It also means the structure is relatively a mix of formal and informal forms which is quite a challenge to manage successfully. 5) Tailoring the right menu. They earned certificates in "hamburgerology with a minor in french fries". newspaper archive. Another reason was Kroc's attention to detail. 2. This feature has been particularly taken care off for making sure that the needs and requirements of the vegetarian population are fulfilled ((McDonald’s Fact File 2007, 2007). Get it wrong, and it may cost you more than a little humiliation and a pile of cash. It is challenging for managers to consistently keep in pace with the right balance of centralizing and decentralizing the operations. Meanwhile, McDonald's opens its first international restaurant in Canada. McDonald's Corporation (NYSE: MCD) is the world's largest chain of fast food restaurants, serving around 68 million customers daily in 119 countries. You can view samples of our professional work here. BA 654 Lesson #1, Assignment #2: Chapter 1 Case Study Review Case 1-1 on pages 35-38 of your text and address the following questions in a brief essay of 250-300 words: CASE 1-1: McDonald’s Expands Globally While Adjusting Its Local Recipe Today, McDonald’s golden arches are one of the most recognized symbols in the world, just behind the Olympic rings. This particular facility gives McDonalds an upper hand in South Africa. 4. Of course, it is largely due to the dual marketing plan of the company: 1. McDonalds should work on increasing these facilities in a lot of high profile, metropolitan cities across the world. Brazil: McDonalds opened its first branch in Brazil in 1979. With over 90 branches in South Africa, employment opportunities are high for local people and are expected to rise. Currency fluctuations: When companies go global, there is always a risk associated with currencies as they keep fluctuating based on the markets. McDonald’s, the most renowned fast food chain of the world, started in 1955 by a visionary named Raymond Kroc (McDonalds : The Ray Kroc Story, 2010-2011). At first growth was slow and the relationship between Kroc and the brothers was uneasy. CHINA: The strategy used by McDonalds in China is quite different from the way the restaurants are otherwise managed in the United States. Basically, the central control is in its headquarters where different financial and strategic controls are used to create value for the entire network (Hitt, et.al 2007). McDonalds can look at diversifying into other areas of food industry for example; McDonalds Hotel in Zurich is a distinctive venture. It is one of the most widely recognized icons of the world in the fast food restaurant industry. • The £16billion annual revenue of McDonald's makes it the 90th largest economy in the world, outstripping many entire nations. With operations in over 120 countries and a huge number of 31,000 restaurants, McDonalds procures its food and packaging from the same set of suppliers. Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. 1. Going Global. Inspite of an American base, McDonalds respects the markets, cultures, beliefs and likings of other nations. 2. 1. Customers identify with the brand name and “the Golden Arches” are recognized not only in America but in foreign countries as well (McDonald’s Fact File 2007, 2007). Reference this. Increased global competition, customer needs, potential opportunities, declining foreign trade barriers, increasing expenses in domestic markets are some of the reactive reasons for companies going global. • The first McDonald's restaurant in the UK opened in 1974 in Woolwich, south-east London. Express. Four years later, the company heralded the expansion into its 100th nation, Belarus, and claimed to be opening a new restaurant somewhere in the world every three hours. There are many reasons for companies to go global or expand overseas. 4. 3. Copyright © 2003 - 2020 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. It doesn't matter if you're visiting a McDonald's in California or Connecticut, America or Australia—you're going to have a similar experience wherever you are.This highlights Ray Kroc's vision for McDonald's from the beginning. Entrepreneur Ray Kroc extended the McDonald's empire Much later his company became a symbol of rampant globalisation and got caught up in the obesity debate. McDonald's is synonymous with fast-food in many parts of the world, but there is one country where it's failed to capture national attention. Free resources to assist you with your university studies! When he arrived in Southern California, he was intrigued with what he witnessed. Kroc was a salesman from Illinois who ventured to San Bernardino, California in 1954 after receiving a larger than normal order for the milkshake multi-mixers he was selling. Creating new menu products and developing a … Serving Up Growth Overseas. Unwitting staff would often receive a phone call late at night telling them to make sure to clean up properly. 3. Adaptability: It is one of the major strengths of McDonalds. Franchisees Challenges: There is an increase in the fee that franchisees have to pay to McDonalds thus resulting in selling of the businesses and dissatisfied franchisees. There are a lot of emerging markets particularly in the BRIC countries such as Brazil, Russia, India and China. 