Effectiveness of Franchise Strategy: McDonald's in Chinese Market

This research project investigates the effectiveness of McDonald's franchise market entry strategy in China, focusing on globalization and various entry modes like franchising. The study aims to identify the challenges and benefits of franchising, analyzing its impact on employee performance and its suitability as a market entry strategy. The research employs a qualitative approach using questionnaires to gather data, exploring the macro environment and specific factors influencing McDonald's expansion in China. The project includes a literature review covering globalization, different entry modes, and macro-environmental analyses, along with methodologies such as research philosophy, approach, and strategy. The findings and analyses section discusses the challenges McDonald's faces in China and the benefits of franchise market entry strategy. The study concludes with recommendations and reflections on the topic. The project also includes sections like introduction, literature review, methodology, findings and analysis, conclusion, recommendations, and appendices. The study highlights the importance of adapting to local tastes and sensitivities in the Chinese market, emphasizing the 5Ps (price, product, place, people, and promotion) for successful market penetration.

RESEARCH PROJECT

ACKNOWLEDGEMENT
I would like to thank to my professor for his kind support. Without his guidance I would not
be able to complete this research successfully. I like to thank to my parents and friends for their
support and love. Their encouragement has helped me to complete this research.

ABSTRACT
Globalization is basically a process or a method through which company, government or
people intact or integrate worldwide. Its a process of integration and infraction associated with
cultural and social aspects. Study uses questionnaire technique for gathering information about
topic. It is qualitative in nature. Study describes that for raising demand of products franchisors
implements commercial activities that helps companies in establishing their branch in new
location successfully. One of the main advantages of implementing franchise option is that entry
cost of this strategy is very low. Furthermore, it supports in rapid foreign expansion of business.
Franchise is the market entry strategy that supports firm in establishing branch in new location
successfully in limited investments. This is beneficial in order to minimise risk of failure of
organisation in new geographical location. McDonalds is the leading fast food firm that
implements various global expansion strategies. This aids the organisation in generating huge
profit and attracting more buyers towards brand. Researcher applies Questionnaire method in
order to gather fresh detail related to subject. Study reflects that franchise market entry strategy
is great option for business in order to establish branch in new location and raise performance of
employees as well.

TABLE OF CONTENTS
TITLE..............................................................................................................................................1
INTRODUCTION...........................................................................................................................1
Research Aim.............................................................................................................................1
Research questions.......................................................................................................................1
Research Objectives.....................................................................................................................1
Background of company..............................................................................................................1
Significance of study...................................................................................................................1
LITERATURE REVIEW................................................................................................................2
Globalisation................................................................................................................................2
Different entry modes..................................................................................................................2
Macro environment analyses.......................................................................................................4
Specify entry mode......................................................................................................................4
METHODOLOGY..........................................................................................................................5
Introduction..................................................................................................................................5
Research philosophy....................................................................................................................5
Research approach.......................................................................................................................5
Research strategy.........................................................................................................................6
Research choice...........................................................................................................................6
Techniques and procedure of data collection..............................................................................7
Sampling......................................................................................................................................8
Data Analyses..............................................................................................................................8
Access negotiation.......................................................................................................................9
Research limitations.....................................................................................................................9
Ethical issues...............................................................................................................................9
Cost..............................................................................................................................................9
PESTLE and SWOT for China..................................................................................................10
Gantt chart.................................................................................................................................11
FINDINGS AND ANALSYES.....................................................................................................11
Analyses.....................................................................................................................................23
CONCLUSION..............................................................................................................................25

RECOMMENDATIONS...............................................................................................................26
REFLECTION...............................................................................................................................26
REFERENCES..............................................................................................................................29
APPENDIX....................................................................................................................................30
Consent form.............................................................................................................................30
Information sheet.......................................................................................................................30
Questionnaire.............................................................................................................................31
Ethics Form................................................................................................................................33

