Introduction
McDonald’s in the United Arab Emirates is a fast-food company, which has, links all over the world and has an impact on the international market. McDonald’s restaurants in the United Arab Emirates are Emirati- owned and they are run and managed by emirates Fast food Corporation. The managing director is Mr. Rafic Fakih. McDonald’s in the UAE has 78 branches, and the first one opened in December 1994. From the time McDonald’s was launched in the UAE, it has interacted with the community, hence, playing a vital and crucial role in the fast-food restaurants all over the region. This paper will look at the most suitable market entry plan the McDonalds can use to continue penetrating the international market.
There is a need for McDonald’s to create a competitive advantage over competing companies to penetrate the international market fully. This can only be done by using an appropriate market strategy. The advantages of the selected market entry strategy to the company will be presented as a justification for the strategy. Logistics and supply chain plays a vital part in the success of companies while competing internationally, and this has been used by the McDonald in UAE. The company has been converting used vegetable oils to make gas for fuels the fleet of their delivery trucks, hence being environmentally friendly. This paper proposes the strategies that can be used by McDonald’s in the United Arab Emirates, to have complete and successful penetration in the international market.
Why go global?
This topic involves the reasons why McDonald’s should venture into the international market. It also involves discussing how social, legal, economic, political and technological factors contribute to companies going global. The reasons include economies of scale, the company will enjoy large profits by producing on a large scale because it will cut down its expenses (Doole and Lowe, 2008). The economies of scale are the benefits that are achieved by a company when it produces on large scale (Jeannet and Hennessey, 2004). Competition is another factor driving McDonald’s in the international market. The company feels that companies, which are in, the fast-food industry in other countries, earn a lot of profit, and they give substandard services. This drives the company in the market to increase and boost the profits and offer quality services to consumers (West, Ford and Ibrahim, 2010). SLEPT is another reason why McDonald’s should invest in the international market.
The social factors
These relate to the behavior, lifestyles, and tastes of consumers. The company should consider consumer behavior because, their changes in cultural practices will lead to changes in their fashions and styles (Thomas, 2008). They should also consider the population structure, that is, the age structure. This will help plan effectively on the current market situation and predict the future (Hill and Hill, 2011). McDonald’s should invest where there are a lot of young people because they form a large base of their customers. The company should work towards identifying the social changes that might occur in the future (Thomas, 2008). This will help them plan for the future market situation.
The legal factors
The legal factors should also be considered. These are the laid down rules and policies that companies should follow. McDonald’s has to identify such policies in their areas of investment. The legal frameworks include consumer protection, environmental legislations, health and safety and employment law (Blithe, 2009). McDonald’s should work to understand the policies in a time of their investment. The company should take proactive measures to ahead of such changes in case they occur. The company should, therefore, follow the laid down policies to the letter to avoid disturbances in the market.
The economic factors
Economic factors are factors that directly affect investment and the company’s profits. They are to be considered before any international venture. They include interest rates, which is the cost of borrowing money. A company should invest when investment rates are low to avoid making losses when it comes to the time of payment (Hill, 2010). A boom is a time when a company or business is earning high profits. It is not advisable to invest during such a time because; it does not reveal the real image of the market (Ghauri and Cateora, 2010). A slump is a kind of economic fluctuations when most businesses make huge losses and close down. McDonald’s should not, therefore, invest in such a time but should wait when the conditions are favorable (Hill, 2010).
Levels of demand at this time are the consumers’ willingness and ability to buy. It should be highly considered during investment. The company should invest in a market where there is rising demand. This is because; the company will be assured of a ready market that can be exploited. The rate of inflation, which is, a general hike in commodity prices, should be considered during investment. This is because; it could lead to a collapse of the market when it causes the prices to rise beyond the affordability of consumers (Hollensen, 2010). The company should consider a venture where the wage is low (Keegan and Green, 2010). The reason behind this is that low wage rates mean the cost of production is low, and the company will make large profits while selling at a low price.
Political factors
Political factors are the changes that arise as a result of government influence. These include policies passed by any trading block such as the European Union, Gulf countries among others. The company needs to consider such factors such as freedom of movement. The company should invest in a country where there is freedom of movement (Brouthers and Nakos, et al., 2009). This will enable the company to use its resources freely including human capital to strengthen the new ventures. Freedom of movement and other favorable factors increase competition, which will help McDonald’s, penetrate the market freely without any discrimination from international governments (Lee and Carter, 2010).
