FACULTY OF BUSINESS, GOVERNMENT & LAW

Assignment Coversheet

Student ID number
Unit name
Unit number
Name of lecturer/tutor
Name of Assessment
Due date
Word Count

U3111278
International Business G
6241
Dr Michael Corliss
1
16.09.2014
10 pages

Student declaration
I certify that the attached assignment is my own work. Material drawn from other sources has
been appropriately and fully acknowledged as to author/creator, source and other
bibliographic details. Such referencing may need to meet unit-specific requirements as to
format and style. I give permission for my assignment to be copied, submitted and retained
for the electronic checking of plagiarism.
Signature of student: ________________ Date: __________

Topic

Page

Introduction
General Information
Mission
Aim of the report

2
2
2

Description
Globalization strategy
Comparative Advantage
New Trade Theory
Investment theory
Eclectic Paradigm
Stages Models of Internationalisation

3
4
5
5
6
7

The new strategy

McDonald's Sets New Welfare Policy
Standards of Business Conduct for Employees

8
8
8

Barriers

Weakness and Threats

Findings
Recommendation

9
10
11

Analysis

Conclusion
Bibliography

Table of Content

McDonalds
Introduction
The McDonald's Corporation is the world's largest chain of hamburger fast food restaurants,
serving around 68 million customers daily in 119 countries. Headquartered in the United
States, the company began in 1940 as a barbecue restaurant operated by Richard and Maurice
McDonald. In 1948 they reorganized their business as a hamburger stand using production
line principles. Businessman Ray Kroc joined the company as a franchise agent in 1955. He
subsequently purchased the chain from the McDonald brothers and oversaw its worldwide
growth. At McDonald's, they strive to be more than just a restaurant -they're a first job for
many, a community partner, a model for other restaurants around the world, and a company
seeking new ways to fulfill brand promise of Quality, Service, Cleanliness, and Value.
Mission
McDonald's brand mission is to be our customers' favourite place and way to eat and drink.
Our worldwide operations are aligned around a global strategy called the Plan to Win, which
centre on an exceptional customer experience People, Products, Place, Price and Promotion.
We are committed to continuously improving our operations and enhancing our customers'
experience.
What I am going to cover
In this report we focus how they become a leading fast food chain in the world.
What strategies they have followed to globalize their business?
What makes them the number one brand all over the world?
What policies they are taking to hold their popularity in this competitive market for a
long time?
What types of problems and barriers they are facing in order to survive in this
competitive world?
What roles they are playing in the global pattern of trade?
In this report I am going to provide some examples to reflect their success ,at the same time
with the help of a graph and pie chart I am going to demonstrate their huge growth. In the end
2

I am going to conclude my report with some findings and recommendation about the
company.

Description
McDonald currently divides its revenues into four segments: the United States, Europe, the
APMEA (Asia, Pacific, Middle East, and Africa segment), and other countries (i.e. Canada
and Latin America and corporate sales). Almost 65% of MCD sales are derived
internationally. MCD focuses both on penetrating emerging markets and expanding in
developed markets.
But just being McDonald's isn't enough it's doing a lot, domestically and globally, to stay
ahead. Here some strategies that are keeping McDonalds are barreling forward. (Bahaudin
G. Mujtaba & Bina Patel of Nova Southeastern University, 2007)
Globalization strategy of McDonald
McDonalds has developed their unique globalization strategy. McDonald include their four
main characters to make perfect business strategy. The four characteristics are shown as
below Think Globally but Act Locally
The main aim of the McDonalds Corporation is to focus locally with the global strategy. It
always performs and supply all the operation, systems as per the requirement of the local
factors. It always try to be fit in local traditions, cultures, society and political. McDonalds
Corporation always keeps special factors in mind while making their business strategy. It
always performs as per the requirements of the different markets. McDonald expenses lots of
resources to develop and create its products as pre the local demands and traditions.
However, McDonald has considered that Hindu community does not eat beef as per their
Hindu belief. Therefore, they specially introduced new vegetarian series of the product in
their menu. Also taking Muslim community in focus that Muslims did nit consume poke.
Therefore, they only sell chicken and lamb. (Rodrigo, December 22, 2012)
Pricing:
The other most important feature is their price differentiates than their competitor. This
pricing strategy of McDonalds corporation is very reliable and unique. While fixing the price
McDonalds takes some factors in consideration like local life style, income of the family,
location etc. The time of fixing price for the products, they also focus on the primary target
group of the company, lower and power level. McDonalds enters in most of metropolitan

