This report will be researching McDonald’s and explaining how they have adapted their
processes and products in order to adapt to selling within a new market, and how effective
McDonald’s have been in adapting their strategies in order to be successful in trading
internationally.
McDonald’s is an American fast food restaurant which was founded back in 1940 that
specialises in selling burgers, chicken products, milkshakes and breakfast items in over
40,000 restaurants across approximately 120 countries around the world. McDonald’s is the
world’s largest fast-food chain and currently employs over 1.7 million people while serving
more than 70 million customers each day (WorldPopulationReview, 2022). In order for a
business to be successful in trading internationally, McDonald’s will need to adapt its
products and processes in order for the business to be effective within the market they are
going into. Therefore, businesses will use strategies so that they can be successful in
operating internationally and achieve their business aims and objectives. Four examples of
strategies that McDonald’s use in order to expand their business into new markets include:
,Partnerships
A partnership is where two or more businesses join together by combining resources, risks
and profits in order to improve the workforce performance of both businesses by providing
new opportunities and learning experiences, as well as making it easier for businesses to
introduce new products and services as the risk is shared between the businesses.
Additionally, a partnership can help a business achieve their objectives through the
knowledge and expertise of the other business partners. An example of how McDonald’s
have used partnerships before was to enter into the vegan market, as McDonald’s agreed on
a three-year global deal with Beyond Meat in order to find many innovative protein
alternatives so that McDonald’s can target their products at the vegan market to increase the
number of sales they make, as vegan customers will be able to buy goods from McDonald’s.
From this partnership, McDonald’s are able to stay ahead of competitors through being able
to offer their vegan customers with high quality food items, and as veganism is being
increasingly popular worldwide with 79 million people choosing to follow a vegan diet in
2021, this partnership has been important for McDonald’s to not lose their customers to this
consumer trend and to stay the market leader within the fast-food market. One way in which
partnerships are effective is because two or more businesses will be committed to achieving
a certain business goal, in which finance, knowledge and resources will be shared between
businesses in order to achieve these goals and increase the chances of success for the
business. As all businesses will have a mutual interest in being successful, this will help
encourage the business in achieving what they want to achieve through communicating and
sharing resources with the other businesses within the partnership. Another way that
partnerships are effective is due to the fact that they are easy to create, as they have fewer
obligations than joint ventures as there is no need to register with Companies House and
registering the business for taxation purposes is simple (informdirect, 2017). Partnerships
also provide both businesses with access to more finance, as both businesses will share
their resources and finances in order to invest in the business and purchase the resources
and equipment needed in order to improve business performance and achieve business
objectives. The advantages of partnerships include offering new business opportunities
through sharing the knowledge and expertise of staff as well as finance and resources that
the businesses would not be able to afford if they were separate businesses. Additionally, a
partnership will bring new ideas and a fresh perspective to the business which could help the
business improve the number of sales they make, profit they receive and reduce staff
turnover. A final advantage of partnerships for a business is flexibility it will bring due to each
business having shared responsibility and having to complete a shared amount of tasks,
while taking on an equal amount of risk with the other businesses in the partnership, allowing
for each business to split the business objectives according to what they are good at
achieving in order to ensure each task is completed successfully and that the business can
achieve what it went into a partnership for. However some disadvantages of partnerships
include the fact that there could be disagreements between both businesses as each
manager could have different ideas on how business objectives should be achieved, which
could confuse employees and potentially increase staff turnover. Additionally, there could be
disagreements on how much profit each business partner receives from the partnership.
There could also be an unequal share of resources and profits between each business,
which could lead to a decrease in the quality of goods and services giving the business a
negative reputation from customers and decreasing each businesses’ market share. There is
also a loss of control for each business manager when creating a partnership with other
businesses which will lead to managers needing to consult with each other before important
business decisions can be made (tpi, 2022).
