Multinational Company - McDonalds - Case Study Example

Primarily, many companies that want to rise as multinationals are “recourse seekers” with that aim of expanding abroad to access opportunities that are rare to come by in the parent country (Hoskisson, Wright, Filatotchev and Peng, 2013). One major thing that leads to this kind of recourse seeking is the availability of raw materials suiting their company in hosting country and other determining factors such as infrastructure and fuel. In the 119 countries MacDonald has set foot availability of raw materials, which is food products has been the major consideration.

• Availability of labour force

Another factor that contributes greatly to the rise of MacDonald multinational company in hosting countries is the availability of labor in a country both the skilled and unskilled. Often, the company will not open a subsidiary company if there is limited labor force. Labour matters a lot, and often, professional multinationals seek expansion in countries with high skilled labor.

• Need to enjoy a global market

In addition, a common thing that drives MacDonald Company to rise to multinational levels is the need to gain and enjoy a local advantage in the hosting country. The supply of fast foods in many countries has been slow and of poor quality. However, since the company offers products of quality and price friendly it has developed the desire to expand and enjoy the global market by opening up stores and subsidiary in many parts of the world the company enjoys a bigger local advantage as it offer the best fast food products (Dunning, 2014).

• Technology

Additionally, technology contributes greatly to the rise of MacDonald multinational company in various parts of the world. The companies have taken full advantage of the already established technology in a hosting country to widen its markets. Technology provides competencies and experiences that might help the company produce diverse types of products that suit different consumers at the global market. Most importantly, technology has contributed greatly to market expansion, a more significant reason why companies go international. The current world market is continuously rising, and needs for diversified and differentiated products and services is relevant as consumer taste and preferences are never the same.

How MacDonald Minimization Costs and Maximize Profits

The multinational company does several things to minimize cost in the international market. The economics of cost determines how companies in international markets strategize on their future. MacDonald therefore used the following strategies to minimize costs and maximize costs

• Cost of production

The company considers the cost of production in parent country and that of hosting country. Additionally, a company will consider the cost of exporting some of its core products to a different country and then compares with the cost of starting a subsidiary company is that specific country. It becomes most cost effective to start up a branch in a hosting country if processes and overall cost of production is cheaper as compared to exporting products. Therefore, by opening up to 34000 stores worldwide the company has been able to minimize the cost of production while maximizing profit.

• Mass scale production

MacDonald Multinational Company maximizes profits and minimizes cost by involving in mass scale production. Their mass production helps them reach huge markets within and without their borders and thus generating huge revenue through mass sales (Chimoriya, 2015). Additionally, the company employs advanced technology alongside efficient management systems in all its stores. This advantage helps them in proper decisions making within its subsidiaries.

• Product specialization

More so, multinationals utilize the aspects of product specialization so that they can develop a strong competitive advantage even in competitive markets. The company produces unique fast food products such coffee, hamburgers among others. Their huge market investments and large production is substantial to their existence because this helps them sale at market friendly prices hence benefiting greatly (Chimoriya, 2015).

• Conclusion

In conclusion, it is becoming a trend for companies to expand growth internationally. Many reasons highlight how multinational companies rise and evolve in the growing global market. As discussed, some of the reasons are growing need to access cheap and very important raw materials in other nations, market expansion so that sales volume increases, and to meet customer demands that are at times distributed globally and cannot be met by other nations especially the developing countries. In simple terms it might never seem economic to have a country invest too much on exporting its products and services to hosting nations while it is more economical to open subsidiaries and offer the same services while having managerial control from mother company. With this it stands that despite the financial limitations to rising companies to grow internationally, multinational corporations and companies have significant benefits to both hosting, home country and consumers. The quality standards of its services and standardized prices make it even better for customers in the hosting nation.