International Business Operations (INB10002)

Ting Yoon Hao (101225396)

Economics of International Business

This essay is a reflection on the topic of my group project. Since I’m currently majoring in
computer science, I have always been looking forward for opportunities to expand my
understanding and knowledge of international business practices. In my recent presentation,
which is Topic 4 titled "Forms of International Business Activities McDonald's in China", I
had the opportunity to investigate this topic in greater depth. Throughout the presentation, I
explored a number of crucial issues pertaining to international business activities. These
included the introduction of McDonald's, the problems it has encountered in China, the
various forms of international business activities such as franchising, and joint ventures, and
the company's global strategies for success in foreign markets. I gained a deeper
comprehension of the complexities of international business activities and the skills necessary
to navigate the challenges of the global marketplace through the course of this study. My goal
in writing this reflective essay is to not only demonstrate that I have a comprehension of the
many ideas and theories associated with international business operations, but also to give
insights into how these concepts might be applied to scenarios that occur in the real world. In
the end, I feel that working on this project has provided me with a solid groundwork upon
which to build my future academic pursuits and professional aspirations in the field of global
business.

First and foremost, we have to understand why companies such as McDonald's go global.
Many firms aim to expand globally in order to capitalise on growth prospects. An
international strategy may help a firm diversify and thrive by promoting the hiring of
overseas staff and the investigation of new markets. Economic globalisation, according to
Twarowska and Kol (2013), is the process through which firms quickly expand their
marketplaces to include clients from all over the world. Since its inception in 1973,
McDonald's Corporation has expanded domestically throughout the United States, building
the reputation of its brand. According to Mujtaba (2007), McDonald's undertook significant
study before to opening its first restaurant in China. McDonald's was able to establish
marketing tactics while also adjusting them to the cultural and national characteristics of
different locations in order to serve specific target audiences through globalisation and
internationalisation. McDonald’s conducts thorough research in regions where it intends to
open new locations, taking into account factors such as social, cultural, technological,
political, and economic conditions. Its success can be attributed to its strategy of “thinking
globally, acting locally”, which has enabled it to achieve financial prosperity in all the regions
where it operates its fast-food outlets (Vignali 2001).

According to Filipović (2014), the choice of the most appropriate form of international
business is crucial as it can significantly impact a company’s success in a new market. In
franchising, a person (the franchisee) pays a fee and gets a share of the profits in exchange for
the right to use the business plan, brand, and goods of a well-known company (the
franchisor). McDonald's has used this model successfully as part of its plan to grow
internationally. It lets the company use the resources of its partners to grow into new markets
while reducing the risks and costs that come with traditional company-owned operations
(International Franchise Association 2019). Through participation in a vast array of
international business (IB) operations, McDonald's has become one of the most recognisable
and successful fast-food franchises in the world. McDonald's utilises franchising as its
primary form of IB due to the substantial cost advantages that are associated with it.
McDonald's is able to shift the operating costs and risks of its restaurants to franchisees while
maintaining brand quality and consistency because it conducts its locations using a franchise
model. The franchising model also enables McDonald's to promptly and effectively expand
into new markets by leveraging the local expertise and resources of its franchisees. According
to the findings of a study conducted by Twarowska & Kąkol (2013), franchising is an
effective strategy for entering international markets due to the associated cost reductions and
reduced risk.

Furthermore, McDonald's understanding of the significance of regional flavours and cultural

preferences has been crucial to its success in international markets. By adapting its menu and
operations to local preferences, the company has been able to strengthen its connections with
consumers and increase its market share in numerous global regions. McDonald's success in
India, a country with a predominantly vegetarian population, is one example. In order to
attract these customers, McDonald's has created a menu with a variety of vegetarian
alternatives, such as the McAloo Tikki burger, which features a potato-based patty (Kannan
2014). Additionally, the company has taken measures to ensure that its cuisine is prepared
according to local customs and traditions. All McDonald's restaurants in India, for instance,
are halal-certified, and the company does not serve beef or pork products. Similarly,
McDonald's has adapted its menu in Japan to accommodate to local preferences, offering
such items as the "Teriyaki Burger" and the "Ebi Filet-O." (a shrimp burger). With table
service and limited-time promotions featuring popular local characters, the company has also
taken measures to create a distinctive dining experience for Japanese consumers (Khan).