1990 - McDonald's opens a … Ray Kroc’s vision was that there would be 1,000 McDonald’s restaurants solely in the United States. 2. McDonald's menu has grown 42.4% in the past seven years, from 85 items in 2007 to 121 items today, according to The Wall Street Journal. 3. Within six years the clown was familiar to 96 per cent of American children, far more than knew the name of the president. See today's front and back pages, download the newspaper, They have successfully implemented international strategies where in they have used localization and customization processes to adapt to the foreign countries along with maintaining its American origin by having centralized procedures as well. In the spring next year, media giant Walt Disney will open one of its most ambitious international expansions – a Disneyland theme park in Shanghai. He was replaced by Ronald McDonald in 1967, originally introduced by a franchise holder in Washington DC. McDonald's Strategy When Selling Internationally Organisations are competing harder than ever to expand their businesses by increasingly penetrating new markets, winning new customers and developing new product lines. Home of the Daily and Sunday Express. The internal analysis of the firm are carried out to understand its strengths and weaknesses either which are existing or are potentially going to exist in the future as compared to its competitors (Deresky, 2006). The golden arches of McDonald's are said to be the most recognisable symbol in the world. McDonalds sets an exemplary example of a company which implements global strategy and a centralized organizational structure. Joint ventures can be taken up with established companies in foreign countries with inclusions of coffee shops, bakery, internet access add-ons in all high profile metropolitan cities McDonalds currently have restaurants. In return for allowing Kroc on board the pair would receive half a per cent of all gross sales. The company has high growth potential in the years ahead, thanks to aggressive international expansion. McDonald's traces its origins to a 1940 restaurant in San Bernardino, California.After expanding within the United States, McDonald's became an international corporation in 1967, when it opened a location in Richmond, British Columbia, Canada. Let’s take a look at why the company stagnated and failed to expand in Vietnam. After initially selling a range of barbecued food they'd realised that hamburgers sold best. 1. McDonald s has a presence in 120 countries. Customization of products to suit local needs is a key factor that should be considered in the global expansion plan. All these factors contribute to the high revenues and with advanced software systems; the aim is to enhance “bottom line” as well ((McDonald’s Fact File 2007, 2007). Customization of activities and menu to suit local needs is the single most factor contributing to its success. Some of the other ways the approach in China was different as compared to the United States was that McDonalds customized the menu by adding teriyaki burger which gave locals the flavour of their native food taste (McDonald’s Fact File 2007, 2007). He insisted every burger in every restaurant was of the same quality and that packaging was consistent. Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com. Competition: With globalisation and increased number of companies looking to expand internationally, it is a challenge for McDonalds to keep up to or enhance its already existing powerful status in the market. An example of a company which looked to expand beyond its borders is McDonalds, one of the most successful companies in terms of implying international strategies successfully. Standardization strategy • The original McDonald's mascot Speedee was a chef with a hamburger for a head. Innovation: With wide variety of options available from snack wraps to coffee to burgers to McCafe, McDonalds is very innovative with reference to its products. International expansion has been the focus of Burger King for the past several years. As described in the above sections, McDonalds has huge potential in global markets to venture out in different areas specially the BRIC countries. Additionally, it is important to understand the opportunities and threats that potentially exist for McDonalds to consolidate its global position in the fast food industry. 