Technological factors
Technological factors are the changes that arise from advances in communication (Egan, 2007). McDonald’s should be aware of the technology used in the fast-food industry. This will enable the company to compete with rival companies in the market and industry. They should invest in technology which will make the company outstanding and favorable to consumers. They should also use modern forms of technology to do marketing. This can be done through social networks and other types of media. Modern technology enables companies to share information. McDonald’s should also invest in technology to cut down costs and improve service delivery (Baines, Fill, and Page, 2010). The company should highly invest in research and expansion in order not to remain behind its competitors.
McDonald’s should go global after having considered all the above factors. The information will enable the company to realize the best time to invest in an international market (Hill, 2010). The company should also analyze the social, legal, economic, political and technological factors that might affect the company’s investment in the future. The company should take proactive measures to ensure they are not negatively affected by any changes in the market (Hollensen, 2010). McDonald’s will be able to penetrate the international market if all the factors and recommendations are put in place.
Global research and strategy development
This part of the report involves identifying the most appropriate market entry strategy that will enable McDonald’s fast food Company, to penetrate the international market. There are different types of market entry strategies, which include exporting, piggybacking, ownership, countertrade, foreign production, licensing, joint ventures, export processing zones (EPZ) among others (Doole and Lowe, 2008). Every market entry strategy has its advantages and disadvantages. The advantages of ownership outweigh those of the other marketing strategies. Its advantages also overturn the disadvantages of other marketing strategies (Bradley, 2004). These make it the most appropriate marketing entry strategy to help McDonald’s fast-food company to penetrate the international market. The company should invest highly in research to evaluate the current market of the fast-food industry (Fraser, Merriles and Wright, 2007). This will enable the company to run ahead of its competitors even in the new markets.
Market entry plan
Ownership
This is a form of market entry where the organization that intends to do international business participates 100% in the operations of the company (West, Ford and Ibrahim, 2010). It is a form where the company owns 100% of all the assets in the new venture. It involves high commitment from the company in terms of capital and management of the venture. This will be a good strategy for McDonald’s where the company will invest parts of the profits earned locally to expand a business internationally (Bradley, 2004).
Advantages of ownership
Ownership as a market entry plan has advantages that outweigh those of other strategies. Its advantages also overturn the disadvantages of the other market entry plans. The advantages of ownership include planning and controlling resources. The company will have an upper hand in determining the resources to use and when to use them. Planning also comes in during production because the companies’ management decides when and how to produce (Fraser, Merriles and Wright, 2007). This helps the company to overproduce and underproduce which helps them produce what is enough for the market. The company also controls movement and acquiring new resources. These resources include raw materials, human resource and any other asset the company may use in its operations. This helps the management to make a decision fast without waiting for authority from anywhere else (Buil, et al., 2009).
The second advantage is the flow of information; the company will have a smooth and free flow of information which can it use to penetrate the market and to counter its competitors. The company also uses the information to identify what the consumers require and how they need it (Lam, Lee, and Mizerski, 2009). Another advantage is faster market penetration when McDonald’s is on the ground and carrying out its operations, it will become easy for the company to discover and identify the weakness of the market which will help them penetrate the international market (Hill, 2010). The company will also benefit from the advantage of a visible sign of commitment.
The customers see ownership by a company as a commitment to serve them and, therefore, become loyal to the company in terms of becoming their customers (Fraser, Merriles and Wright, 2007). This will enable the company to penetrate the international market as a result of goodwill from customers. The company will benefit from becoming an internationally recognized Multi-national Corporation. This part presents a market entry plan which is most suitable for ensuring that McDonald’s ventures into international markets and it has the capability of competing with rival companies in the same industry.
Implementation of global strategy
This part examines each and every market mix. These components of the market mix are product, price, place, promotion, people, physical evidence and process. It also involves analyzing its applicability in the case of McDonald’s fast-food company. It also considers the degree of adaptation and standardization of each and every market mix in McDonald’s venture. It also involves discussing how social networking is applicable as a method of market development.
