Business and Management Methods: McDonalds in the Global Market - Research Proposal Example

Background

McDonald’s Corporation dates back to 1955, when Rey Kroc discovered the establishment run by the McDonald brothers in California. Pitching the idea for operations all over the USA, he was the beginning of the vision that became the corporation. The entity had achieved its 100th million mark by 1958, with exclusive ownership going to Kroc about three years later. The Golden Arches were initially part of the restaurant design, but their adjustment to look like an M enabled their adoption as the company logo in 1962, and the McDonald’s name was incorporated into the logo by 1968.

The entity deals with the production and sale of fast foods, concentrating on items such as hamburgers, fries and beverages. The growth of the company was rapid even at the initial phases. By 1965, McDonald’s already had about 700 retail outlets in the USA. Its global operations began in Canada, 1967, where the first international chain was established in BC. From then, global expansion became rapid with the outlets being set up in Japan, Europe, and even Australia.

The company currently has about 36,500 outlets, with only about 40% being in the USA. The menu for this firm is global, and the differences in pricing are only adjusted according to currency. As of 2015, McDonald’s employed 420,000 people globally. As of the 2012 financial year, the company reported revenue amounts of up to $27.5 billion, and income amounting to $5.5 billion. The total asset value of McDonald’s is about 34.2 billion US dollars.

Beginning 2010, McDonald’s revenue has been on a growing trend from 21 billion US dollars. However, 2015 noted a decrease in the reported revenue from 27 billion to 25 billion, this has been attributed to the closure of some outlets. Nevertheless, the company has always maintain significant profit margins, with the lowest being 17.5% in 2015 since 2010. Further, McDonald’s relies heavily on its financial leverage. The leverage in 2015 hit 5.35%, but at the same time the firm gives a healthy ROE of about 45.43. Notably, this was an all-time low in the last five years as its average rate of returns on equity reach about 63%. Again, these numbers have been attributed to the changes in structuring that the firm executed in 2014 and 2015, essentially increasing its operational costs.

The growth of the company involves not only the opening of new chains, but also the closure of some outlets while adopting new ones. Their decisions for closure are motivated by market factors as well as others within the firm. It is clear that there is an elaborate set of practices, both in financial and non-financial perspectives, which drive its growth and survival.

Research Question

• What are the factors and strategies influencing McDonalds’ global market?

Research Objectives

Based on the main question of the study, it will be crucial to develop a set of questions that guide the accomplishment of the main objective. The questions are indications of the interim objectives, which prompt the central research question. As such, these objectives include:

• To identify and elaborate the McDonald’s investment model
• To understand the profit model used at McDonald’s
• To understand the factors influencing the trends in the market share of McDonald’s

Literature Review

This review of literature will offer the background into global activities and the theoretical basis for the internalization of business. It will also briefly compare the activities of McDonald from previous literature, touching on similar entities with globalization trends for comparative purposes. The literature will form the basis for the formation of a possible hypothesis or the determination of the ideal basis for analysis following the process of data collection.

Theoretical Background

The increase in globalization has led to the decrease in barriers to trade at an international level. The speedy globalization has been an outcome of many combined circumstances, featuring rapid advancement in transport and communication technology, many countries leaning towards trends in the deregulation of foreign exchange, and the action of foreign investments. The companies, however, adopt this shift in full awareness of the fact that they lack full information on all the investments, and thus face high risks in these ventures.

The internationalization theory emphasizes the fact that the process should begin with low commitment, resulting in reduced uncertainty at the initial phases of the transition. This transition should only begin once the firm in question has exhausted all its internal opportunities and is compelled to seek more markets abroad. This theory is the basis for the Uppsala model, which emphasizes the shift to international markets involving gradual familiarization before increasing commitment. Nevertheless, various economic and financial theories offer an alternative perspective into the conduct of international business. The economic theory, for instance, encourages the pursuit of all available market opportunities at the same time regardless of the ones available at the local scale.

Vrontis et al., (2009) elaborates that the debate on whether companies should standardize or adapt their products is likely to remain in focus for some time in academic literature. Some of the existing theoretical perspectives highlight the effectiveness and failure of both strategies, while others solely campaign for standardization. In the wake of these views, Ryans et al., (2003) note that the activity of multinational corporations has experienced a shift from the product-based strategies to more recognition of the needs of the societies in which they sell. The option to standardize or diversify products is based on the views of consumer needs as homogenous; or their being diverse depending on location. Even in the face of adaptation, the decision on which components should be most diversified becomes a point of conflict. This debate forms the basis for the main research question: what are the factors and strategies influencing McDonald’s global market?

