International Failures
Companies around the world are seeking to expand overseas, driven by many different reasons whether to lower labor costs, technological innovation or the almighty dollar. No matter what the reason, without the proper knowledge and financial funding the company will fail. There have been numerous companies that have experienced this first hand. If they would have noticed the warning signs they may have been able to salvage the company.
Fast-food companies have been one of the fastest to globally expand. They also experience some of the hardest down falls. An often quoted example is the failure of Prague's first Pizza Hut which closed down because too many ingredients had to be imported in for the one existing restaurant. The added expense for importing ingredients made operating expenses too high. Fortunately, most fast-food chains are large enough to overcome closure to a couple stores. But what would happen if an entire country was rejecting the company. This is the problem that McDonald's is facing.
McDonald's is one of most successful fast food chains with 29,000 stores in 119 countries and sales of 38.5 billion dollars. But now, with growth slowing worldwide, McDonald's will add just 1,400 new restaurants, the lowest numbers since 1994. International sales already represent 51% of the global sales. They arrived in Brazil in 1979; many of the franchisees had a strong business selling big macs. After many years of growth, from 175 restaurants in 1995 to 563 this year, Brazil is McDonald's eighth most important market worldwide(Smith 1). Their sales in Brazil went from 620 million Reais in 1995 to 1.3 billion last year. Until recently, the company was still planning to double its current number of restaurants here by 2003.
Behind the lines of customers eager for a burger, the Brazilian franchisees are having a hard time financially. According to an estimate made by franchisees that are in judicial litigation against the fast food chain, around 80% of the 152 franchisees that own half of the stores in Brazil are having difficulty to make ends meet at the end of the month(McDonald's 1). Some decided to sell their business. Others decided to fight.
The first main concern of the franchisees is the rapid growth of new stores. The expansion program that increased the fast food chain in the last two years is crea...
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... can succeed globally if they know what they are doing and have the financial funding
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July 2000. http://www.findarticles.com Smith, Tony. Brazil franchisees sue McDonald's. AP Business Writer. December 2001. http://www.washingtonpost.com Pappalardo, Denise. Sprints ION, AT&T-BT's Concert reach end of the line. Network World. October 2001.
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Weintraub, Arlene. How eToys could have made it. Business Week Online. February 2001. http://businessweek.com Zwaig, Melvin and Michelle Pickett. Early warning signs. MSI Network.
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A world without the Big Mac, Happy Meals, Chicken McNuggets, and the phrase “I’m lovin’ it,” is almost inconceivable. People around the globe have become accustomed to the high gleaming golden arches that make up the famous emblem for McDonald’s. McDonald’s has grasped the concept that culture flows from power. In this case, the American culture flows through the veins of this fast-food giant and the more that is supplied, the greater the demand. It is no secret that McDonald’s has become one of the world’s largest fast-food retailers. It has become a well known icon that has played a huge part in globalization, with chains located in many different countries… transforming the meaning of fast-food all around the world.
.... They have successfully entered foreign markets through their success and reputation, which made it easier for local communities to readily accept their standardized processes and consider it a food of their own. They had the resources to transform local companies to similar versions of themselves, and spreading the concept of McDonaldization further on a global scale. Not only have they changed the operational aspect of local firms, but they have also adapted in some of their own ways. For instance, when entering the Indian market, McDonalds offered more vegetarian options and excluded beef from their menu, which they do not do in the North American market. McDonalds kept their processes standardized and basic items the same, but they do understand the importance of adapting to the culture of their target market given the differences in tastes and preferences.
According to Royle (1999) McDonald’s is a very large multinational enterprise (MNE) and the largest food service operation in the world. Currently the company has 1.5 million workers with 23,500 stores in over 110 countries with the United Kingdom and Germany amongst the corporation’s six biggest markets, and over 12,000 restaurants in the United States. In 1974 the United Kingdom corporation was established and in 1971 the Germany corporation was established, currently the combined corporation has over 900 restaurants and close to 50,000 employees in each of these countries (Royle, 1999).
McDonalds traditional competitors include many of the other fast food outlets across the country, i.e. Burger King, Taco Bell, KFC, Wendy’s. It has been shown by Professor Michael Waterson (2004) that the presence of a Burger King, for example, will increase the likelihood that McDonalds will open near by. Thus it can be seen that the threat of competition from traditi...
Have you ever wondered how the business empire of McDonalds was started? With over ninety nine billion served, it was started in 1940 in San Bernardino, California. It was started off as just a Bar-B-Q that served just twenty items. Its first mascot was named “Speedee” They eventually realized that by setting up their kitchen like an assembly line that they could be much more productive and get their food done faster, with every employee doing a specified job; the restaurants production rate became much higher. A milkshake machine vendor came into their small restaurant one day, his name was Ray Kroc. He saw how much potential the restaurant has, so he bought it out and opened one of the first franchises. Within the first year of Ray Kroc buying it, there were one hundred and two locations all around the world. McDonalds currently is one of the largest fast food restaurants in the world and currently has served over sixty four million customers through one of their thirty two thousand sites. It has almost become a way of life for America. Though, McDonalds started off as a small business between two brothers, it grew into one of the largest restaurant franchises in the world and greatly affects our society and how we eat our food.