city of the country in which it enters. Sometime during period of lean time company offers
discounted price to boost their sell in short McDonalds corporation believes that to stay
longer life in the market we should have unique pricing policy. (Rodrigo, December 22,
2012)
Advertising/Promotional strategies:
McDonalds corporation uses more promotional tools to promote their product. Company
offers their product at low price; it gives toys to the children etc. which become the most
successful promotional strategies nowadays. McDonalds has for decades maintained an
extensive advertising campaign. In addition to the usual media (television, radio, and
newspaper), the company makes significant use of billboards and signage, sponsors sporting
events ranging from Little League to the Olympic Games and makes coolers of The Orange
with their logo available for local events of all kinds. To date, McDonalds has used 23
different slogans in United States advertising as well as a few other slogans for select
countries and regions. At times, it has run into trouble with its campaigns. (Rodrigo,
December 22, 2012)
Social responsibility:
The other most thing of the Modern business is care of society. Social responsibility creates
positive image in the mind of customer. McDonalds corporation also believes in betterment
of the society. It took part in social events, sponsored lots of charity shows, monetary aid etc.
McDonalds corporation creates huge amount of local opportunity. McDonalds recruit local
people too, McDonalds gives equal opportunity to the all employers. It gives chance to local
employer at management position. McDonalds purchases their raw material from the local
farmers.
In 1940, McDonalds operated only one QSR but today has restaurants at 33,000 locations in
118 countries. McDonalds utilizes a variety of international market entry modes for rapid
expansion: sole ventures, franchising, master franchising and joint ventures. There are some
reasons why they are all over the world:
Comparative Advantage
They have the comparative advantages because the same type of products they can produce
with a lower opportunity cost than others. Also their strategies help them to make their
service more efficient than other people.

 New Trade Theory

McDonalds has followed the new trade theory, because they have comparative advantage
that helps them produce more products at lower cost than their competitors, may exploit this
advantage, dominate the market, and still eventually benefit the consumer.
First Mover Advantage: McDonald gain popularity just by selling hamburger and
fries which is their core product, they have changed the meaning of fast food.
They have introduced different kids and flavor of burger and because of that
McDonald opens their Hamburger University in 1961. In 1968 they have introduced
Big Mac, which became so famous and they got the first mover advantage. Their
first commercial advertisement was a big hit and attract lots of consumers towards
their product specially kids. In 2008 McDonalds introduces the most
comprehensive global packaging design in the brands history.
Specialization: They are specialized in making tasty and quality burgers,
sandwiches, fries and so on at a lower price. They have tons of competitors but they
are not able to beat McDonald as it knows the technique of producing foods with
lower cost .This advantage is coming due to natural factors such as natural resources
and enjoying labor advantage in various countries when producing their products.
Product Differentiate: McDonald continuously and successfully focuses on
differentiating the product, in this competitive market its very hard to survive
without differentiating the product. 1968 they have introduced Big Mac, In 1973
they added cheese to the menu, in 1987 they introduced freshly tossed salads. In
2000 fruit n yogurt parfait introduced. In 2001 new premiere lettuce and tomato big
and tasty sandwich launched. In 2006 snack Wrap introduced. In 2009 Mc Cafe
coffees including lattes, cappuccinos and Mochas are added to. In 2010 Mc cafe real
fruit smoothies and frappes introduced.
Investment theory
McDonald's does business in more than 100 countries around the world. They are doing
franchising business around the world such as Canada, Australia, Germany, France,
Sweden Japan, Netherlands and so on. They are following foreign direct investment
method.

