Mcdonalds

McDonald’s is the leading global foodservice retailer with more than 34,000 local restaurants serving nearly 69 million people in 119 countries each day. While Ray Kroc was the founder of McDonald. The story of McDonald’s first began in 1955 when Ray Kroc opened the first restaurant in Des Plaines, Illinois. It then grew on to be a worldwide corporation pning 117 countries and serving more than 60 million customers everyday.

In December 1980, Golden Arches Restaurants Sdn. Bhd. (GARSB) won the licence to operate McDonald’s in Malaysia. The first McDonald’s restaurant subsequently opened its doors at Jalan Bukit Bintang on 29 April 1982. The global business is managed by McDonald’s Corporation as distinct geographic segments: United States; Europe; Asia Pacific, Middle East and Africa (APMEA); Latin America; and Canada. McDonald’s Malaysia operates under the umbrella arm of the APMEA group.

As of December 2009, McDonald’s Malaysia has 194 restaurants located nationwide, serving 10 million customers a month and expanding at a rate of 15-20 restaurants annually. McDonald’s Malaysia is fully owned by McDonald’s Corporation, and the restaurants throughout Malaysia are either operated by GARSB or franchisees. McDonald’s Malaysia and our franchisees employ more than 8,000 locals with 150 support staff at the headquarters managing the day-to-day operations of the business.

Different Products/Brands Marketed by the Company

The products produces by McDonald’s can be divided in several groups, such as Hamburgers, Chicken, fish and pork products, French fries, Soft drinks, healthy items like salads and Desserts. There is no doubt that McDonald’s main products are hamburgers. There is a high variety of this type of food. Chicken, fish and pork products such as McChicken, Premium chicken sandwiches, Snack wrap, Chicken McNuggets, etc. are another products in McDonald’s restaurants. You may also be interested in Ansoff Matrix McDonalds

French fries are considered to be one of the most sellable items. The main reason for this is that no matter what other product the consumer is willing to buy, but in every set French fries are included automatically. Other products such as salads are relatively new in this restaurant. The first salads were added to its menu in 1985. Nowadays more and more people are concerned about their health so, McDonald’s puts its all efforts to achieve more and not lose any of the potential customers.

The biggest soft drink supplier is the Coca-Cola Company. Hot and iced tea is delivered by S;D Coffee in the US), hot chocolate, various juice and other regional beverages such as milkshakes are available in various markets all around the globe. Desserts are considered to be the last big group of products in McDonald’s restaurants. It includes such items as ice-cream (McFlurry), McDonaldland cookies, Freshly Baked cookies, Pies, Cinnamon melts, the fruit and yougurt parfait, smoothies and other items which depending on the region and country.

Spicy Chicken McDeluxe is one of the products in burger category. Spicy Chicken McDeluxe is a specially marinated whole chicken thigh meat with a delightfully crispy coat, layered with fresh lettuce and special sauce in a com meal-bun. Following the success of McNuggets, the McChicken was reintroduced in 1988. The current Spicy McChicken Deluxe sandwich recipe is somewhat spicier than the original.

The shaped chicken patty in the Spicy Chicken McDeluxe used to be 50% white meat and 50% dark meat. As of late 2007, McDonald’s commenced advertising that the McChicken contains only 100% white meat. A Spicy Chicken McDeluxe cost RM8.95 A La Carte and cost RM13.25 in a Mc Value Meal that comes with carbonated drink and French fries. Howover, between the promotion hours, 12pm to 3pm and 6pm to 9pm, also known as McValue Lunch and McValue Dinner, the customers will receives a better price at only RM9.45.

Product Strategy

McDonald has offered several type of burger in Malaysia, such as McChicken, Filet-o-Fish, Chicken McNuggets and the product that we choose, Spicy Chicken McDeluxe. This tasty product is offered by McDonald is consumer product. Spicy chicken McDeluxe is a convenience good that under consumer products. Firstly, Spicy Chicken McDeluxe can be bought frequently each time and immediately by customer. This is because the burger is very delicious and affordable price compare to other fast food such as Subway. People usually will purchase this for their lunch and dinner because of low price and McDonald has offered McValue in certain period of time such as lunch and dinner. They try to offer one set of burgers which included French fries and Coca-cola with cheaper price. Secondly, McDonald invests massive amount of money to advertise this product and offer promotion. They use the slogan ‘I lovin’ it.’ to advertise this product through television, advertisement board, radio and so on. In addition, McDonald offers the unique services to the consumers like unlimited refilling drinks, special design chair and table and open 24-hours. Moreover, McDonald’s restaurant is a most well-known fast food around the world. This company operates over 34,000 branches in 119 countries and territories worldwide.. McDonald’s restaurants usually will be opened in the shopping malls and tourist spots such as Genting Highlands, One Utama and Times Square. Therefore, the most famous fast food in the world can be easily found in anytime, anywhere. Furthermore, McDonald offers the different flavors in different countries refer to the culture of the country. For example, McDonald will only provide kosher burger in Islam country such as Malaysia. Also read about factors affecting globalization

Product and Service Decision

Firstly, Spicy Chicken McDeluxe consists of a spicy chicken thigh, 2 slices breads and some vegetables with ajinomoto. McDonald had specify the nutrition profile of Spicy Chicken McDeluxe which contains 29% calories, 16% carbohydrates, 30% protein, 47% fat and 48% salts. As this product of McDonald contains high percentages of salt, so the consumers are suggested reduce to purchase. Spicy Chicken McDeluxe is not a seasonal product, so the consumers who prefer this burger can have meal anytime. Moreover, while consumers purchase this set of burger, they can refill the coke as much as they want, but only for dine in.

Secondly, Spicy Chicken McDeluxe is a name used in branding the product. Actually it is only a deluxe size burger with a spicy chicken thigh and some vegetable, but this product only can be found in McDonald’s restaurant, this is the only feature of the burger. In my opinion, I more prefer Spicy Chicken McDeluxe than other burgers because it give me some feeling that hot and spicy.