Apart from franchising, McDonald’s also utilizes joint ventures as a form of international
business. Joint ventures refer to McDonald’s partnership with a local company in a foreign
market to spread out the risks and expenses involved in entering that market. This refers to
McDonald’s initial entry into the Chinses market in 1990, which was facilitated through a
partnership with a state-owned enterprise known as the Beijing Tourism Administration
Corporation. By doing so, McDonald’s is able to take advantage of the local company’s
expertise while still retaining some degree of control over the operations (Hargrave 2021).
The partnership enabled McDonald’s to secure excellent locations for their restaurants and
navigate the Chinese regulatory landscape too. Additionally, it allowed the company to gain
valuable insights into the Chinese market and customise their menu and operations to cater to
local tastes and preferences (Hargrave 2021).

Besides franchising and joint venture, McDonald’s employs other forms of international
business in different countries. For instance, licensing agreements entail allowing another
company to use McDonald’s brand and system in exchange for payment. In addition,
McDonald’s may acquire existing local chains to quickly establish its presence in a new
market and take advantage of the acquired company’s infrastructure and customer base.
Furthermore, McDonald’s has established strategic partnerships with companies such as
Coca-Cola and Nestle to offer branded products and services in its restaurants. Other
companies, such as KFC also utilize method similar to McDonald’s for expanding
internationally too. According to Hu & Xie (2013), while both KFC and McDonald's rely on
franchising for international expansion, their respective strategies differ. Master franchising
involves awarding a local franchisee the authority to sub-franchise within a specific territory.
This allows KFC to rapidly expand into new markets, as the franchisee is responsible for
opening and operating multiple locations. McDonald's, in contrast, primarily employs single-
unit franchising, where each franchisee operates a single restaurant. This strategy provides
McDonald's greater operational control and assures uniformity across all locations.

In conclusion, the process of writing this reflective essay has provided me with a number of
important learning opportunities. I have developed a deeper comprehension of various
concepts and theories associated with global business operations. The McDonald’s case study
has provided me with valuable insights into how an enterprise can successfully expand into
international markets by employing various forms of international business, such as
franchising, joint ventures, licensing agreements, and strategic partnerships. One crucial
takeaway from the McDonald’s case study is that it is crucial to tailor a company’s menu and
operations to suit local preferences while maintaining brand quality and consistency. I also
recognize the importance of conducting thorough research before entering new markets. It is
essential to consider factors such as social, cultural, technological, political, and economic
conditions to ensure that a company’s products and services are well-received and successful
in a new market. As I reflect on what I have learned, I believe that this knowledge will be
invaluable in my future academic pursuits and professional aspirations in the field of global
business. This essay has provided me with a solid foundation of knowledge that I can build
upon to further my understanding of international business operations and their impact on
companies and societies worldwide.
List of references

Filipović, J. (2014). Hill, C. W. L.: International business: Competing in the global

marketplace, McGraw-Hill Education, Maidenhead, Berkshire, UK. Ekonomski
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Hill_Education_Maidenhead_Berkshire_UK_2014

Hu, W & Xie, Y. (2013). Comparative Study of McDonald’s and Kentucky Fried Chicken
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Kannan, BS. (2014). How McDonald’s conquered India. BBC. Retrieved from
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Khan, M & Khan, M. (2013). “I’m Lovin’ It” – Around the World: A Case Study of
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Vignali, C. (2001). McDonald’s: “think global, act local” – the marketing mix. Emerald
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