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PEPERIKSAAN DALAM TALIANDIPLOMA PENGURUSAN PERNIAGAAN

ONLINE EXAMINATION FOR THEDIPLOMA in BUSINESS MANAGEMENT

UECB 2107: STRATEGI PERNIAGAAN

UECB 2107: BUSINESS STRATEGY

19 JUN 2020 MASA: 1.5 JAM

19TH JUNE 2020 TIME: 1.5 HOURS

ARAHAN KEPADA CALON:

INSTRUCTION TO CANDIDATES:

Jawab semua soalan.

Answer all questions.

Calondibenarkanmerujukbuku, nota dansumber internet

tetapitidakdibenarkanmenyalinsecara verbatim daripadasemuasumber yang dinyatakan.

Candidates are allowed to refer to books, notes and internet sources but are not allowed
to verbatimly copy from all the sources stated.
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International Strategy: A case study of McDonald

The McDonald’s Corporation is one of the most successful global restaurant chains around
the world. They have used effective management and global expansion strategies to enter
new markets and gain a share of the foreign fast food market.

GLOBAL GROWTH AND SUCCESS STRATEGIES

Since the start of the company in 1973, McDonald’s Corporation began spreading
domestically throughout the United States thus establishing its brand recognition. Its initial
strategy began by advertising directly to the middle- and upper-class citizens, as can be seen
in countries such as India and China. However, with its many bargain deals on several of its
food items, McDonald’s began to cater to several people belonging to the lower class.China
was McDonald’s first global country in which it researched heavily before opening
restaurants.

In fact, through globalization and internationalization, McDonald’s was able to develop

marketing strategies, while at the same time customizing them for different regions in
accordance to the cultural and national variations in order to serve specific target markets.

The company conducts heavy research in regions where it desires to open locations based
upon a few elements, including social, cultural, technological, political, and economic
situations. McDonald’s key to success is its business mantra of “think global, act local”.
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This has allowed the company to achieve financial success in every region it opens its fast
food restaurants.Internationally, McDonald’s earns high revenues is India. India is one of the
toughest markets to enter for foreign businesses, due to the governmental hardships
imposed upon by the Indian government. The reason behind such hardships is solely based
on the Indian government seeking to protect its domestic businesses, and employment for
its citizens. VasantVihar, a prosperous residential area in New Delhi, was the initial location
that McDonald’sopened its first store in India in 1996.In order to further emphasize the
globalization element incorporated by the company, the success strategies include:

Paying attention to local details.

One of the most successive strategies that McDonald’suses before opening its stores is
research and development of its foods. Tastes and preferencesvary across the globe;
therefore, the company thoroughly analyses the preferred tastes, especially to not offend
local cultures. For example, India is a nation where beef is highly unpopular due to religious
purposes; therefore, the company had to come up with burgers that were not made with
beef, but rather with chicken or lamb. Furthermore, the company had to create flavours
that were spicy in order to meet the general taste preferences.

McDonald's was able to attract its French customers by introducing some local menus that
suits the French taste bud. When McDonald's first came into France, it faced lots of
oppositions. The difference in food culture between the French and the Americans was very
wide. The French preferred homemade kind of food rather than fast food meals. Secondly
the French were sentimental towards accepting the American lifestyle. The Mistake
McDonald's made was that it positioned itself as an American fast food company,
introducing American menus and way of life to the French. As a result, the French were not
willing to accept its brand. Based on this, there was need for McDonald's to strategies.
McDonald's later discovered the importance of children in influencing family decision, and
therefore, positioned itself as a family restaurant rather than a US brand restaurant. This
strategy was powerful because it was the only brand at that time that recognised the
family.It discovered that the French do not have the habit of snacking. It had to adopt
recipes which the French liked to its menu. It added French pastries and cakes to its menu,
and this was a big boost to its sales. Also, it had to ensure that French franchise only prepare
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fries from a specie of French potato.

Emphasis on Local Management

Throughout the world, McDonald’s prides itself in hiring locals, specifically management in
order to gain acceptance into the country by its citizens. The emphasis is based on the
“think global, act local” theme of the company. For instance, the company decided to
establish two joint ventures with two local entrepreneurs in New Delhi, who were selected
to manage the fast food restaurant. This strategic move allowed the company to gain easy
access to the bureaucracy associated with the country’s government.