Thirdly, Spicy Chicken McDeluxe is packaged by McDonald’s restaurant in a colourful box with cute design. There are many nutrition index and some ingredients of the burger written on the box. McDonald’s restaurant uses distinct type of design to wrap and case the several type of burger. For example, they use a yellow paper to wrap the McChicken whereas use a rectangle box to wrap the Prosperity Burger. In addition, Mcdonald’s restaurant environmentally conscious the society, They never use plastic and Styrofoam to wrap the burger because it will not tasty, healthy and recyclable.

Next, McDonald always promotes the product by combining other products such as Spicy & Ice. It combines Spicy Chicken McDeluxe burger, McFloat and BBQ McShaker in a set. This way of promote the product can let consumers enjoy the meal with lower price. In addition, McDonald’s restaurant always makes promotion for the product with toys. This strategy can attract more long term consumer especially kids.

Lastly, McDonald provides free delivery in certain places and created a contact number that can easily to remember. They guarantee the foods will be delivered in 15 minutes. Furthermore, McDonald’s restaurant provides drive-thru service to let the bustling people can purchase the food conveniently and effectively. Beyond that, McDonald encourages the consumers self-service when dine in. So, the consumers can enjoy their foods effectively and efficiently. 2.1.3 Major brand strategy decision

Firstly, McDonald’s company uses product benefits to position the brand. For example, the burger has special flavor and quality ingredients to attract many loyalty ‘Mc-D fans’. Secondly, desirable qualities for Spicy Chicken McDeluxe include it has suggested its benefits and quality. For example, it can satisfy people needs and wants while they are hungry. It is made by fried chicken thigh, vegetables and 2 slices breads. Besides, Spicy Chicken McDeluxe is really a delicious and luxury for our lunch or dinner. Moreover, the name of Spicy Chicken McDeluxe is easily to pronounce, recognize and remember by consumers. There are also ‘HOT & KICKIN CHICKEN’ written on the box to attract the consumers and make them leave a deep impact. Spicy Chicken McDeluxe is considered extendable from other brands even some of the fast food company has come out similar product such as KFC, Zinger Burger. It is also suitable consumed by adults, teenager even elderly people. On the other hand, Spicy Chicken McDeluxe is easy to translate into foreign languages such as French language, Chinese language and Dutch language since there are McDonald’s restaurant franchisee in worldwide.

Next, McDonald is manufacturer’s brand. McDonald’s restaurants introduce this product under their own brands. This burger is very unique because it only be sold in McDonald’s restaurant and cannot find in other fast food restaurant. Finally, McDonald company has done brand development strategies by using line extension which is introduced an existing product under an existing brand. McDonald has offer many types of beverages such as Spicy Chicken McDeluxe and McChicken. The different of both burger is one of them is chicken pie whereas Spicy Chicken McDeluxe is spicy chicken thigh. Thus, Spicy Chicken McDeluxe is different size and packaging with McChicken. Read also which helps enable an oligopoly to form within a market?

Pricing Strategy

Spicy Chicken McDeluxe is one of the products of McDonald. It fall under oligopolistic competition market which mean a form of market in which there are a few number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price. There are a large number of independent, relatively small sellers and buyers as compared to the market as a whole. That is why none of them is capable of influencing the market price. Further, buyers/sellers should not have any kind of association or union to arrive at an understanding with regard to market demand/price or sales. The products sold by different sellers are homogenous and differentiated. There should not be any differentiation of products by sellers by way of quality, variety, colour, design, packaging or other selling conditions of the product. That is, from the point of view of buyers, the products of competing sellers are completely substitutable.

There is absolutely no restriction on entry of new firms into the industry and the existing firms are free to leave the industry. This ensures that even in the long run the number of firms would continue to remain large and the relative share of each firm would continue to remain insignificant. Both buyers and sellers in the market have perfect knowledge about the conditions in which they are operating. Buyers know the prices being charged by different competing sellers and sellers know the prices that different buyers are offering. The distance between the locations of competing sellers is not significant and therefore the price of the product is not affected by the cost of transportation of goods. Buyers do not have to incur noticeable transport costs if they want to switch over from one seller to another. The main competitors of McDonald are Burger King and KFC. Both of them selling burger but KFC getting the higher market share compare with McDonald. KFC has 407 outlets in Malaysia but McDonald only has 176 and Burger King only 20. So, KFC is the top rank of fast food in Malaysia and McDonald placing in second place. However, McDonald is the top rank of fast food in the world.

New Product Pricing Strategies

McDonald is using market skimming strategies to undergo their business. They usually set a high price for new products so as to “skim” revenues layer by layer from the market. So the company can earn more profit by produce fewer products. McDonald always introduces unique burger to attract customer but normally in higher price compare with other burgers. But the burgers were popular and likeable by customer because it contains high quality and delicious. So McDonald doesn’t afraid others competitors enter the market easily to undercut the price. For example, Grilled Chicken Burger &Prosperity Burger. The normal selling burger such as McChicken only priced RM5.95per set. But Grilled Chicken Burger priced RM11.95.

Product Mix Pricing Strategies

McDonald looks for a set of prices that maximizes the profits on the total product mix. They set the pricing based on product bundle pricing and product line pricing. McDonald made their products into set, a combination of Pepsi, French fries and burgers. The price of the set is more affordable rather than purchase separately. Besides, McDonald offers set lunch and also dinner to attract those customers who want cheaper meal. For the product line pricing, McDonald set different prices for every burgers, they setting price based on the cost and the quality. They also care about competitors prices so McDonald always set lower price compare with other competitors.

Price Adjustment Strategies

McDonald is using time segmented pricing strategy, selling burger such as Spicy Chicken McDeluxe at two differences prices but not based on differences in costs. McDonald has a promotion for a set lunch during 12p.m. – 3p.m and also set dinner during 6p.m. – 9p.m. every weekday. For example, the normal price of a set of McChicken is RM8.15 but the price is McValue Lunch and McValue Dinner is only RM 5.95 per set. Besides, McDonald also brings out the special burger named Prosperity burger during Chinese New Year. This is defining as time segmented pricing. Furthermore, McDonald also using location segmented pricing strategy. Every country has different price and also different flavour. For example, pork is forbidden to sell in Malaysia but in other western countries, pork is allowed to sell.

