Globalization has made the world significantly smaller. It is not only something that is happening around the world but it also represents the diversity and richness of culture that exists within organisations today. The political, economic, social, technological and legal developments around us are affecting the need for different employment and working conditions and changing customer needs are prompting businesses to bring about strategic changes.
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The discussions in this paper shall involve an Environmental analysis using the Pestle methodology to assess the future influence it will have on McDonald’s HR function and it also showcases the strategic role of Human Resource Management in McDonald’s. The annotations and propositions employed in the following discussions have been supported by journals and scholarly efforts that talk about HR strategies and theories.
History of fast foods
Restaurants have played an important role in the lives of people. They generally catered to travelers. In ancient Greece and Rome, taverns and coffee shops normally served food to people who were travelling or away from home. While taverns and coffee houses were well-liked places to meet and share drinks in the 17th century, the thought of eating out for amusement purposes did not come into existence in Western society till the late 18th century (Wilson, 2012).
McDonald’s is the world’s leading food service retailer serving around 47 million consumers daily through more than 31,000 outlets in 119 countries around the world. McDonald’s sells a variety of fast food items and soft drinks such as burgers, chicken, salads, fries, and ice cream. Many McDonald’s outlets have built-in a recreational area for children and promotion is geared towards kids, and a number of them have been restructured in a extra ‘natural’ style, with an added importance on comfort, bringing in lounge areas and fire places removing stiff plastic chairs and tables (Abdullah, 2009).
Introduction for Pestle Analysis
A frequent and practical beginning to strategic analysis is to consider and review the general or macro environment in which industries and firms function. Here we are concerned with very large trends and activities that possibly will affect the aggressive position of firms and their achievements .
Question 1. Environmental Analysis using Pestle
The worldwide operations of McDonald’s are extremely influenced by the state policies enforced by each government. In Europe and the United States only a small group of people give emphasis to state proceedings connected to the health hazards of consumption of fast food. They emphasize that harmful elements like cholesterol and obesity are associated with consuming fast food.
The firm is frequently controlled by the diverse rules and regulations and operations existing in various countries. Different markets lay emphasis on special areas of concern such as the wellbeing, the safety and security of the workes, and the surroundings. All these things are noticeable in the government control of the licensing of fast food outlets in the particular states. If for instance, a dispute has occurred in the McDonald’s franchise in India where the use of a certain meat(beef) in their outlets in India is in fact considered very eoffensive according to the Hindu religion. There are also other studies which points to the violation of McDonald’s in regards to the current employment laws in the targeted markets. Similar to any business undertaking, these McDonald’s stores have to compete with the issues of employment policies in addition to tax obligations in order to thrive in the overseas market (Abhijeet, 2010).
New Zealand’s political system is strong and that its comparative depiction system gives equal opportunity to both males and females. The country’s governance indicators are excellent, with a 96.7 percentile ranking on the voice and accountability parameter in 2010 .
The fast food companies are not exempt from any disputes. They do have their own individual anxiety linking economic factors. Outlets and franchises of fast food restaurants like McDonald’s find it really hard when the economy of the individual states is struck by price rises and by changes in the exchange rates. The consumers therefore are faced with a situation of going over their budgets to decide whether to spend more in these foreign fast food restaurants. As a result, these fast food outlets possibly will have to deal with the issues of the effects of the economic environment. Mainly, their trouble will depend on the response of the customers on these ground rules and how it would affect their general sales. As far as the operations of the food chains like McDonald’s is concerned they have a tendency to bring in a large amount of their raw materials into a particular country if there is a shortage of supply. Variations in the exchange rates are likely to play a major role in the operations of the company (Abhijeet, 2010).
McDonald stores would have to emphasize more with regards to their microenvironment. The company’s global supply in addition to the current exchange rates is only an element of the general components required to guarantee success for the overseas operations of McDonald’s. Furthermore, it is vital for the organization to be aware of the current tax policies required by the separate governments on which they function. It makes it possible for McDonald’s franchises to function smoothly. Similarly, the company may also have to reflect on the economic status of the state on which they function. The economic growth rate of that individual state will determine the purchasing power of the people in that state. For this reason, if a franchise operates in an economically weak state, then their products shall cost more than the other existing goods in the market, then these franchises must take on certain adjustments to maintain the economies of scale (Abhijeet, 2010).
New Zealand has a strong banking sector that has acted as a buffer against the European debt crisis. As of November 2011, there were 21 registered banks in the country .
