Analyzing the Impact of External Factors on the Fast Food Industry

Introduction

The food brands have become more inclined towards retaining the customers with low calorie food products, improved hospitality and speedy delivery and so many customer friendly services. In recent times consumers have shifted their focus to healthier options from junk food. Despite increasing health consciousness, fast food industry has not experienced any fall. Rapid changes in food trends have impacted the industry to a great extent. However, the concerned food industry has also been found to respond to such trends. Since the initiation of fast food industry it has generated fair revenue. In order to cope with new age customer demands most of the food brands, famous restaurants and even some regular outlets have incorporated healthier food items on their menus. The concerned industry has also changed its marketing style. A few known brands namely Dominos, McDonalds, KFC, Wendy’s have been found to face a blow. This study particularly aims at identifying the external factors that have influenced the fast food industry through PESTLE analysis.

Political factors regarding the fast food industry

Political factors have been found to affect the fast food industry more or less in every country. The impact level varies from one nation to the other (Rastogi and Trivedi, 2016). There are several regulations regarding food quality, hygiene, and labor wages in this industry. The brands ruling this industry are bound to comply with such guidelines. In some countries government plays significant role in deciding the food standards and can even alter the food items offered by a brand in order to keep the citizens healthy. Such attitude from the government has been found to affect the performance of well-known food brands to a great extent (Perera, 2017). Moreover, in recent times the regulations regarding food packaging have also been there to challenge the industry. Labor wage has been a matter of concern for this industry as wage rates are not alike in every country. Nations with higher wage rates are bound to pay high labor costs. In Canada, people are obligated to post the calorie value that they intake openly, according to the rule formulated under Health Menu Choices Act. In case of McDonalds it has been seen that the brand has faced fair criticism because of their unhealthy food options on their menu. The health policies for the public have often found to manipulate consumer’s choices regarding food. Such policies affect the trend of food purchase within a country considerably.

Economic factors of the fast food industry

Fast food items are not necessaries instead they belong to the luxury list, so pricey fast food options are subjected to economic situation of a country. Unemployment rate, a country’s economic growth has great impacts on the fast food industry. Options and scopes in the concerned industry have been affected greatly by some economic factors like taxation, interest rates, consumer pocket condition and so on. It has been seen that consumer needs, necessities, extent of spending have slowed down the sales in the fast food industry. Considering the financial crunch in a country or state the fast food brands try to maintain the sales by offering discounts, cheap meals (Kaur and France, 2018). This in turn creates pressure on other similar competitive brands. In other words recession has been found to influence this industry to a considerable extent at times. Most of the times the food brands struggle to maintain food quality within low costs alongside the maintenance of food hygiene, packaging, and customer services. In order to attract the consumers with low budget, several brands have included healthy yet pocket friendly food items on their menus. For example in the United States more than 50 million people feed in various restaurants and food outlets regularly and this activity changes with the economic condition of the nation (Statista. 2020). The better the economic situation is the greater is the surge in fast food sales.

Social factors of the fast food industry

Lifestyle and health related trends have proved to be a crucial influencer of the fast food industry. Rising health awareness trends have greatly impacted the whole fast food industry. Consumers have become more conscious regarding the food choices, they are now more inclined towards low calorie food varieties. The perception of the society has changed and that in turn has influenced the brand offerings. Moreover, in the recent past the concerned industry has faced severe criticism for spoiling the health of children and causing obesity (The Conversation. 2020). In order to deal with such challenges most of the fast food brands were found to take approaches like providing food with reduced calories and its nutrition value mentioned on it.

Cultural values have also contributed to decreased sales. In some countries where health is a major look out for the people, the fast food industry has experienced a great shift. Increasing the demand of organic, healthy and fat free foods has impacted the industry in such a way that the brands had to go through a makeover (Liu et al. 2017). Only branding and social promotion do not seem to be enough. For example McDonalds has changed its appearance with menu screens, modern cleaning and serving approaches to allure young adults still that has not proved to be enough productive for the brand.

Technological aspect of the fast food industry

With the advancement in modern day technology, it can give an extra advantage to the fast food industry in various aspects starting from developing business strategies to implementation and even promotion. According to Vukatana et al. (2016) without technology it would be quite impossible for production of the food items, food labeling and packaging. Taking into consideration certain fast food companies like McDonald installed big screens to attract customers at their restaurants (Mcdonalds.com, 2020). Similarly, at KFC they have used social media platforms to interact with their customers. Employees can ask questions and share their ideas at such platforms.