Place Strategy

In Malaysia, McDonald franchises have become a common investment among local businessman and woman as more restaurants have been set up in most towns and major cities. Every McDonald restaurant has been strategically set up in Malaysia as it only takes the corner lot of every shop lot. This allows the restaurant to occupy more space thus attracting more attention from passer-by’s. Some franchises also occupy a small building of its own with a private parking bay and drive through accessibility. They are built or open in retail areas like shopping malls due to a trend of all Malaysian who loves to shop in malls. They also open in some rural areas however KFC has more restaurants in the rural area. In some strategic places, McDonalds also opens in several local gas stations such as PETRONAS Mesra. They open express cafes that serve some popular products. This can satisfy the hunger of consumers such as, working executive’s on-the-go and motorist. Moreover, Spicy Chicken McDeluxe only offers in a period of time per day which is 12pm to 3pm. It’s considers a direct sell product because McDonald direct move the product to the customer.

McDonald offer the Spicy Chicken McDeluxe in a period of time because they notice that the time is suitable to the student’s and the worker’s lunch time. So that, the Spicy Chicken McDeluxe will more easy to promote into the market and make more profit. Furthermore, many of McDonald restaurants are open 24 hours per day which satisfies the customers’ needs and wants, especially for exists their hunger. They are making their product available for sale through all possible channels of distribution. In additional, McDonald considers a self-serving restaurant. When the customers enter any McDonald restaurant, every customer should straightforward walk to the counter order and pay. But in fact, McDonald also provides “McDelivery” system. This kind of system is a way that will help McDonald to provide their products to the customer that don’t have transport, also can save the customer’s time. Besides, McDonald also provides “Drive-Thru” service to the customer. As we know, most of Malaysians are busy working. They have no enough time to have their breakfast and lunch. So McDonald provides this kind of service, to make easier availability for providing product and services to the customers.

Finally, McDonald also provides online order service in Malaysia. McDonald notice that there are a lot of citizen are always online in internet, include working time, playing time or learning time. So McDonald in Malaysia provides online order service to easy their customer order. This kind of service will easy to enter the new market which is the online order’s market.

Retailing / Wholesaling

Place strategy determines where the product will be sold and how it will get there. McDonald is the leading global foodservice retailer, because they have more than 30,000 local restaurants serving nearly 46 million people each day in 121 different countries. Approximately 80 % of all McDonald’s restaurants worldwide are owned and operated by independent franchisers. As the Spicy Chicken McDeluxe is sold in whole Malaysia at the same time with the same price, and it’s just can buy from McDonald restaurant, so we also can relate that McDonald is a retailer. All McDonald’s restaurants in Malaysia obtain their materials from few sole suppliers that sells only to McDonald’s.

MacFood Services (M) Sdn Bhd is one of McDonald’s suppliers in Malaysia. It produces chickens, beef and chicken patties, fish portions, fish, beef, and chicken nuggets that McDonald’s sell to its customers. HaviFoods Sdn Bhd supplies all buns used in McDonald’s hamburgers. Sugar, salt, and peppers used in the preparations of McDonald’s products are produced by Fima Instanco Sdn Bhd. Next, all thermoformed products used to contain McDonald’s merchandises are manufactured by Malaysia’s Packerman Sdn Bhd. There are 185 McDonald outlets in whole Malaysia in year 2009. The outlets more located in prosperous city such as Kuala Lumpur, Ipoh, Penang and so on. McDonald also built the outlets near the university campus such as UTAR, KTAR, SUNWAY to enter the university students market.

Promotion Advertising

McDonald’s advertise their product, Spicy Chicken McDeluxe in different forms. First, McDonald’s used the most common advertisement media, television to advertise the product. A Spicy Chicken McDeluxe cost RM8.95 A La Carte and cost RM13.25 in a Mc Value Meal that comes with carbonated drink and French fries. At the ending of the advertisement, McDonald’s will use the company’s favourite phrase “I’m Lovin It!” Next, McDonald’s advertise Spicy Chicken McDeluxe in Youtube videos. The name of the video is McDonald’s Malaysia TVC 2010: PartyPopper which attracted over thousand viewers. The video started off with a guy promoting Spicy Chicken McDeluxe with a song and followed by another man who rap a part of the song. The video is very fun and interesting that attracts many people in Youtube.

Another advertising way McDonald’s uses is creating a Facebook page. The page name is McDonald’s Malaysia. 1,445,971 of Facebook users liked the page and 38,644 of users are talking about this page. McDonald’s posted a lot of advertisement of photos and details of their product and it has a lot of viewers by determine the likes and comments. McDonald’s also advertise in big bill boards outside the McDonald’s outlet. They set up bill boards at highways and shop lots to attract people. The best example is recently McDonald’s set up bill boards inside University Tunku Abdul Rahman, Kampar to attract the students to go and purchase their food.

Sales Promotion

In sales promotion, McDonald’s introduce McDonald’s Spicy Chicken McDeluxe Limited Time Deal 2012 to attract customers. By introducing McDonalds new Spice & Ice Meal for limited time deal, the meal includes Spicy Chicken McDeluxe, New McFloat, and BBQ McShaker Fries.McDonald’s also promote Spicy Chicken McDeluxe in a tasty and yummy way. ‘Heat up with the fiery Spicy Chicken McDeluxe. Made from a whole chicken thigh, marinated with spices, topped with crisp fresh lettuce & special sauce, and wrapped in a warm cornmeal bun.’

Besides that, Mc Donalds also promote their McDonalds Doubles Promotion. It is available from 11am to 4am daily. Burgers that offered are double McChicken , Double Filet-O-Fish , Double Spicy Chicken McDeluxe, Double Quarter Pounder with Cheese , Mega Mac and Triple Chessburger. There are several more ways McDonald’s do sales promotion. They are cut out tag from newspaper, free coupons and leaflets inside the newspaper and customers can also print out discount coupons from Facebook. This attracts more customers to purchase in McDonald’s.

