiency. Also, McDonald’s can apply more automation to maximize productivity, based on the external factor of increasing business automation. Furthermore, McDonald’s can improve its mobile services to tap more consumers via its website or mobile app. In the technological aspect of the PESTEL/PESTLE analysis, McDonald’s has major opportunities for growth.

Ecological/Environmental Factors

Ecological external factors affect McDonald’s consumers and, thus, the company’s performance. This aspect of the PESTEL/PESTLE analysis refers to the environmental issues in firms’ remote or macro-environment. In McDonald’s industry, the following are the most significant ecological external factors:

  1. Rising interest for corporate environmental programs (opportunity)
  2. Increasing emphasis on sustainable business strategies (opportunity)
  3. Climate change (threat)

McDonald’s can expand its corporate social responsibility strategies to reach even high performance in addressing environmental concerns. However, climate change remains a threat because of its negative effects on farms and, thus, McDonald’s supply chain. In this aspect of the PESTEL/PESTLE analysis, the ecological external factors highlight corporate social responsibility opportunities, although McDonald’s also needs to further diversify its supply chain to address the effects of climate change.

Legal Factors

McDonald’s must follow legal requirements imposed on its remote or macro-environment. This aspect of the PESTEL/PESTLE analysis pertains to the impact of laws or regulations on firms. The most significant legal external factors for McDonald’s are as follows:

  1. New legal minimum wage levels in the U.S. (threat)
  2. Local health regulations in workplaces and schools (threat)
  3. Animal welfare regulation (threat & opportunity)

McDonald’s faces the threat of higher minimum wages, which lead to higher costs and prices. Also, local health regulations impacting food service in workplaces and schools could reduce the company’s revenues from these areas. In addition, McDonald’s must address animal welfare regulatory effects on its supply chain. For example, the company can implement new policies to ensure animal welfare among meat producers. McDonald’s faces mainly threats based on legal external factors in this aspect of the PESTEL/PESTLE analysis.

McDonald’s PESTEL/PESTLE Analysis – Recommendations

This PESTEL/PESTLE analysis of McDonald’s Corporation shows that there are significant opportunities for business growth. The company can capitalize on technological strategies to enhance efficiency and productivity. McDonald’s can also improve product quality to address sociocultural and political external factors about health. This PESTEL/PESTLE analysis also indicates that the company must deal with a number of significant threats. McDonald’s can address economic external factors by expanding into other high-growth economies, such as Southeast Asian countries.

References
  • Gillespie, A. (2007). PESTEL analysis of the macro-environment. Foundations of Economics, Oxford University Press, USA.
  • Housing Industry Association (2011). An Introduction to PESTLE Analysis. HIA Ltd.
  • McDonald’s Corporation (2015). Company Profile.
  • McDonald’s Corporation Form 10-K 2014.
  • Murphey, M., & Gause, R. (1974). UCF Research Guides. Industry Analysis. PESTLE Analysis. Business Horizons17(5), 27-38.
  • Roper, K. (2012, November). BIM Implementation: PESTEL Drivers & Barriers (Cross-national Analysis). In World Workplace 2012. IFMA.
  • United States Department of Agriculture Economic Research Service (2015). Food Service Industry Market Segments.
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