McDonald's International Business: Strategies, SWOT & Expansion

This report provides an overview of international business, focusing on McDonald's strategies for global expansion. It examines McDonald's business model, entry strategies, and franchising approach, highlighting standardization, promotional activities, cost control, and pricing strategies. A SWOT analysis identifies the company's strengths, weaknesses, opportunities, and threats in the international marketplace. The report emphasizes McDonald's growth strategy, which includes increasing restaurant chains, enhancing profitability, and improving international performance. It also addresses political sensitivity and environmental friendliness as crucial factors for sustainable international business operations. The analysis underscores McDonald's strong market position and its ability to leverage opportunities for continued growth in the fast food industry. Desklib offers a variety of similar solved assignments and resources for students.

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International Business
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Table of Contents
Introduction to International Business.............................................................................................2
Introduction of the Company...........................................................................................................3
Analysis...........................................................................................................................................4
SWOT Analysis...........................................................................................................................4
Growth Strategy...........................................................................................................................6
Business Model and Entry Strategy.............................................................................................7
McDonald’s Model of Franchise.................................................................................................8
Products and Services Standardization........................................................................................9
Higher Identification via Promotional activities........................................................................10
Effective Control over Costs.....................................................................................................10
Pricing Strategy.........................................................................................................................11
Political Sensitivity....................................................................................................................12
Environmental Friendliness.......................................................................................................12
Conclusion.....................................................................................................................................13
References......................................................................................................................................15

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Introduction to International Business
International business can also be referred as the study of internationalization procedure
of multinational enterprises. It encompasses all the commercial activities, which take place in
order to promote and transfer goods, resources, people, services and ideas. In simpler terms,
international business commonly refers to the trading of goods, services, capital, knowledge,
technology at the global level (Meyer & Peng, 2016). Moreover, international businesses involve
the cross border transactions of services and goods between two or more nations. The
transactions of the economic resources in turn, include skills, capital as well as people for the
purpose of international production. The international production comprises physical services
like finance, insurance, construction, banking and other goods. International business can also be
regarded as globalization (Shenkar, Luo & Chi, 2014).
The purpose of the report is to throw light on international business and the major
strategies for a company to become international. The case study of McDonald’s Company is
being taken in order to analyze and evaluate their marketing strategies for becoming
international. It is examined that in order to conduct a business overseas, several companies must
separate the national markets into a single global marketplace. Specifically, there are two main
factors, which underline the trends of greater globalization. The primary factor comprise the
eliminating barriers of making cross border trade easier, that is, free flow of the goods, capital
and services. On the other hand the secondary factor is related to the changes in the technological
areas, particularly the developments in information processing, transportation technologies and
communication (Cano-Kollmann et al., 2016).

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Thee report will highlight certain factors of international business by introducing it in the
report. In addition to this, the report will focus on the McDonald’s Company and its plan for
expansion on the international platform. Moreover, it will highlight the case studies of
McDonald’s as a leader of fast food industry. The aim as well as purpose of the report is to
analyze as well as evaluate the key drivers, which impact the company’s strategies and success.
On the basis of that, a SWOT and other strategic analysis are being done for gaining a detailed
understanding of McDonald’s Company’s future expansion areas.
Introduction of the Company
Globalization has made the world considerably smaller in size. The state lines have
practically turned into a divider, which separates the regions of the massive unitary community.
The businesses are the ones which get highly affected by this type of occurrences. In the world of
globalization, the business of fast food is a vast as well as growth oriented industry (Cavusgil et
al., 2014). Moreover, without any doubts, McDonald’s is one of the leading fast food retail
chains, amongst others. The strategy of the industry is continued growth, remaining an efficient
as well as quality producer, offering highest values of effective marketing and lastly; exceptional
services of customer care.
McDonald’s can be considered as a global scale brand. Since its inception in the year
1973, the company began expanding domestically all throughout United States and thus, formed
its brand recognition. The initial strategy of the company began through advertisements directly
to the upper and middle class citizens, as it was seen in developing countries like China.
However, it is seen that most of the bargaining deals on several food items, the company began
to cater to a large number of audiences, especially those who belonged to lower class. The key

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strategies and elements, which make the company successful is by adding 700 to 900 restaurants
annually (Mcdonalds.com, 2018).
Moreover, the company has also added some specials in their menu and items, introduced
extra value meals in order to promote the frequent visits of the customers. In addition to this, the
company is also focusing on their target customers by focusing on the consistent quality and
product lines, careful attention to the efficiency of storage, usage of the prefix Mc, extensive
advertising and others (Hamilton & Webster, 2015). Furthermore, the employees are courteous
and the company believes in paying an equitable wage to them, in addition to good training and
development programs. The management of the company has believed constantly in being the
leader in issues, which affect their consumers, at large. This is evident in the company’s
involvement in several community projects like education, medical research, rehabilitation
facilities and health care (Picciotto & Mayne, 2016).
Analysis
SWOT Analysis
Strengths
McDonald’s Company has a strong presence on the international platform, along with its
domestic competitors being only half of its size. The company is considered to be a market
leader in both international as well as domestic markets. Moreover, McDonald’s get highly
benefitted from the cost reduction through scale economies due to its enormous size as well as
huge presence in the global markets. In addition to this, it allows the company to diversify their
items and enhance their economic performances in some specific countries. The company is well