Public Relations

McDonald’s Malaysia recently launched its Prosperity Gives Back campaign in conjunction with the return of its popular meal, the Prosperity Burger. The campaign is aimed at helping charity organisations around the community where McDonald’s restaurants operate. McDonald’s Malaysia managing director Sarah Casanova said the charity drive was to share the true meaning of prosperity with the local communities. Casanova said the campaign was also about adding value to the lives of people they wish to reach out to. Marketing head Melati Abdul Hai said that in the first year McDonald’s raised around RM286, 000 and it was distributed to 44 charitable organisations. Through every purchase of a Prosperity Burger meal, 10 sen will be donated to charity. The campaign ends on Feb 15, 2012.

Support for the state’s “No Plastic-Day” campaign is growing with the latest to sign up for the drive being the global fast food giant, McDonald’s. McDonald’s 18 outlets in Penang will replace plastic bags with paper bags every Monday to Wednesday. It has also started to use paper instead of foam for its beverage cup from last month. Chief Minister Lim Guan Eng who launched McDonald’s “Go-Green” campaign at its outlet in Jalan Mesjid Negri, praised the company, saying that the outlets in Penang are the first in Malaysia to participate in the green initiative. McDonald’s Malaysia senior director Daniel Chan said a soft launch of the campaign began a month back and the response has been encouraging. McDonald’s has 194 outlets nationwide, and employs about 8,000 workers. It plans to increase its outlets to 300 within the next five years. In Penang, McDonald’s plans to add another 15 outlets in the next five years.

Critiques of the Strategies and Recommendation

As the largest global fast food service retailer with more than 34,000 local restaurants serving nearly 69 million people in 119 countries each day, the price of the product is much more higher than others fast food restaurant. Customers will somehow find that the price of burger is too high when there’s no promotion. Besides, with low cost menu, McDonalds can attract customers who just have low income. This segment makes up a fairly remarkable part, especially in the recent time, when global economic is struggling. It is not difficult for McDonalds to apply low cost menu on all restaurants. Hence, McDonalds should set their products price lower compared to the other competitors. For example, KFC is selling their famous Zinger Burger Combo meal for RM8.70.So in return, McDonalds can set their best selling product at a price lower than the Zinger Burger. Besides that, McDonalds set meals price range is from RM 5.95 to RM13.25. Therefore, McDonalds should generalize the price and make it in the small price range. For example, McDonald should lower the price of Big N’ Tasty set meal which cost RM13.25 to a lower price. This strategy can attract more customers to visit McDonalds and put McDonalds at the first choice.

Moreover, the products of McDonalds are burgers, French fries, fried chickens, nuggets and so on. With a growing number of obesity cases among people, fast food chains like McDonalds will continued to be overshadowed by their previous products offerings, for example Supersized Meal, no fruit or yogurt, slim salad selection. Besides, people nowadays are facing heart problem more seriously and most of the high calorie foods are not suitable for golden citizens and vegetarians. As a result, they require nutritious and healthy food as well as lifestyle. So, McDonalds should focus on healthier menu like Subway’s concept as well. For example, McDonalds can create a new vegetarian burger, fruit salad or French fries for the target vegetarian customer especially in Malaysia. Fresh burger or healthy dessert also can be developed to the customer who concern about their health but love McDonalds. It is also a golden chance for McDonalds to the customers who grow under health trend.

Furthermore, McDonald is facing customer loose due to the fierce competition by many strong brand like Wendy’s, Burger King or Yum! Brands. These fierce competition makes McDonalds loose a large number of customers who prefer favour of other brands. Thus, McDonalds should strengthen promotion strategy. McDonald has done well in promoting its products in internet, media and so on. However, we recommend that McDonalds can also try the other promoting strategy like organize “Who has the Biggest Appetite?” event where participants will compete with each other to eat as many McChicken burgers as they can within the time limit. Other than that, McDonalds also can offer discount voucher when the customers buy more than RM30 or RM50.

Next is the place strategy. Most of McDonalds outlets are built in the city left out places like highway and industrial area. So, we recommend that outlets should also open in the highway and industrial area. Recently, McDonald’s has been involved in a number of lawsuits and other legal cases in the course. For example, there are many cases which involved with trademark issue. McDonald’s force many others restaurant, company of just a coffee shop to change their brand name because of keeping “Mc” letters. However, we have a recommend that McDonald can invent a McMachine. This concept is based on our daily life vending machine. With this, the customers can purchase drinks, ice-cream, burgers and pies. Thus, customers can purchase the product of McDonalds anywhere at anytime.

McDonalds’ Malaysia is very concerned about what they can provide to their stockholders, the public, customers and even the suppliers. Since McDonalds’ Malaysia first came to Malaysia on 29 April 1982, they are well-known for their high commitment in their corporate social responsibility. McDonalds’ cares about human rights and their customers. They do not employ forced labourers or child labourers. Besides that, McDonalds’ has anti discrimination policy, especially the discrimination against women. Today, 53% of McDonald’s restaurant manager positions are held by women.

The food and services provided by McDonalds’ have met the international food quality and safety standards requirements. Their employees are well trained with fundamental food safety and hygiene practices. The employees are required to follow the procedures strictly. Procedures such as hand sanitizing, handling of raw foods and food quality control are all well-designed and well-followed by the employees. McDonalds’ meat supplier is also awarded ISO9001:2000 certification to ensure that the meat meets certain standards.

Furthermore, all foods provided by McDonalds’ are certified HALAL by Malaysian Islamic Development Department. McDonalds’ has been putting effort in producing less waste to the environments and emphasizes on energy conservation technologies for over 30 years. All McDonalds’ restaurants Malaysia are installed with power system stabilizers. Power factor correction boards also helps in reducing energy costs. These efforts have proved a 5%-8% reduction in energy consumption per month over the past few years. McDonalds’ also take caution measurements about the usage of non-biodegradable items such as plastic bags.

Today, beyond 60% of the materials used for food packaging are made by paper instead of polystyrene or plastic. As for the cooking oil, it is sold back to the supplier for recycling. Every month, around 12,000 kilograms of cooking oil is recycled. Besides that, McDonalds’ also implies the practices of water conservation. The rainwater are channelled and collected from the drainage system installed on the rooftop of McDonalds’ building. The collected water is then used for watering the plants and cleaning the floors. McDonalds’ is not only a profit making organisation but it also contributes to the society.