Politically Sensitive Strategy

One of the company’s major concerns was to develop ways to avoid political confrontation
with the Indian government. The other major concern was to be careful of the religious
sensitives in India. Almost 80% of Indians do not eat beef, and over 150 million Indian
Muslims do not eat pork, therefore, instead of supplying the normal Big Mac, which consists
of beef, the company developed the Maharaja Mac that is made of two lamb patties. Other
example, in Spain beer is sold in McDonald's outlets, while in Great Britain it can't because it
will need a separate license to sell alcohol.

Pricing

As the value of currencies varies worldwide, McDonald’s is often forced to change its pricing
strategyin accordance to its target market. For instance, the value of a Big Mac varies
worldwide (see Chart 1). In Switzerland, the Big Mac is valued $.60 over the U.S. (price base
of the product). However, in China, it is undervalued by $0.60 in comparison to the price of
the Big Mac in the U.S. It seems that the company tries to maintain a price range on all its
products based on the location, income distribution and it is for this purpose that the
company opens up most of its restaurants in major cities such as New Delhi, Shanghai,
Beijing, and so on. Its primary goal is to initially attract middle and upper lass citizens, as
they can afford McDonald’s prices. After this, they slowly target the lower middle-class
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citizens. In the United States, for example, the restaurant chain has appealed equally well to
all classes ranging from the poor to the upper class; however, its popularity continues to be
among the lower, middle and upper middle-classprotection. This is primarily seen within
schools; thus indicating that the company also supports local schools.

Chart 1: Big Mac Index

CHALLENGES THE MCDONALD’S HAS OVERCOME

The company has grown through several challenges that have come its way, including
adapting to its local environments; this is an ongoing challenge that it will face as it
continues to open more restaurants worldwide. However, the biggest challenge the firm
faced was in 2001, when the company had hit a low point, specifically with the new fad of
eating healthy. This was primarily seen in its home country, the United States. In fact,
Subway increased in sales due to its low-calorie subs that were available. After 2001, the
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company changed its strategy: instead of opening more stores, the firm decided to change
its menu by introducing healthier meals. In fact, the company took a big dip in profits from
2000-2002. However, since its introduction of the new menu, consisting of fruit snacks for
children, and healthier meals for adults, such as the grilled chicken flatbread, the company
has begun to increase its revenues from the previous slow years. Furthermore, in order to
fulfil federal health regulations, as well as meet its healthy requirements to societies in
which it operates,the company in 2004, begun to experiment with products. It introduced
new oven baked sandwiches, which were healthier and tastier for its consumers. In 2004, as
a result of overcoming its challenges, the company increased its shares by 11% to 12%.
McDonald’s in Australia, for example, introduced the McCafé, its gourmet coffee for its
customers.

Another way the company begun to increase profits was to introduce its dollar menu. This
became popular very quickly, as it allowed even the lower-class citizens to eat at
McDonald’s, not just in the United States, but in countries such as India and China. With its
new campaign, larger sizes or portions were introduced at a dollar value, including sodas,
fries, salads, and desserts. It seems that during the initial years, when the company first
began to spread domestically, there were little worries on healthy eating, however, as times
have changed and competition has increased, the company has been forced to seek new
and innovative ways to not only increase its shares and revenues, but to also fulfil its
obligation to the societies in which it operates in.

RETAINING LOYAL CUSTOMERS

The McDonald’s brand has differentiated itself from competitors not just through customer
loyalty, but also through quality, consistency, and standardization.The creation of a culture
that emphasizes and delivers these values can propel an organization beyond customer
satisfaction to the type of loyalty that can drive business growth.

