Category: McDonald’s

Introduction

Globalization present different opportunities and challenges to corporate organizations at the global market. McDonalds has enjoyed market leadership in serving burgers for decades.

However, the company has faced challenges associated with its operations in the Scandinavian countries and in the United Kingdom (UK). The company has attributed the challenges to several theories. In the Scandinavian countries, the legal environment hinders advertising that targets children.

In the recent past, the company has faced backlash from people who question the source of materials it uses to make products. Environmentalist organizations and animal rights groups have also continued to present challenges to the business chain. The UK branch has faced difficult moments since 1997 when it lodged litigation in a libel case against two former workers.

Critics have deeply compromised the image of McDonalds in both the UK and Scandinavian countries. The aggressive advertising and marketing efforts have not helped so much in cleaning the compromised image. The business chain continues to struggle because of problems associated with its compromised brand.

McDonalds is seeking to rebrand in the Scandinavian countries and in the UK in order to reposition itself for expansion. Much as McDonalds has continued to operate globally realizing huge profits in some market regions, the food chain business has struggled in the Scandinavian countries and in the UK markets and should rebrand in order to escalate its profits.

Re – Branding at McDonalds

McDonalds has struggled to clean its image through rebranding. It is notable that a large proportion of McDonald’s profits emanate from the sale of fast foods. However, the recognition that obesity has become a major disease globally has affected the UK market. The recognition has made most clients to become more health conscious (Haig & Haig, 2011).

Therefore, potential clients avoid buying McDonalds burgers thus affecting the company’s sales. It is noteworthy that the company use livestock to produce foods. Critics have argued that the livestock used by the company are fed on genetically modified materials.

This has affected the image of the company thus causing it to undertake aggressive rebranding initiatives (McDonalds, 2010). The rebranding initiatives have focused on cleaning the image of the company in order to escalate the firm’s profits in both markets.

McDonalds has struggled with efforts to redeem its image since the beginning of 2000. The company has continually upheld views that its products including beef and bacon feeds on genuine grains. The company has worked hard to correct the perceptions created by environmental activists that it uses genetically modified grains.

The company has worked with farmers to assure the public and critics that its products are produced using quality raw materials (McDonalds, 2010). The rebranding effort was necessary because the company started losing huge proportions of its client base.

Particularly, the company started losing its health conscious client base including youths who feared eating its burgers (Haig & Haig, 2011). The clients were concerned that burgers cooked using beef and bacon fed on genetically modified foods was potentially harmful to their health.

McDonalds is also seeking to rebrand in these markets through minimizing carbon emissions. This program has focused on the emissions generated by cattle it uses in making burgers (McDonalds Corporation, 2011). Indeed, the rebranding effort was timely because many studies had indicated that cattle generated about four percent of carbon emissions.

It is notable that environmental organizations such as Greenpeace have repeatedly criticized McDonalds for its carbon footprints. Therefore, the rebranding effort, which focuses on sustainability, seeks to assure the public that the company is implementing programs aimed at reducing carbon emissions.

McDonalds has also worked with suppliers and chain owners to promote energy efficiency in its processes (McDonalds Corporation, 2011). The company branding on energy efficiency efforts also enabled it to receive the Carbon Trust Standard because it minimized its carbon emissions significantly.

This rebranding effort has been critical to the success of the chain store because it informs clients of the company’s corporate social responsibility.

In addition, McDonalds rebranding has focused on assuring the clients that the fish it uses in making Filet – O – Fish together with Fish Finger products in the UK and Scandinavian countries’ markets are obtained from sustainable sources. The company has made it clear in the rebranding efforts that the fish are sourced from suppliers who employ sustainable fish keeping practices (The McDonalds, 2012).

The rebranding initiatives have been critical in ensuring that the company maintains a positive image on how it sources for its raw materials. It is notable that this has been the greatest concern of worried consumers.

The company has also ensured that the rebranding effort it seeks to undertake promotes transparency in the whole of its systems. For example, the company has disclosed to clients that it sources fries from McCain suppliers. It is notable that this is the greatest potato supplier in the UK market (The McDonalds, 2012).

Furthermore, McDonalds has indicated that it sources additional potatoes for fries from diverse farmers in the regions. The company rebranding has also focused on informing the public that the fries are prepared using vegetable oil. The vegetable oil lacks the cholesterol, which has been a concern for many health conscious individuals in the past.

The company has also engaged in aggressive rebranding efforts aimed at informing the public that it has drastically reduced the salt in its fry’s products (Haig & Haig, 2011). The rebranding program has also been important for the company because it enables the firm provide relevant and adequate information regarding the quality of its fries to the health conscious clients and potential customers (McDonalds, 2010).

However, McDonalds has faced the greatest challenge in rebranding initiatives focused on its buns and muffins. This has been a core concern to many clients who continuously seek information on where the chain store sources the bread for the products (McDonalds, 2010). McDonalds has failed to name the source of the bread.

The food chain store has only been able to indicate that the materials it sources the resources from Heywood and Banbury. The company has failed to indicate the source of grains used in bakeries.

However, it has maintained that the grains originate from genetically modified crops. This is one area that McDonalds has been seeking to rebrand but has significantly failed. However, it has rebranded the grains and bread for making buns originated from genuine crops (McDonalds, 2010).

The company’s rebranding initiatives has enabled it deal with criticisms from environmental organizations for its contribution to the destruction of Amazon rainforest. Greenpeace activities campaigned against the company by storming its restaurants (Melewar, 2008). However, the company has focused on rebranding through building its ethical stance on the purchase of meat produced by local farmers.

The company’s passion for ethical practices has enabled it to redeem its image against criticisms focusing on the chicken rearing conditions, which many people have argued are inappropriate. It has rebranded its image as a company that buys eggs in the local markets. Free-range chicken farmers fulfill the company’s egg requirements (The McDonalds, 2012).

However, the rebranding efforts have attracted criticisms because the company also purchase chicken from Sun Valley, which is in the UK and Moy Park located in Northern Ireland. Cargill, which is the American firm owing the chicken companies has attracted criticisms for its intensive chicken rearing methods (Kincheloe, 2002). Production of meat remains the fundamental purpose of the intensive methods.

Critics have argued that the intensive farming methods deny chicken opportunities to move about. The method encloses chicken in the warehouses. Furthermore, the Sun Valley image has attracted criticisms regarding poor conditions in its supply branches. Therefore, the fact that McDonald’s purchases most of the chicken from the companies has led to criticisms for its processes (Kincheloe, 2002).

Re – Branding and Structural Control

McDonalds has continued its rebranding initiatives in line with the structural control issues. The UK branch of the company operates in a marketplace with less restrictions and regulations on advertising. However, advertisements targeting children have remained unpopular because most critics have argued that burgers escalate the rate of developing obesity among children (McDonalds Corporation, 2011).

Therefore, although McDonalds initially targeted children in its advertisements in a market where advertising in not strictly regulated, it has had to rebrand with a focus on teenagers and youths.

The rebranding initiatives targeting teenagers and youths emerged out of the need to disassociate the company from children with obesity (Hill & Jones, 2012). Therefore, the company’s rebranding efforts seeks to reposition it at the marketplace as a fast food service that generates products with minimal chances of causing obesity.

The rebranding efforts have also necessitated a change in the distribution issues. Particularly, the company’s rebranding activities has focused on the supply chain management, where it requires suppliers to conform to its sustainability practices (Budelmann, Kim & Wozniak, 2010).

The suppliers sign a code of conduct, which formalizes their agreement to uphold sustainability practices championed by McDonalds. Furthermore, the rebranding that focuses on McDonalds distribution issues affirms that its suppliers observe human rights, business integrity, and appropriate workplace conditions (The McDonalds, 2012).

Application of Technology in Re- Branding

McDonalds required a shift in the media and communication technologies to restore the declining profits in the UK and Scandinavian countries due to a bad image.

The company invested billions in technology based branding where the communication specialists had to develop strategies for responding to the shifting climate of opinion. The media and communication branding strategy has focused on dissociating McDonalds from unhealthy children such as those suffering from obesity (Deng, 2009).

In the company’s “Plan to Win” strategy, the media and communication team focused their strategies on revitalizing the five P’s approach to marketing (McDonalds, n.d).