One of its significance philanthropic works is the establishment of Hamburger University. Today, McDonalds’ has 7 Hamburger Universities around the world. Over these years, McDonalds’ Malaysia has been sending restaurant managers to these Universities for trainings. The society has hugely benefited by the establishment of these universities as it has created many job opportunities and learning opportunities. The Ronald McDonald house was opened in Malaysia on 1999. This is a charity home built by the The Ronald McDonald House Charities Malaysia, which is a non-profit organization.

The purpose of this institute is to provide a place to stay for families who travelled far to seek medical treatments for their kids. This has greatly reduced their burden as hotels and motels can be costly to parents. Despite of The Ronald McDonald House, McDonald’s Malaysia also has 8 institutions in Malaysia which serve the purpose of helping kinds with learning disabilities. In this competitive 21st century, businesses which do not make profit do not stay. There will be no investors. That is why McDonalds’ knows that fiscal responsibility plays an important part in this business.

The publics have the rights to know if the company is doing well. The big companies have the responsibility to provide more transparency and accountability to the stockholders and stakeholders. In UK, an annual director’s report is required to go public under the UK company law. The 2011 McDonalds’ annual report contains details about the social accounting, auditing and reporting of the McDonalds’ Co. Ernst and Young, a well known accounting firm, has conducted the audit for McDonalds’ consolidated balance sheet, shareholders’ equity, income statement and cash flows for the year ended 2011.

Ernst and Young also audited McDonald’s Co. internal control over financial reporting. The internal control over financial reporting is to provide reliability of the financial reporting and preparation of financial statements. Without this, the possibility of misstatements of any of the financial reports might occur. These audits are also conducted by the standards of the Public Company Accounting Oversight Board (US). McDonalds’ annual report 2011 consisted many details of the company. The straightforwardness of the disclosure of the financial reports of the company has greatly increases the corporate image and thus, increases the sales. Read about 

McDonald’s quality assurance.

Here are some of the highlights from the year 2011. The sales grew 5. 6%. Revenue increased by 12%. The operating income rose 14%. Operating Margin rose from 0. 6 percentage points to 31. 6%. McDonalds’ returned 6 billion dollars to shareholders through repurchases of share and dividends paid. Next, Diluted earnings per share rose by 15%. Cash generated from operations also increased from 808 million dollars to 7. 2 billion. McDonalds’ Co has a total asset of $32,990 million in 2011. It has increased by $1015 million as compared to last year. McDonalds’ Co also has a healthy cash flow.

The cash generated from operations has increased drastically in these 6 years. Cash Expenditure is maintained at $1900 million to $2700 million, which is a good sign. This means the company has control over their expenditures. Net income of the company has increased $1959 million in 6 years. The total revenues of the company have increased $6,111 million in 6 years. The purpose of comparing the revenues of 6 years is to analyse certain financial stability of the company whereas comparing revenues between 2 years has its own different explanations.

M ATTRACTIVENESS IN THE DEVELOPING WORLD Mergers and acquisitions form the majority of FDI deals in the developed world, but remain relatively scarce as a mode of entry in the developing world. The infrequent use of M as a foreign direct investment (FDI) entry modality into developing regions has motivated this study. As a first step in exploring the M paradigm in developing markets this paper will classify and rank the M attractiveness of 117 developing economies.

Further, the distinction between FDI attractiveness and M attractiveness at a country and regional level will be illustrated. Mergers and acquisitions, as a mode of FDI are rare in developing countries. Only 26, 9 percent of the 11059 FDI developing economy deals documented in this study and concluded between 2004 and 2006 were cross border merger and acquisition deals, the remaining 73% of deals were all greenfield. Within the period 2002 to 2004, mergers and acquisitions made up a mere 19% of the total number foreign direct investment (FDI) deals concluded in developing economies.

In contrast, cross- country mergers and acquisitions held far greater appeal in the developed world where M outnumbered greenfield FDI deals by making up 51% of the total FDI deals concluded over the same period 2002 to 2004 (UNCTAD, 2007). The clear preference for greenfield deals in the developing world indicates that there exist elements within locations attractive to M which are distinctive from those locations attracting greater greenfield activity.

In order to understand these elements, M attractive and unattractive locations must first be identified and classified. M and greenfield are two distinct modes of entry with differing motivations and dissimilar host country effects. M involves the purchase of a controlling share of stock in an existing host country firm with production capacity (Raff et al, H. , Ryan, M. and Stahler, 2008) whereas 1 greenfield investments see the foreign firm building its own independent business, and sourcing all resources directly from the market (Nocke and Yeaple, 2007).

The FDI attractiveness of economies has been well explored in the literature. However, research on the role of FDI in economic development is dominated by a generalised view of FDI where the separation of entry mode strategies was not central. Several authors have commented on the underreporting of M as a process distinct from the FDI umbrella in the literature; these same authors have begun to explore in greater depth the M concept (Kogut & Singh, 1988; Raff et al, Ryan & Stahler, 2005; Nocke & Yeaple, 2007 & Haller, 2008).

The M literature is concentrated on the developed economies of the world as the greatest volume of M activity has historically occurred in developed regions. Much of the literature on M describes the increasing number of these deals and its importance in global FDI, often by referring to the global total (Haller, 2008; Bjorvatn, 2004; Horn & Persson, 2001, Shimizu, Hitt, Vaidyanath, Pisano, 2004). None of these studies have referred to the relative scarcity in utilisation of M in the developing world relative to the developed regions of the globe.

This paper aims to make a contribution not just to the emerging literature on M but also to its particular developing economy paradigm. The methodology of this study allows for the identification and ranking of FDI attractive economies, M attractive economies and for the distinction to be drawn between M attractive economies at the country level and M attractiveness at a regional level. At the country level M attractive economies are economies which attracted more M than greenfield deals internally i. e. economies attracting a greater ratio of M activity to greenfield investments.

Regional M attractive economies were defined as economies which whilst attracting large volumes of M activity within a region were not attracting a greater number of 2 M deals internally. Greenfield deals continue to dominate these markets. In other words these countries were M attractive by virtue of being FDI attractive. FOREIGN DIRECT INVESTMENT IN DEVELOPED AND DEVELOPING ECONOMIES Understanding the distinction between developed and developing economies and foreign direct investment in these markets is fundamental to this study.

