Franchising Market Strategy of a McDonalds - Essay Example

McDonald’s Corp employs the franchising market strategy to expand its operations globally. Franchising involves the company offering subsidiary firms the rights to use the Macdonald’s brand/trademark name or business model to offer products and services exactly similar to those offered by the parent company in exchange for some discount on sales and the payment of royalties for using the company’s brand name (Luthans & Hodgetts, 2012). Thus, with the use of this strategy, the company has outlets in over one hundred and twenty countries with a total of twenty-five thousand outlets. McDonald’s Corp considered the idea of franchising as the best alternative for penetrating the global markets because franchising is a relatively cheaper technique of expanding operations globally, compared to penetrating the international markets with the firm’s capital, which is more risky and uncertain given the global competitiveness of the industry. Therefore, the company considered this strategy as a prudent idea because franchisees (the local firms) fully understand the market dynamics influencing their respective countries and regions thus, are better positioned to tackle any eventuality arising as a result of rolling out new products or services in that market (Luthans & Hodgetts, 2012).

However, earlier on the firm had employed licensing as a marketing strategy for expansion when it awarded a license to Ray Kroc in the year 1954. It is this licensing deal that gave birth to the most lucrative McDonald’s Corp business outside the United States of America because, within the first two years of the deal, the company managed to establish more than seven hundred McDonald’s outlets in Canada; the largest number of outlets in any nation outside USA (Luthans & Hodgetts, 2012). Thus, it is prudent to note that despite franchising being the major strategy that is employed by the firm for its expansion prospects, licensing played a major role in laying the basement framework for the future expansion franchising strategy, when the company extended its market to Canada. Currently, among the more than twenty-five thousand food outlets under the McDonald’s Corp trademark, over 80% of them are as a result of franchising thus, reiterating the fact that the firm has dedicated franchising as the absolute strategy to gain global market penetration.

McDonald’s Corp market segment is global a reason it employs globalization as a mechanism of expanding its operations across different countries. This is achieved by implementing standardization in the sense that, services, products, distribution channels, promotional campaigns, and pricing are done in a standardized manner across all the markets that are served by the firm (Luthans & Hodgetts, 2012). Therefore, this ensures the experience or utility a client gets in an outlet based in Arizona in the united states of America is the similar utility a client in Lagos in west Africa derives from using MacDonald’s products or services hence, bringing out the global feel of McDonald’s brand. Thus, it is prudent to note that the target market of McDonald’s is the global market as its expansion strategy seeks to make a presentation of the brand in virtually all major cities of the world to give its clients a taste of the Mcdonald’s experience. Ultimately, it is evident that MacDonald’s Corp employs the franchising strategy to expand its global market target. Read More