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The Singapore Fast Food Industry Pestel Analysis

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1.0 Introduction

The Singapore fast food industry has been subjected to many threats and opportunities. Despite being better performing than the conventional restaurants, achieving a 2.6% increase in the sales volume from the previous year as compared to the 0.9% of the restaurants (Baker, 2016), in September 2016, the fast food industry’s growth has slowed down to a mere 1% growth in 2016 as compared to a 10% growth in 2011(Baker, 2016). There is hence huge potential in the fast food industry despite the rise in challenges that will affect the companies in the industry. The report has chosen to analyse on the political, economic, social, technological, environmental, and legal (PESTEL) aspects of a company in the fast food industry in Singapore, and the organisation that will be analysed is the McDonald’s.  McDonald’s is one of the biggest fast food provider in Singapore, beginning with its first outlet in 1979, has more than 120 outlets within Singapore and serve about 1.2 million customers per week ("McDonald’s", 2017). This number is significant as it can be estimated that approximately 20% of the Singaporean population makes purchase from McDonald’s once every week. Accompanied by the sale of Singapore and Malaysia franchise rights from the McDonald's Corp to Saudi Arabia's Lionhorn ("McDonald's Singapore franchise sold: A history of the Golden Arches here", 2016), the existing and possible threats and opportunities will require much analysis, which will be covered in this report.

2.0 PESTEL Analysis

PESTEL analysis analyses the external factors coming from all the aspects of the external factors which will affect the growth and development of the company, forming threats and provides possible opportunities in which the company could leverage on to boost the survivability in the long run.

Political Factors

  1. Government implementing policies against fast food due to the needs of the society, limiting the growth and development of the fast food industry
  2. Government and the relevant organisations influencing the consumers and the food and beverage industry, indirectly affecting the profitability of the fast food sector

Economic Factors

  1. Inflation of Singapore is on the rise
  2. Unemployment rate is increasing

Social Factors

  1. Local community leads a fast-paced life-style, demanding on speed and efficiency
  2. Multicultural consumer background requires greater cultural sensitivity

Technological Factors

  1. Social media and its influences could bring positive and negative impacts to the company
  2. New technologies increase the productivity and efficiency of the company, and enables the company to offer more varied products

Environmental Factors

  1. Negative impacts on the environment from the supply, manufacturing and food packaging has sparked critiques, and consumers are more and more aware  

Legal Factors

  1. Updates to the employment law of Singapore

2.1 Political Factors

Being a multinational company, the McDonald’s need to comply with the policies that are implemented by the local governments of the market in which they are operating in. The policies that may not merely be regarding food and hygiene. Asides from legally enforceable policies, the campaigns initiated and inspired by the government and its agencies are also affecting the operations of the McDonald’s.

Firstly, the nature of fast food being unhealthy with high in fat, cholesterol, sodium and other ingredients have been labelled culprit to many diseases in the society, such as heart related diseases, cancer, cognitive functions and obesity (Stoddard, 2017). The role of the government is to guide and protect the wellbeing of its citizens. Hence, the government may come up with direct policies to limit the growth of the fast food in Singaporean society when the intake of fast food becomes increasingly popular and the health conditions of the citizens have deteriorated based on the statistics from the relative health agencies. An example was the call for the implementation of taxation in 2011, on food products which have been reported to be containing excessive amounts of sugar and/or saturated fat ("Tax on food high in saturated fat | Ministry of Health", 2011). This suggestion was modelled after existing policies in countries such as USA, Denmark, France and Canada. Even though the policy was not implemented by the Singapore government, there could be a possibility for the policy to be used as measures to limit the accessibility of such fast food to the local consumers, and also limit on the profitability of the fast food industry in general. The marketing campaign of the McDonald’s can be limited as well through the government policies. For example, in 2014, it was implemented that the marketing campaigns of food products that is deemed unhealthy will be limited by the placement of the advertisement and the content of advertisements, restricting the influence of media on the unhealthy eating habits of children (Manjur, 2014). Such government intervention into the growth of the fast food industry will impede on the growth potential of the company in the local market.

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