International Business Strategy of McDonalds - Essay Example

International Business Strategy Contents Contents 2 Executive summary 4 Brief case history 4 Data and methods 5 Strategic analysis 6 SWOT analysis 6 Strengths 6 Weakness 6 Opportunities 7 Threats 7 PEST analysis 7 Political 7 Economical 8 Social 8 Technological 8 Strategic groups analysis 9 7s MCKINSEY’s Matrix 9 Ansoff’s Matrix 10 Strategic recommendations 11 References 13 Executive summary McDonald’s has created a huge impact in the global quick service restaurant industry by giving the best of service and quality products to its customers globally and also by having strong strategies to grow in the global market. The company has used wide range of marketing strategies to grow and build its business in the global market and acquire the majority of market share in every part over its competitors. SWOT analysis, PEST analysis, Mckensiey’s matrix and Ansoff’s Matrix helps to know the international business strategy of the company helping it to grow widely in the whole global environment. This report gives clear indication of the strategies which has helped the company to become a global leader in fast food industry across the global market. Brief case history McDonald’s, was started in California, USA, by two brothers Richard and Maurice McDonald’s in 1937. They started the business from a small food assembly dine restaurant. In 1954, Ray Kroc saw the opportunity and took the rights to franchise the store in USA and he took the franchise as a very high rate of $950 for McDonald’s when other companies bought franchisees for only $50. McDonald’s first step to the global market was by moving to Canada in 1967. The company has looked to franchise its stores and restaurants across the different parts of the world and has spread widely across to different countries (Burrow, 2011, Pp. 98-102). The company has now become a well known renowned brand in the whole world and has high level of respect as brand across the world’s food market and also a huge brand liking and brand preference among the huge number of customers. McDonald’s has over 30,000 restaurants across the global market with its restaurants been spread in over 119 countries providing the best of service to all the customers of about 45 million people every day generating a total revenue of around $15 billion every year. This report includes the study for the international business strategy of McDonald’s and also understands the company’s policy using various marketing concepts developed by scholars which helps to know the company’s strategy to become one of the leaders in the global market (Churchill, 2009, Pp. 76-78). Data and methods This report is done based on the data obtained from the secondary data from various books and also data from other secondary sources. This method f data collection is very economical and also gives a large number of sources to get valid data to understand the particular concept. This project is done over the topic of the international business strategy for the company been chosen as McDonald’s, for understanding such a concept it is needed to conduct a qualitative research (Burgemeister, 2003, Pp. 56-59). Qualitative research is best done using the secondary data. It helps to understand the concept using various theories and concepts developed by scholars and also give a better view about the concept off going global in the competitive market. There are various advantages of conducting a secondary research as it helps in conducting the research and understanding of the concept at a quick time and also very economically. Another advantage of secondary data collection is that this data is obtained from the experts and professional research reports, which is not obtained in case of primary research (Brown, 2009, Pp. 123-124). It also helps to get new ideas and insights towards the concept from the previous analysis. This type of research will help to get more knowledge about the strategies that are been used by companies to go global and move their operations in different parts of the world and also the strategies they use to keep a good hold over the market share across the global market competing with their fierce competitors (Corbin and Strauss, 2008, Pp. 23-25). Strategic analysis The international business strategy for the company is been studied using various theories and concepts one by one. SWOT analysis SWOT analysis gives the competitive analysis of the company and the position of the company in the global market with respect to the internal and external factors. Strengths It is the biggest fast food market share in the global market and has huge brand recognition. The company looks to spend high budget for the advertising. It has a good adaption to the local taste and preferences. It has the best brands as its partners along with huge number of franchises, targeting Children age group who play a vital role in making the buying decision. Weakness The company has got wrong publicity because of the unhealthy food items and more concern for health and also high employee turnover. The company has less differentiation among the brand from other fast food companies like KFC (Kentucky Fried Chicken) Opportunities It can come up with healthier food and also provide fast and free home delivery, adopting the new practices of people and change accordingly with the new customer habits. Threats The markets of fast food industry in the developed economies are quite saturated and also people are shifting towards having healthy foods. It has a huge threat from the local restaurants and also with the changing currency rates (Handy, 1996, Pp. 89-92). PEST analysis This analysis is used to understand the external factors that affect the working of an organization. This analysis uses the four important factors of Political, Economical, Social and Technological environment which affect the operations and also the strategies of the organization Political The various health and safety guidelines for different countries are different and McDonalds need to follow all these regulations and guidelines for conducting a successful business operation in a particular country (Knapp, 2000, Pp. 67-70). The fast food industry is always criticized because of the use of high fat and calories food items thus the company needs to follow the guidelines set by a [particular countries government and set standards for its products. Apart from the food there is also many ecological factors and guidelines. McDonalds is the largest user of paper in US and because of the huge requirement for packaging of food items, thus it needs to be very cautious about these factors also while moving into different countries in the global market. Economical Different countries have different style of making their expense based on the income and GDP of the country. Thus the company needs to set its prices based on these factors and also take care of the factor that it doesn’t incur loss. McDonalds look to franchise mostly all its restaurants thus it also has to train the employees in the best way so that they can provide the service in the best possible way and also maintain the cash flow in the