The media and communication also focused the branding initiatives towards designing restaurants outlook with the latest messages (Melewar, 2008). The team provided a facelift to McDonald’s staff outlook by constantly redesigning their uniforms. The company constantly redesigns packaging materials as a rebranding effort.

McDonalds rebranding has continuously moved away from targeting children. The shift has seen the company rebranding efforts target teenagers (Botterill and Kline, 2007). This has been of great significance to the company since a huge proportion of its clients include teenagers and youths. The rebranding has therefore helped the company to focus on the largest target group.

The rebranding initiatives also lead to the development of “I’m Lovin’ it” strap line advertisement endorsed by Justin Timberlake (Botterill and Kline, 2007). Furthermore, the involvement of teenage skater Tony Hawks in McDonalds rebranding efforts has enabled the company to communicate with the main target audience.

However, it appears that the company’s media and communication team have to do more work in order to reach a larger target group of the millennium. The company’s McWrap has resonated well with this important client group. The company rebranding must therefore focus on meeting the needs of the millennia group (Deng, 2009).

Their needs include having access to a variety of burgers, customization, and opportunities to personalize their eating experiences. Furthermore, the company must continue to rebrand its foods as fresh and organic.

It is also notable the teenagers and youths consciousness to social change issues must compel the media and communication team to rebrand McDonalds sustainability and corporate social responsibility programs robustly (Botterill and Kline, 2007).

For example, the communication specialists rebranding of sources of livestock used at McDonalds must rebrand the farming practices as highly sustainable and environmentally sensitive. The application of well-informed rebranding efforts based on technology remains crucial in expanding the client base in these markets (Deng, 2009).

Re – Branding and Globalization

McDonalds has faced diverse challenges associated with globalization. The expansion into other global markets has been unprecedented. The company opened additional stores in the UK market. However, the company has faced serious challenges in operating its businesses in the Scandinavian countries.

The challenges have forced the company to close some restaurants and food eating outlets in the countries because of dwindling profits (Botterill and Kline, 2007). It is notable that the challenges partly emanated from the company’s bad image in the region. Therefore, it had to close the businesses in countries such as Sweden.

Rebranding activities have focused on cleaning the image of the company in the Scandinavian countries in order to escalate sales (Botterill and Kline, 2007). The critics in such countries have had concerns with the livestock sources of the company’s materials. They have had critics emanating from animal rights groups who have questioned the company’s livestock management initiatives.

The criticisms have been associated with the perceptions that McDonalds is flouting several animal rights (Botterill and Kline, 2007). Furthermore, the groups have raised concerns with the perceptions that the company buys livestock products from animals fed on genetically modified foods.

Re – Branding in Cross – Cultural Markets

McDonalds handling of cross-cultural differences has always been excellent. The company has ensured that its programs respect the culture of all its clients. The power question has not emerged as a central issue in the company although it operates in cross cultures. The company is run through franchises managed at the local markets.

The local markets in every region have unique cultural characteristics, which the local power structure appreciates in recruitments. The management at the local markets has not promoted the existence of cross-cultural challenges. However, the company’s head offices have experienced strong cross – cultural diversities in management, which affects the rebranding efforts.

Rebranding and Identity McDonalds has done tremendously well in rebranding its identity at the local and global marketplace. The company has promoted the adoption of the brands developed by the head offices at all the franchises around the globe (Haig & Haig, 2011). Furthermore, it has rebranded itself as an organization that appreciates diversity and ensures inclusivity to staff and clients.

The company has ensured that it promotes employment of staff from all ethnicities, genders, religion, sexuality, and class. It is notable that the company has not attracted criticisms based on discrimination accusations (McDonalds, 2013). Furthermore, it has ensured that its products continue to meet the needs of its client regardless of their diversities.

Inevitable Rebranding

The progresses in rebranding McDonalds have been inevitable. This has emerged from the perceived need to ensure that the company undertakes rebranding activities that seeks to restore its image and marketplace position. These efforts have seen the company develop diverse strategies to rebrand its services around the globe (Irwin, 2009). The branding initiatives have revolved around the famous trademarks and straplines.

Conclusion

This paper argues that although McDonalds has continued to perform significantly well in the global marketplace, its operations in the UK market and Scandinavian countries market has faced diverse challenges associated with its image. Therefore, the company is seeking to rebrand in these two markets in order to escalate its profits.

The company’s image has previously suffered harm because critics argue that its products are unhealthy. Furthermore, the critics have campaigned against the company because of its association with suppliers and farmers, which do not follow sustainability practices. However, it has also implemented diverse rebranding initiatives seeking to clean its image.

References

Botterill, J., and Kline, S. (2007). Re-branding: the McDonald’s strategy. Web.

Budelmann, K., Kim, Y., & Wozniak, C. (2010). Brand identity essentials: 100 principles for designing logos and building brands. Beverly, Mass: Rockport Publishers.

Deng, T. (2009). McDonald’s New Communication Strategy on Changing Attitudes and Lifestyle. International Journal of Marketing Studies, 1(1), 37 – 42.

Haig, M., & Haig, M. (2011). Brand success: How the world’s top 100 brands thrive and survive. London: Kogan Page.

Hill, C. W. L., & Jones, G. R. (2012). Essentials of strategic management. Mason, Ohio: South-Western/Cengage Learning.

Irwin, D. A. (2009). Free trade under fire. Princeton, N.J: Princeton University Press.

Kincheloe, J. L. (2002). The sign of the burger: McDonald’s and the culture of power. Philadelphia, Pa: Temple Univ. Press.

McDonalds (2010). McDonalds Best Practices: Building a better business through effective environmental practices around the world. Web.

McDonalds Corporation. (2011). Form 10 – K. Web.

McDonalds. (2013). Global Initiatives. Web.

McDonalds. Risk Factors and Cautionary Statement Regarding Forward-Looking Statements. Web.

Melewar, T. (2008). Facets of Corporate Identity: Communication and Reputation. New York, NY: Routledge.

The McDonalds. (2012). The McDonald’s Supplier Code of Conduct. Web.

McDonald’s seeks to open a new station at Tecoma Victoria, which is a green village setting that attracts tourists who visit the Dandenong Ranges where Tecoma station is to be located. Tecoma residents, who are about 2085 in number, are opposed to McDonald’s idea out of the fear that the business setup will increase pollution and interfere with tourism.

McDonald’s already has a sour relationship with the local residents, yet it needs them as employees and consumers for its successful establishment and survival.

The residents of Tecoma have expressed fears of McDonald’s littering the clean environment with its packaging upon establishing in the locality. The proposed location is also raising concern since it is opposite a kindergarten, thus residents fear that McDonald’s establishment will promote junk food and unhealthy feeding among the kindergarten children.

Several suggestions have been formulated to help tackle the challenges and help McDonald’s gain acceptability among the residents of Tecoma. Tecoma’s unit should adopt green packaging to maintain a clean environment. McDonald’s should start charity programs at Tecoma as a corporate social responsibility initiative to assuage the locals. There should be open and constant communication between McDonald’s and the local community.

McDonald’s should introduce a menu that is compatible with the culture of the people of Tecoma. The new establishment should also employ local residents in most of positions. Foreign workers should be taught the culture of the people of Tecoma. Tecoma’s establishment should be structurally designed to look less urban and more conservative to appeal to the local residents.

McDonald’s should also design a healthy menu, especially for the kindergarten children located opposite the proposed establishment. Involving the residents of Tecoma as the primary stakeholders before establishing at Tecoma is one sure way of gaining acceptability from the residents.

Every organization has values which it strives to uphold. This can be noticed in the manner the organizations conduct their business operations. Strategies will mostly be aligned to the values sustained through the years (Gambino 6).

McDonald’s Mission and Values

The main mission of this company is to stand as the customer’s best place of choice and way to eat. The food chain store has worldwide operations. These operations are focused along a universal tactic known as the plan to win. It lays emphasis on the excellent clientele experience which recognizes 5ps in its services.

The 5ps are people, products, place, price, and promotion. The food store remains focused to endlessly better its operations and improve its clientele’s experience (Shapiro 3).

The Values of McDonald’s

The company places its customers experience at the center of all activities it undertakes. Clients are the reason for the store’s existence. It shows its appreciation by offering the clients high quality products as well as grander service in a neat, friendly atmosphere, and at a very good price. Operations focus on service quality, neatness, and the value for every person involved at all times.