Joint ventures
Joint ventures are separate business entities which are created by two or more businesses,
who will share risks, resources and profits between them. Joint ventures will benefit both
,businesses through the sharing of market knowledge and suppliers which will help to make
the business objectives a success, especially when entering a new market like expanding
internationally. An example of how McDonald’s have successfully used joint ventures in the
past is through working with a Japanese mobile operators, NTT DoCoMo, in order for
McDonald’s to increase sales through customers of NTT DoCoMo being able to pay for the
goods they have purchased from McDonald’s through a mobile phone payment system,
integrating McDonald’s 1.4 billion annual customers and DoCoMo’s 52 million customers
together in order for both businesses to increase their market share and technology through
McDonald’s and NTT DoCoMo sharing costs and risks in order to make this venture
successful (Finextra, 2007). One way in which joint ventures are effective is because by two
or more businesses working together in order to achieve a specific goal, all businesses will
have access to the other businesses' markets, suppliers and customers in order to reduce
costs while being able to successfully introduce new products to a new market with the
expertise of the other businesses’ staff. Additionally, joint ventures help to reduce the risk of
expanding into a new market for a business, as risk and costs will be shared between all
businesses that are part of the joint venture, as each business will have responsibilities
involving purchasing and researching in order to make the group project a success. Joint
ventures also bring additional benefits to all businesses that are taking part, such as
enhanced credibility from the strong customer base the other businesses have built up and
improved economies of scale by being able to use the suppliers and manufacturing options
that the other businesses are using (CFI, 2022). However some disadvantages of joint
ventures include the fact that it can be very time consuming for a business to build a good
enough relationship with another business or businesses in order to create a joint venture,
as all businesses will need to be willing to share risk, profits and staff. Additionally, by
businesses working together, there is the possibility of conflict as each business might have
different objectives and goals from what they want to get out of the joint venture. There is
also the risk of resources and the expertise of staff not being distributed equally, as one
business might have better employees and resources than the other. Finally, the different
business cultures and management styles between two or more businesses might impact
how successful a joint venture can be, as this could hold the businesses’ back from being
able to achieve the goals and objectives they created the joint venture for.
Franchising
A franchise is where the franchisor will sell the right to use their business name and idea to
the franchisee, when the franchisee will buy these rights in order to sell the franchisor’s
goods and services under the already existing business model and trademarks. These are
most popular when somebody wants to start their own business, but does not want the full
risk involved with it, therefore they will purchase a franchise in order to access the
business’s existing brand name and receive the resources and customers the business
currently has. McDonald’s uses franchising in order to have restaurants in 40,031 locations
throughout the around 120 countries they operate in, because of franchising McDonald’s
have been able to increase the number of restaurants they have worldwide every year for
the past 16 years (Statista, 2022). This can help to give McDonald’s an advantage over
competitors as they can obtain franchisees in busy areas where their competition is not
already located. McDonald’s heavily relies on franchising in order to be successful as
approximately 93% of all McDonald’s restaurants are owned by franchisees’. McDonald’s
franchisees are equipped with the training they need in order to manage the restaurant
successfully, increase sales and make sure each department of the restaurant is running
smoothly. Franchising is an effective business strategy because it gives the business the
opportunity to expand and grow their brand without taking on all of the risk, as franchisees
will need to pay franchise fees and rent for the premises the franchisee is using for the
franchised business. For example, McDonald's franchisees’ will need to pay monthly fees of
between 12.25% to 21% of the restaurant’s net sales in rent which is fixed for a 20 years
,term. Additionally, franchisees’ will need to pay McDonald’s an additional monthly service
fee of 5% of the net sales, and a contribution to the marketing fund for McDonald’s which is
4.3% of net sales. This provides McDonald’s with guaranteed income which will help to
reduce the risk of using franchisees’ to expand their brand name, while giving McDonald’s
the finance they need to expand their business into new markets and advertise their
products in order to gain more sales and market share through attracting new customers to
the business. As well as this, franchising will reduce the management demand within the
business, as franchisees’ will be responsible for running most aspects of their franchise and
therefore there will be less need for managerial help, as franchisees’ will have the expertise
and knowledge they need in order to be successful in growing their franchise and staying
successful. An advantage of a business using franchising as a method of expanding their
business is by a business expanding their brand by opening new stores, they will increase
their purchasing power, as a more well known brand with a higher market share will have
access to better deals from suppliers due to the increased negotiating power they will have,
compared to a less well known business, which will help the business to reduce costs.
As well as this, franchising will bring new ideas to the business which the franchisor might
not have previously thought about, that could increase sales and market share for the
business, as franchisees’ might provide the business with new opportunities and knowledge
that could help better the business with a selection of new ideas, as franchisees’ will want to
support the business in doing well and will be willing to share their views and opinions on
how the business can grow. A disadvantage of a business using franchising as a method of
expanding their business is it can be time consuming and expensive at first, as the
franchisor will need to pay in order to train and support their franchisees’, as well as prepare
any legal documents and materials needed for the franchisee to receive and open their
franchise. Another disadvantage of a business using franchising is that there will be a loss of
control for the franchisor, as the franchisee will take responsibility for the day to day running
of the business and will be responsible for making sure that the business is successful and
gaining sales. Therefore, it is essential that franchisors make sure their employees are well
trained, otherwise this loss of control could be a big risk to the business (Haarsma, 2021).
