Evaluation of International Business Practices: McDonald's Case Study

This report evaluates the international business practices of McDonald's and how they are shaped by economic, socio-cultural, and political theories. It also discusses the barriers related to international trade and globalization. The report further analyzes the challenges faced by McDonald's in global marketing and suggests a transnational strategy for the organization.

Introduction
Extended relations between two nations relating to the trade and transactions carried out in
the two respective economies with a mutual agreement. International business comprises of all
commercial transactions i.e. private and governmental, sales, investments, logistics and transportation
that takes place between two or more regions beyond their political boundaries(Mitchell, 2009). The
present carried out analysis is based on McDonald’s which is a multinational chain of fast food
restaurants and beverages. The present report is focused on the evaluation of international business
practices and how they are shaped by the economic, socio-cultural and political theories. Further the
barriers related to the international trade and globalisation is explained. Moreover the ways in
globalization and international trade practices, strategies, and management roles interact with each
other.
LO 1
Pest analysis
The mechanism for systematically discovering and quantifying the factors is PEST analysis.
The concept is an acronym for the external factors that are political, economical, social and
technological; these factors commonly effect the business operational activities (Dlabay and Scott,
2010). The below is the detailed explanation of the PEST analysis:-
Figure 1PEST analysis
[Source- PEST analysis, 2016]
Political
This factor is concerned with the governments rules and regulations and legal issues affect
McDonald’s ability to be profitable and successful organization. Issues that must be considered by the
corporation includes tax guidelines, copyright and property law enforcement, political stability, trade
regulations, social and environmental policy, employment law and safety regulations (Hamilton and

Webster, 2015). McDonald’s should also consider their local and federal power structure and discuss
how anticipated shifts in power could affect their business.
 Government regulations regarding employee’s hygiene, health and food regulations, food
standards etc.
 Government policies regarding the restaurant industry and managing he eateries. These may
include licenses, inspections by health and food departments etc.
Economical
This concept evaluates the external economical issues that will play a significant role in the
success path of McDonald’s. The characters to be considered by the organization are economic
growth, exchange, inflation and interest rates, economic stability, anticipated shifts in commodity and
resource costs, unemployment policies and credit availability (Oded, Yadong and Tailan, 2014).
 Interest rates would affect the cost of capital.
 Rate of inflation determines the rate of remuneration for employees and directly affects the
price of McDonald’s products.
Social
This character analyses the demographic and cultural aspects of McDonald’s market. These
factors help the organization in examining the consumer’s needs and also determining the influencing
power which motivates the consumers to buy the product. The factors to be considered by the
corporation are demographics, population growth rate, age distribution, attitude towards work, job
market trends, religious and ethical beliefs, lifestyle changes, educational and environmental issues
and health consciousness.
 Eating habits of the consumers will affect the business environment and certainly will affect
the organizations marketing decisions.
 Ratio of people preferring to eat out regularly (Combs, and Nadkarni, 2005).
Technological
This factor takes into consideration technological issues that affect the procedures and
methods used by McDonald have to deliver the products and services to the market place. The
specific characters to be considered by the business entity are the technological advancements,
government spending on mechanical researches, the role of internet and the impact of potential
information technology changes. In addition the company should also consider generational shifts,
and their related technological expectations which are likely to affect the consumers who will use the
product.
 A goo technical infrastructure will lead to better production, procurement an distribution
logistics resulting in reduced wastage and lower cost of the products.
 Effective technology may be a decisive factor for food technology innovation, better
presentation, more effective business marketing, etc (Kolk, and Tulder, 2004).
International marketing