The company will always be focused on efficiently serving its people. It offers the chance, develops people’s talents, develops leadership, and rewards performance. It acknowledges the fact that a group of properly trained people having diverse backgrounds and knowledge, functioning coherently in an atmosphere which values respect and enhances superior levels of participation are very key to its continuous success.

The business has developed a superior system in place. Its model of doing business portrayed by its “three legged stool” as an example of owner, supply people, as well as company personnel is the base that it uses to balance all the concerns of all the three mentioned groups.

McDonald’s conducts its business operations through ethical practices. Here, everybody holds himself accountable and performs business to the greatest degrees of justice, morality, and integrity. Everyone is personally responsible and collectively culpable.

The company also gives back to its immediate societies. It seriously considers the mandates which come with it being an industry leader. It assists its clients develop better societies, augment Ronald McDonald House Charities , and control its size in development, scope and assets to assist in making the globe a better place.

The organization conducts its business in a manner in which everything is profitable. Since it is a public company it really struggles to ensure that everybody benefits from it. This needs an incessant emphasis on its clients and the wellbeing of its system.

It also struggles to incessantly improve. It exists as an institution which considers every situation as an opportunity to learn as well as aim to antedate and react to the non-static client, workers, and system requirements through continuous progression and innovation.

McDonald’s Operation Process

The company makes use of a superior operation strategy to get a larger share of the market and intensify the value of the shareholders. It specially focuses on its speed, regularization, quality of products, and the affordability offered to clients.

It has managed to beat competition by majoring on these elements. It contends on three primary pillars like speed, affordability as well as regularization basically to ensure that clients remain satisfied at all times.

By conducting serious market research and survey studies, McDonald’s identified that its clients wished to have speed among the store’s top concerns. Hence, it anchored its operations towards offering a fast, pleasant, and perfect service.

It also realized that definite targets were important to quantify speed. Hence, they incessantly use appropriate measurements to match the actual performance with the desired performance. From the moment a client makes an order, to the preparation of a burger, until the client exits the store, speed is an essential element in the store’s operation strategy.

In order to reduce the time taken to offer specific services, the business makes use of standardized training procedures for all its workers and has created new drive through layouts for many of its customers. In addition to speed, it also strives to outdo its competitors in the market by coming with prices that are so low and affordable to its clientele.

A decision to offer high quality goods in a low cost margin needs effective procedures through all the units that the organization manages. Again, this objective is fitted into the statement of the vision which says that the organization endeavors to become the most effective service provider so that it can be the unique value to many people. The organization makes use of several processes to offer great value to its clientele.

One of the greatest strategies which the organization has made use for a long time is referred to as the value meal. This value meal permits clients to purchase food items like sandwich, French fries as well as beverages at a discount rate when the food items are purchased together at once. This service is offered across all restaurants for both lunch and breakfast meals with time ranging from seven to twelve.

Works Cited

Gambino, Scott. Business in Process. London: Prentice Hall, 2010. Print.

Shapiro, Peter. The Case of McDonald’s. New York: McGraw Hill, 2009. Print.

Nike, McDonalds and Body Shop are the world known brands. Each of these brands has become popular because of many reasons, however, the main of them are human resource management, marketing and distribution, accounting and finance, operations, information management, and cross-functional issues.

The correct organization of these basic processes in economics leads to the successful business running. Speaking about efficiency and effectiveness for Nike, McDonalds and Body Shop, these specific aspects of business are going to be discussed with the stress on how the companies should behave in each of these processes.

Human resource management is one of the most important aspects of company running and a guarantee of successful company performance. Each of the companies mentioned above have specific approaches to the human resources. Nike is sure that having become a part of their company each person is going to change due to the challenges offered by the corporation. McDonalds has the strategy of so-called achievement.

People have an opportunity to achieve the highest positions only having come through the whole career ladder. Being a simple salesman, people can become managers and even top managers.

Training and other supportive practices are guaranteed. Body Shop offers people specific working places. The specifics with in working with human resources in Body Shop is that the first several days people do not work but get used to the new environment.

Marketing and distribution are important as well. Nike offers their products in pair with connecting software of the well-known producers. McDonalds is famous for its fast and tasty products with McDrive and other convenient options. Body Shop sells its products on the internet that increases the rate of customers who are ready to buy their products.

Accounting and finance in the companies is based on the latest innovative technologies and companies are sure to maintain order in these processes. The efficiency and effectiveness of the mentioned companies depends on their financial operations. The opportunity to pay online, create personal account in Nike and Body Shop are important as customers may return to these stores.

McDonalds also tries to improve its financial situation and accounting using electronic money, etc. Selling products online, companies deliver those throughout the country. The delivery is based on various express services which guarantee fast and quality delivery.

It is essential to understand that the effectiveness and the efficiency of Nike, McDonalds and Body Shop depend not only on the products but also on the quality of services offered.

Information management is an important stage in companies’ functioning as the knowledge about the rate of sale in the industry, about the lack or excess of the products and about other strategic issues is crucial for company efficiency.

The inability to get necessary information on time may create a number of difficulties and lead to substantial financial loses. Nike, Body Shop and McDonalds are successful because they do not consider each process of business separately but do all possible to dwell upon a combination of processes, etc.

These world known brands managed to be successful only because they collaborated all the processes implementing each new process in combination with many other processes. The efficiency and effectiveness of the companies is based on successful business running and other particular aspects which guaranteed effective work.

The main aim of any business enterprise or company is to maximize on profits and returns. However, it is necessary to build the company’s reputation in the market. This can be effectively achieved by taking part in activities that promote ethics and display the company’s interest in social responsibility.

This paper analyses the social responsibility demonstrated by McDonald’s, one of the leading fast food companies on the globe. It also discusses the social and ethical implications that these initiatives could have on the target market.

Just as McDonald’s has worked hard to build the reputation of its product, it has worked as hard to create a positive impact on society (De Blasio, 2008). Its policies on animal welfare and related initiatives of public communication are milestones it has taken to be referred to as one of the most ethical companies in the world.

McDonald’s has been committed to being one of the companies that the public can trust. For instance, its global minimum standard prevents the use of antibiotics that belong to a class of components approved for use in human medicine to promote growth of their animals (Jennings, 2008).

In addition to this, McDonald’s stresses on the safety of their consumers. This is displayed in their happy toys. They are backed by a safety program that is proactive. It starts with the design of the product. Once the full scale production starts, McDonald’s has third party safety laboratories, which monitor and test the product. This is done until the manufacture is completed.

The serious concentration on the safety of their consumers is one of McDonald’s social responsibility initiatives. McDonald’s has a communication program that is dedicated to the so­cial responsibility reporting of animal welfare concerns. It is consid­ered to be a narrative since it frames its own history, follows industry and professional presentation conventions and applies behavioral standards related to moral and ethical decisions.

In their 2008 report on social responsibility, McDonald’s expressed their commitment to taking a “total life cycle” approach to their solid wastes. This involves examining ways that could be used in order to reduce materials used during production and packaging and diverting as much waste as they can from the solid waste stream. By so doing, the three courses of action, which are reduce, reuse, recycle are complied with.

To reduce, steps are to be taken to reduce the weight and volume of their packaging materials. There is also a strategy aimed at searching for environmentally preferred materials to use in their packaging. To there is the use of reusable materials and recycled materials, in the fulfillment of their environmental conservation responsibility (McDonald’s Corporation, 2008).

In an effort to develop the underrepresented entrepreneurs, McDonald’s has ventured into partnerships with diverse suppliers. For instance, in 2007, McDonald’s restaurants in the United States purchased goods worth 5.3 billion U.S dollars from minority and women owned companies. Such a move serves to strengthen the economic status of such groups of people, which is a social responsibility (Sims, 2003).

The social responsibility initiatives being undertaken by McDonald’s have helped in building its excellent reputation to the public (Fernando, 2009).

By doing this, it not only concentrates on maximizing profits and returns but also gives back to the society. As marketing manager, I could intensify the social responsibility initiative by helping in educating children from needy families. I would as well indulge in carrying out development projects for communities.

References

De Blasio, G. G. (2008). Understanding McDonald’s among the “World’s Most Ethical Companies”. Web.

