BBA 3001

GLOBAL BUSINESS

CHUANG WAN YIK

2032389

950314-01-5432

JULY 2016
Contents

title page

INTRODUCTION 2

BODY 3-11

RECOMMENDATIONS 12-14

SUMMARY 15

REFERENCE 16

COURSEWORK 17-19

Page 1 of 20
Introduction

Background of McDonald’s

McDonald's is the world's largest chain of hamburger fast food restaurants, serving

around 68 million customers daily in 119 countries across 36,538 outlets. Founded in

the United States in 1940, the company began as a barbecue restaurant operated

by Richard and Maurice McDonald. In 1948, they reorganized their business as a

hamburger stand using production line principles. Businessman Ray Kroc joined the

company as a franchise agent in 1955. He subsequently purchased the chain from the

McDonald brothers and oversaw its worldwide growth. A McDonald's restaurant is

operated by either a franchisee, an affiliate, or the corporation itself. The McDonald's

Corporation revenues come from the rent, royalties, and fees paid by the franchisees, as

well as sales in company-operated restaurants. According to a 2012 BBC report,

McDonald's is the world's second largest private employer behind Walmart with 1.9

million employees, 1.5 million of whom work for franchises. McDonald’s primarily

sells hamburgers, cheeseburgers, chicken, French, breakfast items, soft

drinks, milkshakes, and desserts. In response to changing consumer tastes, the company

has expanded its menu to include salads, fish, wraps, smoothies and fruit.

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Body

1. McDonald’s globalization strategy

Focusing heavily on emerging markets. McDonald’s may seem like it's already

everywhere, but it hasn't quite saturated the world yet. Over the past few years,

McDonald's has made a heavy push toward emerging markets. And not just trendy

markets like China and India, but places previously devoid of the Golden Arches, like

some African nations. Sales are up 8.1% from last year in Asia/Pacific, Africa and the

Middle East. McCafé has been a big win. The McCafé has been demolishing

expectations ever since the company started revving up its marketing machine for it in

2002.Offering a wider variety of food to attract more segments. It’s not just snack foods

and desserts that it's expanding into — there's a whole lot more. McDonald's is trying to

get more consumer segments to chomp up its offerings by expanding non-traditional

menu items, while keeping its core base of burgers-and-fries eaters. Delivering food to

customers in places that demand .Though not traditional in the US, McDonald's delivers

in many markets around the world, and the in those markets. Making its stores more

attractive to get customers in McDonald's is improving its physical locations to make

them more appealing to customers, and it seems to be working. In China, it's trying out

a "Less is More" concept design, which goes with softer colours and cushioned seats.

Free wi-fi is now available in McDonald's restaurants across the world, and lately it has

made a big push to get flat screen TVs in the stores. It's even starting up its own TV

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channel with original programming, called McTV. Increasing it’s offering of snack

items .Americans love to snack on stuff, and McDonald's has recognized that demand

and answered with a plethora of new products. Shortening its menu cycle. The most

prominent example of this is the McRib, making an unprecedented second national

appearance in two years. It took front and centre this fall and was incredibly successful,

driving a 4.9% gain in same store sales. Special edition McFlurries have been in and out

of menus too, along with limited time smoothies. Expanding its dollar menu to breakfast

McDonald's fired up a breakfast dollar menu in 2010 as the economy continued to

slump, which supplemented its existing dollar menu for its usual fare. It has been

working well thus far, capitalizing on Americans' attraction McCafé is the most obvious

example, and it has performed admirably against Starbucks and Dunkin' Donuts. Its

upcoming expansion into desserts is likely to concern Dunkin' even more, along with

niche dessert chains like Dairy Queen. But there's plenty of risk in doing this. As it

opens it to more fronts than ever, it has bigger, powerful brands breathing down its

neck, and even more complexity to worry about in its internal operations.