This concept is the application of marketing principles in more than one country by
companies overseas or across national borders. Global marketing is based on an extension of
company’s local marketing strategy, with special attention paid on marketing identification, targeting,
and decisions internationally. Global marketing is the multinational process of planning and executing
the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges
that satisfy individual and organizational objectives.
International business operations
Design of Goods and Services: McDonald’s goal in this strategic decision area of
operations management is to provide affordable products. As such, the serving sizes and
prices of its products are based on the most popular consumer expectations. However, some
McDonald’s products are minimized in size to make them more affordable (Kumar, and
Kundu, 2004).
Quality Management: The company aims to maximize product quality within
constraints, such as costs and price limits. McDonald’s uses a production line method to
maintain product quality consistency. Consistency satisfies consumers’ expectations about
McDonald’s and its brand in this strategic decision area of operations management.
Layout Design and Strategy: McDonald’s uses practicality for this decision area of
operations management. The strategy involves maximizing space utilization in restaurants
and kiosks, rather than focusing on comfort and spaciousness.
Job Design and Human Resources: McDonald’s human resource strategies involve
training for skills needed in the production line in restaurant kitchens or production areas. For
this decision area of operations management, individual and organizational learning are also
emphasized to support McDonald’s organizational culture (Mitchell, 2009).
Inventory Management: McDonald’s goal for this strategic decision area of operations
management is to minimize inventory costs while supporting restaurant operations. The
company does not directly sell products and ingredients to its restaurants. Instead, local and
regional intermediaries and distributors coordinate with McDonald’s restaurant managers to
manage their inventory.
Scheduling: McDonald’s uses corporate conventions for scheduling, based on local
market conditions and laws, as well as supply chain needs. For example, the company’s
strategy involves regular and seasonal schedules to address fluctuations in local market
demand. Thus, in this decision area of operations management, McDonald’s is flexible and
adapts to local market conditions.
Maintenance: McDonald’s lets restaurant managers or franchisees select maintenance
service providers. However, for kitchen/production equipment, McDonald’s Corporation also
has certified/approved maintenance providers (Dlabay and Scott, 2010). Thus, the company
addresses this strategic decision area of operations management through local and corporate
control.
Supply Chain Management: The firm’s global supply chain supports its various
locations around the world. McDonald’s has a strategy of supply chain diversification for this

decision area of operations management. Such strategy involves getting more suppliers from
different regions to reduce McDonald’s supply chain risks.
Process and Capacity Design: McDonald’s process and capacity design is centered on
efficiency for cost-minimization that supports the company’s strategies. This strategic
decision area of operations management focuses on maintaining process efficiency and
adequate capacity to fulfil market demand. At McDonald’s, the production line method
maximizes efficiency and capacity utilization (Acharya, and Buzan, 2007).
LO3
International marketing environment poses a number of uncertainties and problems.
As against, national markets, international markets are more dynamics, uncertain, and
challenging. Especially, cultural diversities and political realities in several nations create a
plenty of barriers that need special attention. In the same way, geographical constraints
cannot be totally undermined. Widespread terrorism has created a new threat to international
trade. Though the world is advancing in terms of information technology, innovative and
superior methods of organizing marketing efforts (Boddewyn, 2007). For example horizontal
organisation, network organisation, virtual organisation, global efforts for smooth
international trades, and so forth, yet international marketing is not that much easy to pursue,
it has become a challenge to accept. The following are the biggest challenges faced by the
global marketing:
Internal coordination of marketing activities.
The bigger the brand, the more links in the chain. Organisational HQs have
historically struggled with rolling out coordinated marketing campaigns across multiple
territories. Today we have vastly improved systems and communications, but also higher
expectations for relevant, localised execution. Internal coordination of complex campaigns
across business units remains a key challenge on the desk for global marketers. People tend
to be focused on their own regions first and do not always understand the global context.
Many worldwide campaign implementation models include an element of ‘adopt and adapt’;
but there is some problem about how best to achieve the best results (Boddewyn, Toyne and
Martínez, 2004).
Reaching consumers in a meaningful way.
Adapting an idea to suit different cultures and outlooks while remaining true to the
key messages behind the campaign remains a major challenge for the global brands we spoke
to. These creative, intellectual and emotional elements safely across territories are one mighty
task. But figuring out digital media on a global scale with all the technical, media and channel
options available makes the picture even more complex. The local consumer engagement at
the highest possible level is an ongoing work in progress (Cox, 2007).
Measuring and reporting, learning and improving
The biggest challenge with a global marketing role is ROI. It’s more important than
ever to show the value in what you do. It’s clear that working out rock-solid objectives with
associated key performance indicators (KPI) at the outset is a ‘must-have’ for balanced
reporting. Yet, at the same time, global marketers have to be able to ‘flex’ the interpretation