Fernando, A. C. (2009). Corporate Ethics, Governance, and Social Responsibility: Precepts and Practices. New Delhi: Pearson Education.

Jennings, M. M. (2008). Business Ethics: Case Studies and Selected Readings. Ohio: Cengage Learning.

McDonald’s Corporation. (2008). McDonald’s Corporate Social Responsibility. Web.

Sims, R. R. (2003). Ethics and corporate social responsibility: why giants fall. Connecticut: Greenwood Publishing Group.

Introduction

Throughout the history of McDonald’s development as the most successful fast food corporation in the entire world, it is very easy to identify a variety of business strategy implementations that have proven to work. However, how did MacDonald’s exactly achieve such success? The company has a variety of strengths: is shares the largest part of the food market in the world with a brand recognition estimated at approximately forty billion dollars.

It is also known worldwide for its memorable advertising. Although, to properly analyze the company’s strategy, it is also important to recognize its weaknesses. McDonald’s is aware of its main weakness, the negative publicity. The company is criticized for offering unhealthy food to the customers which contributes to the increased obesity rates. Another weakness is the employee turnover which contributes to the lower performance of the workers that are paid minimum wage and have low-qualified jobs.

Favorable geographical approach

The major bulk of the successful business strategy in McDonald’s is based on the geographical approach. Offering products that are relevant to a specific area on the globe gives the company a major competitive advantage in the field. For example, in India, where the consumption of beef is quite low, McDonald’s offers a lower selection of products that contain beef, compared, for example, with European countries. With the help of the geographical approach, McDonald’s not only caters to the specific needs of various populations but also pursues the ‘maximum local development’ of the products. However, the standards that every McDonald’s product should have are the same

everywhere. This means that the company is able to serve the needs of the niche at the same time with sustaining its standards and cost-effectiveness.

Up-to-date with the current trends

Another strong point when it comes to the competitive advantage of McDonald’s is being up-to-date with the current trends. For instance, the Happy Meals that cater to children are updated with toys that relate to the latest movies or games that are new to the market. On the other hand, this has a strong influence on the decision-making for the company: what if the movie toys were made for does not do well at the box office, and the main competitor, the Burger King, promotes a successful movie? Such decision-making is always a risk.

Issue of health

The main challenge for the company that contributes to lowering the sales of the products is McDonalds’ negative reputation when it comes to healthy meals. In the current economic development, the public became aware of the health issues caused by bad eating habits. The health organizations around the world issued reports that state that food offered by companies like McDonald’s not only causes obesity but also can be a contributor to cancer. The issue of health has become the largest issue to the company’s development. Competitors like KFC and Subway offer healthier options of sandwiches or mashed potatoes, so McDonald’s had to respond to the trend. Thus, healthier food options encouraged the customers to come back.

Conclusion

To conclude, if McDonald’s fails to recognize and address the challenges, its competitive advantage will continue to decrease. The shifting interests of customers along with media trends and new technologies are the main obstacles that stand in the way of the company’s development. For achieving the set goals and objectives, McDonald’s should find ways to attract new customers as well as encourage existing ones to return, build strong relationships with employees and, in the end, create growth for the company as a whole.

Introduction

Organisational understanding constitutes a critical aspect of every organisational manager’s work. It involves the scrutiny of an organisation to establish why people behave in the manner they do and/or why some individuals and processes are effective than others. The goal is to envisage organisational success and the expected behaviour of people. It also entails strategising on how to improve the performance of individual employees, work teams, and the entire organisation (Freshwater, Sherwood & Drury, 2006).

Understanding an organisation involves an examination of work structures or work designs, performance management systems, and working conditions. This paper discusses organisational understanding from the context of working condition in three different industries. It compares working conditions at McDonald’s that operates in the fast food industry, Qatar Airways, which operates in the airline industry, and Nike, Inc., which operates in the footwear, apparels, and sporting paraphernalia industry. However, a discussion of the background of the three organisations is considered first.

Background to McDonald’s, Qatar Airways, and Nike, Inc.

McDonald’s

McDonald’s stands out as one of the biggest global fast food retailers offering fast foods in more than 119 countries across the globe. McDonald’s restaurants and franchises, which now stand at about 33, 500, continue to grow as the organisation penetrates new markets in Asia. This immense success is attributed to a number of factors among them being the incredible emphasis on consumer engagement, appropriate leadership that fits well with the business of the organisation, and exceptional investments of the organisational resources in brand management.

The franchise business model of the company has managed to ensure that the products and services that are offered at the franchises are consistent with the services offered at the company-owned restaurants. The company also organises its success around its employees by endeavouring to provide accommodative workplaces to people from all diversities. It also engages in design and production of new product line as new consumer needs arise, especially in the wake of the high sensitisation of people by healthcare professionals on the impacts of eating foods that have high calories.

Qatar Airways

With its main offices at Doha, Qatar Airways, which was established in 1993, is owned by the state of Qatar. It has more than 125 travel destinations that are spread across Africa, Europe, South and North America, the Middle East, Oceania, South Asia, and central Asia among other regions. The organisation employs an excess of 30,000 people. The company employs 17,000 people directly while the rest are employed through its subsidiaries.

Skytrax ranks Qatar Airways one of the five star airways around the globe (Al-Baker, 2005). Following a surveys that involved 12 million air travel customers across the world, the cabin team for Qatar Airways was also ranked the fifth best in the world and the best in the Middle East region by the same organisation (Al-Baker, 2005). Qatar Airways enjoys monopoly in funding since it is the only established organisation in the state of Qatar. Amid the success of the company, which accrues from first-class service delivery by its committed workforce, the company has come under criticism after fostering harsh working conditions that are dominated by intensive scrutiny of its workers and exploration of policies that discriminate its female cabin crew workers.

Nike, Inc.

Nike, Inc. is a multinational organisation that is based in the US. Its main offices are in Oregon. The organisation was founded in 1964, although it was incorporated as Nike, Inc. in 1971. It trades in footwear, accessories, and apparels. It also sells sports equipment. It falls in the category of the largest supplier of sports equipment, apparels, and training shoes across the globe. In 2012, the company recorded over US$24.1 billion in revenue (Todd, Mottus & Mihlan, 2012). By the end of 2012, it had engaged 44,000 persons across the globe. Due to the increasing manufacturing costs in the US in the recent past, the company has sought outsourcing in nations that have low labour costs, especially in Asia such as Indonesia and China. This move has come with a lot of criticism amid allegations of the provision of poor working conditions and involvement in child labour.

Working Condition in the Three Industries

In several years, Nike, Inc. has been accused of employing children in its Cambodia plants. However, it cites that people in Cambodia can buy fake age evidence at very low rates of about $5 (Boggan, 2001). While the stalemate of the company’s accusation for employment of children remains unresolved, according to Boggan (2001), there are immense concerns that the company makes use of a minimal portion of the cost of production of its pair of shoes (70 pounds) in the payment of labour.

Nevertheless, amid the high call for Nike, Inc. to ensure that workers within its Asian production plant are remunerated accordingly, the company does not consider allegations of sweatshops as constituting a problem of public relations. Rather, it sees it as a challenge that involves human rights (Boggan, 2001). Measures to provide good working conditions at the Nike, Inc. plants in the Asian countries face challenges that emanate from the managers and employees.

Relying on media reports, the problem of poor working conditions or sweatshops at Nike’s foreign production plants is created by managers and employees. For instance, managers bribe auditors so that they can report on lesser working hours and higher pay rates. Workers, particularly the immigrants, are normally willing to work longer hours so that they can maximise their savings and return home.

However, there is no report of any issues that are related to employment of children and/or factors that may make the company tolerate child labour within its factories. Through the company’s watch, Tom Connor, Nike, Inc. holds, “upon finishing work in a Nike contract factory, the great majority of Nike workers will go back to rural areas that are marked by extreme poverty” (Boggan, 2001, Para. 10). Due to poverty, employees have a little bargaining power with employers. Thus, their budgets are likely to be liquidity-constrained.