Socio – Cultural Factors
The company goes on establishing a positive approach from their main consumers. McDonald’s indulge a particular variety of consumers with definite types of personalities. It is a fact that the company have given the markets such as the United Kingdom, a choice regarding their dining needs stated that McDonald’s has very wisely brought about an appreciated menu that tenders a reliable standard of quality for the particular market where it operates. Moreover, it is targeted for the younger crowd of people just below thirty-five and they are believed to be the majority of loyal customers of McDonald’s.
The broad temperament of the industry these days is reflected in the callous implication of the statistics on the topic of the accessible market. This method is basically recognized as market research. McDonald’s is able to set up a superior structure in shaping the requirements of the market. It makes use of ideas such as behaviour of consumer’s and product character to its advantage. It is said to have a key control on the potential performance of the company in an individual market (Abhijeet, 2010).
New Zealand possesses a strong business environment. The Wall Street Journal’s 2011 Index of Economic Freedom has given fourth position to New Zealand with regards to a free economy. It was also ranked fourth out of 41 countries in the Asia-Pacific region. New Zealand got the third position in the World Bank’s Doing Business 2012 indicators. According to Doing Business 2012, it is quite easy to start off a business in New Zealand. It merely takes just one procedure and a day for someone to set up a business in New Zealand .
McDonald’s creates a requirement for their individual products. One of the major tools that the company uses for promoting their products is through TV commercials. McDonald’s is also quite good at attracting the interests of the younger customers. The company utilizes the idea of recreational activities inside the premises where it operates and also giving off toys along with the meals as a means to attract children. Other displays of such a promotional approach are also quite evident in their advertisements. They make use of animated forms of characters like Grimace and Hamburglar. The company is also in the habit of employing celebrities to market their products. Besides, McDonald’s have significantly been introducing new technology into their companies. The inventory system and the administration of the value chain of the company make it easy for their suppliers and other vendors to make payments and the particular stores in the respective markets deal with it. The incorporation of technology in the operations of Mcdonald’s adds value to their products. This is evident in the development on its value chain. The development of the inventory system in addition to its supply chain enables them to function in a global perspective (Abhijeet, 2010).
Since Mcdonald’s is a certified fast food outlet, there are many rules and policies that they need to put into practice. One of them is the Halal certification that is a matter of concern for the Muslim community. Mcdonald’s ought to protect for its integrity and consumer confidence by ensuring all materials and processes are as declared.
Other legal prerequisites are that the business owner should follow are laws related to operating hours, business registration, tax requirement, labor and employment laws and quality & environment certification (such as ISO) in which the unit has been certified. These legal prerequisites are essential as the lawbreakers will be fined or have their business banned from operating which can be devastating (Abhijeet, 2010).
McDonald’s New Zealand operation does seem to enjoy some autonomy in HRM and labour relations policies and practices .
Being the world’s major user of beef, potatoes and chicken, Mcdonald’s has been criticized by a lot of environmentalists. Conservationists who are vegetarian have criticized the fast-food leader for brutality towards animals. Mcdonald’s desired to launch burgers using whales caused a big issue since whales are considered to be endangered species. Prior to them using paper for packaging McDonald’s also was condemned for not being sensitive towards pollution since using polystyrene based wrapping for its foods. A large number of people buy their food from fast food restaurants and its effect on humanity and the surroundings by simply not being able to dispose off packaging which is difficult to recycle. The whole world is becoming more concerned about environmental issues and moreover firms must not only think about revenue, but also be very cautious about using resources of the world for further growth. They should be be more worried about the wellbeing of the people and healthy lifestyle for our future generations (Anonymous, 2008).
A rising health hazard for both advanced and the not so developed countries is obesity. It is called as the”global epidemic by the World Health Organisation. One of the main reasons is higher calorie intake, which may contribute to calorie imbalance and New Zealand is also among the list of countries with high calorie intake (Loureiro, 2006).
Conclusion for Environmental scan
New Zealand is acknowledged all over the world for its rigid values, excellence in quality of products and manufacturing process and a practice of pioneering research and knowledge in rural development. As a leader in addressing issues of sustainability and environmental impact in the management of its natural and food resources, New Zealand’s expertise is extensively sought after and applied by other countries.
Firms that practice different competitive strategies require different Human Resource strategies to execute them. Acquiring, developing, and retaining the right talent helps to create the organizational capability and intellectual capital that drives business strategy execution .