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2. Challenges that McDonald’s Faced

Competition: McDonald’s faces significant competition from national, international,

regional, and local retailers of food products. It competes on the basis of price,

convenience, service, menu variety, and product quality. While it does a good job on

most of these metrics, product quality is something that management is working on,

given consumers’ increasing preference for quality and natural products. In the

hamburger fast food category, McDonald’s primarily competes with Burger King

and Wendy’s (WEN). However, it still has the highest market share in the overall fast

food market, with a 22% share, ahead of competitors Yum! Brands (YUM) and

Subway. More Health-Conscious Customers: Many consumers, both in the U.S. and

abroad, are trying to eat a healthier diet. The rise in popularity of organic products, fresh

fruit and vegetables, and goods with all-natural ingredients is somewhat of a concern for

McDonald’s. While the company has very strict quality controls for its food, customers

aren’t exactly going to McDonald’s for free-range chicken and organic vegetables. The

company is also facing concerns that younger, more health-conscious consumers, will

hurt results in the long run unless a shift in strategy is made. Weak demand. Yes, the

U.S. economy is bouncing back, and the stock remains frisky. Upper-income

Americans are spending like crazy on televisions, luggage, jewellery and watches. But

most people are finding the recovery tougher going. The middle class face a tough job

market and higher payroll taxes, while cuts in food stamps and other assistance

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programs have hit the poor hard. Such financial hardships affect McDonald's patrons,

limiting the company's ability to adjust its business to drive growth. “We don't have as

much pricing power," Thompson said last July. "And as long as inflationary rates are

lower and as long as GDP growth and consumer discretionary spending is softer, we're

not going to move forward and take a lot of price because we know that it would mean

guest count erosion longer term. “Focus. This problem is closely related to how

McDonald’s pricing is all over the map. That, along with the fact that the

McDonald’s menu has expanded to the point of being unwieldy and slowing down

operations, has left franchisee and deeply concerned that the company has lost its sense

of focus. McDonald’s recently announced intentions to scale back the menu and put

some items on the chopping block. But such a measure could create its own problems.

After all, some of the items likely to be downsized or cut, including espressos and

McWraps, were added to menus to woo millennials and consumers who otherwise

probably wouldn’t dine at McDonald’s. Millennials Generally speaking, millennials

love food and dining out, and yet their preferences—customizable options,

transparency, and fare that’s healthier, more sustainable, and altogether superior

compared to any cheap cookie-cutter fast food joint—are the exact opposite of what

McDonald’s is known for. McDonald’s has made some moves clearly aimed at winning

over millennials, including ventures into burgers and potentially adding brunch menu

items (brunch is a Gen Y obsession). McDonald’s has also dramatically expanded the

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menu over the years with the hopes of drawing in more young customers. Yet many of

these initiatives have proven to be costly, and they’ve failed to make McDonald’s a top

choice among millennials—who tend to favour Chipotle, and other more upscale fast

casual contenders over McDonald’s or any old-fashioned fast food establishment.

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3. McDonald’s efforts to localize its offering and how successful

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. Kroc was a salesman

from Illinois who ventured to San Bernardino, California in 1954 when he received a

larger than normal order for the milkshake multi-mixers he was selling. When he

arrived in Southern California, he was intrigued with what he witnessed – a restaurant

that was efficiently serving a large number of customers who seemed pleased with the

food they were receiving. Sensing a business opportunity, he made a proposal to the

McDonald brothers to begin franchising their restaurant concept, which the brothers

eventually accepted. Kroc opened his first McDonald's in 1955 in Des Plaines, Illinois.