Budgetary constraints lead to increased child labour at least for the first child in a family (Edmonds & Pavcnik, 2005). For the Cambodia’s Nike plants, this situation may happen in the attempt to garner more financial security in case the contracts are over. Indeed, Boggan (2001) asserts that the company accepts this argument when it reveals that the future economic security of employees in Nike contract factories depends on the amount of money they now make. A survey of three factories based in Philippines, Indonesia, and Sri Lanka amplify this argument. According to the study, neither of the factories paid its workers adequate wage to sustain good living standards (Bunting, 2008). However, people reported to work on a daily basis. Thus, in terms of wages and salaries, working condition in these plants is poor and worth improvement. A working environment, which also involves child labour, is not only unfavourable, but also prohibited under international treaties and the US law.

McDonald’s working conditions vary depending on work structures. McDonald’s employees are in three categories, namely hotel workers, corporate personnel, and franchise holders. The most numerous human resource group comprises the hotel workers, which operates in the restaurant with approximately 0.75 as part-time and lowly paid workers. Each MacDonald’s restaurant has one restaurant manager under which there are assistant managers and swing managers down the hierarchy. The company has corporate headquarters and forty regional offices in which the corporate personnel categories of employees work. Having been successful in their services, outstandingly satisfying customer needs, MacDonald’s has remarkably retained its glory in fast food production ranking.

Amid the remarkable growth of McDonald’s, the company is not immune to complains about its working conditions, especially with regard to compliance with the legal provision on fair labour standards (Peterson, 2014). In a bid to increase its profitability, the company focuses on reducing the cost of running business among them being the labour costs. Managers are required to increase employee output levels. Pressure from corporate managers on line managers to ensure higher organisational performance compels line managers in some instances to adopt unfair working practices such as making people work without a pay (Peterson, 2014).

In fact, two former McDonald’s managers informed the Fast Food Forward, a group that fights for improved pay for all fast food workers, that they have compelled people to work without pay in the past (Peterson, 2014). To ensure higher throughput levels at the organisation’s stores, employees are required to work at excessive speeds in some situations. Although McDonald’s is one of the most successful fast food stores across the globe, these issues among others make the workplace unfavourable and hence the need for rectification.

Qatar Airways has gained immense reputation for offering first-class services to its customers. However, employees’ experience at the workplace reveals varying stories. Acquiring information about the working conditions of the organisation is incredibly hard since employees are forbidden to make disclosures of any information that relates to the work environment and work procedures at the company. Indeed, the organisation does not permit any unauthorised person to address the media or any other agent.

At the cubicles from where the Guards operate, security cameras have been put in place to capture every activity. The captured films or images are directly accessible to managers. Thus, the guards anticipate that everything that happens at the entrances can be reported directly to managers. This information can accompany records of accomplishment for each employee even if some unintentional errors that can damage the records may occur. There are also reports in the media that the organisation’s work conditions interfere with the lives of the employees. For instance, The National Business (2014) confirms that the company prohibits female employees from getting married or having children. However, amid these accusations, the company defends its policies, especially on marriage and pregnancy.

Comparative Review of Good and Bad in the three industries

Qatar Airways, Nike, Inc., and McDonald’s have varying bad and good characteristics of their working conditions. Due to different cultural backgrounds, McDonald’s encounters challenges in terms of putting in place a working condition that fosters multicultural integration. However, this case is not only a concern for McDonald’s, but also for Qatar Airways and Nike, Inc. since the three organisations employ people from diverse backgrounds.

Comparably, low wage and child labour dominate Nike’s production plants in the foreign manufacturing centre. Qatar Airways’ working condition challenges are special compared to Nike and McDonald’s since major complains are mainly related to unfair practices that are directed towards the female gender such as emphasising that women should not marry or have children as suggested by The National Business (2014). Nike, Inc. and McDonald’s have been criticised based on their working conditions, which are associated with efforts to increase output levels while offering low remunerations in a bid to increase profits. Peterson (2014) evidences this assertion when he reports that two former McDonald’s managers came out admitting that they compelled people to work without pay in an attempt to reduce labour costs. However, it is important to note that the allegation is not the policy of the company.

Although Nike, Inc. and McDonald’s face criticisms of putting in place working conditions that seem exploitative to their employees, the companies’ strategy is to raise their outputs and revenues by utilising people as the main source of competitive advantage. In this effort, Nike and McDonald’s focus on creating working conditions that encourage a common organisational culture that recognises the importance of people in enhancing their productivity. Such conditions involve integrating employee diversities to reduce work conflicts (Institute of Leadership and Management, 2007; Johnson & Keddy, 2010).

While work environments that have no conflicts exemplify good working conditions, unlike Qatar Airways, Nike, Inc. and McDonald’s also face common bad attributes for their working conditions. Nike and McDonald’s employees raise complains such as strict opposition to unionisation and complains of low wages within the company-owned stores and franchises. Such working conditions have negative effects on organisations since they translate into low motivation and/or reduced job satisfaction.

Compared to Qatar Airways and McDonald’s, Nike faces criticisms over its bad aspects of working conditions, which damage its reputation as a global brand. For instance, about 25 percent of all Indonesian workers were placed on temporary contracts while the number hiked to 85 percent in Philippines. Worse still, these employees were subjected to compulsory over time. Besides, they were supposed to meet high production targets whilst receiving low wages (Bunting, 2008). ­­At the Sukabuni factory for making converse shoes in Indonesia, workers complained that they had experienced direct abuse from their supervisors, something that Nike, Inc. does not deny. However, the company is quick to claim that it can only do little to stop it (Bunting, 2008).

Qatar Airways provides incredible working conditions that allow people to progress and develop their careers. The input of the employees to the organisation’s success is also well rewarded through a good remuneration. In fact, unlike the case of McDonald’s and Nike, employees at Qatar Airways do not register complains of low pay, overworking, or even allegations of the existence of working conditions that favour child labour as it is evident in the case of Nike in its Asian-based manufacturing plants.

However, allegations of the need for female employees to inform their pregnancy status as soon they gain knowledge on any changes undermine the good fit between work and the life of the employees. Unlike the case of McDonald’s and Nike, Qatar Airways has also come under sharp criticism that its working conditions are dominated by harsh treatment and/or overbearing employee scrutiny (The National Business, 2014). However, the organisation’s management does not verify these claims. Indeed, through the company’s CEO, Akbar Al Baker, the management denies the matter vehemently.

Suggestion for improving the Working Conditions

Poor working conditions in the three organisations can be reduced by addressing their underlying causes. However, the best solution is the one which not only resolves complains, but also ensures that parties that are blamed for creating the problems are satisfied with the suggested solutions. This plan can reduce possibilities of the emergence or escalation of organisational conflicts that are associated with complaints of poor working conditions.

For Qatar Airways, guards’ complaints of managements’ excessive scrutiny of their work can be resolved by instilling in them (guards) the right attitude towards surveillance cameras. For instance, instead of the management letting them know that the cameras are meant to track the manner of execution of their work, the guards need to have the mentality that the cameras only help capture false signal, which they may not perceive due to limitations of human surveillance abilities.

The case of women who serve in the cabin crew that is focused on by the anti-pregnancy and anti-marriage policies should be addressed if the nature of cabin crew work does not suit people with their immediate pregnancy or marital status. This move gives them a freedom of choice. Those who consider remaining in the cabin crew will avoid pregnancy or marriage. Thus, instead of seeing the organisation as discriminating, they become aware that the job itself is the one that discriminates them.

Improving working conditions for Nike, especially with regard to complaints over child labour only requires compliance with the law. It is illegal for a US-based organisation to sell products produced with child labour. In case of McDonald’s, compliance with legal provisions on minimum wage is vital for improving its working conditions. Where employees grumble because of working at high speeds to satisfy their targets, a job measurement to determine the amount time required to serve a certain number of customers or finish a certain amount of job is necessary. This strategy can help in the determination of standard times for work. Where higher performance than the standard time is required, it should be accompanied by additional remuneration in the form of bonuses.

The organisations’ common way of improving their working conditions entails implementing principles of good job-life fit. An organisation that provides a working condition that fits with other obligations of people in their lives outside work environment takes advantage of employee commitment in their work. This situation contributes to increased work motivation. Good working conditions help in inducing fun among employees.

Everett (2011) contends with this assertion by adding that workplace fun has a couple of pros. For instance, he posits, “A fun-filled workplace builds enthusiasm, which leads to increased productivity, better service, positive attitudes, and helps in developing talent, loyalty, and longevity” (Everett, 2011, p.5). With this reality, he wonders why many work environments are not characterised by funny cultures. Responding to the question, he asserts that workload in organisations has become heavier as more demands are placed on employees. This claim is perhaps true for Nike, Inc. and McDonald’s. Thus, it is necessary to standardise workloads to avoid overloading employees or failing to remunerate them according to the workload of the day.