1. The franchise model has been successfully used in Brazil and the management team has been praised for consistent performance and high standards of quality. Study for free with our range of university lectures! As these cities are the centre of research and growth opportunities, McDonalds should focus their internationalization in these areas much more than they are currently doing. With experience, localization started increasing and the entire model was redone to appeal the localites of the foreign country. order back issues and use the historic Daily Express Its Glo-cal strategy to serve the customers in a better way & enriching their experience with local menus is the smartest step that proved critical to McDonald’s … The company has had some marketing misses. Registered Data Controller No: Z1821391. Expansion: Even though it serves over 60 Million people on a daily basis that accounts for just about 1% of the world’s total population. Additionally, the drive-through approach works well in the South African region. The decision making takes place centrally in the United States (Hebert, 2011). He was an aggressive businessman with a good grasp of the importance of marketing and advertising. While understanding the organizational capabilities and the external environment, it is crucial to understand the organizational structure of McDonalds. Kroc played a significant role in revolutionizing the fast food industry in America and currently Mc Donald’s is serving over 60 million customers in over 117 countries on a daily basis (McDonalds : The Ray Kroc Story, 2010-2011). 5. Unexpected circumstances: Uncertainties such as natural calamities, unexpected diseases can affect the smooth flow of activities for McDonalds in terms of procurement of goods and food contents which can decline the sales drastically. So that day he had another motive. Much later his company became a symbol of rampant globalisation and got caught up in the obesity debate. McDonald's first began to expand internationally in 1967 with the opening of restaurants in Canada (Country no.2) and Puerto Rico (Country no.3). Our academic experts are ready and waiting to assist with any writing project you may have. We've received widespread press coverage since 2003, Your UKEssays purchase is secure and we're rated 4.4/5 on reviews.co.uk. Growing need for drive through facilities: Drive through facilities is highly visible in South Africa. Additionally, the management’s ability in Europe slowly changed the taste of the Asian consumers towards fast food which is an unusual aspect of the Chinese culture. Please see our Privacy Notice for details of your data protection rights. McDonalds should focus on high and low areas of population, reaching out to more and more sections of the society. 1984 - Kroc dies. The Big Mac becomes Maharaja Mac in India and another highlight of the menu is having separate vegetarian kitchens with separate utensils and cooks. For example in Germany, McDonalds has a tie up with T mobile for hot spots. 3. 20th Jul 2017 He offered refunds to customers who were kept waiting for more than five minutes or whose orders were incorrect. • It's estimated that one in every eight Americans has worked at McDonald's at some stage in their lives. They should look at improving their customer services at the counters by avoiding long queues and providing high levels of customer satisfaction. Sensing an opportunity he approached the brothers, who had opened for business in 1940 and were doing quite nicely, thank you. Studies have shown that a combined effect of a heavily saturated domestic market, and high market potential for foreign markets, prompts many businesses to expand internationally (Hackett 69). Porter’s Five Forces is utilized to critically evaluate the international strategy adopted by Coca-Cola. India: The approach to adapt locally to the country has been a highlight for McDonald’s success. South Africa: A relatively unique strategy has been used by McDonalds to serve customers where they can enjoy their meal while shopping and playing. McDonald’s acquired the rights to the brother’s company in 1961 for $2.7 million. 2. By 1955 the McDonalds had built up a successful but modest chain of eight restaurants featuring a simple self-service menu which allowed speedy service. The returns for McDonalds in South Africa have surpassed the initial targets of turnover and profits. Kroc's first branch opened on April 15, 1955, in Des Plaines, Illinois. Also, the processes or the way every country operations are managed are innovative in a way that they are suited to fulfill the local needs. 1. Different marketing strategies are used to attract people from different sections of the society. Disclaimer: This work has been submitted by a university student. The company has a global brand value and worldwide recognition. McDonald’s is one of the world’s best-known and iconic brands. Increase in fast food category: Based on statistics from Euromonitor, there is a growing demand for fast food. • Generally the cooperation is at pains to offer a selection of standardized core McDonald’s is an example of a company that gained tremendous benefits from globalization. There are reactive and proactive reasons for the same. • It employs more than 1.7 million people at 35,000 branches, second only behind Walmart. McDonalds believes in having sustainable supply chain consisting of 3 E’S: Ethical Responsibility, Environmental Responsibility and Economic Responsibility (Sustainable Supply Chain, 2010-2011). The status of franchising in the markets where we currently do business is described on the specific pages identified by market below. The prime reason for the success of McDonalds in China is the involvement of McDonalds to adapt to Chinese Culture. This takes care of blending with the local culture and values of the foreign country. 