Global Corporate Strategy Report: McDonald's International Business

This report provides a critical analysis of McDonald's (McD) global corporate strategy, focusing on open innovation, internationalization, and localization within the fast-food industry. It examines the application of strategic management and leadership principles to organizational values and direction, including a case study on bringing external innovation inside and outside Multinational Corporations (MNCs). The report explores open vs. closed innovation, the effects of open innovation factors on McD's approach, and the advantages and disadvantages of internationalization and localization. The report uses the economics concept of ‘demand for internationalisation’ and makes recommendations to maximize corporate profitability through product differentiation and low-cost leadership. Furthermore, the report demonstrates the strategic decision-making process and its relation to changes in global business strategies and the business environment. Personal reflections on learning are also included.

Running Head: MANAGEMENT
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Management
GLOBAL CORPORATE STRATEGY
(Student details :)
8/19/2019

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Executive Summary
The report is emphasized on critical analysis of an international industry as fast-food
industry’s global corporate strategies. This paper is going to demonstrate critical
understanding as well as application of relevant strategic management with leadership
principles which support organizational values and effects on organizational directions. The
paper aimed to demonstrate critical evaluation and monitoring the business mission, policies,
and objectives of global firms like McDonalds (McD). Apart from this, the report is
containing personal reflection to demonstrate critical reflective skills for reflecting on the
influence of their understanding upon the problem-solving process in this era. It is evident
that the report is based on a case study on ‘bringing external innovation inside and outside the
Multinational Corporations (MNCs). Finally, with the help of a detailed analysis of the
company McD, this report has demonstrated concrete knowledge of the strategic decision
making process from critical analysis of how strategic decision-making allows a firm to
related to changes in their global business strategies as well as business environment.

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Contents
Executive Summary...................................................................................................................1
PGBM16 Global Corporate Strategy.........................................................................................3
Introduction................................................................................................................................3
Open Innovation (OI) and Internationalisation..........................................................................3
Open and Closed Innovation..................................................................................................4
Effects of different OI factors on McD’s approach to external innovation...........................5
Internationalisation, Localisation, and Competitiveness...........................................................6
Organizational Purpose, Profitability, and Social Responsibility..............................................9
Personal reflections on learning...............................................................................................11
Conclusion................................................................................................................................12
References................................................................................................................................12

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PGBM16 Global Corporate Strategy
Introduction
This report is based on critical analysis as well as evaluation of the strategies adopted by
Multinational Corporations (MNCs), which are operating in an industry of a particular nation.
For doing so, the info available to the public such as annual reports or other researched
results will be accessed and utilized for completing the analysis. In addition, this report is
going to demonstrate an application of appropriate theories, models and techniques studied
during the module in relation to the practical aspects of strategy development into the
relevant industry. In this way, McDonalds Corporation being a multi-national fast-food
restaurant chain has been selected for narrating on the topic of global corporate strategy. In
this context, topics such as open innovation, internationalization, localization,
competitiveness, corporate social responsibility, profitability and personal reflection on
learning will be covered effectively.
Open Innovation (OI) and Internationalisation
In general, open innovation is all about combining both internal and external resources and
thereby acting upon the opportunities these resources generate (Wolf, 2016). In these days,
MNCs are proving open innovation to be a strong value proposition and hence they cannot
afford to lose out on the opportunities created by the aforementioned combination
(Vecchiato, 2017). It has been found that open innovation is having the capability of creating
long-term benefits in management as well as organizational innovation irrespective of the
only product or service innovation. In other words, when an MNC gets ahead of their
competitors and thereby becomes the favoured partner of choice in their operational industry,
then it turns out to be a long-term advantage definitely (Teeple, 2016). In the context of open
innovation and internationalisation, it is difficult for the competitors to copy as well as
neutralize the advantages which open innovation leadership could bring. In this way, this
section is going to narrate upon how MNCs bring external innovation inside with the help of
open innovation techniques (Tung, 2008).