Reference List

Al-Baker, A. (2005). Qatar Airways. Jordan: Tourcom, Amman. Web.

Boggan, S. (2001). Nike Admits to Mistakes Over Child Labour. Web.

Bunting, M. (2008). Sweatshops are still supplying high street brands. Web.

Edmonds, E., & Pavcnik, N. (2005). Child Labour in the Global Economy. Journal of Economic Perspectives, 19(1), 199-220. Web.

Everett, A. (2011). Benefits and Challenges of Fun in the Workplace. Journal of Leadership and Management, 5(1), 1-10. Web.

Freshwater, D., Sherwood, G., & Drury, V. (2006). International research collaboration: Issues, benefits and challenges of the global network. Journal of Research in marketing, 11(4), 295-303. Web.

Institute of Leadership and Management. (2007). Managing conflict in the Workplace. Oxford, Boston: Pergamon Flexible Learning. Web.

Johnson, C., & Keddy, J. (2010). Managing Conflict at Work: Understanding and Resolving Conflict for Productive Working Relationships. London: Kogan Page. Web.

Peterson, H. (2014). McDonald’s Managers Admit to Making Staff Work without Pay. Web.

The National Business. (2014). Emirates Airlines and Qatar Airways Defend Cabin Crew Rules. Web.

Todd, L., Mottus, K., & Mihlan, G. (2012). A Survey of Airborne and Skin Exposures to Chemicals in Footwear and Equipment Factories in Thailand. Journal of Occupational and Environmental Hygiene, 5(3), 169–181. Web.

Executive summary

This report was prepared for McDonald’s to assess external factors that are impacting the organization’s competitive strategy. Chart one highlights the PESTEL analysis with regard to political/legal, economic, socio-cultural, technological, and ecological factors that are influencing the performance outcomes of the business establishment. Chart two is utilized to further analyze the important external forces that could bring the most essential business opportunities and threats. Finally, will aim at offering some important recommendations that could be adopted by the management so that the firm could realize excellent performance outcomes on the platform of gaining and maintaining a competitive advantage.

Analysis

Figure 1. A chart representing the political/legal, economic, socio-cultural, technological, and ecological forces of McDonald’s.

Political/legal forces

The operations of all multinational firms are influenced by policies of nations in which they conduct business. In fact, management teams of organizations closely analyze policies of a state before establishing markets in them. McDonald’s has been adversely affected by policies in some countries (Arthaud-Day, Rothaermel & Collins, 2014; Rothaermel, 2013). For example, in the US and Europe, governments have been petitioned to declare various types of fast food unhealthy for human consumption. The argument has been that it could lead to health complications, such as obesity and cancer. Tax laws have the potential to support or deter the growth of the organization in many countries (Arthaud-Day et al., 2014).

For example, in countries where tax laws are conducive for foreign firms, then it would be expected that the performance outcomes of McDonald’s would be realized. On the other hand, it would be futile operating in states with very strict tax laws. From a general perspective, the company is experiencing high taxation rates across the globe. Global labor unions are protesting in order to allow their members to have better labor conditions in both local and foreign firms. This could impact the firm negatively because it would be required to hire more workers in the context of restrictions on less working hours (Rothaermel, 2013).

Economic forces

Multinational companies could be negatively impacted by inflation and exchange rates. For example, high inflation rates in many global markets would imply less spending by consumers. In addition, high interest rates would prevent individuals from seeking loans from banks and other institutions. Thus, there would be less money to be spent on fast food offered by McDonald’s (Arthaud-Day et al., 2014).

Socio-cultural forces

It is essential for the management of McDonald’s to identify the social and cultural aspects of global markets so that the company can record excellent sales. The organization has been recording good sales in the past because of the huge investments it puts in understanding the attributes of its customers across the world (McDonald’s, 2014). Through frequent surveys, the firm was able to determine that most of its customers were aged less than thirty-five. The rise of the middle class could positively impact the organization. In addition, lifestyle changes are also ensuring that many potential customers are adopting fast food, which is the focus of McDonald’s (Arthaud-Day et al., 2014; Rothaermel, 2013; Mishra, 2013).

Technological forces

The adoption of technology has impacted many businesses in many ways. The company utilizes television to advertise its products. In fact, the advertisements are based on the platform of sound technological applications. In addition, technology has resulted in better inventory system and supply chain, which imply better operations of the firm. With the rise of the internet, it could be expected that sales would increase due to online sales and marketing (Strategic Management Insight, 2013).

Environmental forces

Environmental damage is a sensitive issue in global businesses. In the recent past, the company has been accused of damaging the environment through the adoption of non-biodegradable materials. For example, it has been argued that glasses and Styrofoam coffers that are used by the business establishment are not good the environment (Rothaermel, 2013).

Figure 2. A chart representing the opportunities and threats of McDonald’s.

Opportunities

Opportunities are important factors that would present an organization with an excellent avenue for growth and expansion. With regard to McDonald’s, opportunities present it with an excellent platform on which to base its international operations in order to realize better performance outcomes. The enterprise is characterized by an international brand, which is supported by a considerable network of franchises spread across the world. In the end, the network will provide the firm with an ideal approach to growth. High-level innovation helps the company to produce high quality products that capture the attention of customers (Arthaud-Day et al., 2014). The ever increasing global population would lead to increased consumption of products that are sold by McDonald’s (Rothaermel, 2013; Strategic Management Insight, 2013).

Threats

Business threats could negatively impact the multinational company. In fact, it should try to minimize the number of threats in its markets. Legal suits against the firm on the premises of its advertising could reduce its revenues. Stiff competition from other established firms in the food industry could make the business outfit lose many of its customers (McDonald’s, 2014). In fact, the most established business rivals of the firm are Burger King that operates in about 20 countries and Wendy’s, which has branches in over 28 countries (Arthaud-Day et al., 2014). In addition, parent organizations have been petitioning the firm against selling fast food to children because it causes obesity (Rothaermel, 2013; Strategic Management Insight, 2013).

The most important forces for the firm to address

McDonald’s should focus on addressing ecological and socio-cultural forces. If it addresses ecological forces, then it would imply that it would not be banned to operate in some countries due to ecological malpractices. A thorough understanding of the socio-cultural aspects among populations would result in increased sales because the management would execute best approaches to dealing with diversity.

Conclusion and recommendations

It is apparent that McDonald’s is a global brand whose performance has been quite good, but for the year 2013. The management should work toward implementing strategies that would reduce the level of competition from competitors by being more innovative and using other aspects such as lower pricing. It should also take advantage of the growing global population to open branches in more markets so that to record higher sales in the future. In addition, it would be important for the firm to continue with its commitment to producing healthy food products, which would not cause an alarm to consumers. In fact, it can do that by changing its product refining approaches. Finally, as shown in the PESTEL analysis, the multinational firm has a brighter future, which would be supported by innovation.

References

Arthaud-Day, M. L., Rothaermel, F. T., & Collins, J. (2014). McDonald’s (in 2013): How to Win (Again)? Web.

McDonald’s (2014). Our story. Web.

Mishra, L. (2013). Subway Customer Loyalty And Evaluating Marketing Strategies. Journal Of Business Management & Social Sciences Research, 2(11), 17-30. Web.

Rothaermel, F. T. (2013). Strategic Management (2^nd ed.). New York, NY: McGraw-Hill Education. Web.

Strategic Management Insight. (2013). SWOT analysis of McDonald’s. Web.

Standards of business conduct are important for each company that focuses on meeting customers’ interests and on creating a positive and ethical atmosphere in the organization according to the principles of respect, accountability, and integrity. Starbucks and McDonalds are among those leaders in the business world and market, which pays much attention to supporting their reputations as ethical and sustainable companies. In this context, it is important to focus on comparing the specific standards of business conduct typical for such companies as Starbucks and McDonalds.