Outsourcing
Outsourcing is when a business will hire another business or businesses in order to create
goods or perform business tasks for them, so that the business does not need to use their
own in-house employees and resources. McDonald’s have used outsourcing in the past as
part of a cost-cutting measure by outsourcing its technology-based systems to offer
customers with an efficient customer service at McDonald’s drive throughs, as McDonald’s
using a voice assistant instead of a human to take orders at drive throughs will help to
reduce drive through queue times by an average of 30 seconds since 2018, which means
that McDonald’s can make considerably more sales, gain more profits and increase their
market share through outsourcing the technology they need in order to do this. (Wired,
2020). Other ways that McDonald’s have used outsourcing is through using other brands to
offer dedicated parking spaces for pick-up orders and also offering a drive through lane
exclusively for pick-up orders that will deliver customers’ food to them on a conveyor belt
system. One way that outsourcing is effective is because of the time savings and finance
savings it can bring to a business, by using other businesses in order to complete certain
tasks, businesses will be using experts that have been trained well in order to get their
assigned tasks completed quickly and efficiently, which will free up a businesses’ time as
they will can give their employees other tasks while the outsourced tasks get completed
quickly by external experts. This gives a business the opportunity to only focus on the
important tasks that matter, while also saving costs through needing less employees, as
outsourcing business tasks to another business will usually be a lot more affordable for a
business than hiring a new employee and having to pay them a wage and pay for
recruitment costs (leavedates, 2020). Outsourcing is so efficient for some businesses that
, 70% of British businesses outsource key services to other businesses, such as IT and
accounting tasks. Another way that outsourcing is effective is it will give a business access
to the expertise they need, that they might not have, as businesses can outsource tasks to
other businesses which have employees that have been trained in the specific skills that
they will need in order to complete the task they have been assigned, that a regular
businesses’ team might not have the skills needed in order to handle such a task. The
advantages of outsourcing include increased productivity in the workplace, as outsourcing
certain tasks to external businesses gives employees more time to focus on the tasks that
they need to complete, with employees being able to focus on the tasks that matters by
giving more difficult and complicated tasks to other businesses, while employees complete
the tasks they have been trained to do well. Another advantage of outsourcing is the
business will be using trusted external talent in order to complete certain tasks which will be
reassuring to the manager, as risk will be shared between both the business and the
external business completing the outsourced tasks. However some disadvantages of
outsourcing include the fact that there are hidden costs involved with using another business
to complete certain tasks as outsourcing businesses might ask for a contract to be signed
which may contain unexpected costs for the business, making this chosen method
expensive. Another disadvantage of outsourcing for a business is control will be lost when
using external businesses, as the business will not be aware of how tasks will be completed
as they will not be able to monitor employees that are at the outsourcing business, this could
reduce quality control and potentially the quality of goods and services that the business
offers which could lead to higher levels of customer dissatisfaction and more customers
choosing to shop at a competitors’ business instead. There are also data protection
concerns with using outsourcing, as sharing customers’ personal data to an outsourcing
business will bring the risk of other people finding out personal information about customers
and risk this information being used illegally if the outsourcing business is not trusted
(Smallbiztrends, 2021).
When McDonald’s are hiring employees in order to operate McDonald’s restaurants in a new
market, McDonald’s will look to hire people who already know the industry well, such as
people who have previously worked at a competitors’ business or have qualifications relating
to the job role they want to do within McDonald’s. Additionally, McDonald’s will require
employees to have knowledge of their local language and maths qualifications at school,
such as needing a grade C in English Language and Maths in the UK, and preferably
knowledge in ICT so that employees can use till systems in order to sell products to
customers (McDonald’s, 2022). It is important that employees have the necessary language
and maths skills, so that they can effectively communicate with customers, encourage them
to buy goods from McDonald’s and return to the business again in the future and to
effectively charge customers the right prices on the products they are buying so that
McDonald’s do not risk customers being under or overcharged. McDonald’s will also look for
employees to have the ability to multitask in order to meet deadlines and get everything
expected of them achieved within their shift, as well as having a friendly attitude towards
customers to give customers a positive experience at McDonald’s which will encourage them
to return to the business again in the future, leading to more sales and an increase in market
share for McDonald’s.
Parent Country Nationals
Parent country nationals (PCN) are the employees of a business who are born in the country
where the headquarters of their business are located, but are sent to another country, such
as if McDonald's where to send their American employees to go and work in Spain, this
would make the employees a PCN. One of the reasons why a business might consider hiring
PCNs when expanding their business into a different country is so that they can bring
employees who already have a good understanding of the business values, and the