They are providing four main benefits of inward FDI for a host country
It brought capital, technology, and management resources to the host country

 It has increased job opportunity of that country, it has too many branches where they
need people to operate their business as a result they are hiring local people.
It has increased the level of competition in a market, driving down prices of local
product and international product as well and improving the welfare of consumers
that helps to improve their standard of living.
The benefits of FDI of McDonald for the home country include

They

Categories of advantages
Ownership Internalization Location
McDonalds
advantages advantages
advantages
Licensing YES
YES
NO

Form of
market
entry

Export

YES

YES

NO

FDI

YES

YES

YES

are

collecting
huge
amount of
money
from their
business
which

indirectly or directly playing an important role to the growth of their country.

They are getting the opportunity to learn valuable skills from foreign markets that
can be used back to the development of their country.
Eclectic Paradigm

According to Eclectic paradigm, when they enter any new market they have the ownership
advantages. As they are doing franchising they have got the internalization advantages
because of their comparative advantages. Location facilities sometimes is not in their hand
because they dont do invest on land. But their outlets are still in very good position around
the world.
Here is a quick view of McDonald Stages of Internationalization; it represents their journey
of success from beginning to ending:

Different Stages

1 Jan 1940: Dick and Mac Mcdonald Bar-B-Q restaurant open

1 Jan 1948: they shut down their restaurant for three months
1 Jan 1949:It opened again as McDonald the patato chips replaced by French
fries.
1 Jan 1954: Multimixer Ray Kroc becomes McDonalds's Nationwide franchising agent.
1 Oct 1958: 100 millionth hamburger sold and multiple stores opened.
1 Jan 1960: Ray Kroc Purchases the McDonalds empire for $2.7 million dollars
11 Oct 1963: 500th resturant opens up in Toledo, Ohio.
1 Jan 1965: To celebrate its 10th year, McDonalds goes public and sells it first stock at
$22.50
1 Jan 1968: 1,000th Resturant opens up in Des Plaines, Illinois
1 Jan 1975: The first real Drive-Thru was created
1 Jan 1978: 5,000th resturant opens up in Kanagawa, Japan
1 Jan 1980: McDonalds celebrates its silver (25th) Anniversary
1 Jan 1981: McDonalds restaurants 1st time in European countries.
Jan 1983: By the end of the year, there are 7,500 stores worldwide. McDonalds is in 32
countries
1 Jan 1988: 10,000th resturant opens up in Dale City, Virginia
1 Jan 2003: I'm Lovin' It" - becomes the official slogan/advertising jingle for McDonalds
1 Jan 2005: For McDonalds 50th birthday, they open up a super-sized commercial resturant
in Chicago.
1 Jan 2008: McCafe goes International in over 50 countries
1 Jan 2010: 250 Billion Hamburgers served, WOW!
1 Jan 2010: McDonalds now offers free Wi-Fi in over 11,000 restaurants
1 Jan 2011: McDonalds operates in 119 countries