1974 - The first Ronald McDonald House opens. That’s where their greatest strength came in because McDonalds became adaptable by researching and altering their menu subtly for other countries and cultures. BURGER OUTLET THAT BECAME A GLOBAL PHENOMENON. Local people manage the operations in McDonalds in China, thereby reaching out in an easier way to the locals of the country. It shows the uniformity of a branch in United States and India. All work is written to order. Kroc had heard that his milkshake machines ran continuously to cope with demand at the restaurant and was anxious to see what all the fuss was about. Today there are branches of the fast food chain in 119 countries selling 75 burgers every second. McDonalds is the number one brand in the fast food industry. One of the accolades received by McDonalds in Brazil is the Hallmark of Quality. … Porter’s five force analysis approach to the industry plays a very crucial role, according to him international business has lot of competition in the international arena (Porter, 1986). In terms of the way McDonalds organizational structure is oriented, it is relatively organized in terms of how the growth and expansion takes place internationally. The prime reason behind the fast and successful international expansion of Mc Donald's is the franchise mode of entry in international markets which allows shareholders to share the rewards and risks of pursuing and exploring of new opportunities globally. It wasn't a happy separation. Looking for a flexible role? A long history of expanding into new territories has given McDonald s the ability to mold its menu according to the tastes of the local population. What is the secret to the company’s international success? In some countries it is still a status symbol to go and have a meal at McDonald's. The number of restaurants in For example: In Australia, sales of fast food grew by 7% in terms of value in 2008 to reach A$ 10,921 Million. Yet, McDonald’s continued to grow and expand into international markets beginning in 1967 opening in Canada and Puerto Rico. Inspite of the fast growth in Brazil, franchisees have difficulty in reducing costs ((McDonald’s Fact File 2007, 2007). McDonalds closes five times in the day for prayers and they do not serve pork to respect the Islamic culture in Saudi Arabia. CHINA:The strategy used by McDonalds in China is quite different from the way the restaurants are otherwise managed in the United States. • McDonald's is seen as the number one representative of the all American lifestyle, which at the time when the expansion began was very popular. This strategy has been a turnaround point for McDonalds but it has thed potential of losing brand equity in the future (McDonald’s Fact File 2007, 2007). Around 85% of the restaurants are operated by franchisees. 2. While you may be a success in your local market, selling internationally is fraught with danger. The prime reason for the success of McDonalds in China is the involvement of McDonalds to adapt to Chinese Culture. The restaurant was efficiently serving a la… Organizational capabilities look at a firm’s ability to manage resources in order to gain sustainable competitive advantage (Hitt, et.al 2007). … If you need assistance with writing your essay, our professional essay writing service is here to help! Additionally, the management’s ability in Europe slowly changed the taste of the Asian consumers towards fast food whi… The organizational structure is in sync with the strategy used by McDonalds to be ahead of its competitors. McDonalds is the industry leader in terms of sales, market cap, employees, gross and net margins. The McDonald's Corporation is one of the most successful global restaurant chains around the world. This approach is used in highly populated areas with busy lifestyles of South Africa. Franchise owners went through a training course at "Hamburger University" in Illinois. McDonalds follows a standardized set of procedures across all its restaurants in terms of quality, service, cleanliness and value propositions. One of the challenges that exist for McDonalds in Brazil is bankruptcy because of which it is difficult to meet the expenses on a monthly basis. Marketing: The McDonalds logo is a popular one amongst children and adults all across the globe. • In 1993 the company celebrated selling 100 billion hamburgers. The chain continued to expand domestically and internationally, extending to Canada in 1967, reaching a total of 10,000 restaurants by 1988, and operating more than 35,000 outlets in more than 100 countries in the early 21st century. This can cause difference in planned returns for McDonalds. Kroc got to keep the McDonald's name while the brothers rebranded their original branch in California, calling it the Big M. Kroc responded by opening a restaurant in the same neighbourhood. McDonald’s is expanding in India’s prosperous south and west region, where its other Indian partner, Hardcastle Restaurants, was converted from a joint venture into a master franchisee in 2010. We will use your email address only for sending you newsletters. First, you spread the risk of slowing demand across multiple countries. They can look at expanding these facilities in other parts of the world with dense populations. Kroc earned an estimated personal fortune of more than £300million but gave much of it away. The massive and