International Business Management Challenges for McDonalds Report

This report provides an in-depth analysis of the management practices and challenges encountered by McDonalds within the global business environment. It begins by identifying various challenges, including cultural, legal, political, and technological aspects, that impact the company's operations and performance. The report then explores the influence of international trade theories, such as absolute advantage and mercantilism, on McDonalds' global strategy. Furthermore, it examines the role of Foreign Direct Investment (FDI) in the company's expansion and its impact on competitive advantage. The report highlights the importance of adapting to diverse cultural contexts, navigating political and legal complexities, and leveraging technology to enhance productivity and customer experience. It also discusses the company's competitive landscape, including challenges related to raw material prices, market saturation, and employee turnover. Overall, the report offers a comprehensive understanding of the factors influencing McDonalds' success in the international business arena, providing insights into its strategies for maintaining trade relations and achieving a competitive edge.

Running Head: MANAGEMENT
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International business
7/11/2019

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Contents
Introduction...........................................................................................................................................2
Future challenges for McDonalds in global business environment........................................................2
Influence of international trade (theories)..............................................................................................5
Foreign direct Investment (FDI) in McDonalds.....................................................................................6
Manipulation of International financial markets for competitive advantage..........................................8
Conclusion.............................................................................................................................................9
References...........................................................................................................................................10

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Introduction
The report brings about the discussion on the concept of management practices and
challenges faced by organisations in global business environment. Businesses operating in the
society are affected by the external environment, which includes their competitors. The
global factors or environment that influences the working of an organisation include number
of things. A business organisation faces these challenges, in their working affecting their
performance and advantage in the industry. The company ‘McDonalds’ has been taken in
this report to analyse the challenges, theories of international trade, and other phenomenon. In
the later part, the report will mention the company’s involvement into maintaining the trade
relations inclusive of the foreign direct investments. Thus, the readers will gain an
understanding of different factors that influence the working of the company in global
business environment.
Future challenges for McDonalds in global business environment
McDonald’s is a big name in the food industry, i.e. biggest fast food restaurant chain
uses their strengths to operate within business environment. Despite their effective
functioning, and strength the company faces number of challenges, i.e. cultural, legal,
political, technological, and natural and others. The fast food business need to adopt more
better technologies and systems to increase their productivity, sales and communication
amongst their teams as per their customer expectation (Robertson et al., 2016). The fast food
business operates at a global level in different locations and this generally leads the
organisation face competition at a high level. Other than competition, the company face
certain common challenges in cultural, political, legal, and technological aspects and others
(Robertson et al., 2016).
One of the major issues that the company faces is managing their operations across
different cultures. Indian’s Hindu culture has framed one of the major cultural issues for the
organisation. As for an example, the Indians and Muslims in India do not eat pork, or meat
of the sacred cow, and this creates problem for various stores of the McDonalds.
It has been found through research that McDonalds has shown respect and adapted the
Indian culture in their operations for their food products. The company has created an Indian
version of burgers that are made from Mutten and chicken. All the foods have been

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segregated as vegetarian and non-vegetarian due to the Hindus. Therefore, the company may
face the issue of Hindu culture, for the usage of the oil, and other stuffs in their food
products. For managing with Hindu Culture, the company can employ some of the local
citizens to help them in their business in context to a particular culture (Gao, 2018).
Discussing about the political and legal aspects, the fast food business must respond
to the existing laws and rules across different countries. They must comply with the health
and hygiene regulations as it mainly affects the people. Issues of government tensions
between countries are one of the challenges for the company. For an instance, dealing and
communicating with the Russia is one of the issues to be faced by the company in their future
years. It has been analysed that complications amongst government parties could shift their
current trade agreements, which creates a hostile environment for the fast food operate
effectively (Hartmann et al., 2017).
The fast food business has encountered number of problems in context to the legal
environment. Many law suits and cases have been filed against McDonalds, and many of
these have involved the issue of trademark. The fast food joint may further face problems in
legal matters, in context to their advertising methods, which mainly portray children. It has
been found in the previous records also, that McDonalds face complexity due to their
exploitation strategy of children through their advertising, and caused indirect exploitation to
the animals. Thus, the company must undertake proper actions and improvise their strategies
to avoid these political and legal issues affecting their operations (Geppert, Matter &
Williams, 2016).
On the economic side of their business the company has faced the problem of
financial crisis in past years. The economic condition of each different country affects the
way they operate, and carry out their operations. Therefore, deciding whether it is a small
decision to purchase raw materials locally or to ship them is a problem to be faced by the
business. Economic recession and low disposable income of the people were found as major
economic problems likely to be increased in the future years (Dekker & Breakey, 2016).
The company is also facing the problem of employee turnover, at a greater rate which
might affect their economic state of balance. Low set up costs, along with rapid expansion
acts to be one main economic challenge for the business in the future years. Keeping prices

