Pest Analysis of McDonalds in Malaysia

Pest Analysis of McDonalds in Malaysia lad stands for Political, Economic, Sociological, and Technological. gent analytic thinking is an effective tool to audit come withs environmental influences which tin be used for strategic decision- fashioning. The curse word psycho outline is a very utile tool to apprehend and analyze market growth, market position, future potentials and counselor-at-law for a particular business so A fella analysis can be termed as a business measurement tool. plague analysis summarizes the external environment in which the business is planning to die or already operating. However, an effective follow up and proper receipt plan is required to ensure optimum use of pesterer analysis (Luthans Doh, 2008). This traverse aims to discuss PEST analysis of McDonalds in Malaysia. The report is sh ard into five parts. First part is introduction where the basic theory and practise of PEST analysis is discussed. The next part is detail explanation of quadrup permit comp atomic number 53nts discoerly Political, Economic, Sociological, and Technological of PEST analysis. The third part of this report highlights PEST analysis for McDonalds in Malaysia. The final part of this report discusses conclusion and succinct analysis.2.0 Background of the Company2.1 IntroductionMcDonalds is a popular brand name in fast victuals sedulousness. McDonald has 34,000 restaurants in 119 countries serving roughly 69 million people any day. Worldwide well-nigh 80% of McDonalds restaurants argon franchised and generally owned and operated by indep repealent topical anaesthetic entrepreneurs (McDonalds, 2013). McDonalds annual report 2012 shows that areawide the company generated operating income of 8.5 billion in 2011 with 9.7% growth over 2010 (McDonalds Corporation, 2012). McDonalds Malaysia opened its first store in 1982 in Kuala Lumpur. harmonize to the emblem of 2009, McDonalds Malaysia manages 194 restaurants nationwide catering the tak e in of 10 million customers monthly. McDonalds Malaysia is growing importantly with 15-20 restaurants per annum. In order to manage day to day operations McDonalds Malaysia has around 8,000 topical anaesthetic employees who are working in divergent outlets and near just about 150 personnel are working in the headquarter (McDonalds Malaysia, 2009).2.2 Company reportRay Kroc the founder of McDonalds corporation started his business with Richard and Maurice McDonald by purchasing franchising justifiedly in 1950s to operate McDonalds restaurants in the USA. In 1961, he bought carry by dint of shares of the company from the McDonald brothers. In the last quarter of 1980, Golden Arches Restaurants Sdn. Berhad. (GARSB) received allowance to bring McDonalds in Malaysia. The first McDonalds opened on 29 April 1982 at Bukit Bintang, (McDonalds Malaysia, 2009).2.3 Products are ServicesMcDonalds offer wide variety of fast ingenious nourishment and beverages including burger, nugget, grumbler fries, French fries, set meals etc. Moreover the restaurant serves different type of coffee, carbonated beverages, ice creams and flavored drinks (McDonalds Malaysia, 2013). McDonalds continuously does enquiry and update its batting order to keep the market share. Cost leadership and price differentiation is McDonalds one of the key marketing strategies (McDonalds Corporation, 2008).3.0 Introduction to PEST analysisIt is mentioned earlier that PEST stands for Political, Economic, Social, and Technological. This tool is used to evaluate the market for both new entrants and alert business units. This analysis tools are a framework for assessing a stain. It can be applied to evaluate a position or a strategy, company direction, new marketing proposition or even a new idea. Thorough analysis of the environment in which the firm functions empowers a company to take advantages of opportunities as well as minimize the threats. PEST framework often encourages proactive thinkin g and brainstorming rather than relying on instinct (Luthans Doh, 2008).3.1 PoliticalPolitical factors often refers organisation intervention, entry barriers, valuate or tariff structures which are designed to benefit Government or the citizen. The political environment has huge influence on the business. Political stability, regulations, disbursal power of consumers often dramatis personaes the profitability of a business (Oxbridge Graduates, 2013). There are trusted factors which influence political situation of a country which includes ecologic or environmental issues, current legislation home market, future legislation, multinational legislation, regulatory bodies and processes, government policies, government term and change, trading policies, funding, grants and initiatives, home market lobbying/pressure groups, world(prenominal) pressure groups, wars and conflicts (businessballs.com, 2010).3.2 EconomicEconomic factors comprise some another(prenominal) factors e.g. stability, income status, income parity, purchasing powers, unemployment rates, exchange rate, interest rates etc. there is no doubt that these factors plays a vital subroutine in decision making for an constancy or a business (Oxbridge Graduates, 2013). It is necessary to consider certain factors while analysis economic situation of a country, for example, home saving situation, home economy trends, overseas economies and trends, general taxation issues, taxation specific to product or receiptss, seasonality and weather issues, market and trade cycles, specific industry factors, market routes and distribution trends, customer or end-user drivers, interest and exchange rates, world(prenominal) trade and monetary issues (www.businessballs.com, 2010).3.3 Socio-CulturalSocio- cultural factors refer to the pattern and trend of contain which generally occur due to the nationality, religious or culture. As for food industry it is evident that local taste and preferences will decide the acceptance of particular food products. In order to survive and grow local likings and disliking should be followed. So a thorough understanding about local market is required to ensure successful business (Oxbridge Graduates, 2013). The cultural and kind influences on a particular business vary country-wise. When a Socio-Cultural situation is analyzed lifestyle trends, demographics, consumer attitudes and opinions, media views, law changes affecting favorable factors, brand, company, technology image, consumer buying patterns, fashion and role models, major events and influences, buying access and trends, ethnic or religious factors, advertising and publicity, ethical issues