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placed to grow and expand, as well as take advantages of the long term economic enhancement
(Maseland, 2017).
Weaknesses
The industry of food is really saturated and therefore, the company has to deal with
several prospects of looming in the market saturation that could make it challenging to add other
outlets. However, the forecasts reveal that the market will grow by two percent each year.
Opportunities
The company has sold a chunk of its section to its founder in the year 2003 and decided
to discontinue its operations. However, the company can instead focus on other renowned fast
food industries for its operations. Grill is one of the most successful brands and also it will help
McDonald’s to increase their profitability and productivity. In addition to this, the restaurants of
McDonald’s need to change and refurbish their image, which will help in adding new and
innovative features like Internet accessibility and others (Parboteeah & Cullen, 2017).
Threats
McDonald’s is however exposed to various changes, especially in the global economy.
The aggressive international expansion of the company has left them extremely vulnerable to the
economic slowdown of other countries. The fluctuation of foreign currency can also be regarded
as a greater threat to the global companies, such as McDonald’s. Moreover, the industry of fast
food is becoming a highly competitive sector (Fairfield-Sonn, 2017). Therefore, it is immensely
important for the company to keep up with their competitors by conducting expensive
promotional campaigns. This will lead to the limited margins and help the company in gaining

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market share. In addition to this, the company should attempt to differentiate itself from its
competitors by using new menu items and formats. However, other fast food companies are also
doing the same thing and therefore, the ideas should be as creative as possible (Turton, 2017).
The SWOT analysis has revealed that even though there are several threats against the
company, McDonald’s occupies a stronger position in the international marketplace. Taking into
consideration Porter’s Five Forces model, it is worth mentioning that the strongest competitive
force is mainly between the rival sellers in any business or industry. The SWOT analysis have
shown much strength of the company, which employs to keep itself on the top of fast food
industry. However, it is true that there are several weaknesses and threats, which the company
can turn into opportunities by hiring more and more creative employees for international
expansion (Ghemawat, 2015).
The fast food industry has vast opportunities to grow and expand on the global platform.
However, it needs to combat with the customers’ health expectations. McDonald’s Company has
strong base of consumers and it has huge opportunities to grow in the coming years. The analysis
has also shown that the company has some flaws related to their finance policies; however, these
are hugely due to the policies of expansion, within the organization. The major threats of the
competition can mainly originate from the competitive sellers present within the industry as well
as other firms in the related industry, which typically forms the substitute products (Crane &
Matten, 2016).
Growth Strategy
The strategy for growth and development of McDonald’s is presently based on three
specific factors, which are;

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 Constant increase in the number of the restaurant chains,
 Enhancing the profits and sales at the existing restaurants,
 Improving the profitability, internationally
Maximizing profits and sales at the existing restaurants will however, be accomplished
by re-investment, better operations, refinement and product development, lower development,
operating costs and effective strategies of marketing. McDonald’s Company is aware of the fact
that their growth and sustainability totally depends upon their stakeholders, suppliers, customers
and franchisees. The company believes that as long as the suppliers and franchisees are
profitable, McDonald’s would also get benefitted. The improved profitability on the global
platform is realized to be the economies of the scale. These are achieved in the individual
markets as well as through company benefits from global infrastructure and development
(Adekola & Sergi, 2016).
It can be said that the company’s revenue sources depends on two specific mediums-
from their home country and the foreign markets. Due to increased globalization, their share of
earnings is increasing rapidly from the foreign markets. However, McDonald’s may also face
certain expansion costs if they want to open their stores at some other countries, which are totally
new to them. Initially, their costs will be higher but after assessing the long-term prospects of
various markets, it can be said that the company will get hugely benefitted. McDonald’s opened
its outlets, initially at higher income and developed countries like United Kingdom, Canada,
Japan and then it moved to the developing countries like China (Bergman, 2015).

