Q NO.1. What is the purpose of conducting an external environment analysis? What are the general environment forces that could influence or have influenced McDonald’s development in china? Ans : First of all before describing the purpose of external environment analysis we should come to know what external environment actually is? External environment include all that factors that influences the activities and operations of an organization. Actually it determines the opportunity and threat of an organization. External environment analysis is conducted so that we come to know about the environmental factors which affect our organization so that we can take maximum advantage of opportunities that can lead to higher profits and reduce the impact of threat that can harm the future of our organization. McDonald's, the world-famous American fast food franchisor, entered mainland China in 1990, when Chinese franchise law did not even exist. In this once-closed country whose market only opened up to foreign investors in 1978, McDonald's had to adapt to an unfamiliar and rapidly changing environment. Not only was food culture in China vastly different from that in the West, but food culture, lifestyles and legal structure were altering as a result of surging economic growth and massive urbanization. Competition was also intensifying as local and foreign restaurants sought to capitalize on China's increasing affluence. As the growing middle class demanded higher standards from these companies, McDonald's local business practices in terms of food healthiness, employee welfare and other socio-environmental issues were put under close scrutiny in China. While the nation's booming economy provided environmental conditions suitable for fast-food culture, the environment also posed challenges to the survival of fast-food operators in the country. There are environmental forces that could influence the development of McDonald in china can be determined through pest analysis. Kotler (1998) stated that PEST analysis is a strategic tool to analyze the present market condition of a business, understanding market growth or decline, potential and direction for operations. According to porter (1985) PEST ensures that company’s performance is aligned positively with the powerful forces of change that are affecting business environment. Pest analysis consists of four factors that are political, economical, social and technological affecting the business of an organization. Now we will conduct the pest analysis of McDonald in china in order to know the environmental factors which can affect the growth of McDonald in china. 1.
Political factor plays a major role in any organization’s business expansion in new markets. The political condition of the china, region or the market has direct effect on the McDonald’s outcome there. When Mac Donald’s started its operations in china it face bitter experience because Chinese government didn’t warmly welcome it and it faced many legal restrictions over there. But later it moved on very smoothly in china, as it had moulded itself so nicely with Chinese culture that Macdonald’s opened many restaurants in china. 2.
According to Thompson (2002) economic conditions determine that how easy or difficult it is to be successful and profitable at any time because they affect capital availability, cost and demand. McDonald's as a global fast food chain had a great impact on the Chinese economy. McDonald’s, according to official statistics have nearly the 32,000 restaurants all over the world in which 75% is operated by franchising, McDonald's have about 1700 restaurants in Chinese market out of which only 1 is operated by franchising. McDonald's main aim at present is to develop its franchises in china to establish their business all over the country. Moreover McDonald’s market in china has risen because it introduced tier price policy there which contributes a lot to the sales of McDonald. 3.
The social environment...
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