PEST Analysis of McDonald’s: Which factors affect their future success
The highlight of every kid’s day – taking a trip to McDonald’s.
You remember sitting in the back seat, bouncing around, waiting to see those familiar Golden Arches come into view. You couldn’t wait for your Happy Meal because it truly was the source of your joy. And then, once the nuggets were clamoring in your stomach, you’d immediately rip into the toy, hoping it wasn’t that dumb one all your friends had.
McDonald’s is still a magical place for children. But adults? Not so much.
The growing desire to be and eat healthy doesn’t mix well with McDonald’s offerings. This fast food joint, located all over the world, is as well known as it is ostracized. But why is that? I’ve examined essential political, economic, socio-cultural, and technological factors that affect the current and future success of McDonald’s.
Let’s dive into this PEST analysis of McDonald’s.
Political factors: Governmental conflicts overseas
McDonald’s must respond to political laws and influences in over a hundred countries. Like any other restaurant, they must comply with health and hygiene regulations. If their food doesn’t abide by a certain code, they would be shut down. Their employees must also adhere to all food and health laws while working in any given location.
Fast food shops are feeling governmental pressure because of the high amounts of sodium and sugar pumped into their menu. Sugar and sodium are linked to many common health diseases like type 2 diabetes, hypertension, and heart disease. Consuming too much of these foods can lead to obesity, stroke, and heart attack.
As a countermeasure, McDonald’s is now offering new “healthy” addition to pre-existing food choices. For instance, you can now add additional protein to their fruit smoothies. Adding alternatives is one way to respond to changing public health agreements, but it could also increase their operating costs too.
McDonald’s is also affected by the government tensions between countries. For instance, the United States’ relationship with the United Kingdom has been strained as of late. And communication with Russia may be questionable. Even though they have restaurants located all over the world, McDonald’s is an American company. Complications amongst governmental parties could shift current trade agreements, creating a hostile environment for McDonald’s to function overseas.
Economic factors: The economy of 100 countries
It’s not only the United States’ economy that affects McDonald’s success. The economy of each country they operate in ultimately affects their results. They must decide whether it’s a smarter decision to purchase raw materials locally or to ship them in. The number of tariffs for imported resources and foreign incorporation taxes plays a vital role in this decision.
In 2008, McDonald’s took a financial hit from the economic recession. Disposable income was at an all-time low while people scrambled to find new jobs. Since then, McDonald’s brand image has taken a hit due to an increase in health consciousness among consumers. Many fast food restaurants are adding healthy options to their menu while trying to shed their “junk food” image. But it’s hard — and expensive — to change the opinions of the public.
Additionally, McDonald’s should factor in the unemployment rate of each location they’re in. The company is known for its high turnover rate, meaning they hire and lose workers on a consistent basis. It’s a known joke that McDonald’s is “always hiring” but this can be a glimmer of hope for locations with high rates of unemployment.
Socio-cultural factors: A negative brand image across the globe
Consumers obsessively scrutinize what they’re putting into their bodies. We’re seeing a rise in low-carb and low-sugar diets. People are jumping on the intermediate fasting bandwagon. Why? Because they’re seeking ways to strengthen their bodies without sacrificing health.
Unfortunately, McDonald’s menu doesn’t comply with these demands, making them as a less desirable option for health-conscious adults.
McDonald’s is trying though. You can swap out high sugar ingredients in their drinks for a low-calorie alternative. And, as mentioned above, they’ve recently come out with high-protein smoothies. However, consumers are still complaining about the high sugar content in these drinks.
Overseas, fries and hamburgers don’t cut it. People in Asian countries, for example, are used to eating their local cuisine. Although hamburgers and fries can be nice to have once in awhile, it might not be the first choice option for international audiences. While McDonald’s has offered localized menu options in countries like Japan and Canada — an opportunity they should take advantage of more often — it can be a costly endeavor for the company too.
McDonald’s needs to shed its unhealthy image to move forward with the growing food trends. It won’t be easy. But it’s necessary if they want to survive among other fast food companies who are reshaping their menu for their customers.
Technological factors: Less tech but stronger impact
Cosmetics revolve around selling products online. Retail giants, like Amazon, designed their business structure for internet use only. Compared to these, it doesn’t seem McDonald’s has a strong need for technology. But that’s not true. The tech they use is necessary to improve staff productivity, communication amongst teams, and produce food as quickly as their customers expect.
However, McDonald’s has recently upgraded their menus with flashy television screens hanging from the ceiling behind their cashiers. They also use their website to showcase nutritional information. In some locations, you can order your food online, allowing you to stroll in and grab your meal without waiting in line.
They’ve also remodeled their stores as a means to rebrand their image. Many McDonald’s now have a new set of paint, chairs, and tables to match their fancy flat screen menu displays. They also provide free Wi-Fi to encourage more customers to order and stay.
But, as the old joke continues, their ice cream machine is still down more than it’s ever up.
McDonald’s is also active on social media. They use Facebook and Instagram ads to nab their customers’ attention with their new or returning offerings, like their summer hit, the McCafe Vanilla Chai Frappuccino.
Although McDonald’s is incredibly well-known (and needs a little introduction), not capitalizing on social technology will only give their competition, like Wendy’s, known for their witty and hilarious Twitter conversations, an advantage.
Photo by David Clarke on Unsplash