Analysis
The new strategy
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In 2003 McDonalds switched to generating more sales from its existing restaurants. In 2013
around 90% of the companys growth is expected to come from incremental sales at its
existing restaurants. Capital expenditures for new restaurants decreased $544 million in 2013
because the company opened fewer restaurants and focused on growing sales at existing
restaurants including reinvestment initiatives such as restaurant reimaging in several markets
around the world. (Companys Financial Report, 2012)
McDonald's Sets New Welfare Policy
Hamburger giant McDonald's Corp. has announced a new global policy for its suppliers using
antibiotics in food animals.
The new policy prohibits direct suppliers from using growth promoters in food animals after
2004. McDonald's global poultry supply comes from direct-relationship suppliers who
control the use of antibiotics in production, and who have facilities specifically dedicated to
producing products directly for McDonald's. McDonald's beef and pork suppliers are
considered indirect suppliers. (Joe Vansickle, Senior Editor, 2013)
Standards of Business Conduct for Employees
Each year McDonald's employees certify that they have read and will abide by our Standards
of Business Conduct. Employees also complete regular training on the Standards, anti-bribery
laws, and various other laws, regulations and company-specific policies. In addition,
McDonald's and its employees in all countries must comply with the U.S. Foreign Corrupt
Practices Act (FCPA).To ensure compliance, McDonald's has adopted a Global AntiCorruption Policy, which contains guidance for employees on all applicable anti-bribery
laws, including the FCPA. (About McDonalds, 2014)
Barriers of McDonald's
In a recent call with investors and analysts, CEO Don Thompson revealed the four biggest
issues facing the brand
Quality of Product: They are focusing on the low price strategy as a result they are
sacrificing the quality of product which is one of the main purposes of a fast food
company.
Poor Customer Service: McDonald's drive-thru wait times have gotten worse over
the years, in-part because of an increasingly complex menu. Thompson acknowledged
this problem and said that the company was sending corporate representatives in for a
"service reset."
Unhealthy Product: Thompson is aware that many view McDonald's as unhealthy
junk food. This problem has been exacerbated by a food factory scandal in China.

Weakness and Threats

Negative publicity
Unhealthy food menu
Mac Job and high employee turnover
Low differentiation
Saturated fast food markets in the developed economies
Trend towards healthy eating
Local fast food restaurant chains

Conclusion
Findings
Political/legal factors: Political environment consists of the government activities
covering the economy and its subdivisions. McDonald's as a food provider is much
more affected by these political, legal and customers safety issues. Differences in
individual

countrys

government

policies

extremely

influence

McDonalds

international operation. Favourable and stable political situation, legislation, legal

procedure and sustained use of logo are just an indispensable part of the business
success.
Economic factors: Economic expansion, the rates of interest, exchange and inflation
comprises the overall economic environment. This cost of capital often fluctuates with
the movement of interest rates. McDonalds practices hardship in countries that is hit
by inflation and fluctuations of exchange rates. As a market leader, McDonalds most
often focuses very high target market which works as an additional advantage as these
markets are rarely unstable.
Product lines and pricing: McDonald's first and foremost sells hamburgers, french
fries, soft drinks, breakfast items, various types of chicken sandwiches and desserts.
Soup type products are served only in some selected countries like Portugal etc. And
for this special deviation from its standard menu helps McDonalds to be popular
among the countries other than its homeland. Much is talked about McDonalds
pricing strategies and its menu price differs in different countries. Also the higher
price in the local restaurants very often becomes burden for the customers.
Customers preference: With a brand value of $49.5 billion, McDonalds has grown
49 percent in worth and now is the most favoured brand in the fast- food group.
McDonalds innovative choice and giving importance to the peoples ever -changing
demand with due progress, technology and development is the key to McDonalds
present situation.
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 Social factors: Population growth, career opportunity, cultural distinctiveness, health

of the masses and social security build the ground of societal factors. McDonalds
food products demand and its operational strategies differ greatly to cope with the
movement of these factors. McDonalds also keeps providing Halal food to consider
the religious and cultural issues.
Technological factors: Technological movements affect expenditures, excellence,
and innovation and machine made food is more hygienic. McDonald's employees
quick service and quality food standards are the result of its high-tech operating
procedure. Customized database management system and computers and smart
cashiers are used in McDonald's to speed up serving and operating excellence.
Mc Mommy Blogging Society: In December2007, McDonald's opened up its
kitchens to the group of mother bloggers to report allegedly unedited findings on
McDonald's website and on blogs in the Internet. McDonald's equipped six mothers
chosen from 4000 applicants with laptop computers to record their impressions of its
operations over the next few months. Nothing like this has ever been done on the
internet by a fast food company before.
Recommendation:
Introduce healthy products
Improve their customer service
Offer quality product

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