best possible way and also be profitable (Kotler, and Pfoertsch, 2006, Pp. 89-96). Social The preference of food changes with the changing country and also society. People have different liking for food items based on their taste, healthy effects and also many other factors. McDonalds tries and keeps it s menu based on the preference of the customers in different locations, which has helped the company to get brand liking among various customers across the whole global market (Mueller, 2011, Pp. 85-88). The social preference of the people depends on the culture that they follow for example McDonalds has the item of Ham Burger in US, UK and other countries but as this considered to be a bad thing in India, the company didn’t launch Ham Burger in India because of which it was happily accepted by the people in India and it gained a good market share even in India. Technological With the improvement in the technology environment in the different countries, McDonalds uses various technologies to conduct its various operations like for supply chain, for marketing and advertisements and also for the management information system for the internal operations of the restaurants and also internal communications among the employees (Ries, and Trout, 1986, Pp. 92-96). The company keeps updating its technology with the changing environment in different countries which helps them to improve the efficiency of the company towards providing the best of facility to the customers across the global environment. Strategic groups analysis McDonald’s and KFC are the fierce competitor in the fast food industry in the global market. Both the companies have tried to capture the majority of market share and become the global leader in their own ways by using unique strategies. The product category of both the companies is different from each other but on the similar categories, thus both the companies try to attract the customers and also change with the changing preferences of people around the world. The price of the products are quite similar and are been kept keeping the affordability power of the customers. McDonald’s looks to take advantage over KFC and other local restaurants through its extensive high variety of product range and by having its stores located in the major locations of the major cities across the various global countries (Wright, 2006, Pp. 123-125). Even the pricing ranges of the company products are very well affordable for its target customers. They tend to set their price based on the demand of the particular product to attract more customers and also get a competitive advantage over its competitors. McDonald’s has looked to open its stores in the major locations where the company can help the customers approach the stores easily and also help in increasing the visibility of the company. 7s MCKINSEY’s Matrix The various “S” in the Mckinsey’s matrix are been analyzed. First is the Strategy, the company’s strategy to move in the global market by understanding the situation of different country. Second is Structure, McDonald’s has 80% of the stores as franchisee spread across the world in different locations. Third is Systems, McDonald’s uses management information system for its internal communication and also process of operation in the stores. Fourth is Skills, the skills of the employees are been improved by high level of training programs. Fifth is the shared value, the Company looks to give more value to the customer satisfaction and also tries to achieve the maximum customer satisfaction in all aspects (Office and Webster, 2010, Pp. 32-35). Sixth is the Staff, the employees are been recruited after high level of scrutiny and afterwar5ds they are trained very well to improve their efficiency. Seventh and the last one is the Style, the style of operation of the company is to provide the best possible service to the customers and look towards achieving its goal working hard over its objectives been set (Henry, 2008, Pp. 134-136). Ansoff’s Matrix (Source: Proctor, 2014, P-268) Market penetration (existing products, existing markets): The process to gain this is by gaining part of their market share of the competitors or by attracting new customers. Product development (new products, existing markets): McDonalds can come up with new burgers in the existing global market based on the preference of the customer of various locations (Cheverton, 2005, Pp. 234-237). Market development (existing products, new markets): An established product in the marketplace can be tweaked or targeted to a different customer segment, as a strategy to earn more revenue for the firm Diversification (new products, new markets): Diverse from the main product and come up with new products in the new market. For McDonalds the concept of product development is best as they have already captured the majority market. Strategic recommendations Looking at this study and understanding the strategy used by McDonald’s for growing its business in the global market certain recommendations can be made to improve their operational process. The company must look to have extensive supply chain network across the whole world finding the right suppliers of the materials so that they can have fresh items and also reduce their cost as a result of which they can put more concentration over customer satisfaction. . The PEST analysis for understanding the factors affecting the strategies and operations of McDonald’s in the global market clearly shows the importance of the preference and liking difference in different countries. The company must conduct a quality functional deployment (QFD) to understand the exact liking and preference of the customers at various countries so that they can make the same kind of food items which will make customers prefer more of McDonald’s product over other companies which will give McDonald’s a huge competitive advantage in the global market as they will be able to provide items based on the exact preference of the customers. References Brown, L. 2009. Marketing and Distribution Research. New York: Ronald Press Company. Burgemeister, S. 2003. Market analysis. Berlin: GRIN Verlag. Burrow, J. 2011. Marketing. Stamford: Cengage Learning. Cheverton, P. 2005. Key Marketing Skills: Strategies, Tools and Techniques for Marketing Success. London: Kogan Page Publishers. Churchill, G. 2009. Marketing Research. London: Cengage Learning. Corbin, J and Strauss, A. 2008. Basics of Qualitative Research. London: Sage. Handy, C. 1996. Gods of Management. Oxford: Oxford University Press. Henry,A. 2008. Understanding Strategic Management. London: Oxford University Press. Knapp, E. 2000. The Brand Mindset. New York: McGraw Hill. Kotler, P. and Pfoertsch, W. 2006. B2B Brand Management. Berlin: Springer. Mueller, B. 2011. Dynamics of International Advertising. New York: Peter Lang. Office, S and Webster, R. 2010. Management of risk: guidance for practitioners. London: The Stationery Office. Proctor, T. 2014. Strategic Marketing: An Introduction. London: Routledge. Ries, A. and Trout, J.1986. Positioning: The Battle for your Mind. New York: Warner Books. Wright, R. 2006. Consumer Behaviour. Stamford: Cengage Learning. Read More