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Business Model and Entry Strategy
McDonald’s is one of the leading fast food industries all across the world. It has gained
immense popularity, since its inception and managed to win the hearts of its target customers.
However, it is true that McDonald’s Company deals with food and beverage products and
therefore, it cannot export its products or services to some other country. Thus, it can choose
some other operation modes in the foreign markets. This will help in involving a high level of
loyalty of the resources than other factors. In particular, the company can open a new ancillary,
which franchises directly. In addition to this, McDonald’s can also enter or opt for a joint venture
with some local partners of the market (Neelankavil & Rai, 2014).
Moreover, the company can also establish an arrangement of master franchising, where
the master franchisees own as well as operates all other outlets within their territory or find
others to perform the same job. Furthermore, the investment level, which McDonald’s commits
to the markets, varies as per their entry modes. However, in all the cases, the company tries to
take control over the total number of their outlets as well as growth in each of the markets.
Therefore, McDonald’s should internalize the expansion cost or expense to a huge extent,
depending on the governance kind within every market. This will help the company in setting the
path of expansion within the country as well as other markets (Elo, Harima & Freiling, 2015).
McDonald’s Model of Franchise
McDonald’s Company of fast foods primarily operates through all the franchises all
across the world. The franchises give some companies like McDonald’s a cheap way of
expansion into other counties. In addition to this, it also gives the company a control over the
utilization of their brands and their operations. This part of the report emphasizes upon the
advantages of franchising, which are discussed as follows;

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 The franchises run faster as compared to some other ownership forms.
 They help the parent company to generate more profits quickly.
 Moreover, the supplies are also cheap for the franchises, which in turn help in leveraging
the supply chain management of the parent company.
 The initial investment for the company is lower.
 In addition to this, the overall control on the usage of the brand as well as its operations is
much high as compared to that of leasing.
 The franchises gets overall managerial assistance regarding the knowledge of the
company.
 McDonald’s will be able to generate revenues from its franchises in two different types;
one is the service fees and the other is the rent. However, McDonald’s Company has
majority of their properties on which the franchises operate. Therefore, it will be able to
collect a minimum percentage as rent, from the monthly sales. With the help of this
method, McDonald’s has become one of the largest owners of the corner properties all
across the world.
The accomplishment factor of the franchise expansion mode mainly depends on three
different factors, which are being discussed as follows;
Products and Services Standardization
The company makes sure that it standardizes the functions all across its franchise in order
to ensure that their standard is maintained properly. In addition to this, the aim of the company is
to provide its target customers with great experiences, all across the world. Moreover, the
company achieves this through decreasing the skills’ amount, necessary for the preparation of the
product lines. This can be done by segregating the procedure into the series of continuous and

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repeatable actions in order to achieve a similar result. In particular, by instructing the workers,
the company can get hugely benefitted. McDonald’s can also ensure that every worker abide by
the company’s policies and procedures, which has similar output over them, across the globe
(Edwards & Tennent, 2017).
Higher Identification via Promotional activities
McDonald’s Company is the one of the major advertisers among its competitors. On
having incorporated brand promotional activities, all across the globe, the company ensures a
uniform and high identification brand image all across the markets and geographies, where it
operates (Tarique, Briscoe & Schuler, 2015).
Effective Control over Costs
Through stricter control over each franchise costs as well as the contrast across them,
McDonald’s Company is able to make sure that every franchisee operated at their right structure
of costs. Moreover, it can utilize the knowledge from several outlets, which are owned by the
company itself, in order to promote, find and experiment appropriate measures of cost
optimization (Miller, 2016). However, one of the major problems with the penetration of the
company is that in some of their franchisees might end up cannibalizing each one’s share in the
markets. This will lead to unhealthy competition and resentment. Furthermore, the franchises
may also begin to feel stagnated by the amount of overall controls, which the parent company
will exert over them. In most of the cases, the company will seem to cover the correct balance
between adjustment and standardization to the local needs (Christodoulides, Cadogan &
Veloutsou, 2015).

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It can be said that the company must look for certain things in their franchise stores,
which are;
Business Experience: The employees, who have a well demonstrated successful management or
ownership of the multiple units of business and have supervised various departments,
Rapid Growth: Those who own the aptitude and capability of growth swiftly with the company,
Business Plan as well as Customer Experience: The ability of developing and executing the
business plan,
Financial Management: The skills and abilities of managing the financial part, which includes a
thorough understanding of the financial statements of the business,
Management Skills: The assurance to manage the regular operations as well as actions of the
business,
Training: The eagerness to complete a world class training session and become highly proficient
in different aspects of operations in the restaurant business of McDonald’s.
Pricing Strategy
The companies that enter into the global platform for businesses need to evaluate the
pricing strategy of the products on the basis of their earnings allocation of the local rise, citizens
and other related factors such as currency exchange rate and others. Due to the different
exchange rates in different countries, it is highly possible that the customers may end up paying
various prices for the same product in several countries. Therefore, McDonald’s Company
should open their stores in some major cities targeting the upper and middle class customers as
the prices are affordable to them. After setting a proper target for the upper and middle class