1.1 Company Profile
In terms of both revenue and brand value, McDonald’s founded in California in 1940 with its headquarters in Oak Brook, Illinois is arguably the most well-known fast food chain in the world. The company serves a locally relevant-menu of various food items, soft drinks and other beverages. The corporation is so globalized that the Big Mac Index is a standard indicator for measuring the purchasing power parity between countries.[1]
To obtain operational growth, McDonald’s works aggressively on becoming a 95% franchise entity by 2018. Approximately 235.000 people were employed as of year-end 2017 in the 36.000 stores in 120 different countries. With its franchise model, the corporation is similar to a large real estate company which is structured into four segments: the largest market is the United States; international lead markets including France, UK, Canada, Australia and Germany; the high growth markets including China, Italy, Poland, Russia, South Korea, Spain, Switzerland, Netherlands and the foundational markets, including 100+ countries are also relevant.[2]
Although the annual revenues are decreasing from year to year, the company’s profitability shows a positive development. In the restaurant industry, McDonald’s generates a significant part of the company’s operating income outside the United States. With a regard for volatility risks in connection with foreign currency changes, the effective income tax rate for 2018 is expected to be in the 25-27%. Nevertheless, there are no significant capital investments required through the gains in franchisee royalties[3] to attempt benefits for McDonald’s shareholders for the long term.[4]
Table of Contents
1. Internationalisation of McDonald’s
1.1 Company Profile
1.2 News-related influences and major competitors
2. Cultural challenges
2.1 Key external drivers in the I/R Framework
2.2 Classification into a corporate culture typology
3. Critical Evaluation and strategic obstacles
3.1 Market selection and entry mode
3.2 Timing and allocation
3.3 IMGT classification
4. Conclusion
Research Objectives and Key Themes
This scientific term paper provides a critical analysis of the internationalisation process of McDonald’s. It examines how the global fast-food giant balances standardised operations with the necessity of local adaptation, while evaluating the strategic, cultural, and operational obstacles encountered in key markets such as China and India.
- Analysis of McDonald’s international expansion strategies and franchise model.
- Evaluation of cultural challenges and the concept of glocalisation in foreign markets.
- Examination of market entry modes and the strategic impact of joint ventures.
- Assessment of timing strategies and the evolution of the corporate organisation (IMGT scheme).
- Critical review of reputation risks and supply chain management in diverse regulatory environments.
Excerpt from the Book
3.1 Market selection and entry mode
In a hypercompetitive environment, every firm is vulnerable to be attacked by competitors. In the following, the motivation of the market selection and the entry and operation mode is illustrated. A comparison between the Indian and Chinese market is shown.
The ability to deploy intangible assets across national borders, especially for US firm strategy, McDonald’s expands its worldwide location with company-owned and franchised restaurants, with a goal to be approximately 95% franchised over the long term.
Noteworthily is that this goal is likely to be reached in the near future. Although the revenues declined from USD 28 billion in 2012 to USD 22,8 billion in 2017, the operative results increased from USD 8,6 billion to USD 9,5 billion. This effect can be explained by massively higher margins in the franchise business and is a reason for the successful corporate strategy. McDonald’s, as an owner of the restaurants properties, lease income plays a major role.
Licensing agreements involves a contractual arrangement, whereby a licensee acquires the rights from a licenser to use its industrial property rights or non-protected knowledge, technological know-how and experience. In Asia, McDonald’s aggressively expands its presence, particularly in China. As per the industry estimates, Chinese population constitutes nearly 19% of the world population. 55% of the population is urban. The market and cultivation strategy which should be chosen is to be active in markets like China where a growing demand for food products and beverages offered by McDonald’s exists. In order to tap this growing market, the McDonald’s Corporation has already embarked aggressive expansion plans. In August 2017, McDonald’s announced its growth initiatives. By 2022, the opening of 2000 new restaurants, bringing the total of 4500 restaurants in China is targeted.
Summary of Chapters
1. Internationalisation of McDonald’s: Provides an overview of the company's global profile and discusses how external factors, such as food safety scandals and competition, impact its reputation.
2. Cultural challenges: Analyzes the drivers for glocalisation and categorizes McDonald’s corporate culture using established typologies like the EPRG scheme and Handy’s typology.
3. Critical Evaluation and strategic obstacles: Critically evaluates market entry modes, the timing of international expansion, and the classification of the firm within the IMGT organizational model.
4. Conclusion: Summarizes the effectiveness of the refranchising strategy and highlights the risks associated with rapid expansion and real estate-dependent profitability.
Keywords
Internationalisation, McDonald’s, Franchise, Glocalisation, Market Entry, Corporate Culture, EPRG Scheme, Task Culture, Supply Chain, Reputation, Operational Growth, Strategic Management, Fast Food Industry, Joint Venture, Real Estate Operations.
Frequently Asked Questions
What is the primary focus of this paper?
The paper focuses on a critical analysis of the internationalisation process of McDonald’s, specifically examining its expansion strategies and the operational challenges the brand faces in global markets.
What are the central themes discussed in the work?
The central themes include the balance between standardization and local adaptation, the efficacy of the franchise model, corporate culture typologies, and the impact of market entry modes on long-term success.
What is the primary objective of the research?
The objective is to evaluate how McDonald’s navigates cultural, economic, and legal obstacles while maintaining its market position and brand reputation through its global expansion strategy.
Which scientific methods are applied?
The paper utilizes a qualitative analysis based on secondary data, including annual reports, industry literature, and case study comparisons between the Chinese and Indian markets.
What is covered in the main body of the paper?
The main body examines the company profile, cultural adaptation (glocalisation), the strategic evolution of the organizational structure, and the critical evaluation of market entry risks.
Which keywords characterize the work?
The paper is defined by terms such as Internationalisation, Franchise, Glocalisation, Task Culture, and Market Entry Strategy.
How does McDonald’s use the franchise model to achieve growth?
McDonald’s utilizes franchising to move toward a 95% franchise-based entity, allowing the corporation to act similarly to a real estate company while diversifying financial risk and maintaining global presence.
Why did McDonald’s encounter difficulties in India?
Difficulties in India arose primarily from legal disputes with a joint venture partner, supply chain inconsistencies, and issues regarding product quality, which ultimately impacted the brand's reputation.
What is the significance of the "IMGT scheme" mentioned in the study?
The IMGT scheme is used to classify the relationship between the subsidiary and headquarters, illustrating how McDonald’s transitioned from an international organization to a transnational one with a focus on glocalization.
- Citar trabajo
- Daniel Germar (Autor), 2018, Critical Analysis of McDonald’s Internationalisation Process. Competitors, Challenges, International Markets, Múnich, GRIN Verlag, https://www.grin.com/document/444526