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Source: (Daniel, 2018)
Open and Closed Innovation
The difference between closed innovation and open innovation can be determined by the way
in which innovation is produced originally. In this context, when a closed innovation is
usually developed, it evolves always in a self-contained company environment; contrary open
innovation usually incorporates external knowledge within innovation management
(Thompson, 2019). As depicted by the above figure, a closed innovation (CI) is always based
on the view which innovations are formed by the firms themselves. For instance, from the
ideas generation to the marketing and development, the whole innovation process takes place
within the organization hence it is known as CI. In this way, CI generally executes within the
company (Story, 2011).
On the other hand, OI means opening up the whole innovation process external to the
company boundaries for increasing an individual’s own innovation potential by active
strategic utilisation of the corporate environment. In this way, in OI innovation arises as a
result of the interaction of internal and external ideas, processes, sales channels, and
technologies. OI aims at developing promising innovative products and services as well as
business models within an organization. In OI, company’s customers, suppliers, employees,
prime users, competitors, universities or companies of other industries can be easily
integrated. Here, the place of innovation is can be either inside or outside of the organization
(Shenkar et al., 2014).
In the context of McD, the company is using OI approach for internationalisation as the
company philosophy is to get the best from anywhere in the world. McD practice conscious

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import as well as the export of knowledge for improving and accelerating their innovations
(Rothwell, 2010). In addition to that, the MNC promotes innovative ideas with the help of an
open exchange of innovative ideas with internal ideas beyond organizational boundaries. In
the context of OI, it has been seen that McD has seen the role of their customers as the active
innovators. Apart from this, a detailed analysis of the annual reports of the MNC suggests
that employees’ mobility at McD is high as compared to CI at rest MNCs (Retail ET, 2018).
Open innovation and internationalization at McD depict suggests that venture capital plays a
vital role at such MNCs. This is the reason that the significance of OI is constantly growing
day-by-day over CI for MNCs development and growth (Pteronzio, 2017).
Effects of different OI factors on McD’s approach to external innovation
In this section, a critical evaluation of the impacts of ‘demand conditions’, ‘factor
endowment’, ‘related and supporting industries’, ‘government’ and ‘chance’ on the MNCs
approach to external competition and innovation will be demonstrated (Pontiskoski &
Asakawa, 2009). The analysis suggests that:
 Factor endowment is the amount of land, labor, capital, as well as entrepreneurship
which a nation possesses and thereby exploits for innovative manufacturing. Thus,
factor endowment always influences positively on the OI approach of McD as found
by their recent annual reports (Pasquier, 2015).
 Related and supporting industries of McD like food supply, considerably impact on
the MNC’s approach to the external competition and innovation as without these
associated industries McD cannot work towards achieving OI strategic
implementation within their operations (Panmore, 2017).
 Moreover, demand conditions of the market considerably influence OI, because when
demand is low then OI cannot work, vice-versa is true.
 Government and Chance leave a major effect on the MNC’s approach towards
innovation while dealing with their external competitors because ethical, legal and
many other factors are directly related to open innovation strategic implementation
globally.
 Now, ‘strategy, structure and rivalry’ is the key connection amid global competitors
of the chosen MNC. Thus, it can be said that the three above mentioned elements are
important while MNC is heading towards OI strategies globally (Pasquier, 2015).

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Internationalisation, Localisation, and Competitiveness
This section of the critical analysis report of McD is dedicated to critically assessing the
advantages and disadvantages of fulfilling the ‘demand for internationalisation’ along with
the ‘demand for localisation’ simultaneously. Post analysis of these two demands, a
recommendation to the chosen MNC will be provided in relation to adopting one of these two
demands in order to maximize their corporate profitability. While recommending the one
competitive strategy, product differentiation or focus or low-cost leadership will be
considered largely (McDonald Annual Report, 2019).
In this context, the economics concept of ‘demand for internationalisation’ can be defined as
the procedure of enhancing the involvement of firms in global markets, while there is no
agreed definition of the chosen term. It has been found that there are
many internationalization theories that have attempted to explain why there is a need for
international activities by the companies (McDermott, 2017). In this way, the major merits
and de-merits of ‘demand for internationalisation’ are as follows:
Merits
 It allows fostering human development from understanding as well as respect through
nations
 Demand for Internationalisation promotes academic entrepreneurialism
 Demand for Internationalisation expands as well as sustains avenues for future
economic competitiveness
 Demand for Internationalisation allows many citizens to be employed by foreign-
owned organizations
 It raises intercultural awareness
 Demand for Internationalisation improves organizational outcomes for meeting
essential needs of the international market
 Demand for Internationalisation improves graduates’ regional, national and
international mobility
 Demand for Internationalisation typically enhances global expertise and mobility
 Demand for Internationalisation (DFI) further helps people to become an efficient
global citizen
 Demand for Internationalisation always contributes to quality measures of global
strategy planning, designing, implementation as well as modification.