SUMMARY

McDonald’s is one of most successfulcompanies in the world today.With itsrapid

embracement of globalization, the firm has been able to expand and retain numerable
growth.
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McDonald’s success has been largely due to its envelopment of globalization, specifically
through its adaptation of the local tastes and preferences. Food, specifically fast food seems
to be a weakness among humans, especially, when it is cheap, convenient and tasty. Yet,
this has also led to the company’s downfall in its home country during the healthy fad and
the growing concerns of obesity among children and adults that the U.S. is going through.
However, the company changed its menu in order to accommodate the much-desired
healthy lifestyle, as well as fulfilling its obligations to provide healthier meals for children.
The healthy menu thus carried on over to its global restaurants, where it was tweaked to
meet the tastes of the local people. This growth illustrates McDonald’s successive strategies
of not only adapting to the local environments in which it operates, but also fulfilling
society’s obligations for healthy lifestyle, donating large funds to various countries and the
environment

Adapted from: McDonald's Success Strategy and Global Expansion Through Customer and
Brand Loyalty (2007) & Think Global Act Local: A Case of McDonald's Global Strategy (2014)

Questions:

a) Briefly explain one (1) global strategy that has been implemented by McDonalds.
Explain two (2) reasons to support your answer.
What is the key to the company’s international success?
McDonald’s is AN example of an organization that gained tremendous edges from
economic process. Of course, it's mostly because of the twin promoting set up of the
company:

1. Standardization strategy
Anywhere the corporate operates, it offers identical food product like McFlurry,
McNuggets, McChicken, Happy Meal or Filet-O-Fish. The set up provides the
corporate with a robust image. The strategy could be a time and cash saver for
McDonald’s because it helped build economies of scale.

2. Adaptation strategy
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The strategy are often compared to localization. With this strategy, McDonald’s
adapts to the requirements of the customers PRN by the cultures of specific
countries.

Adaptation works okay for McDonald’s. The strategy permits the nutrition chain to
own a wider reach worldwide. The strategy will need higher communication and
production prices.

Aside from the winning ways, the company’s promoting combine is likewise
versatile, so as to tailor it to the native market necessities in terms of location of
distribution, promotions plans and pricing
(8 marks)

b) Explain any two (2) competitive advantages of McDonalds.

McDonald's primary competitive advantage is predicated on a technique for value
leadership. the corporate is capable of victimization economies of scale and
manufacturing merchandise at low value, so providing merchandise at a lower terms
than its competitors like KFC and Subway. For Associate in Nursing example each
McDonald’s store square measure economical and keep everyday operations prices
as low as attainable. Doing so, can enable their stores to be superior to alternative
aliment restaurants as a result of McDonalds will serve their food at lower costs than
the other aliment company
The second competitive advantage of McDonald is that McDonald retains client
royalty. The McDonald's whole distinguished itself from its competitors not solely
through client loyalty however additionally through worth, consistency and
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standardization. Creation of a culture that stresses ANd implements these values can
lead an organisation to the shape of loyalty which will drive business growth on the
far side client satisfaction. many of us like McDonald's stores for his or her high client
Service and Satisfaction standards.

(4 marks)
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c) List any four (4) complex variables that faced by international firms when they enter
international market.
Difficulties that are faced byinternational corporations once they enter the
international market . First , international firm can have problem to find a reliable
partners , for AN example finding an area distributor , native promoting team to
spice up their sales . this can be as a result of international corporations wont have
expertise therein specific country they enters while not knowing concerning the
country's culture . Second, communication vogue and language variations . As we all
know several countries have their own mother language it will be a barrier to speak
with the native individuals. Besides that , business executives from completely
different countries will encounter many barriers to effective communication besides
obvious language variations. Executives from alternative countries could place a
better price on things like countenance rather than simply the words that area unit
being aforementioned. Third, distinguishing the market would like .A key to success
in international company area unit providing product and services that client have a
compelling would like. The client encompasses a hassle that must be resolved, and
also the product or service provides the answer in such a good manner that its edges
don't seem to be robust to speak. Finally, it'll be distance and time , wherever we'll
be facing difficulties to coordinate comes this can be thanks to geographical zone
difficulties . For AN example , geographic region facet is obtaining morning and every
one the executives are preparing to figure once the europe half they're going to be
closing their break day .

(4 marks)

d) State four (4) reasons why companies are interested to global market
There are many reasons why companies would to go to the global market.One of the
reasons are to improve profit margins.Next,the reason to go global is so that the
company can compete for new sales.Another reason is so that the company can
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diversify the business.Lastly,the reason to go global is to enlarge the customer base

for the company.
(4 marks)