TITLE
"Effectiveness of franchise market entry strategy for establishing branch in China successfully”.
INTRODUCTION
Globalization has changed the scenario of market. Geographic dispersion has helped
business in increasing their revenues and dealing with mass audience. Entry strategies are
considered as methods that are used by firms to establish their business in other location.
Research Aim
“To identify effectiveness of franchise market entry strategy for establishing branch in
China successfully: A Study on McDonalds”.
Research questions
 What are the challenges McDonald’s cloud face in China?
 What are the benefits of franchise?
 Why is franchise the best entry strategy?
Research Objectives
 To understand conceptual framework of globalization
 To explain types of market entry strategies for business
 To determine factors that create issue for McDonalds to enter in global market
 To analysis impact of franchise market entry strategy and its relationship with employees
performance
Background of company
Present study is based on McDonald’s that operates its business across the world and
have developed unique brand image in fast food industry. It has strong chain of fast food
restaurants. Company is operating in approx. 37241 locations and has generated 22.820
billion profits in the year 2017. McDonald’s has employed 235000 employees globally
those who are servicing consumers well. Its main agenda is to become leading fast food
brand and serve to mass audience globally.
Significance of study
This study will be beneficial for companies that operate in fast food industry as by this way
companies swill be able to know effectiveness of market entry strategies and will be able to
choose correct strategy for entering into Newmarket. Furthermore, this research will be
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beneficial for other scholars as well, as they will get brief idea and will be able to conduct study
in the future.
LITERATURE REVIEW
Globalisation
Lee and et.al., (2015) There are various kinds of tools through which enterprises can
enter into new market such as export, franchises, joint venture etc. All these have their own
significance and disadvantage. It is essential for enterprise to select the best method through
which it can meet with its objective.
According to (Hollender, Zapkau and Schwens, 2017) Globalization is basically a process or a
method through which company, government or people intact or integrate worldwide. Its a
process of integration and infraction associated with cultural and social aspects. Its one of the
most important part of modern society and also one of the hardest one to grasp. It results
removing barriers among all notional economies to encourage flow of goods, capitals, services
and labour. Many organizations have either been evolved or created into key roles in
globalization process.
As per the view of Lee and et.al., (2015) There are many impacts of Globalization on
business like: Increased competition: Flow of foreign investment in countries, removing
regulations which makes it possible for a business to enter market which was one impossible for
those companies. Greater Awareness and react to needs of customer: Customers nowadays are
very selective for quality, price or service which is being provided to them. Scale economies:
large scale production economies can be acquired by selling good across many nations. Because
of this they become even more competitive. Location flexibility: Many techniques or services
can be made available and allocated almost at everywhere. Because of this they can gain low
cost labour and many other resources at even lower price. Increased mergers and joint ventures:
Allows access to cost advantages and bigger market more freely.
Different entry modes
Franchising is the method in which firms sell their goods and services through
permitting other firms to sell their goods (Hollender, Zapkau and Schwens, 2017 ). For
example McDonalds is working in many locations across the world, it has implemented this
strategy that has supported business in making connections with mass audience and
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increasing profitability of the organization. There is strong relationship between franchise
entry strategy and business performance. Kotabe and Helsen, (2014) argued that If companies
take support of this methodology then it would help in minimizing financial risk of firm.
Companies give rights to other firms those, which are local at particular geographic area to
sell their goods and services by taking their name. As these big firms have strong reputation
in market thus, other local retailers become able to attract more people by using the name of
these big organizations. This assists entity in establishing their brand in other location
successfully and increasing number of customers as well. This supports firms in maximizing
value of enterprise with minimum investment. As brands are not required to invest anything
by implementing this franchise market entry strategy.
Hollender, Zapkau and Schwens, (2017) stated that through franchise enterprise can
easily enter into new location and can know about standard of that place. This would help in
improving level of performance of its employees. Cavusgil and et.al., (2014) argued that it is
not good strategy because it increases chances of spoiling brand image of the firm. There are
many small retailers those who have taken franchise of big brands but fail to serve
consumers well. This has affected overall reputation of brand to great extent. It is very
