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Unit 1 - Exploring Business
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Nabeel Choudhury
Unit 1 – Exploring Businesses
Assignment Two
The Effects of the Environment on a Business
I enquired to create a report that discusses and assesses the effects of the environment on a
business. The business which I have selected is:
McDonald’s
Introduction:
McDonald’s
McDonald’s is one of the largest American fast food businesses that provides a service with
new headquarters in Chicago, Illinois, United States from Oak Brook, Illinois. McDonald’s
was founded by Richard and Maurice McDonald in 1940 and in 1954 Ray Kroc joined as a
franchise agent after witnessing the potential McDonald’s had with their 6 franchises. He
later proceeded to buy the chain from the McDonald brothers by taking 1.9 percent of the
gross sales whereas the McDonald brothers got 0.5 percent with maintaining a small
number of restaurants that caused conflict. Ray Kroc eventually bought them out for $2.7
million-cash in 1961 as he wanted full control however, he wasn’t aware that the deal did
not include the original McDonald’s in San Bernardino. He was able to get them out of
business by creating a franchise one block away and now Kroc was able to successively run
McDonald’s. Unfortunately, Ray Kroc died on January 14, 1984 at the age of 81 as the chain
had thrived that year with 7500 outlets in the United States and 31 other countries and
territories. It was then taken over by James A. Skinner who started off as a restaurant
manager trainee without graduating from college and worked his way up to become CEO of
McDonald’s.
Political Factors – McDonald’s
In over one hundred countries, McDonald's will respond to political pressures. Due to the
high levels of salt and sugar poured into fast-food menus, McDonald’s are now facing
governmental pressure from the Australian government. The National Health and Medical
Research Council (NHMRC) advises that Australian adults should aim to consume no more
than one teaspoon (5 grams) of salt a day (or 2,000 mg of sodium a day) in order to prevent
chronic disease.1 Sugar and sodium are also associated with many common health problems
1
https://www.betterhealth.vic.gov.au/health/healthyliving/salt
1
,Nabeel Choudhury
Unit 1 – Exploring Businesses
Assignment Two
such as diabetes type 2, hypertension, and heart disease. Excessive consumption of these
foods can result in obesity, stroke, and heart attack. McDonald's now offers a new "healthy"
addition to their pre-existing food choices such as extra protein can now be added to their
fruit smoothies.2 By including these alternatives, they are able to respond to the changing
public health agreements however, it will also raise and affect their operating costs.
McDonald’s have created these healthier options so that they enhance the mood of
customers when they are stressed. When the body is in a chronic state of stress, it breaks
down protein to prepare for battle which shows that McDonald’s look out for their
customers as well as cared for.3
The communication with Russia is questionable as they maintain diplomatic and trade
relations. The relationship was generally warm under the Russian President Boris Yeltsin
(1991–99) however, since the NATO bombing of the Federal Republic of Yugoslavia in the
spring of 1999, it has worsened significantly. 4 Despite having restaurants all over the world,
McDonald's will always be an American company. As the trade relations with Russia get
worse, it will make it more difficult for McDonald’s to trade across international borders as
the Russian Federation will implement more tariffs, quotas on imports and exports of
certain goods. Specifically, Russia imposed a ban on imports of certain agricultural and food
products (covering about 52 specified HS classifications) originating from the United States
which applies to meat products, milk, dairy products, fish products, fruits, and vegetables. 5
This makes it challenging for McDonald’s to operate in Russia as they are unable to import
certain items that they typically use in their original restaurants in America. They have been
able to get around this political issue by “going local” with Russian suppliers as they stay
above the political fray widening between the United States and Russia. The "going local"
concept is delivering success for McDonald’s, as they grew 6% year-over-year in 2018,
compared with just 1.5% growth in other parts of the world.6
The government support businesses like McDonald’s with grants as seen in 2018 when they
received a £500,000 grant for UK dairy farmers to invest in Animal Welfare. 7 Connor
McVeigh, the supply chain director at McDonald’s UK mentions how the “UK farmers have
always been front-footed when it comes to animal welfare... they continue to invest and
innovate. [They] want to work hand in hand with farmers to make sure the industry
continues to thrive.8 This grant supports McDonald’s as they are encouraged to set up their
2
https://www.delish.com/food/g4364/smoothies-nutrition-facts/
3
https://www.nerdwallet.com/blog/health/benefits-of-eating-healthy/
4
https://en.wikipedia.org/wiki/Russia%E2%80%93United_States_relations
5
https://www.export.gov/article?id=Russia-Prohibited-Restricted-Imports
6
https://www.bizjournals.com/chicago/news/2018/11/09/mcdonalds-is-succeeding-in-russia-by-going-
local.html
7
https://www.farminguk.com/News/McDonald-s-unveils-500-000-grant-for-UK-dairy-farmers-to-invest-in-
animal-welfare_48793.html
8
https://blog.waterpoweredtechnologies.com/2018/03/21/mcdonalds-unveils-500000-grant-for-uk-dairy-
farmers-for-animal-welfare/
2
, Nabeel Choudhury
Unit 1 – Exploring Businesses
Assignment Two
business in more areas to open more jobs for the local community. A large well-known
business like McDonald’s shouldn’t necessarily receive grants from the government because
they are financially stable businesses as they continue to grow year-on-year. Rather than
supporting large businesses, the government should be investing into smaller businesses
that require support to help them become successful. In 2016, McDonald’s created over
5,000 UK jobs to increase its total number of employees to 115,000. 9 The government said
the new jobs are to confidence the UK economy after Britain's vote to leave the EU. If the
UK leaves the EU, businesses are warned that they may consider relocating suggesting that a
recession is possible.10
From my research, political factors have a big impact on McDonald’s considering they cannot
conduct their operations within certain countries as they originally operate in the United
States with their questionable trade relations. The political factors act as a barrier against
McDonald’s as it restricts them from maximising sales within different countries which will
impact consumer’s preference. An example of a country that McDonald’s is yet to operate in
is North Korea because of issues such as war that can potentially but workers in danger or
even worse like death. Both America and North Korea have had previous conflicts with there
being threats of using nuclear weapons which are one of the most dangerous weapons on
Earth. The conflicts between each country can put the business in jeopardy with the life of
workers being on the line as well as the entire business reputation. Other political factors
issues like governmental pressure can impact McDonald’s with the amount of salt and sugar
that they use in each and every product. If McDonald’s do not continue to use healthy
products, they’re business will impact society which will reflect back upon them.
Economic Factors – McDonald’s
In over one hundred countries, McDonald's will respond to economic issues. One economic
factor is the fiscal policy where the government attempts to control spending, expenditure,
taxation in order to control the rate of inflation and to enhance the growth rate of GDP in a
country. The total spending of the UK government in 2019 is £878.6 billion where the
government has planned to increase the figure by 2.4%. 11 The fiscal policy in the UK benefits
McDonald’s with the reduction of unemployment which is 3.8% and has lower than a year
earlier from 4.0%.12 McDonald’s is able to support workers with there being an increase in
demand for labour because of the low unemployment rate. With less people being available
for work, employers have to increase their wages to find, and keep these employees. This
can cause some organisations like McDonald’s to settle for less-talented workers, which can
reduce the productivity of the business as a whole. The fiscal policy can affect society as the
government can reduce tax and more people will have a lot of money left after expenditure,
9
https://www.bbc.co.uk/news/business-36903913
10
https://www.reed.co.uk/career-advice/brexit-britain-five-ways-leaving-eu-could-affect-your-job-search/
11
https://www.gov.uk/government/publications/spending-round-2019-document/spending-round-2019
12
https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment
3
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