Staying consistent with the core components of your business doesn't mean the products

you sell, or even the way you deliver them, have to stay the same. With a solid

foundation and established processes, you can tweak your product without causing

disruptions to better serve your customers. Innovation stemming from responsiveness to

customers and franchisees has played a big role in McDonald's fending off stagnation

over the years.But perhaps the biggest reason McDonald’s has been a success for so

long is its ability to weather storms. Though the trajectory for McDonald's has been

primarily upward throughout its existence, the company has had to weather several

challenges and controversies.McDonald's has had many lawsuits directed at them for

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various issues, and has been the subject of a large amount of negative press. What does

McDonald's do combat this negativity? From an outside perspective, it appears that at

least part of their strategy entails acknowledging the concern or issue, and then

dedicating resources in-house to staying on top of the issue as the following examples

illustrate. How can McDonald's turn these tribulations into bumps in the road instead of

them have a devastating impact on business? Part of the reason McDonald's can be

resilient when they are challenged is an established rapport within the community.

When controversies arise, having goodwill with consumers can help any company

weather the storm. Ways McDonald's cultivates goodwill with consumers include their

involvement in youth sports programs and charity programs such as Ronald McDonald

House charities.Very few companies will ever come near the magnitude of operation

McDonald's has achieved. But the lessons the corporation showcases are on display to

be learned by entrepreneurs striving to make their company the best it can be. The

success of McDonald's can be attributed to many more factors that have been discussed

in this article, but these are some that have contributed heavily to it.Perhaps the greatest

strength of McDonald’s France, in addition to its uncanny ability to predict French

consumer preferences, is its ability to redefine the American model that has worked so

well in the U.S. McDonald’s France has created an entire ecosystem that has been

critical to its current success. After the José Bové bulldozer incident, McDonald’s

France introduced ad campaigns to tell customers more about itself, where it came from,

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what ingredients it used, and who it employed — just how French it had actually

become. It then strengthened ties to French agribusiness, advertising widely that 95% of

the company’s ingredients come from France, with the rest coming from the European

Union. McDonald’s is today the number-one purchaser of beef in France. “We know

where every hamburger and chicken nugget came from,” notes Lemoyne. “We can trace

them to the farm within one day.” This also allowed for some advantages during the

mid-1990s’ “mad cow disease” panic (Bovine spongiform encephalopathy). “Our

competitors had to cut out all beef production. We were so confident we knew our

farms that we continued producing and gained market share. “Moreover, although

McDonald’s sources 95% of its produce in France, very few of its suppliers have formal

contracts with the chain. Instead, they are seen as partners whose success is symbiotic to

McDonald’s. “McDonald’s cannot afford to have supply issues preventing it from

selling Big Macs,” Lemoyne says, “but the large capital investment that suppliers make

to provide products makes them equally dependent on Big Mac sales — creating a sort

of interdependence between supplier and the restaurant. “Employees are supported

through programs to give them particular qualifications, such as nationally recognized

diplomas and certifications, and in turn, employees regularly have been found

supporting McDonald’s and protecting its brand on Internet forums and blogs.

McDonald’s leverages its franchises and their proximity to customers by ensuring that

20 elected franchisee representatives vote on every marketing campaign and product

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launch before they are implemented. French doctors were consulted when discussing

how to improve McDonald’s nutritional content, and Greenpeace was engaged to

discuss its environmental strategy. In their book, The Soul of the Corporation, Hamid

Bouchikhi, a professor at ESSEC business school in France, and John Kimberly, a

professor at Wharton, examine the challenge of both corporate and national identity in

multinational corporations. Ask any French person the “nationality” of McDonald’s,

and he or she will most certainly say it is an American brand. However, 95% of all

McDonald’s France products are sourced from French farms. The company’s

management, employees and franchisees are 100% French and operate nearly

autonomously from the U.S. parent organization. Its menu items, designed by French

chefs and featuring regional specialties, such as Roquefort cheese sandwiches and

Parisian macaroons, are found nowhere else in its global network of restaurants.Can

McDonald’s France still be considered an “‘American'” company? Can its unique

French characteristics explain its success there? Although McDonald’s France leverages

the power of the global network — contributing to, and benefiting from, the brand and

innovation — it has redefined itself as a French company that is constantly looking to

adapt to the needs and preferences of the French culture.

