In this report, I have chosen two businesses which I will be operating in contrasting international markets. For each business, will be including information like the structure, activities, and chosen market, reasons each conducts business internationally, types of finance available to each, trading blocs on international trade, globalisation that affect each business, an analysis of the barriers to each of operating internationally, etc.
McDonald’s is an American fast-food Company which founded in 1940 as a restaurant operated by Richard and Maurice McDonald, in California, United States. McDonald’s is one of the greatest brands known worldwide and the largest chain of hamburger fast-food restaurants around the world. McDonald’s is in the fast service restaurant market.
The organisation structure of McDonald’s business international is used as a hierarchy with an organisation. It identifies each job, its function and where it reports to with the entire business. With McDonald’s UK sending employees to countries like America, there sometimes can elimination of some roles which can impact the organisation structure with who they will report to. This can the organisational structure easier to understand or confusing as employees may contract the wrong person in a vital situation. One of the advantages of using hierarchy in McDonald’s business structure is its support for monitoring and control of global operations. McDonald’s company is using three different structures between its process, Functional structure for the company itself, divisional structure for the restaurants, and geographic structure for its global market and McDonald’s structure is a matrix structure
McDonald’s is Multinational Corporation because they are one of the world’s leading food service brands with more than 36,000 restaurants in more than 119 countries. And around 93% Of McDonald’s restaurants international is owned and operated by independent local business owners. And they are serving more than 60 million customers daily. McDonald’s always keeps on top of cultural trends and adapts their menus to work with these trends. The Successful international expansion of McDonald’s is the franchise model applies to them. McDonald’s Revenue $21.08 billion for 2019.
McDonald’s offers very popular menus include fries, the big mac, chicken sandwiches, chicken nuggets, hamburger, quarter pounder with cheese, salads, wraps, dessert, soft drinks, veggie burger and much more. The advantage of McDonald’s is multinational companies including economies of scale, greater efficiency and lower prices, increase market share, increase sales and profit, Create wealth and jobs around the world.
McDonald fast-food restaurant is all around the countries like the UK, China, India, USA, Japan and many more. Which this business is less developed economies or developing economies and emerging markets. There are over 400 McDonald’s restaurants in India which there is potential high sales and profits for example in India there are 1.3 billion people which is much more than a lot of other countries.
An emerging market economy is the economy of a developing country that is becoming more engaged with worldwide markets as it grows. The advantage of emerging market for McDonald’s are there are investments is the potential for high growth, Useful to identify high level strategies, Opportunities to be the first candidate into that market and access to new capital.
Reasons Business Do Internationally
There are few that do contribute to McDonald’s may want to conduct their business operation internationally. The reason why McDonald’s is a business internationally because they want to increase global competition, meet customer needs, potential opportunities, declining foreign trade barriers, increasing revenues and being known the best fast-food restaurant all around the world. McDonald’s was capable to spread their products international, growing the number of customers they have and the amount of money they make all year round. They keep on top of cultural trends and adjusts their menus to work with these trends.
McDonald’s continues to gain success internationally and in existing markets. McDonald’s is 10% Global Share and 43% of the U.S. Fast Serve Market. Also is has been the Largest Market Share in The Fast Food Industry.
A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. McDonald’s is a business leader in the fast-food industry. It is important for them to have competitive advantages included, affordability, innovation, quality, hygiene, and value-added services.
They are successful of the global brand known as McDonald’s is strategic market segmentation. And they aware of that people are their biggest players and consumers. For example in the United States, the largest market of the brand, McDonald’s specifically targets children.
The Types of Finance Available to Each
There are four types of finance available of international business which are prepayment to the importer, letters of credit, export credits and bank loan.
Bank loans depend on your contract with a bank and the type of loans offered depend son size of the loan required by your organisation, depends on the country with which you are importing from, the banks understanding of the type of market your business is. Also your credit history influences the amount of loan you will get. If you have a bad credit history then you are likely you get low or no loan, this is because the bank sees you as a high risk of not repaying back your borrowing due to your past. However, if you have a high credit history then you will get the right amount of loan you asked for. The advantages of bank loans is the business is guaranteed the money for a certain period if they are eligible for it. Interest is paid on the loan so there will be no need to provide the bank with a share from your business. Interest may fixed for the term or the interest would be low depending on how much was borrowed and the term of repayment.