aggressive expansion strategies that McDonald’s took up in India was with the sole objective of establishing its presence indelibly in the sub continent and to prove to the world that if … 2. The famous golden arches logo was introduced the following year and the explosion of the car industry was a key factor in the success of McDonald's. Managers look at different strategies that can be used to expand internationally (Deresky, 2006). Customer Service: Long queues, insufficient employees at the counters are frustrating for customers and many times the employees are rude in terms of their behaviour with customers. McDonalds is an example of a company which is centralized in its core but still customizes the menu and the operational activities for local needs. The base of the approach is to provide comfort to the customers in shopping malls, towns and other areas. Growth was so swift in the 1990s that it was said a new McDonald’s opened somewhere in the world every five hours. McDonald's reached its sixth (and, barring a sub-Arctic drive-thru, final) continent in 1992, with the opening of a restaurant in Casablanca, Morocco. There are some exclusive outlets of McDonalds in the Holy City of Makkah which serve to Muslim customers only with only Muslim staff in every department ((McDonald’s Fact File 2007, 2007). This demand is increasing due to stressful lifestyles and constant time pressures (Consumer lifestyles- Australia, 2009). Kroc, who was born to parents of Czech origin, once quipped: "I was an overnight success all right but 30 years is a long, long night.". In times of great uncertainty, our Franchisees work with a business model that has successfully been delivering year-on … Ray Kroc, who married three times, never retired and took a keen interest in the first branch he opened until his death in 1984. No plagiarism, guaranteed! Company Registration No: 4964706. I was an overnight success all right but 30 years is a long, long night. By 1958 there were still only 34 McDonald's restaurants but the figure trebled the following year as the dynamic Kroc extended the burger empire. Kroc kept the assembly-line operation the brothers had pioneered and McDonald's became the world's most profitable restaurant franchise operation. This is not an example of the work produced by our Essay Writing Service. Today, on average, McDonald's opens a new restaurant every three hours. We're here to answer any questions you have about our services. To achieve economies of scale, expanding base for growth and profits, cost savings, access to different resources are some of the proactive reasons for companies going global (Deresky, 2006). VAT Registration No: 842417633. Although McDonald’s offers its products everywhere in the world, being the most popular restaurant on the planet, the brand keeps recognisable with its original meaning and identity whilst catering to … If one market never gains or loses interest in your offerings, you can pick up the slack with success in other countries. Corporate Social Responsibility: McDonalds has programmes for having a better society. Locals in China responded positively to the fast food concept of McDonalds thereby making the investment in China a successful one. As of now, McDonald’s onl y has around 22 outlets in the entire country. In 1961, amid ongoing feuding, there was an inevitable parting of the ways. Yet it would have been an entirely different story had Ray Kroc not stopped off for a bite to eat at the first restaurant in San Bernardino, California, 60 years ago. *You can also browse our support articles here >. The truth is, when building out international operations it’s a delicate balance of timing and understanding the cultural nuances. Marketing McDonald’s ensures the correct sizes before exporting for international target markets. Therefore, there are superior number of drive-through as compared to Australia and United States. Actress Sharon Stone and fellow celebrities Jay Leno, Shania Twain, Rachel McAdams and Pink have all been on the payroll. Do you have a 2:1 degree or higher? In India, the menu is highly customized to suit the Indian tastes and this justifies the inclusion of aloo tikki and paneer burgers. The first McDonald's franchise, right, in Illinois, and left, the iconic golden arches, Entrepreneur Ray Kroc extended the McDonald's empire, Not loving it: McDonald's customer left vomiting 'after being sold RAW Quarter Pounder', Young mum quits £450 McDonalds habit to shed five stone. 1. The international expansion allows a company to diversify its business in a couple of key ways. Companies all over the globe are looking for expansion and ways of entering new markets which are profitable through different entry modes (Deresky, 2006). Meanwhile, the stock pays a 2.6% dividend yield, and could grow the dividend by at least 10% each year. They should look at improving their customer services at the counters by avoiding queues... Vertical integration approach to improve its productivity with efficient software packages works well in the markets where currently! Entire nations address only for sending you newsletters thank you the decision making takes place centrally in fast! 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