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Recommendations

1. What do you think the best opportunities for future growth lie for McDonald’s?

Why?

Upgraded Menu: New CEO Steve Easterbrook has big plans to turn the company

around. Part of the plan is to offer premium products at some of its locations. The

restaurant recently introduced artisan chicken and sirloin burgers to its menu in parts of

the U.S. The company is also trying to strengthen its position in the high-margined

caffeinated beverages industry, dominated by Starbucks (SBUX). McCafe has had some

success by keeping prices competitive, and the company has been able to harness its

vast store network, marketing muscle, and highly efficient supply chain.

The McCafe menu also now includes fruit smoothies, an appeal to more health

conscious consumers.Expansion Plans: McDonald’s is always on the lookout to expand

its market share. While the markets in North America and Europe are fairly saturated,

there are opportunities in more underdeveloped nations. The company also recently

announced that it was going to refranchise 3,500 restaurants by the end of 2018,

accelerating the pace of refranchising and increasing the global franchised percentage

from the current 81% to 90%. This should allow for a more streamlined, lower cost, and

more stable organization. Fast food industry now is developing significantly. The

change of lifestyle leads to the change in people eating habit. In the past, if just workers,

drivers or someone who had to work busily and didn’t have enough time for a home

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meal choose fast food; nowadays, almost people eat fast food and a major of them like

fast food very much. It is a huge chance for fast food brand to increase their revenues,

especially McDonalds. McDonald should research green energies and green packaging

solutions and incorporate these finding as a part of their marketing strategies and

advertisements. McDonalds has more than 31,000 restaurants serving in almost 120

countries. Of the 31,000 restaurants, at least 14,000 are in US. However, now, because

the care of McDonalds about favours and cultures in each countries it enters,

McDonalds can open more restaurant in new areas such as China or India – the

countries which culture influences on people lifestyle deeply. They are very potential

markets. The expansion of these areas is big opportunities For McDonalds. With low

cost menu, McDonalds can attract customers who just have low income. This segment

makes up a fairly remarkable part, especially in the recent time, when global economic

is struggling. It is not difficult for McDonalds to apply low cost menu on all restaurants.

Discounts given on every food item may help them gain more customers. Moreover, a

new trend is rising among customers that they like freebies and discounts, even when

they don’t need it or don’t use these freebies after. Customer’s tastes now become more

diverse. As a result, they require new format of service in order to satisfy them.

McDonalds, with new format of business such as McCabe, it can attract new segment of

customer; for instance civil service, who prefer coffee as well as want to use Wi-Fi to

work when drink coffee. Although people concern about how McDonalds influence

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badly on their health, it is also a chance for McDonalds. This company can develop new

products, specifically fresh burger or healthy dessert.

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Summary

The strength of the alignment among the Company, its franchisees and suppliers

(collectively referred to as the "System") has been key to McDonald's long-term

success. By leveraging our System, we have been able to identify, implement and scale

ideas that meet customers' changing needs and preferences. In addition, our business

model enables McDonald's to consistently deliver locally-relevant restaurant

experiences to customers and be an integral part of the communities we serve.

Our overall vision is for McDonald's to become a modern, progressive burger company

delivering a contemporary customer experience. Modern is about getting the brand to

where we need to be today and progressive is about doing what it takes to be the

McDonald's our customers will expect tomorrow. To realize this commitment, we are

focusing on our customers and what matters most to them – hot and fresh food, fast and

friendly service, and a contemporary restaurant experience at the value of McDonald’s.

The cornerstone of our System is our powerful and enduring Brand. We’re leveraging

our competitive strengths: iconic menu items that customers love, a unique franchise

model that empowers local entrepreneurs, size and scale that makes operational

investments efficient and a global well-diversified geographic footprint.

