The Global Macro Environmental Variables on McDonald's in Kenya - Report Example

GLOBAL MARKETING: MCDONALDS IN KENYA by McDonalds in Kenya After analysing upon the global macro environmental factors of Kenya which would be of great help for the expansion of McDonalds into this country (PESTEL analysis in appendix), there are certain factors that need a change before the actual expansion decision is made which is whether McDonalds should expand its business to Kenya or not. The critical analysis and evaluation of these factors and the major changes needed in them are given in the next section with recommendations. Critical Analysis and Evaluation of the Global Macro Environmental Variables on the Company and Changes Needed There are a lot of concerns for McDonalds for starting its operations in Kenya. The first concern that might change McDonalds after entering the Kenyan market is that there is a lot of corruption in Kenya. It is regarded as the fourth most corrupted country of the world according to a report by AllAfrica (2013). There are a lot of people concerned about its corruption, because there are many people blaming Kenyan security forces who are the most corrupted segment of this country and corruption in Kenya is not punished as it should be (Warner, 2013). Such corruption issues might attack McDonalds as well because if McDonalds thinks of hiring people from this country, which is usually feasible for the companies as to hiring people from the host country is cheap because they are familiar with the laws and culture of that country, then McDonalds has to think over its decision twice. McDonalds might have a risk of facing losses if people are corrupt and work in a corrupt way in this company. McDonalds’ operations would not go as smoothly as the company might think it can. Moreover, there are two scenarios from which the company might have to choose. i. If the company decides to minimize the risk of corruption and avoid hiring people from Kenya, then the company has to bring its own people to operate within Kenya. That would require a lot investment and a lot of money for training their own people according to Kenyan standards. ii. If the company decides somehow to employ Kenyan people within McDonalds, then the company have to invest again to train them accordingly so as to cleanse them from corruption within. Besides, the company would have to manage a lot of cultural diversity as well that affects the performance for the company too (Gartside, Griccioli and Richburg, 2011). Another change in PESTEL that might affect McDonalds launching in Kenya is the inconsistency of regulations within the country. An Investment Climate Statement report on Kenya 2013 (US Department of State, 2013) says that there are several inconsistencies in Kenyan laws, and that might have an effect on McDonald’s operations in Kenya. For instance, there is a law which goes in favour of McDonalds but the government of Kenya does not approve it, does not take any action to implement or does not do anything about it for long then it might affect McDonalds adversely. More on that, the country seems to be open to foreign investments and the exchange rate is quite flexible, which again goes in favour of McDonalds. But Kenya imposes a lot of restrictions on foreign ownership and there are very few businesses enjoying their personal ownership. But the above mentioned report also states that Kenya has shown positive results towards betterment of regulations and ownership matters. If these two factors are experiencing change and McDonalds plans to enter Kenyan market in such a situation, then the company and its brand would have to face these changes as well. The third change in Kenya’s PESTEL that might affect McDonalds would be changes in environmental laws. McDonalds strictly follows corporate social responsibility but Kenya is considered to be ranking very low when it comes to environment protection as compared to Western Europe, US and countries like that. People need a lot of awareness to protect environment and if people start littering around with McDonalds’ waste papers then the government of Kenya would impose some kind of fine or tax for that. The company would have to suffer if any such thing happens. According to a report made with collaboration of University of Nairobi and Centre for Sustainable Urban Development (Barczewski, 2013), there are a lot of issues regarding Kenya’s environmental law and protection of ecosystem but there are a lot of steps that are taken by the Kenyan government for the good of this cause. The new Environmental Management and Coordination Act is expected to change the face of Kenyan environmental law and bring positive results not only for the society and Kenyan citizens but also for the public, private and foreign companies operating within the country. If so, McDonalds would benefit a lot from these actions. Some of the future recommendations for McDonalds to deal with these changes are mentioned below: To avoid adverse effects of corruption, McDonalds can gain the Kenyan government’s support first and then ally with the government to help them reduce corruption. McDonalds can do this by lobbying with the government to reduce the overall corruption especially the related networks of McDonalds. Fighting corruption is highly important as stated in one of the articles posted by The Guardian (Gutierrez, 2011). About the regulatory inconsistency, McDonalds can talk about the related regulatory firms that are to affect McDonalds and its operations in Kenya. McDonalds can make sure that there are no arguments and discrepancies between the regulations of Kenyan firms and the goals of the company itself. The most effective way to deal with another country’s environmental issues is to agree upon an environmental safety deal (World Trade Organization, n.d.). Safe agreements between McDonalds and the environmental firms can smooth out the trade operations of McDonalds within the country. Impact of Kenyan Culture on the Company and Brand Kenya is the