of data coming from several different environments to make it meaningful and digestible.
Delivering consistent measurement across a multitude of channels and geographies remains a
challenge, particularly where boards demand short-term results (Kolk, and Tulder, 2004).
How to handle the creative development process.
Localisation of the big idea for different territories is the default for all global brand
guardians, but the methodology for doing so is somewhat polarised. Whatever route people
are taking, it’s clear that localisation and a focus on smart implementation are firmly on the
agenda when it comes to rolling out global creative that resonates wherever it lands. It adds
up to a complex picture but one in which the best managers find systems and partners to
manage creative development for a wide range of implementations (Kumar, and Kundu,
2004).
LO4
Transnational Strategy
According to this concept business conducts operations in several countries with
varying degrees of coordination and integration of strategy and operations. This strategy
combines global reach, coordination of operations and leveraging unique advantages of local
markets to drive sales, market share and profit growth (Boddewyn, 2007). A transnational
strategy seeks middle ground between a multi domestic strategy and a global strategy.
McDonald’s have to balance the desire for efficiency with the need to adjust to local
preferences within various countries. For example, McDonald’s can rely on the same brand
names and the same core menu items around the world. The firm will make some concessions
to local tastes too. In France, for example, wine can be purchased at McDonald’s. This
approach makes sense for McDonald’s because wine is a central element of French diets
(Escobar, 2007).
 Transnational strategy will help McDonald’s in involving and operating in different
world markets, designing responsive organizational structures and establishing value-
added activities that exploit national similarities and differences (Mitchell, 2009).
 Countries with a sound fiscal and monetary environment, secure property rights and
anti-corruption policies attract transnational companies which will be beneficial for
the organization. Transnational businesses may use global brands or create specialized
local brands.
 Developing a marketing strategy around one set of brands is more efficient than
having several different brands for different regions of the world. Global brands share
certain characteristics, such as a focus on a single product category and consistent
market positioning (Dlabay, and Scott, 2010).
Conclusion
The carried out analysis is based on the evaluation of the international business
practices and also the economical, political and socio-cultural theories which help the global
marketing activities of McDonald’s. Further the international business operations of the
organization are evaluated. Moreover the issues and challenges faced by McDonald’s in
global trading are also explained. And also a business strategy is analysed which can be used
for the organization in international marketing.

Reference
Books & Journal
Mitchell,C., 2009. A Short Course in International Business Culture: Building Your
International Business Through Cultural Awareness. World Trade Press.
Dlabay, L and Scott, J., 2010. International Business. Cengage Learning.
Hamilton., L and Webster, P., 2015. The International Business Environment. Oxford University
Press.
Oded Shenkar, Yadong Luo, Tailan Chi, 2014. International Business. Routledge.
Combs, G and Nadkarni, S. 2005, The tale of two cultures: attitudes towards affirmative action in the
United States and India, Journal of World Business, 40 (2).158‐71.
Kolk, A and Tulder, R. 2004, Ethics in international business: multinational approaches to child labor,
Journal of World Business, 39 (1), 49‐60.
Kumar, V and Kundu, K. 2004, Ranking the international business schools: faculty publication as the
measure, Management International Review, 44 (2) 213‐28.
Acharya, A and Buzan, B. 2007, Why is there no non Western international relations theory? An‐
introduction, International Relations of the Asia Pacific‐ , (7) 287‐312.
Boddewyn, J. 2007, The internationalization of the public affairs function in US multinational‐
enterprises: organization and management, Business & Society, 46 (2), 136‐73.
Boddewyn, J. Toyne, B and Martínez, Z. 2004, The meanings of international management,
Management International Review, 44 (2), 195‐212.
Cox, R. 2007, The international’ in evolution, Millennium – Journal of International Studies, 35 (3),
513‐27.
Escobar, A. 2007, Worlds and knowledges otherwise. the Latin American Modernity/Coloniality
Research Program, Cultural Studies, 21 (2 3),‐ 179‐210.
Kedia, B. 2006, Globalization and the future of international management, Journal of International
Management, 12 (2), 242‐5.
Kissack, R., Koivisto, M. and Wastl, F. 2007, Editor's introduction, Millennium – Journal of
International Studies, 35 (3), i‐iii.

Online
International business, 2016 (Online). Available Through< https://www.google.co.uk/search?
q=pest+analysis&biw=1352&bih=637&noj=1&source=lnms&tbm=isch&sa=X&ved=0ahUKEwiDiIS1o9
LPAhXGTCYKHcZxCMQQ_AUICCgB#imgrc=j5UOppjnrz-36M%3A>. [Accessed on 11th October 2016]