Per capita income, an indicator of the wealth and potential of a market, is an important manifestation of the differences between developing and developed economies. Unfortunately however, developing economies are subject to frequent policy regime switches and growth rate volatility when compared against the group of developed economies (Aguiar and Gopinath, 2007). Productivity in emerging markets is unstable, here the cycle of political and economic shocks have become trends (Aguiar and Gopinath, 2007).

The income inequality, higher poverty levels, governance, institutional contexts (North, 1994; Peng and Heath, 1996) and the level of economic and human development of developing economies is offset by the fact that since the early 1990’s these countries have also been the fastest growing market in the world for products and services (Khanna and Palepu, 2005). The strategic choices made by multinationals engaging in developing markets must necessarily be considered with respect to the above mentioned host country factors.

Many developing economies which are characterised by an accelerated pace of economic development and a liberalisation or opening of their economies by the application of free market principles are termed emerging economies (Hoskisson, Eden, Lau, Wright, 2000). Other rapid growth countries included in this group are the transition economies of Eastern Europe which were historically planned economies but have now adopted free market principles (Hoskisson et al, 2000). 3 The literature is dominated by developed economy FDI.

However, FDI patterns observed in developed countries cannot be generalized to transitional or developing economies (Pan, 2003). Blonigen and Wang (2005) have established that the factors determining the location of FDI “vary systematically” between developing and developed countries (Blonigen and Wang, 2005). In their paper, Phylatakis and Xia (2006) investigate the dynamics of global, country and industry effects in firm level returns between developed and emerging, markets. Their findings show that especially for emerging markets, country effects are more important than ndustry effects in explaining return variation for firms (Phylatakis and Xia, 2006). Sethi, Guisinger, Phelan and Berg (2003) believe that FDI flow should not only be studied at a firm level but additionally at a country level as country level factors affect the decisions of all firms over time (Sethi et al, 2003). In addition, not all of the hypothesized relationships in the literature on FDI (e. g. exchange rates and source country size) were supported in a study on the transitional economy of China (Pan, 2003).

This suggests that the developed and developing region FDI paradigms should be studied as distinct entities. LOCATION FACTORS Encouraged by superior technology, faster and cheaper communications and motivated by intensifying competition, businesses are able to scour the globe in search of locations offering advantages which increase the competitiveness of the firm. Location advantages refer to the institutional and productive factors which are present in the particular geographic area chosen for FDI (Galan and Gonzalez-Benito, 2006).

Dunning’s OLI theory explains a firm’s choice for a particular FDI destination. First the home based firm must possess an ability which it is able to 4 exploit abroad and which is portable. This is termed the ownership advantage (the O advantage) of the firm. The ‘L’, which is the focus of our research, refers to the location which must have desirable qualities and offer advantages to the firm. Examples of this would include large markets, production factors including cheap or skilled labour or natural resources. A locational advantage would enhance the profits of a firm.

The ‘I’ refers to internalisation, which implies the firm has more to gain from the total control of the asset than by allowing control to rest with export agents or licensees (Dunning, 2001). Tong, Alessandri, Reur and Chintakananda (2008) find that country and industry effects and their interaction substantially influence firm performance. The authors advocate that industries with growth opportunities learn how to exploit country specific factors by locating operations there. Even though low labour costs are used by many developing economies to attract FDI (e. g.

China and Vietnam) studies show that it is of far less consequence to FDI attraction than host market size and distance. Total costs of production taken together are however largely influential in the direction of FDI flows. High labour costs may be mitigated by the infrastructural spend on health and education which would result in a healthy, skilled and more efficient workforce which in turn acts to lower costs (Bellak, Leibrecht and Riedl, 2008). In understanding M attraction it is important to first mention the literature on FDI attraction, that is why firms go to foreign locations.

According to Fontagne and Mayer (2005), firms will go to foreign locations if there exists sufficient demand in the country or region, total production costs incurred at the location are low, intense competition is not a threat, public policies are advantageous and institutions create productive and efficient economies in which to operate. Foreign locations may also be desirable in order to leverage economies of scale, take advantage of arbitrage opportunities involving factor costs, to diversify and reduce risk, exploit distinctive 5 dvantages to gain market and to escape from increasing home market competition (Rugman & Li, 2007 and Rugman and Verbeke, 2001). Therefore we may expect that economies offering locational factors conducive specifically to M will display greater attractiveness values. In light of the statements above, host country demand amongst other factors is responsible for the decisions of firms to choose foreign locations it leads us to believe that market size or the GDP of a country has an important role to play in M attraction.

Therefore it may be expected that the larger a countries GDP the greater the M activity it will attract. First documented by Knickerbocker (1973) is an idiosyncrasy in the movement of firms. Firms follow into locations where other firms from their industry have already entered despite the increase in competitive intensity this generates. Therefore M attractiveness may also be related to the number of firms already functioning within the host market. This agglomeration tendency may be linked to supply chain and input-output linkages.

Further by locating affiliates close to other multinational affiliates they may be able to benefit from absorbing technological spillovers. The effect of this would be the lowering of R costs and raising the firm’s competitiveness by enabling it to stay abreast of competitor strategy (Fontagne and Mayer, 2005). REGIONAL COUNTRY LEADER EFFECT Part of the focus of this paper is to explore a regional dimension of FDI and M. Much of the literature on regional leadership effects concerns Japanese FDI into the Asia-Pacific region.

The ‘flying geese’ model by Ozawa describes the trend where mature products and industries are shifted from one country to another more peripheral lower cost destination within the region 6 (Ozawa, 2003 and Kojima, 2000). As the host country costs rise so it too moves toward higher value add products and the production of the good moves to the next low cost destination (Edgington and Hayter, 2000; Hart-Landsberg and Burkett, 1998). In this way advantages such as technology, employment, real incomes and innovation may cascade through a region (Clark, 1993).

