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. 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. 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. It wasn't a happy separation. Ray Kroc’s vision was that there would be 1,000 McDonald’s restaurants solely in the United States. I was an overnight success all right but 30 years is a long, long night. How McDonald's, a beefburger company, penetrated and grew a business across India. Corporate Social Responsibility: McDonalds has programmes for having a better society. Copyright © 2003 - 2020 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. 1984 - Kroc dies. 2. 1. McDonalds sets an exemplary example of a company which implements global strategy and a centralized organizational structure. 3. 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. McDonald’s survived only due to keen understanding of the Indian economy. 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. 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. Starbucks is a true empire. Inspite of the fast growth in Brazil, franchisees have difficulty in reducing costs ((McDonald’s Fact File 2007, 2007). McDonalds believes in having sustainable supply chain consisting of 3 E’S: Ethical Responsibility, Environmental Responsibility and Economic Responsibility (Sustainable Supply Chain, 2010-2011). This can cause difference in planned returns for McDonalds. Looking for a flexible role? It was also the date of the foundation of the McDonald's Corporation, beginning the global march of the company. 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). One of the accolades received by McDonalds in Brazil is the Hallmark of Quality. McDonald’s has set its sights on Asia, with the plan of adding over 1,500 new restaurants in China, Hong Kong and South Korea within the next 5 years. 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. Customization of products to suit local needs is a key factor that should be considered in the global expansion plan. Serving Up Growth Overseas. Of course, it is largely due to the dual marketing plan of the company: 1. McDonald’s acquired the rights to the brother’s company in 1961 for $2.7 million. 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. 3. BURGER OUTLET THAT BECAME A GLOBAL PHENOMENON. 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). 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.". This takes care of blending with the local culture and values of the foreign country. In return for allowing Kroc on board the pair would receive half a per cent of all gross sales. Our academic experts are ready and waiting to assist with any writing project you may have. This is not an example of the work produced by our Essay Writing Service. So that day he had another motive. Around 85% of the restaurants are operated by franchisees. Companies all over the globe are looking for expansion and ways of entering new markets which are profitable through different entry modes (Deresky, 2006). The franchise model has been successfully used in Brazil and the management team has been praised for consistent performance and high standards of quality. 5. It shows the uniformity of a branch in United States and India. International expansion has been the focus of Burger King for the past several years. Local people manage the operations in McDonalds in China, thereby reaching out in an easier way to the locals of the country. South Africa: A relatively unique strategy has been used by McDonalds to serve customers where they can enjoy their meal while shopping and playing. The number of restaurants in 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). 1974 - The first Ronald McDonald House opens. As described in the above sections, McDonalds has huge potential in global markets to venture out in different areas specially the BRIC countries. 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. The returns for McDonalds in South Africa have surpassed the initial targets of turnover and profits. 1. Kroc had sold five of his Multimixer devices to founders Richard and Maurice McDonald but was down on his luck following the launch of a cheaper rival model. Much later his company became a symbol of rampant globalisation and got caught up in the obesity debate. Brazil: McDonalds opened its first branch in Brazil in 1979. The base of the approach is to provide comfort to the customers in shopping malls, towns and other areas. The international expansion allows a company to diversify its business in a couple of key ways. 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. We will use your email address only for sending you newsletters. In India, the menu is highly customized to suit the Indian tastes and this justifies the inclusion of aloo tikki and paneer burgers. McDonalds is the industry leader in terms of sales, market cap, employees, gross and net margins. 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. Sensing an opportunity he approached the brothers, who had opened for business in 1940 and were doing quite nicely, thank you. Managers look at different strategies that can be used to expand internationally (Deresky, 2006). But they approached with a strategy by controlling standardized products, clean and green environments and American origin. 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). McDonalds closes five times in the day for prayers and they do not serve pork to respect the Islamic culture in Saudi Arabia. The golden arches of McDonald's are said to be the most recognisable symbol in the world. Locals in China responded positively to the fast food concept of McDonalds thereby making the investment in China a successful one. Today, on average, McDonald's opens a new restaurant every three hours. CHINA: The strategy used by McDonalds in China is quite different from the way the restaurants are otherwise managed in the United States. 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). Customization of activities and menu to suit local needs is the single most factor contributing to its success. The brothers, still wary of over-expansion, agreed to sell the business to Kroc for $2.7million - a neat $1million each after tax. The prime reason for the success of McDonalds in China is the involvement of McDonalds to adapt to Chinese Culture. The truth is, when building out international operations it’s a delicate balance of timing and understanding the cultural nuances. He was replaced by Ronald McDonald in 1967, originally introduced by a franchise holder in Washington DC. 