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References

http://www.aboutmcdonalds.com/content/mcd/investors/company-overview/company-

overview-segment-information.html

http://finance.yahoo.com/quote/MCD?ltr=1

http://knowledge.wharton.upenn.edu/article/born-in-the-usa-made-in-france-how-

mcdonalds-succeeds-in-the-land-of-michelin-stars/

http://www.valueline.com/Stocks/Highlights/

McDonalds_Corp___A_Short_SWOT_Analysis.aspx#.V4e1M7h97IV

http://www.franchisedirect.com/

http://blog.globalizationpartners.com/global-marketing-localization.aspx

http://www.papercamp.com/group/effort-of-mcdonalds-to-localize-its-offering-in-

france/page-0

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Coursework

Nama: Chuang Wan Yik

Student ID: 202389

IC: 950314-01-5432

1. Please describe mercantilism

Mercantilism is a sixteenth-century economic philosophy that maintains that a country's

wealth is measured by its holdings of gold and silver. According to mercantilists, a

country's goal should be to enlarge those holdings. To do this it should strive to

maximize the difference between its exports and its imports by promoting exports and

discouraging imports. The logic was transparent to sixteenth-century policy makers: if

foreigners buy more goods from you than you buy from them, than the foreigners have

to pay you the difference in gold and silver, enabling you to amass more treasure.

Mercantilist terminology is still used today, for example, when television commentators

and newspaper headlines report that a country suffered an "unfavorable" balance of

trade—that is, its exports were less than its imports.

At the time mercantilism seemed to be sound economic policy—at least to the local

king. Large gold and silver holdings meant he could afford to hire armies to fight other

countries and thereby possibly expand his kingdom. Politically, mercantilism was

popular with many manufacturers and their workers. Export-oriented manufacturers

favored mercantilist trade policies, such as those establishing subsidies or tax rebates

Page 17 of 20
that stimulated their sales to foreigners. Domestic manufacturers threatened by foreign

imports endorsed mercantilist trade policies, such as those imposing tariffs or quotas

that protected them from foreign competition. These businesses, their workers, their

suppliers, and the local politicians representing the communities in which the

manufacturers had production facilities all praised the wisdom of the king's mercantilist

policies.

However, most members of society are hurt by such policies. Governmental

subsidies of the exports of certain industries are paid by taxpayers in the form of higher

taxes. Governmental import restrictions are paid for by consumers in the form of higher

prices because domestic firms face less competition from foreign producers. During the

Age of Imperialism, governments often shifted the burden of mercantilist policies onto

their colonies. For example, under the Navigation Act of 1660 all European goods

imported by the American colonies had to be shipped from Great Britain. The British

prohibited colonial firms from exporting certain goods that might compete with those

from British factories, such as liars, finished iron goods, and woolens. To ensure

adequate supplies of low-cost inputs for British merchants, the British required some

colonial industries to sell their output only to British firms. This output included rice,

tobacco, and naval stores (forest products used in shipbuilding). This particular

mercantilist strategy ultimately backfired—it contributed to the grievances that led to

the overthrow of the British Crown in the American colonies.

Page 18 of 20
 Because mercantilism does benefit certain members of society, mercantilist policies

are still politically attractive to some firms and their workers. Modern supporters of

such policies, called neo-mercantilists, or protectionists, include such diverse U.S.

groups as the American Federation of Labor-Congress of Industrial Organizations,

textile manufacturers, steel companies, sugar growers, and peanut farmers.

Such protectionist attitudes are not limited to the United States: North Americans

and Europeans have long complained that Japan limits the access of foreign goods to its

market. For example, it took forty years of negotiations before Japan grudgingly agreed

in 1993 to allow the importation of foreign rice, and even then it limited rice imports to

less than 10 percent of its market. And Asian and North American firms criticize the

Europeans for imposing barriers against imported goods such as beef, automobiles, and

video cassette recorders. Such finger pointing is amply justified: nearly every country

has adopted some neo-mercantilist policies in order to protect key industries in its

economy

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