Essay
Unit 1 P6,M3,D2
- Institution
- Newham Sixth Form College (NEWVIc)
UNIT 1 BTEC BUSINESS LEVEL 3
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In this assignment I will be analysing and evaluating some parts of the PESTLEanalysis, this includes; Economic, Legal, Political and Social factors. I will provide
a definition and evaluate how future changes in these factors may have an
impact on the strategies of McDonalds.
PESTLE stands for Political, Economic, Social, Technological, Legal and
Environmental factors, which is a key that helps to plan ahead and give the
business a competitive edge. Political factors are those factors which determine
the percentage to which a government intervenes. This mainly emphasis on
political stability, tax guidelines, trade regulations, safety regulations, and
employment laws. Economic factors have a major impact on the business
progress as it affects the way in which a business operates and make’s key
decisions. Economic factors include economic growth, interest rates, exchange
rates and inflation rates. Social factors are the factors which the business
analyses to help understand their customers in a better way, these mainly
include cultural aspects, population growth, age distribution and safety. Legal
factors are the rules and regulations that are passed by the government and
implies on every business. These mainly focus on customer safety, health and
safety act and etc.
Political factors influence the strategy of McDonalds dramatically as the whole
strategy needs to be refined. One of those factors can be different typeof taxes,
every year the government sets new budgets which also affects the tax rates. In
the recent budget the government has set a corporation tax rate, which all the
organisations must follow. This means that the government would collect money
from different businesses including McDonalds, consequently, resulting in
reduced profit and less return on their investment. The government also
increased the VAT (value added tax) to 20% and as a result consumers would pay
the same price but the profit margin on each product of McDonalds would
decrease. The consequences would be reduced turnover, minimal return on
investments and a large sum of capital would be presented to the government in
a form of tax. McDonalds after acknowledging the change in the tax rates would
have an in-depth review of their future strategies and how effective it would be
for their business. McDonalds would increase awareness among customers by
using modernised advertising techniques that will help to increase their sales to
meet their overhead expenditures. As the number of sales increase, the profit
level would also increase; this can help McDonalds to cater the difference
between the new tax rate and the old tax rate, which the business wouldn’t be at
a greater disadvantage from.
Social factors are one of the very important strategies that a business would
have to look carefully, specially a fast food business such as McDonalds. These
factors include the community McDonalds is operating in and the social trend of
the society. In India McDonalds adapted to this challenge adhesively, as they
recognised the need to modify their burgers according to the religious
specification in the country. The Big Mac was altered to Maharaja Big Mac as
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