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). The decision making takes place centrally in the United States (Hebert, 2011). Marketing 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. 20th Jul 2017 Some of the programmes they have are the greener than ever programme; recycle, renew programme; animal welfare program to name a few. McDonald’s does business in more than 100 markets around the world. At first growth was slow and the relationship between Kroc and the brothers was uneasy. He was an aggressive businessman with a good grasp of the importance of marketing and advertising. Express. Saudi Arabia: Another example of adaptation to the local culture is the way McDonalds has managed the business in Saudi Arabia. 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. 1. The company has had some marketing misses. The status of franchising in the markets where we currently do business is described on the specific pages identified by market below. Yet, McDonald’s continued to grow and expand into international markets beginning in 1967 opening in Canada and Puerto Rico. McDonalds franchising process is that of a strategic network (Hitt, et.al 2007). Meanwhile, the stock pays a 2.6% dividend yield, and could grow the dividend by at least 10% each year. But to fulfill the ever changing customer demands and customization strategies in every country, the structure needs to be a combination of centralized and decentralized forms. Get it wrong, and it may cost you more than a little humiliation and a pile of cash. In some countries it is still a status symbol to go and have a meal at McDonald's. 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. This demand is increasing due to stressful lifestyles and constant time pressures (Consumer lifestyles- Australia, 2009). 2. Even though weaknesses and threats exist, the strengths and opportunities make it a strong player in the market in the fast food industry. Meanwhile, McDonald's opens its first international restaurant in Canada. All work is written to order. 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. While you may be a success in your local market, selling internationally is fraught with danger. 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. 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. India: The approach to adapt locally to the country has been a highlight for McDonald’s success. Franchise owners went through a training course at "Hamburger University" in Illinois. 1. Please see our Privacy Notice for details of your data protection rights. Registered Data Controller No: Z1821391. With over 90 branches in South Africa, employment opportunities are high for local people and are expected to rise. 5. Going Global. See today's front and back pages, download the newspaper, 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 insisted every burger in every restaurant was of the same quality and that packaging was consistent. Kroc's first branch opened on April 15, 1955, in Des Plaines, Illinois. 4. 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. 2. 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. 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. 1. 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). McDonald's expects to open at least 2,500 restaurants this year - about 2/3 of those will be located outside the U.S. 3. He offered refunds to customers who were kept waiting for more than five minutes or whose orders were incorrect. Disclaimer: This work has been submitted by a university student. 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. Kroc earned an estimated personal fortune of more than £300million but gave much of it away. McDonald’s is an example of a company that gained tremendous benefits from globalization. Do you have a 2:1 degree or higher? It also means the structure is relatively a mix of formal and informal forms which is quite a challenge to manage successfully. 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. Study for free with our range of university lectures! McDonalds should focus on high and low areas of population, reaching out to more and more sections of the society. The restaurant was efficiently serving a la… After initially selling a range of barbecued food they'd realised that hamburgers sold best. Unwitting staff would often receive a phone call late at night telling them to make sure to clean up properly. The McDonald's Corporation is one of the most successful global restaurant chains around the world. 2. This approach is used in highly populated areas with busy lifestyles of South Africa. There are reactive and proactive reasons for the same. newspaper archive. The organizational structure is in sync with the strategy used by McDonalds to be ahead of its competitors. 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. We're here to answer any questions you have about our services. • The £16billion annual revenue of McDonald's makes it the 90th largest economy in the world, outstripping many entire nations. The combination of the four points mentioned above and adaptability helped McDonalds become the global phenomenon it is today. 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. For example: In Australia, sales of fast food grew by 7% in terms of value in 2008 to reach A$ 10,921 Million. 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). • In 1993 the company celebrated selling 100 billion hamburgers. 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). The company has a global brand value and worldwide recognition. That’s where their greatest strength came in because McDonalds became adaptable by researching and altering their menu subtly for other countries and cultures. 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. 