MANAGING THE ORGANIZATIONAL ENVIRONMENT (Chapter 5) CASE STUDY : McDONALD’S Presented by Group No 5 Nadeem AkhtarFa-11-CE-062 Bilal YounusFa-09-Msc-EM-167 Faisal IsmailSp-11/Msc-EM-008 Hammad Raza Sp-10-Msc-EM-123 HamidFa-11-Msc-EM-035 Bilal FarooqFa 2010/MSc EM/CE/113 Muhammad Saad ToorFa-2011/MSc EM/001 M Atif khanFa-11-Msc-EM-CE-008 Irfan NawazFa-2011/MSEM/040

McDONALD’S Leading global food service retailer 30,000 outlets worldwide Serving 52 million people Operations in more than 100 countries

Organizational Environment Importance of internal and external environment Effective marketing strategies of MNCs and organizational environment

McDonald’s Organizational Environment The organizational environment for McDonald’s: –General environment –Task environment

GENERAL ENVIRONMENT

General Environment Comprises of forces such as –Political / Legal –Economic –Socio-cultural –Technological –Global

Political and Legal Forces Political/Legal factors are –Laws –Agencies –Groups –Stability of country –Financial Policies –Government attitude to foreign markets MNCs need to mould themselves according to the political/legal systems of a country

Political and Legal Force McResponse Russian and Japanese legal issues –Local names or written in local alphabets In Russia MA KДAOHA Л Д C In Japan, pronunciation changed to MaKudonaldo Russian law requires –City Council’s 3/4th majority vote for approval French and Chinese laws –No door-to-door promotional campaigns German law –forbids use of superlative and comparative claims in promotion –Words like ‘better’ and ‘best’ not allowed Ghana law –Indirect price controls

Economic Forces Economic factors affect –Consumers’ purchasing power –Consumers’ spending patterns MNCs should keep lower prices for countries at lower stage of economic development

Economic Forces McResponse McDonald’s employs cost effective promotional tools to keep the final price within reach

Technological Forces Technological factors create –New technologies –New products –Market opportunities MNCs have to consider as to whether local industry is sufficiently equipped with required technologies

Technological Forces McResponse McDonald’s used cutting edge technologies to achieve internationalization Standardization achieved through careful positioning of technology Example: Due to obsolescence of Russian technology equipment from Holland was brought in to harvest potatoes

Socio-cultural Forces Socio-cultural forces are formed up of –Social structure –Values –Perceptions –Preferences and behaviors MNCs have to adjust to shifts in spending power, development, designing, packaging and promotion of products

Socio-cultural Forces McResponse In 60s and 70s a large US population consisted of teenagers - Teenagers and children were advertising targets US society favors less time on preparing and eating food- result is fast food Big Mac burger not launched in India due to beef content- Maharaja Mac created out of lamb meat In Muslim countries “halal” food ensured Puerto Ricans did not like American Ads dubbed in Spanish language- Separate Ad-campaign in Spanish language launched

Socio-cultural Forces McResponse In Chinese language the word for number four and death are similar- Prices requiring number 4 are avoided In Japan family ties are strong and important- Ad campaign launched depicting various facets of family life

Global Forces Global forces are affected by –International relationships –New technologies –Politics and laws Environmental friendliness is an important factor

Global Forces McResponse Global tilt to eco-friendliness lead McDonald’s to reduce use of plastics and Styrofoam McDonald's is working with Environment Defense Fund to reduce unnecessary and harmful waste

Task Environment

Task environment consists of –Suppliers –Customers –Competitors –Distributors McDonald’s strives to build and maintain a good relationship with all the stakeholders in the task environment

Suppliers Due to scale of operations, global outreach and prestige, suppliers are keen to retain their contracts with McDonald’s

Customers To increase its customers McDonald’s: –Does not advocate the standardization strategy –Follows internationalization marketing strategy THINK GLOBAL, ACT LOCAL

Customers In India Hindus do not eat beef, Muslims require “halal” meat and Jains do not eat meat at all- Vegetable based products and mutton based “Maharaja Mac” introduced “Halal” certification in all Muslim countries from local clerics In tropical countries guava juice is served Banana fruit Pies served in Latin American countries

Customers Wine available in France Chilled yogurt drinks served in Turkey Samurai pork burger with sweet sauce served in Thailand In Germany beer and croissant on the McDonalds’ menu Espresso and cold pasta served in Italy

Competitors Aim: To increase market share Strategy: Both Cost Leadership and Differentiation are employed Cost leadership attained through economies of scale Differentiation is achieved through customization and value addition to products

Competitors On global scale only competitors are Burger King and KFC Local competition in some countries is tough Substitutes include kebab and pizza Only McDonald’s offers drive-through outlets

Distributors McDonald’s has preferential access to distribution channels

Barriers to Entry Barrier to entry into task environment is high as McDonald’s has: –Achieved economies of scale –Preferential access to raw materials and own distribution channels –Brand Loyalty

Conclusion

Conclusion McDonald’s is both effective (doing the right thing) and efficient (doing the thing right) McDonald’s is successfully employing an amalgam of standardization and localization It successfully adopts a mix of cost leadership and differentiation strategies

Bon Appétit !!