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 It has been found that as a huge benefit DFI strengthens the rewards systems and
appraisal systems for employment as well as promotion through making them more
equitable, valid and rigorous.
 DFI always enhances the visibility for MNC
 DFI typically contributes to world economics
 DFI also improves the country’s economic, cultural, and political visibility
 Besides, DFI contributes to the enhance the understanding of different people belongs
to diverse culture and religions (OpenIsme, 2019).
De-merits
 Demand for Internationalisation causes discrimination
 Demand for Internationalisation does not have complementary goods
 Demand for Internationalisation is not having enough resources for a large level
expansion
 Demand for Internationalisation might not have the capability of transferring their
competitive benefits
 DFI might brain-drain of people of developing nations of the world
 As benefits of DFI sometimes confined, hence it causes disadvantages to local
employees
 DFI often weakens the regional as well as national engagement of people all across
the world
 DFI impacts adversely on the global job market
 Many times, DFI causes acculturation as well as the loss of indigenous values and
culture which is again a drawback
Contrary, Localization can be seen as the adaptation of products or services in order to meet
the requirements of a specific language, culture or preferred population's views (Oke et al.,
2009). In this way, localisation is the procedure of initially enabling a product to
be localized and thereby localizing it for diverse local audiences. In this context, merits and
de-merits of ‘Demand for localisation’ (DFL) are as follows:
Merits
 DFL offers reputation to the company
 DFL offers skilled labour and growth of facilities to the MNC

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 The economic benefit is one of the merits of the DFL in the context of MNC
operation
 DFL provides employment opportunities to the local people of the place where MNC
is working majorly (Oc & Bashshur, 2013).
De-merits
As localisation is not an unmixed go-ahead thus it has de-merits as follows:
 DFL causes a local imbalance as the emphasis of the MNCs in one region leads to the
major-sided development of the fiscal.
 An imbalance of resources of infrastructure and areas development like transport,
finance, power, and labour occurs due to DFL. It ultimately causes some regions to
improve while the rest areas linger backward largely (Mathur, 2017).
 DFL is hugely associated with dependence, as we know that if an industry is localised
in a specific locality then it makes the local economy dependent for their needs of the
products and services manufactured there.
 There are some social problems as well, which are strongly resulted from DFL. For
instance, social issues like the emergence of slums, congestion, increased accidents,
and strikes are usually occurring due to DFL.
 Subsequently, the aforementioned social problems badly impact the efficiency of the
labour and hence the whole productive capability of the industry.
 When MNCs like McD adopts DFL, then limited employment problem occurs.
 DFL causes raised costs of production and thereby reduce total production of the
MNC thus it generates diseconomies largely (Enterslice, 2017).
Therefore, all of the above-mentioned merits and de-merits of DFI and DFL suggests that the
chosen MNC as McD should adopt the approach of DFI in order to maximise their corporate
profitability through product differentiation and low-cost leadership as well. Here, two
supporting reasons for suggesting DFI for the McD are as follows:
With the help of product differentiation, McD can use the approach of ‘demand for
internationalisation’, it is essentially required for MNC’s sustainable busies future. This
analysis did not find the DFL approach suitable for the McD because it is already expanding
internationally and for this specific case DFI is the correct approach from the sustainability
perspective of the business model of McD (Bolman & Deal, 2017).

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While using low-cost leadership, McD can use DFI to launch their food items into different
countries of the world while customizing them as per the target consumers’ needs. Thus, if
we talk in terms of corporate profitability then DFI is the best approach for McD as they can
expand in the emerging low-budget markets such as Nepal, Bangladesh, Bhutan, and Nigeria
which is beneficial for the company’s long-term growth and sustainable development (Hill,
2008).
Organizational Purpose, Profitability, and Social Responsibility
This section is going to critically evaluate as well as monitor the corporate vision, mission,
policies, and objectives of global fast-food chain McD (McDonalds Co., 2019). In order to
evaluate corporate mission and vision of McD, the following findings have been found post
conducting the evaluation and critical analysis on the company’s annual reports:
McD’s corporate mission is to be their guests’ favourite place to eat and drink all the time. It
has been found that the mission highlights the importance of consumers being the business
focus when also maintaining the firm being the main influence on their food and beverage
purchase decisions in relation to international guests (Panmore, 2017). Thus, McD’s
corporate mission statement contains below-listed major components:
 To become consumers’ preferred option to eat and drink with friends and family
 To become consumers’ preferred place to eat and drink with friends and family
The chosen global firm McD is having a corporate vision statement of aiming to move with
pace towards driving profitable growth and thereby become a better restaurant for serving
more consumers delicious, healthy and safe food every day all across the world (Cavusgil et
al., 2014). This corporate vision has been updated in 2017, before that the vision was to
become an advance progressive burger supplying firm through delivering a modern consumer
experience all around the world. Thus, the key vision components of the company are:
 To become an even better McD
 To move with pace for driving more corporate profitability and achieve social
responsibility
 To serve more consumers tasty and safe food every day internationally (Christensen
& Innosight, 2009).