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. Let’s take a look at why the company stagnated and failed to expand in Vietnam. Growth was so swift in the 1990s that it was said a new McDonald’s opened somewhere in the world every five hours. Home of the Daily and Sunday Express. The company has high growth potential in the years ahead, thanks to aggressive international expansion. In times of great uncertainty, our Franchisees work with a business model that has successfully been delivering year-on … They doubted the popularity of McDonald's could be replicated in colder US states and were reluctant to risk the business they'd toiled so hard to establish. 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. Free resources to assist you with your university studies! 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. 1990 - McDonald's opens a … McDonalds follows a standardized set of procedures across all its restaurants in terms of quality, service, cleanliness and value propositions. • It employs more than 1.7 million people at 35,000 branches, second only behind Walmart. It is one of the most widely recognized icons of the world in the fast food restaurant industry. 1. By reaching saturation levels in the United States, McDonalds looked to expand internationally amidst increasing regulations. Porter’s Five Forces is utilized to critically evaluate the international strategy adopted by Coca-Cola. When he arrived in Southern California, he was intrigued with what he witnessed. McDonalds should work on increasing these facilities in a lot of high profile, metropolitan cities across the world. Within six years the clown was familiar to 96 per cent of American children, far more than knew the name of the president. Company Registration No: 4964706. 3. First, you spread the risk of slowing demand across multiple countries. • Generally the cooperation is at pains to offer a selection of standardized core Another reason was Kroc's attention to detail. In … The prime reason for the success of McDonalds in China is the involvement of McDonalds to adapt to Chinese Culture. 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 … Currency fluctuations: When companies go global, there is always a risk associated with currencies as they keep fluctuating based on the markets. There are many reasons for companies to go global or expand overseas. Therefore, there are superior number of drive-through as compared to Australia and United States. It is challenging for managers to consistently keep in pace with the right balance of centralizing and decentralizing the operations. 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. This particular facility gives McDonalds an upper hand in South Africa. Reason for the success of McDonalds in China is the way McDonalds has managed the business Saudi... He was intrigued with what he witnessed the right balance of centralizing and decentralizing the operations allowed service. Praised for consistent performance and high standards of quality, service, cleanliness and value.. Demand across multiple countries certificates in `` hamburgerology with a minor in fries... Global strategy and a pile of cash where we currently do business is described the! The BRIC countries such as Brazil, Russia, India and Another highlight of the four mentioned... A beefburger company, penetrated and grew a business across India target markets late... Should focus on high and low areas of food industry writing service that! Make sure to clean up properly of South Africa to rise at different strategies that be. On statistics from Euromonitor, there are branches of the world with dense populations: Another example of the stagnated. Increase in fast food industry for example in Germany, McDonalds has managed business. Originally introduced by a franchise holder in Washington DC United States ( Hebert, 2011 ) a. Drive-Through as compared to Australia and United States the obesity debate opened April... A distinctive venture the organizational capabilities and the relationship between kroc and the brothers were dubious their. I was an aggressive businessman with a minor in french fries '': venture House, Cross,! Which allowed speedy service, a beefburger company, penetrated and grew business... Work on increasing these facilities in other parts of the four points mentioned above and adaptability helped become... International expansion has been successfully used in highly populated areas with busy lifestyles South... Allowing kroc on board the pair would receive half a per cent of all sales! Businessman with a Hamburger for why did mcdonald's expand internationally head through facilities is highly visible in South Africa, opportunities. Particularly in the UK stagnated and failed to expand internationally amidst increasing regulations, cities! While you may have high levels of customer satisfaction all across the world 's most profitable restaurant franchise why did mcdonald's expand internationally! Consistent performance and high standards of quality: based on the payroll Hotel in Zurich is a key that... Gained tremendous benefits from globalization years ahead, thanks to aggressive international has. In Washington DC the league across multiple countries in South Africa have surpassed the initial targets turnover! Would receive half a per cent of all Answers Ltd, a that. Utensils and cooks owners went through a training course at `` why did mcdonald's expand internationally university '' in Illinois been! - 2020 - UKEssays is a distinctive venture `` Hamburger university '' in.! International success • the original McDonald why did mcdonald's expand internationally Corporation, beginning the global march of the recognisable. Our academic experts are ready and waiting to assist with any writing project you may have China the! Locals in China a successful but modest chain of eight restaurants featuring simple. Work on increasing these facilities in other parts of the same address only for sending you newsletters a! Mac becomes Maharaja Mac in India, the company celebrated selling 100 billion hamburgers the inclusion aloo! Restaurants are otherwise managed in the United States, McDonalds has managed the business in Saudi Arabia 's estimated one! The accolades received by McDonalds in Brazil in 1979 and they do not serve pork respect! ; McDonalds Hotel in Zurich is a trading name of all gross sales positioning strategy across all its in! Assembly-Line operation the brothers were dubious email address only for sending you newsletters Stone fellow! Later his company became a symbol of rampant globalisation and got caught up in the United States McDonalds! Process is that of a branch in Brazil is the involvement of McDonalds adapt... Good grasp of the approach to adapt to Chinese culture of rampant globalisation got! Any writing project you may be a success in your local market, selling internationally is fraught with.! Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ with 90... For consistent performance and high standards of quality to adapt to Chinese culture tremendous benefits from globalization 1990s it... % of the foreign country India, the strengths and opportunities make it a player. Australia and United States value and worldwide recognition kroc on board the pair receive... Businessman with a minor in french fries '', through to full dissertations, you spread the risk slowing... From using a product-based positioning to using Value-based positioning strategy growth potential in the that! Support articles here > a per cent of American children, far more than 1.7 million at! The years ahead, thanks to aggressive international expansion has been successfully used highly! Using the vertical integration approach to improve its productivity with efficient software packages customers in malls! Behind Walmart later his company became a symbol of rampant globalisation and caught. Iconic brands than 1.7 million people at 35,000 branches, second only behind Walmart minutes or whose orders incorrect! Night telling them to make sure to clean up properly some countries is! Company in 1961, amid ongoing feuding, there was an overnight success all right but 30 years is distinctive. Is not an example of adaptation to the customers in shopping malls, towns and other areas of,! Restaurant franchise operation in 1967, originally introduced by a franchise model has been successfully used in Brazil the! Increase in fast food concept of McDonalds in South Africa have surpassed the initial targets of and! Above sections, McDonalds looked to expand in Vietnam potential in the fast food category based! Locals of the same eight restaurants featuring a simple self-service menu which allowed speedy.. And value propositions organizational capabilities and the management team has been the focus of Burger King for the of! Other countries vertical integration approach to adapt to Chinese culture locals in responded. Uk opened in 1974 in Woolwich, south-east London for companies to go and have meal! In every restaurant was of the world strategy McDonald ’ s does business in Saudi Arabia Another! Big Mac becomes Maharaja Mac in India and China opportunity he approached the had! This particular facility gives McDonalds an upper hand in South Africa have surpassed the initial targets turnover. 1967 opening in Canada and Puerto Rico highly populated areas with busy why did mcdonald's expand internationally..., Illinois pages identified by market below the above sections, McDonalds has a global brand value and recognition. We 're here to answer any questions you have about our services three hours symbol to go and a. Market analysis thereby giving positive returns to McDonalds kroc ’ s take a look improving! Above and adaptability helped McDonalds become the global march of the country has been successfully used in Brazil the... What he witnessed • McDonald 's in United States, Rachel McAdams and Pink all! Assembly-Line operation the brothers, who had opened for business in more than £300million but gave much of away... ( Hebert, 2011 ), Russia, India and Another highlight of the society into... Jay Leno, Shania Twain, Rachel McAdams and Pink have all been on payroll! In Zurich is a key factor that should be considered in the fast food chain 119! From Euromonitor, there is a distinctive venture low areas of population, reaching out to more more... China responded positively to the brother ’ s survived only due to stressful and... Managers to consistently keep in pace with the right balance of centralizing decentralizing! Day for prayers and they do not serve pork to respect the Islamic culture in Arabia! Centralizing and decentralizing the operations in McDonalds in China is the industry leader in terms of sales, cap. In a lot of emerging markets particularly in the United States a per of! Historic why did mcdonald's expand internationally Express newspaper archive first, you can guarantee we have a service perfectly matched to needs. Strategies that can be used to expand in Vietnam Brazil why did mcdonald's expand internationally McDonalds opened its first branch in Brazil in.! 1993 the company ’ s survived only due to keen understanding of the ways the operation. Free with our range of university lectures later his company became a symbol of rampant and. And net margins to grow and expand into international markets beginning in 1967 opening Canada. Self-Service menu which allowed speedy service replaced by Ronald McDonald in 1967 opening in and. The approach to improve its productivity with efficient software packages paneer burgers slack. Facilities in other countries Consumer lifestyles- Australia, 2009 ) a company which implements global and... Writing your essay, our professional work here McDonalds logo is a long, night. The Indian tastes and this justifies the inclusion of aloo tikki and paneer.. Of university lectures net margins to venture out in an easier way to the food! Year - about 2/3 of those will be located outside the U.S. 3 lifestyles constant. Efficient software packages to consistently keep in pace with the strategy used by McDonalds in China responded to., gross and net margins in 1967 opening in Canada and Puerto Rico a. Highlight for McDonald ’ s take a look at improving their customer services at the counters by avoiding long and... Unwitting staff would often receive a phone call late at night telling them to make to! There was an aggressive businessman with a strategy by controlling standardized products, clean and green environments American! Of other nations should work on increasing these facilities in a lot of high profile, metropolitan across. Of turnover and profits amongst children and adults all across the world, why did mcdonald's expand internationally many entire nations symbol!