The fast food industry in the UK. Analysis of McDonalds with PESTEL, VRIN and Porter's Five Forces

CONTENT

EXECUTIVE SUMMARY

CONTENT

INTRODUCTION

EXTERNAL ANALYSIS OF THE FAST FOOD INDUSTRY IN UNITED KINGDOM
TRENDS
KEY DRIVERS
POWER
ATTRACTIVENESS

INTERNAL ANALYSIS OF MCDONALD’S
CORE COMPETENCE
VRIN ANALYSIS
COMPETITIVE ADVANATGE
DISTINCTIVENESS

CONCLUSION

REFERENCES

BIBLIOGRAPHY

APPENDIX
APPENDIX 1: External (PESTEL) Analysis of the Fast Food Industry (Yuksel, 2012)
APPENDIX 2: Porter’s Five Forces on Fast Food Industry (Porter, 2008)
APPENDIX 3: INTERNAL ANALYSIS (resources and core competence of McDonald’s)
APPENDIX 4: VALUE CHAIN OF MCDONALD’S (Johnson et al., 2011)

EXECUTIVE SUMMARY

The analytical report explored the external analysis of the fast food industry in United Kingdom through the PESTEL framework and Porter’s five forces. The report also examined the attractiveness of the fast food industry in the United Kingdom. In addition, the report analysed internally the McDonald’s corporation through the VRIN framework. The report also identified the distinctiveness of McDonald’s based on their core competences and competitive advantage within the fast food industry in United Kingdom.

The fast food industry was analysed through the PESTEL framework what examined the external environment of the fast food industry and measured the impact on the firms. In addition, the Porter’s five forces analysed the competitors of the fast food industry and identified the attractiveness of the fast food industry in the United Kingdom. The report also explored the possible opportunities and threats of the fast food industry.

As a firm, McDonald’s was analysed internally through VRIN framework. It was analysed to explore the core competences and competitive advantages of McDonald’s in the fast food industry. The core competences like low price, quality, technology, and least delivery (40s) were act as competitive advantage as well. These key competences made the firm distinctive in the fast food industry. It was noted that the McDonald’s corporation competed with their competitors like KFC, Burger King, and Subway and attained distinctiveness with the fast food industry in United Kingdom.

To summarise, the analytical report outlined that fast food industry was attractive and McDonald’s had competitive advantages what made them distinctive within the fast food industry in the United Kingdom.

INTRODUCTION

The report will explore the fast food industry in United Kingdom. The report will also examine the McDonald’s corporation as a firm. In addition, the report will appraise mainly on two areas for instance attractiveness of fast food industry and distinctiveness of McDonald’s corporation. The report will use some strategic analytical tools for examples PESTEL framework (attached in appendix 1) and Porter’s five forces (attached in appendix 2) to detect the trends, key drivers, and power of the fast food industry. The analytical tools will also distinguish the attractiveness of the industry. Moreover, numerous core competences of the MacDonald’s corporation for instance their own resources, skills, and value chain (attached in appendix 3 and 4) will be also critically analysed through the VRIN framework to find out the competitive advantages of the Macdonald’s corporation. This will identify to recognise their distinctiveness as well.

Johnson et al., (2011) stated that there are three parts of the exploring strategy model for instances understanding the strategic position of an any industry or business organisation known as context, assessing strategic choice for the forthcoming incidence known as content and managing strategy in action known as process (shown in figure 1). Finally, these three elements are aligned in a systematic way make strategy.

Figure 1: The Exploring Strategy Model (Johnson et al., 2011)

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Currently, the fast food industry is growing dramatically in the United Kingdom as well as all over the world and competing with their competitors in the fast food market. Therefore, industry analysis is quite significant to make long term profit and run the business smoothly. In addition, external analysis is potential to evaluate the whole fast food industry and detect the attractiveness, possible opportunities, and threats in the entire market. Moreover, internal analysis is noteworthy to identify the quality of McDonald’s corporation and their core competences act as distinctiveness.

MacDonald’s is the top and renowned fast food corporation in the fast food industry. About 1.8 million people are working in 34,000 restaurants in the world. Richard and Maurice McDonald established the business as a restaurant in 1940 in United States. Afterwards, McDonald’s was opened as a single restaurant in Woolwich located in London in 1974. At present, about 97,000 people are working in 1200 restaurants throughout the UK and Northern Ireland (McDonald's, 2016).

Figure 2: Revenues and Profitability of McDonald’s (MARKETLINE, 2012)

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McDonald’s (2016) reported that in United Kingdom, McDonald’s corporation organise training and development project each year and invest more than £40 million. In addition, about 70% restaurants are owned and organised by local business men and women in United Kingdom. MARKETLINE (2012) published the huge profit and revenues (shown in figure 2) of the McDonald’s corporation. According to McDonald’s (2016), they made profit about $5.1 billion globally. It is noted that, there are numerous core competences compare to their competitors due to the rate of their cash flow and large amount of revenue. Therefore, this is the key strength of the McDonald’s corporation having large number of customers who contribute to make long term profit.

EXTERNAL ANALYSIS OF THE FAST FOOD INDUSTRY IN UNITED KINGDOM

PESTEL is the most important analytical tool for external analysis of any industry or corporate company or business organisation (Yuksel, 2012). Basically, the external analysis depends on several environmental factors. The macro environment of the fast food industry in United Kingdom is influenced enormously by PESTEL (attached in appendix 1). PESTEL actually denotes political, economic, social, technological, environmental and legal analysis. PESTEL could be effective to identify the trends and key drivers of the fast food industry.

TRENDS

There are numerous areas and factors of PESTEL framework what might influence the fast food industry in various extents.

Figure 3: Identified Trends of Fast Food Industry in United Kingdom

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For instances political factors could be threat for the fast food industry due to government regulation on packaging, economical factors would lead the financial instability inside the industry through the recession of joblessness rate and high housing cost, social factors could introduce the health awareness tendencies among customers, technological factors increase the publicity about the fast industry through social media and relaxation level among customers, environmental factors could lead people to use environment friendly material and legal factors would promote campaign regulations and health complaints among consumers.

Trend is referred to the upward or downwards direction through the modification or development based of the preferences. The identified trends (shown in figure 3) are analysed in the fast food industry through the application of PESTEL tool.

KEY DRIVERS

The key drivers can be driven the consumers to make profit and running the fast food business smoothly. Basically, the following main key drivers (shown in figure 4) push the consumers to the fast food industry.

Figure 4: Key Drivers of the Fast Food Industry

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There are numerous firms in the fast food industry in United Kingdom. McDonald’s, KFC, Domino’s Pizza, Burger King, Pizza Hut, various Subway are the most common firms within the fast food industry in United Kingdom. Each firm generate their own key drivers based on their business strategies model. However, every firm follows particular strategies to attract the consumers to their own firm to run their business successfully along with profit. It is also noted that, fast food industry is demanding rather than traditional restaurant due to quick service and ready to eat where consumers save their time. Hendry et al. (2015) reported that recently fast food industry customised their menu (not using Trans Fatty acids) to avoid dropping out the number of consumers in their industry due to lifestyle diseases for instances Coronary Disease, Obesity, and Diabetic Mellitus. Moreover, lowering the food price could be adopted in term of recession of the economy or employment rate. Therefore, fast food industry would be stable and further market growth could be feasible with the changes of the population age group.

POWER

Porter (2008) discovered five forces (attached in appendix 2) what can analyse the entire fast food industry and identify the main source, who actually hold the main power and control the market situation. The fast food industry hold much power rather than the supplier and consumers hold bargaining power, while that is reasonable.

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