Strengths of Both Standards of Business Conduct

Both standards of business conduct include all the important information and guidelines on the relationships between employees, customers and employees, and employees and suppliers. The code used in Starbucks is effective because much attention is paid to explaining the principles of quality, equal opportunity, and diversity followed in the organization. Furthermore, large sections describe the principles according to which business partnerships need to be organized, and conflicts of interests need to be resolved. One more strength observed while analyzing the code is the focus on environmental sustainability (Starbucks, 2011, p. 4). In addition, the detailed information is provided on whom to contact in order to resolve ethical questions.

Standards mentioned in the McDonalds’s document are effective in terms of describing the aspects of the workplace relationships, as it is in the standards for Starbucks, and in terms of providing the detailed descriptions of core values and such principles as accountability, integrity, respect, and diversity. These sections are organized in the document more effectively in comparison with the information proposed in the standards for Starbucks. McDonald’s also focuses on discussing the regulations for protecting confidential information and addressing intellectual property rights (McDonald’s, 2011, p. 4). In addition, possible cases of conflicts of interest are described in detail to prevent these situations during the work.

Weaknesses of Both Standards of Business Conduct

In spite of being appropriately organized, the standards of business conduct have some weaknesses. Thus, the document for Starbucks lacks a clear discussion of core values and principles followed in the organization when the document for McDonald’s lacks focusing on environmental sustainability. Although the nature of workplace relations is described in detail in both codes, the standards lack the concrete information on punishments and aspects of compliance (McDonald’s, 2011; Starbucks, 2011). Furthermore, more attention can be paid to discussing the ethical relations with suppliers in both codes in addition to the description of expected relations with customers and other stakeholders.

Conclusion

Having analyzed the standards of business conduct for both Starbucks and McDonalds, it is possible to state that the organization of the document for McDonald’s is more appropriate to provide effective guidelines for stakeholders on the company’s vision and principles. Thus, the document for Starbucks only refers to some principles and values, but they are not discussed in the text. Although the code of ethics and conduct for McDonald’s also needs some improvement, it can be discussed as more effective in comparison with the other document because the standards for Starbucks do not include the clear reference to the necessity of compliance and possible punishment measures in different cases.

It is an important aspect because a code of business ethics can be effective only when the punishment measures are formulated in detail and followed strictly as a result of monitoring. Furthermore, to guarantee compliance with standards, it is necessary to focus on ethical training.

References

McDonalds. (2011). Standards of business conduct. Web.

Starbucks. (2011). Business ethics and compliance: Standards of business conduct. Web.

Introduction

Investment opportunities can be assessed with some indices, and the elasticity of demand is among them. This term defines the dependence of order on various factors, the most popular ones including price changes, customers’ income fluctuations, and the changes in the price of other different services and goods.

In this paper, McDonald’s Corporation and Hyatt Hotels Corporation have been chosen to demonstrate the influence of these indices on investment choices. However, other characteristics of the companies are also taken into account to make an informed decision. The paper includes a short overview of both companies, a theoretical overview of the elasticity terminology, a description of the critical elasticity features of both firms, and some additional investment-relevant information. The conclusion includes a possible decision concerning investment.

Hyatt: Short Description

Hyatt operates and franchises over 500 luxury hotels and resorts in almost 50 countries. The chain’s history began in 1957, but the brand Hyatt Hotels appeared in 2004; in fact, the company owns the brands Hyatt, Hyatt, Grand Hyatt, Andaz, Park Hyatt, Hyatt Place, and Hyatt Summerfield Suites (extended stay) brands (Hoover’s Inc., 2015a). The target market of the company includes business travelers and leisure vacationers with high income.

The competitors of Hyatt include other luxury hotel chains, such as Hilton Worldwide Holdings Inc., Starwood Hotels & Resorts Worldwide, Inc., or Marriott International, Inc. (Hoover’s Inc., 2015a).

McDonald’s: Short Description

McDonald’s Corporation is specialized in foodservice retail that was created in 1955. The company operates and franchises restaurants in the US, Latin America, Canada, Europe, the Asia-Pacific region, and the Middle East. The company-operated restaurants amounted to about 18% as of 2014 (McDonald’s Corporation, 2014). Most of the company’s restaurants offer drive-through service.

The menu includes typical fast food items like hamburgers, cheeseburgers, and French fries; apart from that, McDonald’s serves salads, sundaes, and pies. Finally, soft drinks, water, juices can be bought by the customers. Among the famous special McDonald’s offers are the Big Macs, Quarter Pounders, and Chicken McNuggets.

According to The World’s Most Valuable Brands Rating by Forbes (2015), McDonalds scores “poorly” with customers, but due to the size of the company (33,500 restaurants, 68 million customers, 119), it is ranked the 7th most valuable brand. For example, in the US, only there are more than 14,250 McDonald’s locations.

McDonald’s Competitors include Burger King Worldwide, Inc., Yum Brands, Inc. (Hoover’s Inc., 2015b).

Elasticity: Key Terms

Flexibility is the term used to describe the effect that a variable has on another one (Png, 2012). For example, the price elasticity of demand “measures how much the quantity demanded a response to a change in price» (Mankiw, 2014, p. 90). Therefore, the term can be defined as the change in the demand (the quantity demanded) divided by the difference in price (both presented as the percentage). In case the resulting number is more significant than 1, it is evident that the demand is significantly affected by the price change; the need for this good will be described as a price-elastic one. The need for a good is considered to be inelastic in case the elasticity is less than 1, and such an index demonstrates that the change in order is not affected by the price change significantly. Finally, the index may equal 1: in this case, the market has “unit elasticity,” which shows that the “quantity moves the same amount proportionately as the price” (Mankiw, 2014,p. 92).

The price elasticity of demand has been shown to depend on several factors. For example, depending on the existence (and accessibility) of substitutes, a good may be given up in case of a price increase that makes purchasing it less profitable than obtaining a replacement. A “necessity” good tends to have a relatively price-inelastic demand while the products qualified as “luxury” ones are usually more elastic for prices. However, it should be pointed out that the definition of “necessity” varies among consumers, and the target market is generally chosen about these differences (Mankiw, 2014, pp. 91-92). Apart from that, elasticity depends on the definition of the market (low flexibility for clothes in general, but a much higher one for expensive brand suits) and may change with time, for example, if the market situation changes and a substitute appears.

For instance, it has been defined that the price elasticity of demand for food (which is a necessity ethical without a substitute) is 0.1. At the same time, the flexibility for different kinds of food differs: the one for eggs is estimated to be around 0.27, while that of juice is 0.79 (Andreyeva, Long, & Brownell, 2010, p. 218). However, the elasticity for restaurant meals (a luxury good with substitutes) was estimated to be about 2.4 (Mankiw, 2014, p. 94).

Of course, the total picture of demand elasticity is much more complicated: there exist many other factors that demand can depend on; for example, advertising elasticity or R&D elasticity have also been determined by scientists (Png, 2012). Another significant determinant is the income elasticity of demand. Obviously, it demonstrates the relation between market and the income of the consumers. It is measured as “the percentage change in quantity demanded divided by the percentage change in income” (Mankiw, 2014, p. 97). For most goods, higher income means a growing demand, even though in cases of necessity goods elasticity is not very high since, regardless of the revenue, customers need to acquire them. For other goods, however, the inferior products (those associated with lower income; for example, public transport tickets), the income elasticity of demand is negative, which means that the need for these goods decreases with the growth of income (Mankiw, 2014, p. 98).

Finally, the cross-price elasticity of demand demonstrates how “the quantity demanded of one good response to a change in the price of another good” (Mankiw, 2014, p. 98). In this case, the numerator of the function includes the percentage change in good demand, and the denominator consists of the percentage change in the price of the good. For substitutes, the cross-price elasticity is usually positive, since the increase in the amount of one of the alternatives causes the demand for others to rise. In case of complements (the goods that can be used together, for instance, mp3-players and headphones), the rise in the price of one of the products results in the decrease of demand for the other one and the elasticity becomes negative.

The importance of indices appears to be visible. Indeed, the lower the elasticity of demand is, the more stable it is, and the easier it is to predict demand fluctuation. Companies with lower elasticities can be called more reliable. At the same time, by determining the elasticity about different factors, one can define the features that demand particular attention. To make the investment decision between McDonald’s and Hyatt, we are going to describe the relevant indices for the two companies.