Market mix
A market mix is a business tool most applicable to the selling of products and services. This tactic is used by a marketing professional to attract customers (Lee and Carter, 2010). The market mix is also known as the 7 Ps with each P representing a component.
Product
This is a commodity to be marketed. It has to satisfy customers’ needs. A product must add value to a customer. Products are either tangible or intangible (Cateora and Graham, 2008). Tangible products are that one can touch and feel them, for example, McDonald’s goods are tangible because they are foodstuffs. Intangible goods are that one cannot touch, but derives satisfaction. An example of an intangible good is the hotel services which McDonald’s can venture into to widen the scope of its market. McDonald’s has been in the market so it does not require to introduce new products but to innovate, so as to improve their products. McDonald’s should take advantage of their already established brand name to exploit the international market (Buil, et al., 2009). The company should exploit the already experienced employees in a positive way to achieve the best results and be the market leader in the fast-food industry. The company should also ensure their many products complement each other in the market. The company’s product should be clearly labeled so that customers can easily identify them (Jeannet and Hennessey, 2004).
Price
This is the second component of the market mix. This is the value by which a consumer is to pay for a product. The price is very important because it determines the company’s sales and profits. Prices should be competitive (West, Ford and Ibrahim, 2010). McDonald’s should have a reasonable price so as to penetrate the market. There are different types of pricing, which McDonald’s, can use to set their price. They include price skimming, price penetration and neutral pricing (Johansson, 2004). The company, since it is new in the international market should use market penetration. This will help them attract customers.
In setting, the price elasticity of commodities should be considered. In McDonald’s case, a slight increase in price would lead to a loss of customers to competitors’ goods. They should also consider referencing and differential values of purchasing. The reference value is where a consumer considers prices of competitor goods before purchasing therefore McDonald’s should have a price that is slightly lower to those of other companies (Thomas, 2008). The price, which is set, for a certain product, should complement those of other products by the company. The company can also involve discounts and offer them as part of its pricing, so as to penetrate the market. The company should also ensure its prices are fairly distributed and are maintained (Hill and Hill, 2011).
Place
This refers to where a customer can get the product, and how a product reaches the selling point. The place where the consumer gets the product should be convenient. The customer should be able to get the commodity whenever they like, therefore, the company should introduce channels by which a customer can make an order (Brassington and Pettitt, 2006). They can also introduce retail and wholesale shops to serve their customers conveniently. The company should ensure that they are covering each and every place. They should also consider their demand in relation to their production. The products at the store should be of sufficient quantities so as to satisfy customer needs. The company should also put into consideration storage, inventory and distribution which it should ensure are at an acceptable level.
Promotion
Promotion is the art of making people aware of a company’s product and where they can get them. It is the most visible form of marketing, and it is the one most people recognize and identify (Egan, 2007). It takes different forms, which include advertising, branding, corporate identity, special offers and exhibitions among others (Lam, Lee, and Mizerski, 2009). It is a form of communication by the company to its customers. Promotion entails telling the customer about the benefits of the product rather than its features.
It must attract the attention of the customer; therefore, it should be appealing and have a message which is consistent. The message in promotional materials should be easy to understand. It should strongly show and give the customer a reason for buying from McDonald’s and not competing for firms (Keegan and Green, 2010). The company should also ensure there is clear communication between the management and employees. The employees should have the correct information about the products of the company. This will make the employee feel recognized and will work towards the success of the company; therefore, they will let the customers know about the product and buy it (Hollensen, 2010).
People
This concept refers to each and every person who is involved in the production and selling of the product. The company should ensure employees are well trained and have the right information about the product. This will help create a positive impression of the company together with the products (Doole and Lowe, 2008). The company’s reputation and success depend on how the staff handles the customers. The staff should provide after-sales assistance to customers. This will enable the company to increases its popularity among customers.
The management should show the staff that they are important, so as to work towards achieving the objectives of the company (Brouthers, et al., 2009). The staff can also give advice to customers, and this will help the company penetrate the market. The employees of the company should make the customers feel they are important. The success of the company depends on those people who are involved in the marketing and selling process (Hill and Hill, 2011). The company can also have a customer care desk to handle customers’ complains and compliments. This will show the customers their importance and will aid the company to win and penetrate the market. The company can also issue catalogs and sales reports to help them purchase what they want (Hill, 2010).