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low for their customers impact their economic or financial stability and thereupon
productivity. Thus, McDonalds should factor and improve in context to their unemployment
rate in each of their locations. This is essential because they are facing the problem of high
employee turnover, as they lose and hire workers on a consistent basis (McDonald & Thorpe,
2016).
In context to the technology related aspects, it has been found that technology is
reshaping the way fast food restaurants serve their customers. McDonalds face the challenge
of introducing and launching ‘digital ordering platform’ in the coming years. This will
include their restaurants to be developed with self-service kiosks. The technology of self-
service kiosks for their customers across different regions will lead to an increase in their
overall sales. The technology initiatives of the company are considered as positive steps
which will boost the value of their stock, and improve performance (Gilberthorpe & Hilson,
2016).
In McDonalds, the role of technology has been quite important to enable the business
owners survive and earn huge profits. This ensures the fast food company, to enjoy a
competitive space in the industry. McDonalds derives more than 80% of their revenues from
eight different countries around the world. However, some of the tough competitors for
McDonalds include KFC, Burger king, Subway, BKC, Yum foods, and others making it more
difficult for other firms to enter the market (Forbes, 2017).
One of the significant challenges faced by McDonalds is regarding the prices of their
raw materials and food products. The competitors focus on balancing the prices of raw
materials as well as their products. Due to this, McDonalds have to deal with their alarming
change or saturation in the market, and this makes it difficult for the company to open up
with new branches or outlets. Therefore, this is one of the major competitive issue or
challenge for the company in the long period (Harrington, Ottenbacher & Fauser, 2017).
The fast food business, McDonalds need to maintain their physical structure in
appropriate manner to attract large number of customers. It includes ensuring cleanliness,
maintaining décor, and ambience of To enhance the consistent delivery of the quality,
services, and cleanliness through the excellence in the restaurants is one of the major
challenges. It integrates with the demographic factor, in context to different regions or
countries. For an instance, in China the restaurants have their interior walls covered with the
posters, and slogans which emphasize the family values. This makes the delivery of services

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in variable manner in different communities (Martins, Rindova & Greenbaum, 2015).
Another aspect, taking into account the composition of population such as child-centred
families, and young men and women are the basis of their service delivery. This is one of the
most common and vital demographic factor which may create challenge for the company in
the coming years (Anaf, Baum & Fisher, 2018).
Through research, it has been found that the company was embroiled in food safety
scandal, in China recently, which poses demographic issues. Moreover, the company had to
reduce or cut down the supply of their fries to Japan after a labor dispute at the Port of Los
Angeles. Therefore, these incidents or problem leads to a significant impact on the bottom
line workers, and cause operational issues for the firm.
Influence of international trade (theories)
Absolute advantage
The company, McDonalds has been one of the successful global food restaurants
around the world. They have used effective management strategies and focused on their
global expansion to entre and capture new markets for their food products. It therefore, states
about the concept of international trade, which mean exchange of goods and services between
countries. The exchange of goods or services gives rise to the economy, and impacts the
prices, demand, and supply of the brand or fast food products. The company operates using
adaptation strategy which enables them understand different cultures, and the varying needs
and preferences of the customers. Competition plays a major role in different countries to
provide goods and services to the customer (Frynas & Mellahi, 2015).
The theory of absolute advantage in international trade defines that an economy can
enhance their production of total of goods for the same quantity of goods. It states that fewer
resources are required to produce the same amount of goods, with the low costs. The
company make purchase of their raw materials in bulk required for set menu. This helps them
achieve economies of scale, and benefits their customers through the food at low or
affordable prices. The fast food chain enjoys this benefit or advantage all across the world
within restaurant industry. Therefore, the theory of absolute advantage has a positive impact
on the effective functioning of McDonald (Hamilton & Réquillart, 2017).

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Quick production and delivery of the food are the two major competitive advantages acquired
by the firm. The company has learned to execute their strategy in effective manner, with a
low rate of failure ensuring best food products or services to their customers. Henceforth,
these competitive advantages of the firm comply directly with their vision, to be the world’s
best quick service restaurant service (Martinsons, 2016).
Mercantilism
On the other hand, the theory of mercantilism in international relations or trade is
considered important determining the conduct if trade across regions. Mercantilism can be
defined as national economic policy which has been established to maximise the exports of a
nation. The policy aims at accumulating monetary reserves through a positive balance of
trade, especially in context to finished products (Robertson et al., 2016).
Today, the concept of mercantilism is called as franchising, and it refers to the
corporation i.e. parent company and the individual franchises (owner). McDonald’s
restaurant pays to the McDonalds Corporation a fee to open up the restaurant. Here,
according to this concept the owner must agree to the set prices, menu, and other items as per
the instructions of McDonalds Corporation. They also need to use the logos, merchandise,
suppliers, and drinks as made in use by the corporation. This states about the influence of the
mercantilism as the restaurant chains are nearly controlled and governed by the parent
company (McDonald et al., 2019). Due to this aspect, i.e. making their franchises follow
their rules and regulations, the parent company gains maximum wealth and power, with the
increase in the opening of their store or outlets. Therefore, it has been analysed that each of
the McDonalds restaurant is managed independently, but every owner needs to follow the
established same rules in conducting their business (Martinsons, 2016).
Foreign direct Investment (FDI) in McDonalds
To assess the aspect, of earning or gaining wealth and power it has been found that
the more the number of restaurants, the more profits will be earned by the parent company at
the national level. Besides, the company serves better quality and tested products, and
purchase from the suppliers which are trusted by the parent company. This has depicted a
significant level of influence on each of the owners and restaurants in context to the

