In this paper, we explore the concept of STEP analysis by means of illustration. We perform an elaborate STEP analysis of McDonald's, the world's fast food giant. This is then followed by a recommendation on what actions McDonald's can do in order to take care of the issues that have been exposed via the STEPanalysis.
McDonald's is a food and beverage franchise that by 2001 boasted of close to 28,700 outlets spread in 120 nations Karen,2005). The company's food outlets are very popular among the youth. It offers an environment which is perceived to be safe for families as they can enjoy quality food at an affordable price in a clean environment. The food chain offers its client a familiar environment that is characterized by a McDonald's clown as well as stunning interior worldwide as pointed out by Debres (2005). The company has made efforts to ensure that it builds good relationships with both its franchises and all suppliers. It treats suppliers and franchises as partners and makes efforts in helping them to improve their business operations via a timely managerial and capital aid. The consequence of this is loyalty from the suppliers and franchises since they become more committed to the growth of the company (Aswathappa, 2006). Gubman and Russell (2006) however indicates that the company is challenged by the continuous need to innovate so as to grow while managing to operate seamlessly. In this paper we conduct a STEP analysis of McDonald's with the aim of understanding its external macro-environment.
What is PESTLE analysis?
The term STEP analysis (Political, Economic, Social, and Technological analysis) has been in constant use for over a decade. Other similar terms / acronyms that mean the same thing as STEP are PESTLE, ETPS, STEEPLE and PEST. The term is very popular in marketing and HR publications. PESTLE analysis is therefore a systematic audit of a company's environmental influences with the intention of using the information to guide the process of strategic decision making (Daniels,2010).IN order for organizations to plan for future events and make appropriate decisions in the process, the must first of all understand the macro-economic as well as meso-economic environment within which they operate. The meso-economic environment in this case refers to the environment within which the organization operate and in which they have little or no impact. The macro-economic environment on the other hand refers to the factors that are influential to the organization but beyond its control. A STEP analysis is therefore an important tool for STEP analysis in particular is important in the understanding of the risks that are associated with a given market growth as well as decline. It helps in gauging certain variable like market position, market potential as well as market direction for a single business or an organization.
MacDonald's STEP analysis
The popularity of McDonald's soared between 1950 and 1960 at a period when American underwent radical lifestyle change to embrace a life of enjoyment after the World wars. Americans decide to have more children (3 or more as opposed no one or none). McDonald's captured this new market by targeting families. They also focused on little children, teenagers as well as young adults as pointed out by Debres (2005). Currently, most of its customers enjoy visiting its stores due to the ambience and peaceful nature that exists in them. The youth enjoy the concept of self-service as well as minimal contact with adults. The casual atmosphere, noise as well as the bright colors in its restaurants also attracts the customers (Debres, 2005).
In other foreign countries, the company targets the ever changing lifestyle of the people. For instance in Malaysia, the company took the developments of the local (Malaysian) economy in tailoring its products. It used the fact that Malaysians are capable of eating in expensive food outlets and with a high expectation in regard to quality and service delivery. The young and urban Malaysian consumers want some technological elements in their lives and they therefore regard items like wireless internet and credit card payments as a necessity. The cosiness of the ambient environment also attracts them to these hangouts. In regard to cultural issues, some Indians (Hindu) never take beef, Muslims never eat pork and insists on Halal meat, Germans like to drink beer and the Finnish like dishes having fish on the menu. MacDonald's has therefore made a lot of efforts to localize its menu to fit the local culture.
McDonald's has upheld a culture of technological innovation while delivering its products and services. The company uses CRM software to manage its global supply chain.The company ahs also integrated technology in its sales and marketing function. It uses websites to take orders (e-commerce) and the same internet to advertise its goods (e-marketing).This is largely fuelled by the fact that technology and especially internet penetration has increased to appoint that it is almost becoming a necessity in certain parts of the world. It has developed special mobile Applications for locating restaurants and free Wi-Fi internet (McDonald's,2011a).It is also relying on the power of social media to advertise its products
The operation of McDonald's is influenced by several economic factors. For instance, the recent economic downturn affected its operations since unemployment or the general rise in inflation leads to customer loss and an increase in operating expenses due to the rise in fuel prices and cost of supplies. The fact that McDonald's deals with cases of international sourcing for some of its raw materials means that it has to be aware of the currency exchange risks (losses) as well as any other variables that affects global supply economics. On the local scene, the company must pay tax according to government regulations. Since the company employs the franchise business concept/model, it has to pay a percentage of its revenue to the parent company that is located in the U.S.
The operations of McDonald's are heavily influenced by the government policies and decisions. In the U.S. For instance the government is concerned with the health of its citizens. The government is currently regulating the marketing of fast food industry due to the rising concerns of cholesterol and cardiovascular issues (Hodge, Garcia and Shah,2008). Some government and consumers blame Obesity on fast food companies like McDonald's (Miller,2011). Governments also control the licensing of fast food restaurants like McDonald's. In order to succeed in foreign countries, McDonald must cooperate with the governments on issues of health, tax and even employment. The U.S. government in particular has requested McDonald to ensure that they only serve 'healthy' meals to its customers. The company had in the past acknowledges that some of its suppliers were using growth stimulating antibiotics on it poultry and meat supplies. It however agreed to phase out their usage due to government regulation (Dellapenna,2007).
The company also collaborates with for the Ethical Treatment of Animals in improving the manner in which the animals are reared and slaughtered as pointed out by Greider (2003).
This PESTEL analysis highlights certain elements of McDonald's that needs to be strategically manipulated in order to allow it to prosper in the dynamic and highly competitive marketplace. The company can therefore engage in activities that would save its brand name and corporate integrity. For instance it should go green in all of its operations in order to bring about sustainability. It should participate in activities that do not lead to environmental degradation. It should promote healthy eating habits and healthy menus. It should engage e-commerce, e-business and e-marketing for its supply, sales and marketing functions respectively.
Because it is apparent that McDonald's is expanding on a continuous basis, it is prudent if it resorts to direct dealings with the authorities in its various markets of operation. It is therefore important that it fosters a good working relationship with governments of their countries of operation. This can be achieved by proper understanding of all of the legal requirements as well as following the regulations that are put in place by the various regimes.
Prior to penetrating any new markets, the company must engage in an extensive market researc shifts in inflation as well as the fluctuation in the exchange rate must be taken into account.
It is important that the company gets the latest information from its target market on the latest trends in consumption. The company must therefore perform a market research on the target market so as to establish the trends in consumption as well as the public policies that govern social life. Factors affecting consumer purchasing behavior and purchase intention must be identified.
The company must engage the latest technological innovation in its production, sales and marketing functions. This is to say that its must acquire the latest CRM technologies, the latest Supply chain management software (SCMS) software, the latest internet marketing technologies such as social media, mobile marketing, proximity marketing as well as sales through the internet…