Theories in support of standardization note the possibility of the informed consumer shifting towards the convergence of tastes. This theory supports the globalization of markets, where instead of consumers displaying the distinctiveness of cultures, they are likely to appreciate similar tastes across the globe. Consequently, the idea of homogenous needs ceases to be preposterous in this context, owing to the possibility of globally standardized products in the market. However, Ghantous (2008) argues that even in the presence of globalization, cultures are still important. Therefore, despite the exposure to different media to influence their perceptions, the ideology of their selecting a homogenous preference would be highly unlikely.

With the globalization of distribution channels, the bargaining power of global brands seems to be higher than that of the local brands. The global brands also tend to have high brand equity, granting them the luxury of high pricing and thus maintaining profits at the global scale. Schuiling et al., (2004) argues that this perspective gives more credence to global firms that tend to standardize their products. Alluding to companies like Coca Cola, the literature emphasizes on the trust that comes with the product and its being a chief part of the marketing strategy. The entities, while observing the movement in their costs and pricing, effectively conquer new markets and probably retain their overall business models. Consequently, they form the basis for the third objective: to determine the factors that influence the market share of McDonald’s

Alternative globalization theories suggest the use of financial integration as motivation for investment in other economies. Financial integration is likely to enable profitability due to investment in the international market, further, lending to foreign economies improves the efficiency of the local lenders. Ideally, the wealth should flow both ways. However, Chawla and Gupta (2014) note that wealth tends to flow from the poorer economies to the rich economies. For McDonald’s, this could be profitable due to its base in the USA and operation in countries that include the emerging economies of the world. Nevertheless, the international market makes the financial operations more volatile as they are subjected to a wider array of forces. These features have induced concern among governments and policy makers on the approaches to international financial markets.

Studies into the effectiveness and speed of globalization have indicated several changes in the global financial market. For instance, a study by the McKinsey Corporation revealed a slow-down in financial market globalization since 2007.

Source: McKinsey Corporation

From their data, the movement in globalization slowed down and was characterized by a decline in the movement of equity and securitized loans. However, there has been lack of recent studies to comparatively analyze this movement after the end of the financial crisis and the growth of economies from their recovery.

Global Strategy by Corporations

The global strategies adopted by organizations are portrayed in literature as firmly dependent on the intentions of the entities. For instance, entities that are determined to gain and maintain market leadership in the markets they enter will be more likely to adapt their products. The adaption is an attempt to understand the perceptions of the local population, and yet presents dire financial implications for small producers. However, standardization strategies exist among firms with distinct brand recognition and the desire to maintain low production costs. Standardized production and marketing will diminish the costs of distribution and sales. While the product may fail to attract the strongly local minded, it will fetch considerable markets among those open to new concepts.

Firms like Proctor and Gamble have conceptualized the idea of glocalisation. The approach features finding a continuum between standardization of the products globally and the localization of control. Notably, this feature has enabled P&G to increase its dividend annually, even though this has recently been at a declining rate.

Source: Proctor and Gamble Filings

For Proctor and Gamble, this choice has been fairly simple due to features such as its being a large firm and able to execute the economies of scale. Further, the company works at the realignment of its operations in order to fit each global context. The company also makes use of franchising dominantly, ensuring its presence in countries is asserted while limiting the costs of investment. Franchises tend to eliminate the cost of investment for the parent company, granting it partial control and royalties during the conduct of business. The choices of P&G and similar firms form the basis for the research objective: determination and understanding of the investment model used by McDonald’s

Lundeteng (2012) recognizes the vitality of standardization in companies such as Coca Cola and the motor industry. Standardization enables the elimination of geographical differences, essentially enabling a wholesome strategy for the firm. Coca Cola’s success can be attributed to its having largely similar products, with only minor variations existing per country. Like P&G, Coca Cola is also a heavy franchiser globally. McDonald’s is identified as having standard products, but there are subtle differences in the manners of offering. For instance, beer may be a dominant offering in Germany, but only wine is offered within French restaurants. The company also uses local food products in majority of the countries, essentially appealing to their mental cultural perceptions. Few enterprises adopt complete adaptation, such as fashion company Agatha. These companies face difficulties recognizing and adapting fully to local sentiments, essentially limiting the effectiveness of this approach in the global scenario. Considering the choices that these companies make to maintain their profitability, the second objective of this study is: to understand the profit model that is used in McDonald’s

Method

The methods section will elaborate specific approaches to obtaining the data. The main variable from this study will be the specific strategies that McDonalds applies in every outlet. The strategies will be identified by the approaches to pricing, reporting, and decisions to opening or closing outlets.

Research Design

According to Saunders et al. (2009), the study design is the basis for incorporating the views of an individual of the world into their research. The design may adopt multiple philosophies; positivism, realism, interpretivism, and pragmatism. The pragmatism philosophy attempts to connect theory and practice. Consequently, it is the choice philosophy for this study, as it will attempt to relate the theoretical perceptions of globalized business and the actual activities of multinational entities. Rather than engaging in the debate over standardization and adaptation, the philosophy will identify one approach and use it as a basis for justification of concepts.