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In this way, this discussion is helpful to understand the selected organization’s purpose, and
measures to achieve corporate profitability (CP) and corporate social responsibility (CSR).
Here, while evaluating the capabilities of the CEO as well as the senior management team of
chosen MNC McD, it has been found that they all are working to attain CP and CSR
objectives efficiently for the MNC’s growth and future survival (THOMPSON, 2018). In this
context, there are so many strategic management and leadership principles which support
McD’s organizational values and hence impact on organizational directions in relation to
global corporate strategies. Key strategic management and leadership principles are
suggesting that since the beginning McD’s digital innovation strategy is evolving the
restaurant of the future. As mentioned by (McCluskey, 2018), there are so many appreciable
lessons present from McD’s open innovation process which considerably apply to global
health care. It has been seen several times that innovation at McD is fostered by its CEO and
senior management team largely. OI at McD begins with clear success criteria as their new
products always taste good, inexpensive as well as easy to prepare for quick delivery (Neate,
2015).
In addition to that, in such boundaries, internal senior management teams and CEO always
create as well as test new innovative ideas. It is evident that McD does not practice ‘blue sky’
but their size with customer expectations imposes rest natural constraints as well (Hill, 2008).
Thus, McD’s management and leaders have successfully demonstrated innovative leadership.
In general, innovation leadership is a philosophy and technique which usually combines
different leadership styles for influencing employees in order to produce creative ideas,
products, as well as services. It is also well-known that the key role in the practice of
innovation leadership is the innovation leaders which have been successfully demonstrated
by the leaders of the company McD. Recent sources suggest that McD is making this kind of
modern move was hardly surprising, though, as they'd seen huge success in 2011 with a
German campaign called ‘Mein Burger’ (Amit & Zott, 2012). It was indeed a six-month
competition allowing customers to invent as well as crowdsource new burgers online. The
CEO made it happen that these entries were voted on and judged, with 5 winners served in
stores throughout Germany. In this way, from the perspective of Organisational Purpose,
Profitability and Social Responsibility, leaders of the firm have been seen allowing customers
to design their own burgers. Subsequently, I got proved incredibly popular, so much so the
concept to Create Your Taste has been taken offline and directly into stores (Wigboldus,
2016).

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Personal reflections on learning
This section is focused on narrating personal reflection on learning throughout this module. I
am going to reflect on the impact of this assessment of my understanding of the MNCs which
are operating in the fast-food industry. While learning into this module, I have assessed the
benefits with the limitations of the theoretical concepts such as:
 External innovation or Open innovation
 Localisation
 Internationalisation
 Organizational purpose
 The role of senior management
 The role of leadership (CEO)
While creating a culture for sustaining corporate profitability, I have observed that leaders
and employees of McD are working towards internationalisation and open innovation. I also
learned the importance of CSR activities for achieving the sustainable development goals
(SDGs) set by the United Nations for 2030 (Corporate McDonalds, 2019). When I was
studying and practicing this critical analysis of the chosen MNC, then I realized that SDGs
are dependent on safe food and nutrition of the world people. Hence, MNCs like McD,
Burger King, KFC and many more are working towards achieving those food and basic
nutrition-related SDGs which are ultimately necessary for achieving the rest of the SDGs
effectively by 2030. Based on my learning from this module, I can now say that OI is much
better than CI for the global firms or MNCs as OI fosters corporate growth, profitability
along with CSR of the company. Besides, my evolved views suggest that both
internationalisation and localisation are having their own merits and de-merits depending
upon the particular situations thus all we need to do is a critical evaluation of the situation so
as to apply the best concept or strategy on MNC for organizational as well as societal growth
in the long-term (Buckley & Ghauri, 2015).
Conclusion
In whole, with the help of this report, important theoretical concepts have been applied and
explored for a particular industry as Fast-Food industry of the world. The MNC McD has
been chosen for the detailed analysis and evaluation of the firm on the basis of different
factors internationally. McD has been working since long in the fast-food restaurant industry