Letters of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. The benefit of letters of credit is reach out to new customers, Increasing export coverage, timely shipments, safely expand business internationally. However there are disadvantages of letters of credit is that for the exporter there is a high cost for negotiating and other procedures of letter of credit is high.
An Analysis of the Support That is Available to McDonald’s
Many businesses are offering support for businesses to trade internationally including British chambers of commerce, GCGP LEP, trade fairs, identifying international partners, grants for international promotions etc. They offers a service of workshops and information packs to help any business thinking of trading internationally to have support to do so. It helps UK companies by providing insurance to exporters and guarantees to banks to share the risks of providing export finance. It can make loans to overseas buyers of goods and services from the UK.
The British Chambers of Commerce have been offering support for businesses to trade internationally for more than 150 years and promote partnerships between organisations in different countries. The BCC works with the government departments involved and provides advice, guidance and support. The Chamber of Commerce gives you the opportunity to meet with other local business owners and network. They can get access to detailed support to operate in a particular country including: market information, practical tips about how to trade in a country, building the share of a market in a particular country which this would be really useful for McDonald’s when they want to trade the business to a country that they haven’t open a fast-food restaurant in that country and it would be easy for them to get all the information.
The Role of Trading Blocs on International Trade
Trading blocs are usually groups of countries working together to move goods and services more easily and removing any barriers to trade for example, European Union(EU), European Free Trade Association (EFTA), North American Free Trade Agreement (NAFTA) etc.
International trading blocs are Protect themselves from countries outside their group, Work together to make goods or services move more easily and Place restrictions on a number of goods or services being brought into the area.
Trade creation between members, since they are treated favourably in comparison to non-members. Trade creation is the movement from a higher cost basis of output to a lower cost source of supply as a result of linking a trade agreement.
The Main Features of Globalisation That Affect McDonald’s
The main features of globalisation including trading blocs, international mobility of labour and capital, international currencies, multinational corporations, international business communications, international payment system.
Due to globalisation that McDonald’s can start its business is other countries without any difficulty. Since the company have opened in 1955, McDonald’s has successfully operate which is 31 000 restaurants in 117 countries worldwide. McDonald’s is operating in are India, Malaysia, Indonesia, China, France, United Kingdom, and many more. Due to this, McDonald’s had become well-known in most of the countries in the world as one of the biggest fast food chain in the world. Globalisation is noticed by many as a threat to the world’s cultural diversity. It is feared it might drown out local economies, traditions and languages. Which this can effect McDonald’s because in some countries some certain foods is not allowed for example in a Muslim countries people do not eat pork and other foods has to be halal in order to people eat it so they don’t do that then the business wouldn’t be successful. McDonald’s have to adapt its menu and business plan to each culture to show its respect town different cultures.
McDonald’s fast-food restaurants has franchisees all around the world, they decided to expand its business to India. However, for a country which 20% of its population are vegetarian and around 80% does not eat beef, McDonald’s might face problems in attracting its customers because MacDonald’s maim food is burger chicken and hamburger. So when they realised that problem, they has decided to change its menu to suit the local’s needs which they offers several products that are only available in India.
Another features of globalisation that affect McDonald’s internationally is that there are many existing competitors such as KFC, burger King, Subway and Wendy’s, there are amounts of potential entrants has joined the industry and fast food restaurant all around the world are growing rapidly. This has affected the business because it would be hard for McDonald’s to attract more new customers to consume its products because there more fast food restaurants available for people to choice. To solve this problem McDonald’s has decided to do a limited time promotions like offers discount coupons and freebies for certain products and product bundles, as a way attract its existing as well and the new customers.
An Analysis of the Barriers to Each of Operating Internationally
There are some barriers to trade that restricts where and how businesses can trade. These barriers or restrictions sometimes operate inside a trading bloc were countries are still negotiation on operate to stop businesses to trade in that area because the countries want to protect the vulnerable industries. There are many different reasons why a country may restrict overseas business to trade in the particular industry.
The reasons for protectionism in international markets, for example, to protect infant industries, to protect employment/local business. There are ways for protecting markets including tariffs, customs duties, currency restrictions, quotas, subsidies, legal restrictions. The example of Barriers to trade are trade restrictions, exchange rate volatility, legal and regulatory systems, financial requirements, operating risks, economic sanctions.