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franchising system. Thus, the aspect of mercantilism supports the parent company and other
individual stores to add and enhance their exports across the nation, to facilitate international
trade (Burger, Ianchovichina & Rijkers, 2015).
Moving further, the discussion will analyse the impact of the investment made by the
firm on their labour, capital markets, impacting the overall economic growth. Foreign direct
investment i.e. FDI is an investment that controls the ownership in a business in one country
through an entity based in another country.
It has been found through research that McDonalds uses FDI, as a second approach
for entering into different markets for carrying out their business. This has been found
through the case of the fast food business, McDonald’s entry into the market of Nigeria.
Here, foreign direct investment i.e. investment has been found when McDonalds established
themselves in Nigeria without collaborating with the existing restaurants or licensing. They
established their stores or outlets and sold their food items to the Nigerian population
directly. for targeting the population of Nigeria, the fast food business relies on the foreign
direct investment, as best technique due to the reason that rents or charges are low as
compared to other countries such as USA, UK, and others (Rusu, 2016).
The option or mode of entering into foreign markets through FDI has been considered
quite beneficial due to certain resources or benefits. In terms of the labour, the region
particularly provides the availability of both skilled and non-skilled workers at a relatively
affordable or lower cost. This shows effective managerial strategies to be implemented,
determining good level of foreign direct entry by McDonalds (Helo, Gunasekaran &
Rymaszewska, 2017).
One of the major benefits of the FDI i.e. Foreign direct investment to the host country
is increased levels of the income in the target country. This has also led the fast food business
increase their earnings, profitability with large market share in the food industry. However,
the reports have mentioned that McDonalds does not receive many benefits from the foreign
direct investments, but it does not allow the company to control their standards. Therefore,
the company has chosen the ‘international franchises’ up to 80% for their stores worldwide,
other than the foreign direct investment. These stores are run and owned by the franchises,
developing a strong base for their growth in the economy (Hanaysha, 2016).

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This states the benefit of relying on the method of franchising more than the foreign
direct investment. Through the aspect of international franchising, the franchisee is able to
gather information about the local culture and market customs of the respective country
easily. This is not possible in the case of the fast food to gain the benefit solely from the
foreign direct investment. Despite these issues, and lack of benefits the company still chooses
to use FDI. The reason behind this is that it assists McDonalds to set their own operating
standards, maintaining or exercising control over their product line. This would facilitate or
lead the company gain advantages of positioning itself against number of competitors (Noe et
al., 2017).
In addition, it has been analysed that it is important for the franchisor to work
successfully in their own country, before expanding at a global level. This has been
represented in the company’s low price strategy, consistent menu, quality delivery of the food
products, and speed of the services. These aspects have ensured great level of competition of
McDonalds with other businesses operating in the food industry (Jones & Kierzkowski,
2018).
It has been found through research that McDonald’s foreign direct investment does
not emphasize on exercising control over their affiliated restaurant chain, in developed
countries. Rather, FDI aims to develop the countries as well as their internal investors gain
benefits or easy access to the markets in the foreign countries. Thus, it has been understood
that the fast food business, has been greatly impacted or influenced by foreign direct
investment (Baker & Friel, 2016).
Manipulation of International financial markets for competitive advantage
The fast food business i.e. McDonalds has attained effective competition in the
overall industry, and continues to attain grow in the future years. Now, the discussion will
determine the impact or manipulation of international financial markets to gain competitive
advantage. International financial market refers to the place where financial wealth is traded
between the individuals and countries. In other words, it refers to the marketplace where
buyers and sellers usually participate in the exchange of the assets, such as equities, bonds,
and currencies. International monetary system refers to the set of internationally agreed rules,
conventions, and institutions that facilitate the international trade. Not only international

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trade, it also fosters investment across the borders and the reallocation of the capital between
nations (Martins, Rindova & Greenbaum, 2015).
Market manipulation refers to the type of market abuse wherein there is a deliberate
attempt to interfere with the free and fair operation of the market. The practice of
manipulating the international financial market tends to create the false or misleading
appearances in context to the prices of their products. The fast food joint, McDonalds
manipulate their financial market, by selling off their stocks at the end of the day or week an
influence their prices. At McDonald’s it has been observed that shareholders are rewarded
with the dividend income, but their buy-back reward are mainly unstable, and here
shareholders receive benefits from the manipulation of their stock prices.
Conclusion
To conclude the above discussion it has been analysed that the company has become
the leader in the food industry. The report above has mentioned the factors or environment
that influence the working of an organisation includes number of things. These consist of the
legal, political, social, technological, and economic factors. The report has mentioned the
role of international trade, financial market, and their influence on the working of the
business in food industry. Thus, it has been found that McDonalds has attained great level of
competitive advantage, and continue to attain success in the future years.

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References
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