essential for business that to give franchise to correct firm which has strong customer
network and successfully operating operations in particular area. If entity gives franchise to
such companies that have poor reputation then people will not buy products from that firm.
This will affect its operational efficiency and my impact on expansion plan of enterprise as
well.
Hollender, Zapkau and Schwens, (2017 ) stated that Licensing: It is an arrangement where
rights to use a service or product is transfer to another company. It is one of the most useful
technique to enter into a desired market if that company or organization has large market share.
Licenses can be of two types i.e. marketing license or production license. Kotabe and Helsen,
(2014) argued that Franchising: It is typically an American process for fast market expansion
which is growing in other parts of the worlds (Franchise your business, 2018). It is mostly used
for food industries which has common business model which a company can easily transfer in
other market. There are few conditions which comes into picture if we are using this model. First
either your brand should have a strong congregation globally or its business model should be
unique so that can be utilized globally. And second future competition may be created in future
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of you franchise. Partnering: To enter a new foreign market its almost necessary and in some
parts of the works it is the most necessary thing.
Macro environment analyses
As per the view of Cavusgil and et.al., (2014) Economic Factor: Most important factor
which creates an issue to enter into a global market is Economic factors. Most of the fast food
industries have really expensive products which cannot be accepted by many countries as they
cannot afford it but there are some countries which can readily accept those products. Social and
cultural factors: All the countries are different from each other in terms of food eaten, language
spoken, dressing etc. But most important factor is food which his very significant and real and
affect the fast food industry business in that particular country.
According to Lee and et.al., (2015) Political and legal factors: it is important to gain
knowledge about the attitude of the government and people that particular country. Attitude of
that country's government towards foreign company and its product should be considered, mostly
fast food industry as the government and people of that nation are very choosy in terms of food
so it can affect the business. Market Attractiveness: This factor should be considered in terms of
revenue that can be generated and access that organization can get to the market of that country.
Specify entry mode
Basically franchising refers to the method of practising and using another person's
philosophy of business. There are some pros as well as cons of franchise. So the benefits are that
the brand name and products and services are already established.
McDonald's is a US based fast food chain is planning to enter and expansion in China market.
They have to find the challenges and adopt some strategies to establish in the existing market.
Strategies as per the China market
Re-engineering the menu according to the people's taste, lifestyles and perception. To survive, in
the market, the company have to be responsive to the China sensitivities.
Their strategy is to follow 5Ps which is price, product, place, people, and promotion.
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METHODOLOGY
Introduction
Research methodology is the process through which scholar can conduct investigation in
effective manner. Research methodology is systematic tool for conducting an investigation and
reaching to end result
Research philosophy
This is the type of technique that deals with development of knowledge and sources that
are being involved for answering research questions. There are various kinds of philosophies:
positivism, interpretivism, realism etc. Positivism is type of technique that believes in hypotheses
development. This is generally applies in quantitative type of research projects. In this scholar
has to develop assumptions and have tested these assumptions in order to reach to end results.
This technique works on quantifiable observations (Murshed and Zhang, 2016). Realism is
another kind of philosophy that emphases on truth of reality and recognises significance of multi-
level study. Interpretivism is the philosophy that pays more attention on involving human being
in study. It takes support of theories and models in order to develop understanding about topic.
In the present study on impact of franchise market entry strategy on business in order to
enter into new location successfully, scholar has applied interpretivism philosophy. This has
helped person in knowing more about various market entry strategies and analysing significance
of franchise strategy for McDonald’s in order to enter into China successfully (Guthrie, 2015).
Interpretivism philosophy will be used in order to understand the same objective reality I
different ways.
Research approach
It can be defined as procedure or outline of carrying out an investigation effectively.
There are inductive and deductive two main approaches that used by researcher. Inductive is type
of technique that is associated with qualitative studies. This method involves theoretical
perspectives and by reviewing existing theory scholar has to answer research questions.