should be considered (www.businessballs.com, 2010).3.4 technologyTechnological factors shape the production output and efficacy of the plant and operation. As for the food industry it is seen that employment of technology brought fruitful results in the food industry (Oxbridge Graduates, 2013). enginee ring is a critical success factor to achieve and sustain agonistical advantages. Moreover, this is a key driving force of globalization. An analyst considers competing technology development, research funding, associated or dependent technologies, replacement technology or solutions, due date of technology, manufacturing maturity and capacity, information and dialogues, consumer buying mechanisms or technology, technology legislation, innovation potential, technology access, licensing, patents, intellectual property issues, global communications while evaluating technological situation (www.businessballs.com, 2010).4.0 PEST analysis for McDonalds in Malaysia4.1 Political ComponentsMalaysia is a multicultural country with threesome major ethnic groups namely Malay, Chinese and Indian. Moreover, the country has few autochthonal groups who live mostly in East Malaysia. Evidently, these groups live in calmness without any major clashes (Rex, 1991). Moreover, this country is a popu lar tourist destination. According to Malayan Tourism Board in 2012 around 25.03 million international tourists visited Malaysia and on an average 64,000 tourists landed in Malaysia everyday which is 7.2% higher than the inbound tourist in 2011 (MTPB, 2013). The apparent political stability is one of the important attracting factors for foreign as well as local investors. Pro- business government mentality, stable political situation and a good legal corpse shows attractive prospects for investors. Moreover, in order to attract large investments, the government offered great portion of foreign equity ownership in businesses and enterprises under the promotional material of Investment Act (PIA), 1986. Market-oriented economy and an educated multilingual workforce do Malaysia as one of the popular destinations for investment (Tsen, 2005). So, McDonalds has tremendous opportunities in Malaysia and the company can capitalize this harmonious political situation for promote expans ion.4.2 sparing FactorsThe global financial crisis has touch the whole world at the end of 2007 resulting sharp decline in global trade and it also change magnitude the unemployment rate in many countries. The good thing is Malaysia was not affected severely by the recession like its neighboring country Singapore. single reason could be Malaysia learnt its lessons from the previous financial crisis which occurred in 1997. Moreover, McDonalds dealt the problem expeditiously by reducing product price and offering value meals. This is how McDonalds managed to assert sales figures and performed better compared to its competitors. Currently, Malaysian economy is growing at a pace of 4.5-5% per annum. The rate of Malaysian Ringgit against US Dollar was steady at average 2.95 (Zheng, 2009). The .4.3 Socio- Cultural FactorsAs it was mentioned earlier that Malaysia is a multi- religion and multicultural country. Islam is considered official religion in Malaysia and more than 50% of popu lation is accessory of Islam in Malaysia. So naturally the concept of Halal plays important role in Malaysian food industry (Muhammad, Isa, Kifli, 2009). To respect the religious plan of Muslims and to comply government rules McDonalds in Malaysia does not serve any pork barrel item. Moreover, McDonalds follow strict Halal compliances while buying the main ingredients e.g. chicken or meat from suppliers. Beef is one of the popular food items for many Malaysians especially Muslims, that is why data shows that in Malaysia the bestselling McDonalds product is Big mac (McDonalds Malaysia, 2009). Recent trend shows that the Millennial generation in Malaysia are fitting wellness concern.4.4 Technological factorsMalaysians are becoming more and more technology oriented. Social networking sites are playing vital role in every aspect of Malaysian peoples lives especially the younger generations are heavy users of meshing and other IT gadgets (Miniwatts Marketing Group, 2010). McDonalds Malaysia has its own website and also it has strong Facebook and other online social networking presence. It disseminates corporate information as well as various promotions and events through these channels (McDonalds Malaysia, 2013). However, it certainly lacks in some aspects where the other competitors are counsel ahead. For example, McDonalds did not have internet ordering system until recently. Moreover, the delivery service in inadequate and often does not cover most of Kuala Lumpur let alone other cities (McDonalds Malaysia, 2013). In order to sustain in todays warlike business world McDonalds should design appropriate strategies to response changing need of the customers.5.0 ConclusionA PEST analysis is an excellent tool to understand the external affecting factors of business. It enables the company to capitalize the opportunities as well as minimize the potential threats. This report has outlined a PEST analysis for McDonalds Malaysia. However, it should be remembered that todays business world is very dynamic, demanding and ever changing so in order to ensure maximum success, the factors should be analyzed and updated on a regular basis (Luthans Doh, 2008).5.1 Summary of the PEST AnalysisThe compendious of PEST analysis McDonalds Malaysia is mentioned belowPolitical Despite of being a multi-cultural society, Malaysia enjoys a peaceful environment. Moreover the government is trying to encourage investments in various ways so McDonalds can use this opportunity for further expansion.Economic Though Malaysia was not badly affected by 2007 world recession but still McDonalds was prepared and had taken timely measures. The general economic improvement of Malaysian opens new opportunities for McDonalds.Socio- Cultural Factors McDonalds has managed to blend with Malaysian culture nicely and understood local preferences very well, as a result McDonalds is a household name in Malaysia. However, recent health consciousness among Malaysians poses a threa t for McDonalds. However, McDonalds can capitalize this change in consumer behavior by offering healthier foods e.g. organic foods, salads etc.Technology McDonalds understands the need of technology applications. It has strong presence in online social medias e.g. Facebook. The communication patterns and preferences are changing, McDonalds should respond to these changes by innovation.