Fast food outlets actually have been existed from millennia in China, India and ancient Europe. In the past, many people cannot afford to have a kitchen and this becomes the main reason they buy their food in fast food outlets (Reverse Your Age, 2013). The perception of fast food started to change in twentieth century. The first company that change the culture and perception of fast food was McDonald’s, followed by their future competitors such as KFC, Burger King, Wendy’s, Taco Bell, Pizza Hut and Subway. As they get a good appreciation from the customers followed by the impact of the globalisation, almost all of the fast food companies have been expanded their restaurant chain in many nations (Wojtek, 2013). Nowadays, with our busy life schedule and the increasing trend where women entering workforce promote an opportunity for the fast food industry to grow bigger. We can see the significant growth from the fast food industry as the industry itself has been generated over $160 billion in 2012 compared to their revenue in 1970 which only around $6 billion (Franchise Help, n.d.). With this significant growth, it does not mean that every company in this industry are successful. Some company has to closed some of their stores due to the lack of environmental research and preparation in entering a new country which commonly lead to the poor selling rate. The deeper explanation and points that is mention below will be also represent as the industry current state.
McDonald’s has made it obligatory for anyone wanting to own a McDonald’s franchise to join a course where they are trained on the main operations of a McDonald’s store. These events are split into operations in the McDonald’s kitchen and employee management. The course aims at guaranteeing that the food quality at McDonald’s store is not negotiated and there remains proper working order in all stores. The store décor and architectural design are consistent in across countries globally. In order to maintain the quality of supplies, McDonald’s has preapproved list of suppliers that all franchisees must stick to
Another strength is Burger King’s franchise development having 90% of its restaurants franchised. The franchise concept allowed the company to grow with minimal capital expenditure and receive royalties and fees. Burger King went above and beyond and created a new model of its restaurant to attract mo...
Not having to answer to a corporate boss is the dream of many and the flexibility that owning a business franchise creates provides this option. Success is not reached by simply creating a business, however. The level of success is measured by the size and efficiency of the business. Business growth is the driving force of the economy. The additional jobs and revenues created when a business expands allow the economy to grow at exponential rates. One of the fastest and most popular ways to increase the size of a business is to turn it into a franchise, which can then be purchased by individuals. Franchising provides opportunities that are beneficial to both the parent company and the purchaser. The company that owns the business can expand without having to pay such a large initial cost to open a new store since the franchise purchaser pays a cost to open the business. As well, the company can regulate many of the business activities so that there is a sense of consistency throughout all of the locations. The purchaser is allowed to use the trademarks and goods of the franchise which already have a large market presence. As well, they are provided with training and work standards by the company to help their business run smoothly (Kalnins & Lafontaine, 2004, p.761). Looking at the business model of the world’s largest food retailer, McDonald’s, provides great insight into franchising and business growth in general as well a better understanding of a global business that utilizes the franchising technique.
Fierce and growing competition – big fast food companies like Burger King and Kentucky Fried Chicken are constantly competing with McDonalds for customers and trying to take the spot as the top fast food chain.
With strength ultimately comes weakness and McDonald's has its fair share, especially in the last few years. Many weaknesses are due to the external environment which includes market saturation, increased price competition, and food and labor costs. These weaknesses affect many firms in the fast food industry so McDonald's is trying to effectively combat these forces using a differentiation strategy. Developing new products such
McDonalds has always been a leader in the fast food industry. Through its dynamic market expansion, new products and special promotional strategies, it has succeeded in making a name for itself in the minds of the target customers. However, McDonald’s earnings has declined in the late 1990’s and 2000s. This is mainly due to a fiercely competitive industry and variety in customer tastes and preferences.
McDonald’s has the largest fast food market share in the world. As mentioned, it serves 68 million customers every day in 119 countries, allowing it to be the second largest outlet operator with more than 34,000 outlets.
Expansion across seas can be very advantageous and lucrative for many companies; however, there are many risks associated with doing business overseas, and companies that intend to expand internationally should be careful and strategic when doing so. Not only do companies run the risk of experiencing a product fail due to differences in cultures, they also face severe political and economic risks as well.
By choosing to expand into markets later than other fast food restaurants Burger King hopes to avoid the problems of developing infrastructure and establishing a market base. For instance, by following McDonalds into Brazil, Burger King avoided the need to develop the infrastructure and mark...