Other than this, KFC have been using modern technologies for hassle free ordering and deliveries. Subway has been showcasing their full menu along with the nutritional information through online mode making it an easy availability for the customers. Technological use has been vividly witnessed even in the case of Starbucks, where they have launched app based discount coupons in collaboration with Apple. This enabled them in expanding their business base through huge responses among the service seekers. With the Wi-Fi accessible outlets, the company has enabled the customers to use the internet while indulging in the comfort foods. Fast food industry with the help of online ordering and online mode of payment have minimized the ordering delays and hurdles and maximized their e-commerce and transaction.

Fast food industry should be careful regarding the changing customs and trade regulations in the countries they have been working in along with the licensing regulations related to this particular industry. Subways have been facing certain issues regarding their food quality. Therefore, strict regulations and laws implemented by the regulatory authority of the country should not be overlooked instead the fast food companies should abide by them strictly (Adhikari et al. 2018). Similarly, Starbucks need to be more careful to not violate rules both in their home country and in other foreign countries they have been buying their raw materials from as well as those countries where they have been opening their outlets. Starbucks should also be careful regarding policies that include caffeine production and consumption regulations issued by the health authorities.

With regards to KFC working in over 140 countries and territories with 23,000 outlets across the world, it must follow rules and laws of each location. In accordance with Online.kfc.co.in, (2020) proper amount of tax filing, abiding the labor laws and ensuring that their outlets have been maintaining the code of conduct, KFC could remain operational and without facing external legal hazards. Thus, even though regulation has been the biggest concern for any industry, still if the companies adhere to the legal requirements, they could run their commerce without much perturbation.

Certain environmental factors have raised hurdles in the path of fast food industry expansion and caused adverse impacts to this industry. As stated by Chen et al. (2018) with the ongoing awareness regarding the wellbeing of health and maintenance of hygienic diet, there have been certain repercussions regarding not only the health but also the environment. Usages of non-vegetarian items have caused massive obstructions and also the production of food materials with red meat requires a significant quantity of water and in turn releases carbon dioxide.

McDonald’s revenue growth from 2018 to 2019

Taking into consideration Starbucks have been facing concerns from international activists as well as advocacy groups. Not only them but the consumers have also expressed anxiousness and apprehension regarding their business practices (Starbucks.in, 2020). Similarly, there have been certain complicated issues regarding the paper suppliers of KFC. This has affected the brand name which has been interlinked with deforestation and thereby affecting sustainability usage in a negative way. There have also been issues with Subway regarding the usage of pesticides and antibiotics in their food items that contain meat. Thereby, Subway has been monitoring the food served and changed the use of additives in their food materials.

Conclusion

Based on the above analysis and the industry situation, it can be recognized that the political factors in this industry have a high risk of military invasion along with high levels of corruption in the consumer goods sector. Political issues also involve bureaucratic interference regarding intellectual property protection and supervision of trade regulations and tariffs. Economical factors depend on the types of economic system running in the respective country. The socio-cultural aspects surround various elements like demographics and the skill of the workforce. It also includes the hierarchy and the education level of the population as well as the education level of the industry concerned. Modern technological usage along with adhering to legal laws and abiding environmental sustainability enables smooth business transactions of the fast food industry thus making PESTLE analysis an important part of the business.

Reference

Adhikari, K., Bosse, J., Fish, A. and Sherman, B., 2018. Intellectual property and related legal issues facing the Australian Native Food Industry (pp. 1-34). AgriFutures Australia.

Chen, Y., Wang, S., Yao, J., Li, Y. and Yang, S., 2018. Socially responsible supplier selection and sustainable supply chain development: A combined approach of total interpretive structural modeling and fuzzy analytic network process. Business strategy and the environment, 27(8), pp.1708-1719.

Kaur, H. and France, A., 2018. Gaining a competitive advantage in the fast food industry.

Liu, W.K., Lee, Y.S. and Hung, L.M., 2017. The interrelationships among service quality, customer satisfaction, and customer loyalty: Examination of the fast-food industry. Journal of Foodservice Business Research, 20(2), pp.146-162.

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