melting pot of many different cultures which have the colours of both Kenyan tribal cultures and the western cultures as well. A lot of Islamic colours in the Kenyan culture are seen too, especially through their dresses. There are certain aspects of Kenyan culture that might be of greater interest for McDonalds because they would have an impact on the company’s operation in this country. The Kenyan culture is more group oriented (Kwintessential, n.d.). This means that they do not like individualistic approach, like that of West, and like to be associated with one another in the time of need and apart from that too. In the light of Hofstede theory, the Kenyan culture tends to incline more towards collectivism rather than individualism. This group oriented approach can be taken by McDonalds as an advantage because the company can make advertisements that are more targeted towards the group binding behaviour. McDonalds can focus on marketing and promotion closely by taking this group behaviour as their main element for advertisement making. Kenyan culture is also family oriented. According to the Hofstede theory, this again goes in the category of collectivism where the persons kike to be affiliated with groups, in this case families. They like living with families and even the extended families. This means that where buying decision is concerned, McDonalds figures that the buying decision unit would be larger than only relying on the individual decision. McDonalds can take benefit from this approach and again show families enjoying meals in the McDonalds eating place. The company can also focus on family orientation by showing a special occasion, celebration, party etc for which McDonalds delivery would come into the advertisements of this company. As the country has technologically advanced a lot, it has also advanced in terms of entertainment. This means that Kenyans have televisions in most of their homes now. Internet is also now within reach of every technology savvy individual of this country (Kariuki, 2014). The Kenyan culture lies close towards the indulgent society scale according to Hofstede theory because they like to indulge in activities that are fun; they like to fulfil such desires that give them joy and happiness. McDonalds is all about fun and taste. All of this goes in favour for McDonalds because the company would have a large number of target market individuals which they would aim at. McDonalds would promote their brand through television ads and internet too. McDonalds can make advertisements while keeping the above mentioned cultural factors in mind and can show them on air via televisions to a larger target market base. Same goes for the internet; McDonalds would have a lot more number of people who would be having access to internet and therefore having an even larger target market base for the company and its brand. According to an article (Bizfilings, 2012), internet serves a lot more advantages than a business can think of. So, McDonalds must make full use of this benefit. Marketing Techniques to Identify Kenyan Market Potential There are various methods and techniques for McDonalds to gauge upon the market potential for Kenya. One of the best seems to be the BERI index which measures the ease of doing business in a country and the risks associated with it. According to The World Bank data, Kenya stands on 122 according to this index. The higher the index, the lesser the regulatory restrictions for a business in that country. This means that McDonalds would be facing low restrictions for its operations in Kenya which is in favour for the company and the promotion of its brand. Already, there are very few restrictions on the incoming foreign investment and the economy is now open to new foreign businesses in the Kenyan market. This would support McDonalds to deal in this country and start its operations by opening new restaurants in the country. McDonalds can start with the capital of the country, and later on expand to other cities as well. The capital of the country would also serve as the measuring scale of the total success of McDonalds within Kenyan market. It would clearly tell what people like and what not, what do they prefer and what not, and what would they like to have in addition to the existing deals on McDonalds menu. Sometimes, when another foreign business is entering an international market, it has take upon some changes either in its operations or the product that they are offering. In this case, McDonalds would have to bring changes in its menu because the Kenyans are fonder of chicken. Most of the foods that they eat are of chicken and that is the reason McDonalds would have to bring interesting meals related to the chicken category. Also, a large number of Muslims live in this country and they are concerned about the “halal” food. McDonalds would have to give a new turn to its food because of this factor otherwise they might suffer losses because a large number of Kenyan market would not be able to eat McDonalds. References Accenture, 2011. Managing Global Workforce. Outlook Journal. [online] Available at: http://www.accenture.com/us-en/outlook/Pages/outlook-journal-2011-manage-global- workforce.aspx [Accessed on 11th April 2014] All Africa, 2013. Kenya 4th Most Corrupt Country in the World, Transparency International Says. All Africa.com. [online] Available at: http://allafrica.com/stories/201307110091.html [Accessed on 11th April 2014] Bizfilings, 2012. Understanding Your Target Market is Critical for Success. [online] Available at: http://www.bizfilings.com/toolkit/sbg/marketing/overview/understanding-your-target- market.aspx [Accessed on 11th April 2014] Gutierrez, E., 2011. Why Business Should Care About Fighting Corruption. The Guardian. [online] Available at: http://www.theguardian.com/global-development/poverty- matters/2011/jul/01/bribery-act-business-should-fight-corruption [Accessed on 11th April 2014] Kariuki, J., 2014. Improved Internet Access Revolutionizing Business in Kenya. Daily Nation. [online] Available