Process
This refers to the method through which a service is delivered to a consumer. The company should ensure the channels used to offer the product are helpful to the customer (Baines, Fill, and Page, 2010). The process involves how long a customer takes to be served, and the time he or she takes to get the commodity. The company should, therefore, ensure products are provided on time. The customers get attracted to services such as credit. The company should know the customer is always interested in getting the services, but not how the company runs. The company should, therefore, ensure their channels and processes favor the customer by giving the best services in the industry. The company will be able to penetrate the international market if it treats the customers the right way (Lee and Carter, 2010).
Physical evidence
Physical evidence refers to the feeling the customers have after using a company’s product. McDonald’s provision of fast foods makes the company a service provider. Service being intangible goods makes a customer fear to buy or to order for fear of the unknown. The company should, therefore, invest in making the customer know the good better (Ghauri and Cateora, 2010). This can be done with the help of brochures and pamphlets. They will make the customer understand the product better and feel they know what they are buying. Physical evidence is also shown by how the company reception is organized and how clean the places the product is sold are.
Those clean places will attract more customers than those which look substandard in terms of hygiene. The company should ensure its physical evidence is appropriate and goes hand in hand with the company’s reputation (Hill, 2010). The market can lead to a company becoming most successful in the market if each and every mix recommendations are put into practice. The 7 P’s are very important to any company aiming for success in the international market (Cateora and Graham, 2008). McDonald’s should aim at developing the best products offered at the most competitive prices. This will attract a lot of customers, thus penetrating marketing internationally.
Global business to business marketing and supply chains considerations
This part of the report presents issues affecting the company’s organization and the customer’s organization. It also explains the meaning of global sourcing, logistics and supply chain issues. The part involves identifying the most suitable organizational structure to help control the company mechanism and help the company become successful in international marketing (Bui, et al., 2009). The company’s organization will be affected by government influence and other factors. The company will have to adjust to make room for foreign government requirements. These requirements include paying taxes to the government which will reduce the company’s profits. Venture into the international market will strain the company’s resources both capital and human because they will have to cater to the new venture (Bradley, 2004).
Global sourcing
This is an act out of acquiring resources or goods from other countries, which share the same political ideologies. The method aims at exploiting the advantages that come with such organizations and political blocks (Brouthers and Nakos, et al., 2009). These advantages enable a company to deliver a product or service by incurring lower costs. This results from low-cost labor, low cost of raw material and other favorable economic factors such as tax holidays and low trade tariffs.
Logistics and supply chains
The company should also aim at creating logistics and supply chains, which are short. This will ensure the products reach the customer within the shortest time possible. This will increase the company’s productivity due to high production (Doole and Lowe, 2008). The logistics and supply chains will be vital in the management of raw materials movement in the company, managing the dispensation of the raw supplies into finished products, and the disbursement of the end product to the customers.
Organization structure
The company should have an organizational structure such as below. This will ensure the company to have a source of central decision-makers. It will also ensure that, in every country where there is the company’s venture, there is a manager. These levels ensure the free movement of information down the ranks up to the last level. This will result in efficiency which leads the company to success (Lee and Carter, 2010). The chief executive is the overall figure in the company and, has the final word in any decision that affects the company. As shown below, the executive officers are international managers and operations executive that help in day to day running of the company and they report directly to the chief executive.
The workers in the Mcdonald’s restaurants will be dealt with and controlled by the operations department. The marketing department will connect the company with the customers; hence, it will give the customers a view within the company. The firms’ products will be organized and planned by the development department; hence, it will ensure that manufacturing will take place efficiently. The finance department will ensure that the company meets its aim. It will also pay the employee’s salaries.
Conclusion
McDonald’s fast-food company requires a lot of research to be successful in the international market. It requires implementing ownership as the best market entry strategy because it outweighs all the rest. It should also consider an analysis of social, legal, economic, political and technological factors that might affect its operation in the international market. The company should also consider the components of the market by analyzing each one of them and weighing their applicability in their favor. McDonald’s, being a reputable company in the United Arab Emirates will register success in the international market given its experience in the fast-food industry. The company should also put into consideration the organizational structure that will cater to the company’s ventures, be it locally or internationally. The company should have the chief executive leading the company in all its operations.
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