Several studies have shown that when MNC’s first plan to internationalise they choose geographically and culturally proximate regions, this is known as the ‘market familiarity principle’. In this way home based skills, advantages, management and resources may be leveraged to minimize transaction costs (Gomes and Ramaswamy, 1999). In ‘Regionalism and the Regionalisation of International Trade’, Gaulier, Sebastien and UnalKesenci (2004) explain the idea that regionalisation is a natural pattern and that the volume of inter-neighbour trade between countries is high due to the economic sense of trading over shorter distances.

Various studies find that countries have the bulk of their foreign trade concentrated within a particular triad region (Gaulier, Sebastien and Unal-Kesenci, 2004; Rugman and Verbeke, 2004). In their study on 64 Japanese multinationals Collinson and Rugman (2008) found that only three operated globally with the remainder concentrating 80 % of their operations (sales & assets) intra-regionally. More importantly, with implications for this study and the attraction of M, was the finding that region-specific regionalisation trends are linked to changes in infrastructure, information or cultural ties.

Large regional trade agreements, especially when a custom union exists, were also shown to have positive effects on trade volume and created lucrative opportunities for foreign producers. The trade agreements allowed access to a large market from a single country, even if it was a smaller market than its neighbours (Gaulier, Sebastien and Unal-Kesenci, 2004). This paper 7 reinforces the importance of institutions in developing regional trade and mentions specifically that a positive “gravity” factor of regionalisation could be the swift acceleration of GDP growth of other countries within a region.

Policy makers should take note that contractual relationships present significant risks to foreign MNE’s in host countries which have linguistic, legal and economic institutions systems vastly different from the home country (Clark, 1993). Promoting and facilitating corporate governance would have a positive impact on inter-company linkages with the resultant promotion of regional development. The ability to access risk finance and instruments make it critical for a firm to operate in an advantageous national location within a region (Clark, 1993).

Pajunen (2008) reinforces the above idea of a MNE firm searching for the most advantageous location within a region. In order to access the rapidly expanding emerging economy market a firm may make a strategic decision to enter South America or South–East Asia and will then search for the most attractive location within that region to trade from (Pajunen, 2008). As we have seen in an earlier paragraph, the growing number of regional trade agreements allows the MNE to transact with minimal trade costs within a region. The regional leader attracts the most FDI in a region. This research asks the question who attracts the most M and why?

This question may be answered by the findings of Qian, Li, Li and Qian (2008). Qian, Li, Li and Qian (2008) confirm that firms are regionally focused and also offer an explanation for the regional internationalisation of firms rather than a fully global expansion. They find that firms’ costs are lower intra-regionally and hence performance is enhanced. They add however that a threshold to performance is reached intra-regionally and that a developed country MNE may maximise performance by entering into a moderate number of developed country regions and a strictly limited number of developing regions as costs here are substantially 8 ifferent. They advocate the careful selection and allocation of resources in developing regions as over-diversification here will result in costs outweighing benefits (Qian et al, 2008). This reinforces the idea of a regional FDI leader in the developing country context that is a ‘safer’ haven for MNE resource allocation. Taking into account this evidence, it is possible to assume that as regional cooperation is enhanced so inter-regional trade is encouraged which results in greater amounts of FDI and M which will flow into a regional leader country with the safest reputation. MERGERS AND ACQUISITIONS

An imperative of a foreign investment entry strategy is to minimise the cost of entry in order to render the venture more profitable. Cultural barriers and socio-political differences between the entrant and host raise the cost of transacting and thus the entry mode chosen will attempt to reduce this. M AND CAPABILITY SEEKING MULTINATIONALS Firms have capabilities in their own markets which are not necessarily internationally mobile, may not be useful in a foreign market or the firm may require a set of additional competencies to operate successfully in the foreign market (Anand and Delios, 2002).

Anand and Delios (2002) offer a description of upstream capabilities which are described as fungible and portable; an example of this may be intangible technological know-how. By engaging in a cross-border M the firm is able to access the local knowledge and downstream capabilities of a local firm and use this to supplement its portable advantages in serving the new host market (Nocke and Yeaple, 2007). Examples of capabilities or advantages which the local firm may possess include brand, marketing and sales force knowledge, privileged access to 9 istribution channels, a capability to manoeuvre through local ‘institutional voids’ and challenges (Khanna and Palepu, 2005), emission rights for environmental pollution, landing slots at airports, scarce land or oil/mineral extraction rights amongst others (Horn and Persson, 2001). Fungible upstream capabilities are a stronger driver for acquisitions than downstream capabilities which are less fungible (Anand and Delios, 2002). Developing countries are less likely to have superior technological capabilities than the potential developed country acquiring firm.

The lower sophistication of the developing market would therefore limit the number of acquisition targets available for a developed country MNE. Acquisition targets for downstream capabilities (marketing, brand etc. ) would hold greater appeal in countries with large target markets. The number of M deals can therefore be expected to relate to market size (GDP) and market sophistication (represented by aspects like the level of human development and infrastructure). The number of M deals will also be related to the number of local acquisition targets available which in turn is dependent on the level of development of the country.

ACQUISITION DRIVERS The initial choice to engage in FDI over export is dependent on how profitable the firm expects the greenfield or M to be. The second strategic choice of greenfield over M is related to the firm’s ownership of productive assets and varies both across and within industries (Raff, Ryan and Stahler, 2005). A cross border-merger provides access to a foreign market whilst a national merger relieves domestic competitive pressure. When trade costs are low however national mergers do not reduce competitive pressure and firms will seek access to foreign markets through a cross-border merger.

Economic integration results in lowered trade costs and therefore increased competition which is likely to increase the profitability of acquisitions (Bjorvatn, 2004). The lowering of trade costs 10 which is dependent on host country regulations will therefore increase the level of cross-border M activity. The literature describes one of the main advantages of cross-border M to be the access which it provides to a foreign market (Horn and Persson, 2001) whilst within border mergers are generally attributed to relieving domestic competitive pressure (Bjorvatn, 2004).

Raff et al (2008) explains that firms entering a foreign market will approach local firms with a merger and acquisition or joint venture proposal in order to enjoy the synergies of such a relationship. Raff et al (2008) maintain that a merger & acquisition offer will be accepted by the local firm if the profitability and success of a greenfield investment by the multinational is likely and credible. Further, the greater the anticipated profitability of the greenfield investment the lower the merger & acquisition price offered to the local firm.