Various organisations implement different ways to manage their workforce. They are of the opinion that the three major grounds for competitive advantage are innovation, quality and cost while strategies involving quality and innovation are generally linked with a loyal workforce. For companies where costs are the most significant part of the question, control is likely to be a more important factor than commitment. While some level of consent is always necessary, control is high on the agenda at McDonald’s. Control at McDonald’s is not entirely gained by direct supervision, machines, the physical design of the restaurant and the detailed course of rules and regulations but also through recruitment, job design, Human Resource Planning, compensation, training, job evaluation, performance evaluation, and termination.
Unskilled workforce also have some influence to upset the effectiveness of the operation by retreating support from the production process, upsetting the progression or by merely leaving the company. Workers may perhaps surrender to the power of the employer, but are most likely to maintain a strong interest to exercise their labour power. Staff and management are, for that reason, somewhat co-dependent; organization cannot rely exclusively on compulsion or still compliance to attain high performance, organization also needs to obtain employees approval and teamwork.
When employees efforts are obtained through an elaborate system of rules, including regulations about grounds for promotion and punishment, employers perhaps establish more control over workers’ personalities and values than when their efforts are extracted through direct exhortation or force or through the design of equipment (“Human Resource Management at McDonald’s”, 2009).
Question 2. Strategic Human Resource Management
Excellent administration is not merely an organization. Managing the organisation well is a feeling derived by the determination to do things in the right manner. It is having an honest desire in the wellbeing of the group you work. The capability to make the people feel think that the company comprises of both the groups, not purely just workers of the company .
One of the central element of firms is HRM. Strategic Human Reource Management is a strategic observation of Human Resource in other words reflecting the company’s strategy in Human Resource activities. Strategic Human Resource Management takes efforts to direct Human Resources in the course of attaining organization strategy and goals, it drives it into various actions and functions of Human Resources. Strategic Human Resource Management can carry out the firm’s Human Resource Management activities, by means of a logical approach, in the direction of accomplishing strategic management. Strategic Human Resource Management has diverse purposes however the most fundamental one is to establish Human Resource strategies in various areas like job design, compensation, Human Resource Planning, recruitment, job design, performance evaluation, job evaluation, training, and termination.
Figure 1: HRM System (Qasemi, 2009)
In Figure 1, Human Resource Management involves twelve vital requisites. Strategic Human Resource Management stages can be observed in figure 2.
The most significant Strategic Human Resource Management objective is Strategic Human Resource Planning which is to match strategic requirements and people in organizations short-term as well as long-term. Strategic Human Resource Planning is to seek a long-term solutions by which firms are able to foresee the future of their Human Resources. The essential elements of Strategic Human Resource Planning are forecasting Human Resources based on needs of firm’s future, Human Resource inventory to go with existing Human Resource to upcoming requirements, demand and supply analysis of Human Resource, develop various approaches for building a stability involving organizations and Human Resource. The tactics adopted by Human Resource Management to apply environment opportunity and threat, organization strength and weakness to make available competitive advantage, called Strategic Human Resource Planning. In reality, Human Resource Planning is strategic when it helps to envisage manage the firm in a different situation. Therefore, the tactics of desired objective would be established by investigating strategic plans of the company, learning the interior and exterior surroundings, and based on restrictions, possibilities and strategic purpose of Human Resources. Similar and full approaches are not available for Strategic Human Resource Planning since it varies for each company (Qasemi, 2009).
The following model introduces five stages in developing a Human Resource strategy.
Human Resource Management system
Planning the total workforce
Generating necessary Human Resource
Invest in HR development and performance
Assess and supporting organization’s competence and performance
Figure 3. Strategic Human Resource Planning Model (Qasemi, 2009)
“One of the most important feature of Human Resource Management is the importance attached to strategic integration which flows from top management’s vision and which requires the full commitment of people.” .
Since the world is becoming technologically more advanced new IT systems are being implemented into the organisations to improve competence and effectiveness it is essential that Human Resource managers think about whether and how technology adoption can complement their organization’s management of people (Hartel & Fujimoto, 2010).
For businesses to understand adequately the nature of the competition they face, they must define their market accurately. This involves recognizing a broad base of competitors. McDonald’s has thousands of competitors, each seeking a share of the market. McDonald’s recognizes that it is up against not only other large burger and chicken chains but also independently owned fish and chips shops and other eat-in or take-out establishments. A company like McDonald’s therefore, has to develop competitive strategies that differentiate it from its rivals.
All organisations need to be in touch with their business environment in order to make sure that what they do fits with customer expectations. These expectations change over time. Moreover, the IEO market in which McDonald’s operates is becoming increasingly competitive, as the chart below illustrates (“Staying ahead in a competitive environment”, 2012).