The study will use a deductive approach. This is because there already are theories regarding the operation of MNCs, and the data collection will have a descriptive intention. The deductive approach gathers data after theories exist, forming the basis for explanations and allowing the prediction of phenomena. As such, the development of hypothesis for this study will be from existing theories in the area. The data collected and its descriptive analysis will only confirm or reject the hypothesis.

There lacks a strategy that is inherently superior to other research strategies. Consequently, the research will use the case study strategy, which investigates a certain contemporary within the real life situation. In this case, a single case study-McDonald’s Corporation- will be adopted. This is because the strategy can enable answering both how and why questions, as well as achieving data based on contemporary events. Further, the analysis will require minimal statistical analysis as it is based on limited data from a single entity. With the choice philosophy, approach, and strategy, the study is expected to take minimal time. This will imply about five months for the process of data collection and analysis.

Data Collection

The process of data collection will combine primary and secondary methods. Secondary data will be obtained from news and web reports, books, journals, and existing company profiles. Due to limitations in physical availability, the data from these sources will be online. Most of this literature will be crucial in the process of data analysis.

There are several alternatives for primary data collection. These options include interviewing, focus groups, questionnaires, and observation. The study will make use of two primary methods of data collection, observation and questionnaires. The methods both present advantages and disadvantages to their adoption in research. For instance, observation has the advantage of access to real life situations, and is useful during the development of explanations of content. However, it is time consuming and may be excessively subjective. The questionnaires are advantageous over interviewing for data collection as they minimize time and costs. They also provide data that is easy to convert and analyse scientifically. On the other hand, questionnaires lack the ability of interviews to assess for accuracy and clarification. It is also impossible to use questionnaires with illiterate respondents.

The questionnaires will be sent to McDonald’s staff in various countries globally through email. The sample is expected to be about 500, justifying online questionnaires against interviewing. As these are expected to be senior staff, or at least supervisors, the question of illiteracy is eliminated. The questionnaires will be supported by the researcher engaging in observation in several McDonald’s outlets. Observation will facilitate understanding the responses to the questionnaires and putting them in context. The perceptions expressed on the questionnaires may vary, but analysis will be easier as the researcher already develops a subjective view of the situation.

As the study is on McDonald’s, it is expected that the researcher obtains permission for the data collection. Consequently, this will be sought in official form from the Oak Brook address, covering the study in all the subsidiaries. Should the response require specific requests for all the outlets, then these will be created well in advance.

Research Ethics

This being a case study, the research ethics for consideration are critical. Consequently, some will include:

• In light of the secondary data collection, recognition of the sources of information will be crucial for the maintenance of scholarly integrity.
• Information of senior management on the intention to observe activities within their premises
• Avoiding the revelation of any information acquired during the process of data collection that could be intellectual property or a trade secret
• Seek permission to conduct the study and data analysis using the activities and data from McDonald’s

Timescale

Activity

Time

Development of Comprehensive literature review

4 weeks

Data collection

7 weeks

Data coding and compilation

2 weeks

Data analysis

5 weeks

Final review and presentation

2 weeks

Resources

The choice methods limit the costs of this study. Questionnaires will be e-mailed, limiting the cost of paper and movement. The tentative costs will include:

Cost

Amount

Travel

£500

Correspondence

£50

Time

Six Months

Appendix: Sample Questionnaire

My dear participant,

I am a student from the Coventry University of London. I invite you to participate in the research study Global Marketing Strategies of McDonald’s. The purpose of this study is to determine the factors and strategies that influence the global market for this entity.

Please note that your participation is entirely voluntary. Your information will remain confidential, and these questionnaires will be destroyed upon completion of the study. You may leave any of the questions you do not wish to answer blank. There have been no outstanding risks that can be associated with your participation in the research.

If you have any questions about the research, feel free to contact the investigator through the provided address. Should you want to complete the study, it will take you about five minutes. Please submit the questionnaire through the same correspondent email address.

Thank you for your participation.

Sincerely,

Xun

Questionnaire

Company Address------------------

Location------------------

Date------------------

Study Questions

• Year of commencement

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• Is production continuous through the year?
• Yes-----------
• No----------
• Describe your products in brief

• Do they present any specific health benefits?
• Yes-----------
• No-----------
• Elaborate your target market in the country/state/region

• Who are your common competitors?

• What is your company’s market share in this country/state/region?

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• What are the annual sales turnover levels of this specific outlet?

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• What are the approaches to marketing the product?
• Standardization---------------
• Partial standardization/glocalization---------------
• Adaption---------------
• What is the annual expenditure in marketing efforts in this country?

----------------

• How much profit do you make specifically in this country?

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• What edge do your competitors have over you in the country?

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• What advantage do you have over the competitors?

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