at: http://www.nation.co.ke/counties/nakuru/improved-fibre-internet- access/-/1183314/2146882/-/562nyjz/-/index.html [Accessed on 11th April 2014] Kenya Demographics Profile, 2013. Index Mundi. [online] Available at http://www.indexmundi.com/kenya/demographics_profile.html [Accessed on 11th April 2014] Kwintessential, n.d. Kenya: Language, Culture, Customs, and Etiquette. [online] Available at: http://www.kwintessential.co.uk/resources/global-etiquette/kenya.html [Accessed on 11th April 2014] The World Bank, n.d. Ease of Doing Business Index. World Bank Group. [online] Available at: http://data.worldbank.org/indicator/IC.BUS.EASE.XQ [Accessed on 11th April 2014] US Department of State, 2013. Investment Climate Statement Kenya. Bureau of Economic and Business Affairs. [online] Available at: http://www.state.gov/e/eb/rls/othr/ics/2013/204669.htm [Accessed on 11th April 2014] Warner, G., 2013. In Kenya, Corruption is Widely Seen, Rarely Punished. NPR.org. [online] Available at: http://www.npr.org/blogs/parallels/2013/11/27/247468299/kenyas-security- forces-a-victim-of-corruption-nepotism [Accessed on 11th April 2014] World Trade Organization, n.d. The Environment: A Specific Concern. WTO.org. [online] Available at: http://www.wto.org/english/thewto_e/whatis_e/tif_e/bey2_e.htm [Accessed on 11th April 2014] Appendix PESTEL Analysis of Kenya Political When the political environment in Kenya is observed, it is very clear that foreign investment inflows are welcomed into this country. McDonald’s entry into this market would not be a problem in this regard. The government is stable and there are no major issues like riots or instability regarding political environment. The tax rates are fine and encourage McDonald’s operations if the company wants to enter the country. Besides, there are laws for the employees which are quite in favour of all the workers there because Kenya prohibits inhumane treatment to workers and gives them protection from slavery. McDonalds also is in favour of such practices and plans to promote all of these principles through its business plan. Trade restrictions are pretty low because Kenya now believes in private and foreign investments in the country which extremely favourable for McDonalds. Economic Many problems are faced by Kenya when it comes to economic environment because there are some main problems faced by this country. Inflation, high population growth, instable GDP and rapidly increasing corruption are on top of the list. Agriculture is the country’s main source of income in economic terms and the industrial sector in underdeveloped. Due to the rapid increase of information technology and the service sector, McDonalds can deem it favourable to launch its operations in Kenya. IT can help McDonalds in soothing its operations in every way and making the supply chain work smoothly till the end, till the customer gets his meal ready to be eaten. Service sector is growing and this where McDonalds can gain a lot of benefit too. Social Taking a look at the demographics, the birth rate is quite high as population continues to grow but the death rate is high too, due to AIDS. Some of the influence of the tribal culture is still there but a lot of the western culture is now seen in Kenya. There is a lot of poverty and there are certain tribal groups that own cattle. In urban cities, people wear western clothes. Crime rates are high in cities. Many hospitals are there and even adult literacy programs are run by the government. Women are treated inferior to men but now women are gaining education and living a better life by even earning for themselves. An Index Mundi report (2013) on the demographics of Kenya says that Christians constitute of 82.5 % of the population, Muslims 11.1%, Traditionalists 1.6%, other 1.7%. English and Kishwali are their official languages. By looking at all of these factors, McDonalds can take an advantage of launching itself in this country because the western culture is already at boom; people would be ready to try something new and that too, related to West itself. There are a lot of Christians in the population of Kenya and McDonalds can take advantage when it has to hire people. Therefore, hiring would not be a problem because the company would take people from the Kenyan community. Technological Kenya has made significant advancements in technology. Many of the schools are now equipped with computer labs. Huge work on geo thermal energy reserves is being done and the main office of UNESCO for Africa is in Kenya. Computer ownership by the common public is increasing which shows that educational level is increasing among Kenyan population too. High importance to secondary education is given and it is funded by the government itself. As already mentioned above, technology and IT would be of great help to McDonalds because a lot of operations would undergo through a systematic procedure and a lot of updated machinery would be used to make fresh meals in a very short time for the customers. Environmental The climate of Kenya is mostly based on rainfalls and this is the reason that flora and fauna are in abundance in this country. Kenya has become a tourist place therefore, and the country welcomes foreign inflow of money in this respect. A lot of tourist destinations are there now and this is the reason that a lot of diversity is seen in the Kenyan environment due to diverse cultural people coming every now and then. Moreover, due to this reason a lot of job opportunities are there. Besides, if McDonalds finally decides to come here there would be a number of job openings for the Kenyan people too. Legal Kenya has a similar law system as that of Britain. But also, there are Arabic laws and tribal laws. The legal framework is still weak and irresponsible which is the main concern for Kenya. Due to this, the legal system is unable to control corruption in the country. There are now less legal terms for the foreign investments, so it goes in favour for McDonalds to start its operations in this country. Read More