Global HR for Competitive Advantage
Global companies face a trade situation where social, economic, and political issues are normally mutually dependent and entwined and large business choices cannot be done in seclusion from the other elements. For instance planned decisions on foreign investments depend on the judgment firms create concerning the potential social and political growth in the targeted state. Occasionally the financial judgment argues one way, on the other hand political consideration point in the other direction. Lastly, the difficulties encountered by international companies is mixed by vagueness in the setting driven by growing pace of change
as well as its underlying unpredictability.
Previous strategies, created during the period of relative steadiness, assurance, autonomy, and straightforwardness cannot guarantee the continued existence of international firms in the present surroundings, not to mention giving them a permanent cutthroat lead in the market. It also means that the organization structure, procedures, and policies in place should be more and more flexible and compliant. The complication in the setting ought to be reflected in the firm itself. Because a complication in the aggressive atmosphere creates the requirement for additional compound business strategy, construction and supporting universal organization ability to perform with the required momentum and competence develops into a important challenge. The significant building blocks for this potential are directly associated to people, their attitudes, and behavior-producing an significant new area for the Human Resource function .
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In New Zealand market is quite small and companies to examine only the local market might not be a foundation of lasting productivity. As a result local firms may go global if they think that they have distinctive goods or services or be able to look upon worldwide movement as a starting place of enduring expansion. In a number of cases firms become global when they are new in the market or when local market situations are deprived but leave again when local circumstances get better. Human Resource Management should maintain their global understanding and utilize their knowledge to the advantage of the company throughout the duration of the global move. When business starts growing, firms venture into a fresh market and ultimately finish as an international firm. By using the web as a medium to grow to be extra proactive in strategy and business competition, companies may possibly wish to be internationally linked to the digital financial system. The employment legislation, varying technologies, and international demands together with extreme local competition, initiate essential change in New Zealand companies throughout the previous decade. The focus has changed from cutting back to include value addition since stakeholder is challenging superior and low cost goods. Only a few firms in the present day can claim to be untouched by global pressure for competition, and the new development has without doubt made the Human Resource management to obtain strategic importance. Thus, numerous points have been obtained in favor of and against the achievements in a global company where in they need to deal with their Human Resource Management problems in an international organisation culture. Companies in New Zealand are not restrained by geographical limitations when it comes to the distribution of resources and sharing of information (Plessis, 2009).
A firm’s talent philosophy and business strategy are the basis for the HR strategy that guides its staffing strategy. Its talent philosophy reflects how it thinks about its employees. Its business strategies are created to leverage their resources and capabilities in ways that result in superior value creation compared to their competitors. Its competitive advantage depends on its ability to leverage the resources and capabilities that derive from the talent it is able to hire and retain. How it positions itself to compete in the marketplace determines the competitive advantage it needs to create and the staffing strategies it needs to pursue to acquire and retain the appropriate talent. A company’s choice and execution of its staffing strategy influences the number and types of people it hires, and thus its ability to maintain a competitive advantage and execute its business strategy (Qasemi, 2009).
The following captions from the Mcdonald’s website captured my interest and it does seem like a good start for Mcdonald’s new recruits.
“Even presidents and CEOs of major corporations had to get their start somewhere. And for many of them, that start was a job at McDonald’s. We’re proud of the many people who chose to stay with us over their careers, building long-term success for themselves and their families”
“We strive to hire and keep the brightest and the best. And to do that, we’ve put together perks designed to make you smile – even before you pick up your paycheck. From flexible schedules and competitive wages to management training and investment opportunities, our benefits let you know you’re a valued part of our team.”
Creating hiring goals that are clearly linked to organizational strategies and objectives guides the strategic staffing process. Strategic staffing should result in the organization being better able to execute its business strategy.
Every organization has to use its resources as efficiently as it can. Continuous improvement in products, processes, and productivity is vital to success. Sensible procedures have to be in place for compliance, risk management, and accountability. But customers make their buying decisions on how they value what they are offered, not on how it suits the supplier to get it to them. Delighting customers comes from the discretionary behavior of the people working for the organization at every level, most of them a long way from head office and its ability to dictate conformance.
HR should create practices that enable international leverage and local awareness. HR must shape some HR practices that ensure consistency across geographic boundaries and have some HR practices that adapt to local conditions.
Firms ought to deal with transparency where internal operations are exposed to external scrutiny. HR professionals should be able to make sure that value is created by promoting and observing values.
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