Inductive approach observes facts and determine pattern (Keutmann and et.al., 2015). This aids
in generating new theory successfully. Deductive is another kind of technique that starts with
theories and frame hypothesis. Scholar tests these hypotheses for finding actual results.
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In the present study on effectiveness of franchise market entry strategy on business
growth investigator has applied inductive research approach. That aids the person in minimising
complexity and reaching to end results in significant manner
Research strategy
It can be defined as outline of process that is applied by researcher for completing this
investigation. Descriptive, semi-experimental, experimental, exploratory etc. are various
designing techniques that are used by scholar as per suitability of the research project.
Descriptive design is the type of technique that aids in describing situation or case (Silverman,
2016). It is theoretical approach, by implementing this method scholar can get in-depth
information that may helps in answering the research problems. Experimental design is another
kind of tool that assists in analysing relationship between cause and effects. Scholar has to
involve dependent and independent variables that allow in finding actual impact of one variable
on other. Explanatory design is tool in which researcher applies their own ideas and thoughts in
order to generate valid results. Exploratory design helps in exploring facts related to subject
matter (Taylor, Bogdan and DeVault, 2015). In the current study scholar has taken assistance of
descriptive research design. This has supported in answering the questions related to market
entry strategies and its effectiveness for business
Research choice
Primary data collection sources assist in involving fresh details that have never been
used in any previous literature. Study will apply random sampling method that would help
in avoiding biasness and collecting current detail related to subject matter. Secondary
research will be done by reviewing the various journals and articles. The data will be also
collected from only the articles which is been published in English language. Information
will be also gathered by searching for the key-words like Mac Donald, globalisation, fast
food and many more. Researcher is responsible for conducting an investigation in efficient
manner. Individual has to use primary and secondary information for developing knowledge
about topic. But cost, access and ethical aspects are considered as most essential elements that
may affect overall results (Taylor, Bogdan and DeVault, 2015).
Primary data collection
It is the technique that helps in gathering fresh data. Such kind of information are very
fresh and never been used in any previous research. Such type of data is carried by research
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oneself. These are more specific details that help scholar in understanding needs of study and
involving correct detail in the research project. Primary data collection sources supports scholar
in acquiring new data that can explain situation well and can assist in answering all questions in
significant manner (Silverman, 2016). One of the main advantage of using primary data
collection sources is that these are original and have high relevancy with the subject matter.
Reliability of these information is very high.
Questionnaire, observation etc, are various techniques that supports scholar in finding
real facts related to topic. Present study is based on impact of franchise market entry strategy on
business in order to enter into new location successfully. For completing this research scholar
has taken support of questionnaire tool. This is the best way through which investigation has
asked questions with manager of McDonald’s and have realised effectiveness of various market
entry strategies (Keutmann and et.al., 2015).
Secondary data collection
This is another technique that helps in gathering information about topic to
scholar. There are many researchers those who have conducted many researches in past on same
topic. Investigator involves their studies in order to develop understanding about topic. Books,
Journals, internet articles etc. are various sources through which researcher can gather in-depth
detail about topic. External data are being collected from outside sources that aid investigator in
developing understanding about topic. The main advantage of using secondary details is that it is
cheaper and easier to gather (Simmons and Watson, 2015). By this way, scholar can collect
huge data in less time
Techniques and procedure of data collection
Research can be defined as art of investigating about topic. It is considered as methodical
searching that assist in knowing more about topic and gathering real facts related to subject
matter. Effective researching allows scholar in collecting authentic data that may help in
answering research questions significantly. There are two main types of data collection tools that
are used in different kinds of investigations (Taylor, Bogdan and DeVault, 2015). Questionnaire
will also be used to conduct the study. It will be utilised as data collected from this method is
authentic and reliable. Advantage of this process is that a lot of information can be collected
from the participants at an affordable price. The main disadvantage of using it is that their can be
a misconceptions in understanding and interpretations of facts. Questionnaire will be used by the
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