Key Elasticity Features for McDonald’s and Hyatt

The Market

As it has been pointed out, the demand for food is relatively inelastic; still, given the fact that the market for McDonald’s would be defined as “fast-food restaurants,” the situation becomes different. Restaurants cannot be described as a necessity, even though in the case of fast food, they could be regarded as “convenience.” For example, it has been proved that consumers tend to prefer cheaper fast-food restaurants for cooking (Andreyeva et al., 2010). Still, it is evident that the elasticity for McDonald’s would be much higher than that for food in general.

Hyatt’s service would commonly be described as a luxury one. At the same time, it should be pointed out that at least for a part of the target market that includes mostly high-income populations and especially business travelers, it could be considered a necessity. Still, less luxurious variants could be considered even by the target market, which is described below.

Competition. The Price

The situation in the market also defines the elasticity of demand. Given the fact that neither company can be called a monopolist, both of them are expected to face competition on numerous levels.

It has been pointed out that the competition McDonald’s has to meet nowadays is quite severe (Trefis Team, 2015a, June 16). According to McDonald’s Corporation (2014), the company faces competition on multiple levels, geography-wise (local eateries and especially local cuisine restaurants), and service-vise. Economists agree with the latter and point out that McDonald’s is a comparatively conservative chain that is mostly famous for the fast-food offers (Trefis Team, 2015a, June 16). Fast food has become less favored as the ideas of healthy eating habits are being popularized, and healthier food is offered by emerging competitors (for example, Chipotle Mexican Grill). To stay competitive, the company creates unique offers (for instance, Big Mac), and insists on incorporating healthier food into the menu (McDonald’s Corporation, 2014). Still, in case it becomes necessary, it is evident that the services by McDonald’s can be easily substituted.

In fact, the same can be said about Hyatt. While the company does have a defined and refined brand, there do exist competitors with similarly famous brands (Hoover’s Inc., 2015a). Therefore, the service of this company can also be substituted, and its elasticity of demand also depends on this factor.

Cross Price Elasticity

For the substitutes of the companies, the demand cross-price elasticity would be positive. As for the cross-price flexibility between McDonald’s and Hyatt, it would not be an exaggeration to say that the target markets of the two companies do not overlap. Hyatt primarily targets high-income customers, while for McDonald’s, it is the medium-income population that is important. Therefore, a severe impact of the prices of the two companies on each other would not be expected. Still, the two services could be regarded as complementary; therefore, in case a correlation between them would be found, the cross-price elasticity would be negative.

The Income Level

The income level elasticity of demand for food depends on the actual product. Fast food elasticity among low-income customers is about 2.09, which is lower than the need for restaurants but is still a very significant figure (Andreyeva et al., p. 218). Therefore, we may conclude that with the decrease in income, the demand for McDonald’s services will also decrease significantly.

Being a luxury hotel chain, Hyatt would be expected to have a significant income elasticity of demand. It is evident that four-star hotel accommodation is a luxury good that is not even considered by low-income populations. Still, the fluctuations in the income of more affluent customers would also be expected to affect the demand for Hyatt’s services.

Conclusion

Neither the price nor income elasticity of demand for McDonald’s or Hyatt’s service could be described as inelastic. Still, it should be pointed out that the need for McDonald’s service would be less elastic in both cases. This is the result of the fact that Hyatt’s service could be described as a luxury product; therefore, its elasticity for all the factors is quite high.

At the same time, it should be mentioned that the target market of the hotel’s chains is defined by its “luxuriousness.” Price elasticity has been described as “an important tool” by Rhett Hirko, the Director of Revenue Analytics in Hyatt Hotels Corporation (Getting warm, 2012, August 24). He has pointed out that Hyatt includes the relevant indices as a tool for the assessment of the market demand that defines the company’s pricing policies.

Other Factors Relevant for Investment

McDonald’s: Poor Performance and Future Changes

As a result of the fierce competition and global economic changes, McDonald’s has been “underperforming” on the stock market: during the past two years, it has only risen 7.5% (Trefis Team, 2015a, June 16, para. 2). There is a chance that this situation will not be rectified shortly. However, it should be pointed out that McDonald’s Corporation (2014), acknowledging the “challenges,” intends to attend the current difficulties (p. 3). The activities, that, according to McDonald’s Corporation (2014), can improve the company’s future performance include paying extra attention to quality, service, and cleanness; localizing menu and marketing strategies to suit the needs of varied regions; modernizing technology (for example, implementing web and mobile orders), and strengthening customer’s trust. The latter factor is supposed to be achieved within the company’s sustainability program that includes environmental issues (initiatives concerning energy and sustainable water use), and healthy food improvements in the menu (that presupposes adding more fruit and whole grains to satisfy the healthy eating customers). The fact that the problems of the company are noticed and paid attention to allows one to expect the improvement of McDonald’s performance shortly.

Hyatt: Brand Reputation and Expansion Policy

Conducting business ethically appears to be a trend for modern companies. Hyatt Corporation (2015) emphasizes that it is an advocate of corporate social responsibility (CSR), which, in short, presupposes taking into account the impact that a business can or does have on all the groups of stakeholders and the world in general. The company’s CSR policy, Hyatt Thrive, includes, among other programs, those aimed at providing the employees with education and career opportunities. As a result, Hyatt is included in the Top 50 Places to Work in several countries, including the US, the U.K., Germany, the United Arab Emirates, and China (Hyatt Corporation, 2015, p. 1).

Similarly, Hyatt Corporation (2014) claims to have significantly increased the number of women in senior executive roles and emphasizes supporting LGBT for the past 11 years. Apart from that, the company is concerned with environmental sustainability, which includes reducing energy use, sustainable water use, and decreasing greenhouse gas emissions. Given the competition that Hyatt also has to face, it is supposed to maintain the popularity of its brand with various resources, and this ethical business policy appears to be a suitable option.

Among the more tangible opportunities of Hyatt is its expansion policy. Most of the company’s revenues come from the Americas, but the company has been expanding to the Asia-Pacific Region (APR) for the past several years. It should be pointed out that the competition for lodging in the APR is described as considerable. At the same time, the demand for hotels in the region of emerging economies and touristic countries is also enormous. Currently, Hyatt possesses almost 70 owned, managed, or franchised properties (over 25,000 rooms), with about 4000 rooms purchased during the past three years (Trefis Team, 2015b). Given the fact that Hyatt is still underrepresented in APR in comparison to its other regions, the expansion policy of the company appears to be promising.

Conclusion

McDonald’s Corporation and Hyatt Hotels Corporation are similar in providing what can be described as “luxury” services, which defines their demand elasticity. Apart from that, the two companies are international giants with famous brands and years of history. In general, the price and income elasticities for both companies are quite significant and appear to be closely correlated with the competition that the firms have to face. To alleviate the effects that the game can have on their demand, the companies maintain the popularity of their brands by positioning them as unique symbols of quality and ethical business conduct.

The cross-price elasticity for the two companies does not appear to be relevant since their target markets do not overlap. The differences in target markets also define a peculiarity of Hyatt Hotels Corporation’s demand. While it appears to be evident that the company’s service is a luxurious one, the target market of Hyatt (particularly, traveling businessmen) could regard it as a necessity. This factor serves to make the demand for the company’s services more stable. Apart from that, being a dignified brand, the Hyatt Hotels Corporation is a remarkable competitor that cannot be easily substituted.

McDonald’s also provides distinctive services, but the competition appears to be rather tough for this company, which has been demonstrated by the deteriorating performance in the past several years. The latter fact makes this company a rather undesirable choice for investment. It should be pointed out that McDonald’s realizes the difficulties that have arisen and attempts to deal with them. This could mean that the company could make a breakthrough in the future; apart from that, its size and name do provide McDonald’s with certain opportunities. However, it should be mentioned that Hyatt also has opportunities for future development and, currently, does not seem to encounter similar difficulties. Therefore, given the current market situation, Hyatt appears to be a better investment option.

References

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Hoover’s Inc. (2015b). McDonald’s Corporation Competition. Web.

Hyatt Corporation. (2015). Hyatt 2015 Corporate Responsibility Report. Web.

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McDonald’s Corporation. (2014). McDonald’s Corporation 2014 Annual Report. Web.

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Trefis Team. (2015a). McDonald’s: Better Days Ahead?Forbes. Web.

Trefis Team. (2015b). Hyatt Hotels: Further Room For Occupancy Growth In Asia Pacific Properties Despite Supply Concerns.Forbes. Web.