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External Influences and the Stakeholder Model: McDonald's - Activity

A McDonald's restaurant

Image: Business has not been going as well for McDonald's in recent years as it struggles to keep up with the demands being made upon it. Copyright: Les Powell, stock.xchng.

There are a number of Activities on Biz/ed(http://www.bized.co.uk/educators/16-19/business/external/index.htm) that cover specific external influences on business. Briefly, these cover:

  • Legal and political
  • Business ethics and moral behaviour
  • Technology and changing social attitudes
  • Pressure groups
  • Global factors

This Activity seeks to draw together these different areas to look at the ways in which businesses try to balance the competing stakeholder demands.

Let's get one thing very clear before we start: it is impossible for any business to meet the demands of all its stakeholders - they invariably conflict. So what they must do is to find a way of prioritising stakeholder demands and thus balancing out these competing requirements. This involves judgment. It can be argued that there is no scientific way of doing this, someone in the organisation has to make a decision and this decision may be based on a wide range of information they have been provided with.

However good this information is, ultimately it is that person who has made the judgment. If most of the stakeholders are satisfied with the plans and the outcome, s/he will be regarded as a 'good leader and manager'; if the decision angers some stakeholders unduly, that person's reputation might well suffer.

On such fine decisions leaders and managers are judged.

The Stakeholder Model

A stakeholder is defined as any individual or group who have an interest in the success of the business. It is worth noting the reference to 'success' because this would exclude competitors from the model. Competitors may have an interest in seeing the business decline but not necessarily in its success so for that reason we are excluding this group.

The Stakeholder Model - Banks, Creditors, Management, Customers, Employees, Local Community, Environment, Shareholders, Government, Suppliers

Task 1

Identify the key demands of each stakeholder group in business in general and produce your own mind map showing where the conflicts might lie.

Now look at the following summary of McDonald's. The company is well used in business circles but does serve to highlight the difficulties facing businesses in meeting the contrasting demands of its stakeholders.

Task 2

Identify the main stakeholder groups of McDonald's and state what you think the demands they make on McDonald's are. (For example, the local community might be concerned about the extent of the litter in their area from the McDonald's restaurant.)

Having identified these stakeholder demands, you should now be in a position to be able to identify where McDonald's are facing the conflicts in dealing with these external influences. Some of these external influences will affect the way that the business is managed and run. For example, if there were complaints being made about the level of pay for its workers then McDonald's might have to respond to this. Even though it could be argued that the workers demands are not an external influence the company still faces pressure to make judgments about the nature of its decision-making.

McDonald's is one of the world's leading fast food restaurants. It opened its first restaurant in the United States in 1954 and has since expanded to almost every country on the planet. Its first UK restaurant opened in 1974 and McDonald's now serves around 2.5 million customers every day in the UK.

In recent years McDonald's has faced pressure on its profit levels. High profile concerns about the quality of its food and its business practices dented the profile of the company. In the latter part of 2002, it made a loss for the first time and sales growth in the few years before this had been slow.

It has, however, made attempts to address its situation in today's world by reviewing its business practices and its menus. In the USA, sales have started to pick up, and the situation in Europe is yet more encouraging: last year, it posted its highest sales growth figures for 15 years.


Task 3

  • Work together in groups to identify how McDonald's could develop its strategies to meet the demands of its stakeholders.
  • Present a short report on what judgments it might make on resolving the conflicts between its stakeholder groups. Try to ensure that you explain how the judgment will meet stakeholder needs, what conflict might exist and how this conflict can be balanced and minimised.

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