Hence M& A would be preferred over greenfield as the entry costs would be lowered. The choice of greenfield over M will depend on the number of competitors in the market and the market potential as this affects the anticipated profitability of the greenfield venture or the cost of the M (Raff et al, 2007). This leads us to hypothesize that countries with greater market potential (GDP, GDP per capita and HDI) and fewer local competitors will result in a lowering of the cost of an M which in turn results in increased volumes of M.

CULTURAL CHALLENGES AND THE ‘LIABILITY OF FOREIGNNESS’ Mergers and acquisitions and partially owned ventures offer the opportunity for a foreign MNE to access local assets such as brand, distribution networks and a client-base which is difficult to mobilise from home by working with local established companies (Petrou 2007). In instances where large cultural distances exist between home and host countries, Brouthers and Brouthers 11 (2000) advocate the use of acquisitions in order to confer legitimacy and cceptance on the foreign MNE. However, M involve greater costs when the cultural distance is high and therefore Chang and Rosenzweig, (2001) assert that firms would be more likely to choose greenfield entry to avoid the costs of integrating diverse company cultures. Greenfield investments offer total affiliate control and avoid post merger cultural difficulties but take a far longer time period to establish market presence and require substantial experience and know-how of local conditions (Chang and Rosenzweig, 2001).

Most recently Slangen and Hennart (2008) have found that MNE’s will prefer acquisitions in culturally distant locations if they have little international experience or if they plan to grant the subsidiary autonomy in marketing. If they are internationally experienced or have no market related concerns then a greenfield is preferred in culturally distant locations. The entry choice is also industry-specific depending on the resource requirements of the firm.

Manufacturing operations tend to favour greenfield deals whereas in advertising where brand and product are tailored to local tastes acquisitions are preferred as FDI entry strategies (Kogut and Singh, 1988). The above information alludes to the idea that M will tend to occur in the services industry as it confers on the MNE an understanding of, acceptance within and access to a foreign market. The information examined above dealt with the cultural challenges of M. The next section will broach the subject of institutional challenges in M deals especially in developing economies.

M FAILURE 12 Approximately 70%-80% of all mergers fail (Bretherton, 2003) and KPMG reports only 17 % of cross border M s create value while 53% destroy value (Shimizu, Hitt, Vaidyanath, Pisano, 2004). These statistics may be part of the explanation for the lower volumes of M deals in developing economies where investor firms may be wary of entering into deals already known to have high failure rates and then compounding this in an environment fraught with challenges i. . developing regions. Therefore many organisations choose to enter into strategic alliances and joint ventures which allow them the benefits of searching for new market opportunities, sharing in innovation and technology, overcoming host regulatory requirements and developing new capabilities. Importantly however these alliances are easier and less costly for companies to enter and exit should the need arise. IMPORTANCE OF LEGAL AND FINANCIAL FRAMEWORKS TO SUPPORT MNE’S

Market inefficiencies related to the resource profile and institutional profile of a host economy may be overcome by the entry strategy of the MNE. Chang and Rosenzweig (2001) assert that an acquisition is the quickest way for a firm to build a sizable presence in a foreign market. The challenges of this mode however involve the post acquisition cultural merge, the risk of overpaying and an inability to fully assess the value of the acquired assets (Chang and Rosenzweig, 2001).

In a developing market context additional challenges to M include the scarcity or absence of legal, financial and institutional organisations and structures through which the deal could be investigated, formalised and protected and is further complicated by the existence of burdensome host country regulations relating to ownership (Khanna and Palepu, 2005). HYPOTHESIS 13 It is expected that M attractive economies in the developing world may be identified as a group distinct from FDI attractive economies depending on the context of the location factors of the host economies.

It can therefore be hypothesised that M attractiveness does not equal FDI attractiveness and that varying levels of M attractiveness occur. RESEARCH DESIGN SAMPLE AND DATA SOURCES The World Bank and UNCTAD, through the annual World Investment Report and World Investment directory, publish data on over 210 economies which are divided into developed and developing economies. In this study data were assembled for 117 developing and transition economies.

Blonigen and Wang (2004) in their examination of the FDI experiences of developed and developing economies conclude that the variation of data across these groups makes it inappropriate to pool data on them in empirical analyses. A further rationalisation for the isolation of developing economies from developed economies in this paper can be found in North (1994), he writes that the experiences of actors in highly developed modern economies may not be compared to that of individuals operating under conditions of uncertainty, political or economic.

In order to identify regional FDI leaders, for the purpose of this study, the country data was divided into regional groupings (see table below) according to the United Nations Statistical Office as published in the UNCTAD World Investment Report classification for 2007. [Table 1 about here] VARIABLES AND MEASURES The analysis aims to separate FDI attractiveness from M attractiveness and to rank the attractiveness of developing countries to mergers and acquisitions.

The data for value and volume 14 of M in the sample of developing economies was taken from the latest available M and greenfield data published by UNCTAD (based on data from Thomson Financial) over the period 2004 to 2006. Six variables were created. The table below describes, explains and shows the grouping of the variables. Group A in table 2 below represents country M attractiveness. Two measures numbers 1 and 2 were used to measure attractiveness at the country level.

One is volume based; that is the number of deals in one country as a percentage of the country’s total deals, whilst two is value based that is the dollar value of deals which flowed into the respective country as a percentage of GDP. Thus the measure for country level M activity has two dimensions in this way the variable carries richer information and is less likely to be skewed by a single, large dollar value deal. As this measure is computed using per country total deals and per country GDP as the denominator, it is an intra-country measure. Group B in table 2 represents regional M attractiveness and contains 3 measures.

Again both a volume and a dollar value were used to measure regional M activity for the same reasons listed above for country attractiveness. If for example a country attracted one very large dollar value deal, but no other deals, it may be read as an M attractive economy when in fact it only attracted a single deal. This regional group of variables is computed using the number of total regional M deals, the number of total regional FDI deals and the dollar value of the total regional FDI inflow as the denominators. Thus it measures the country’s M volume and value respective to the regional total.

It is an intra- regional value. Group C in table 4 contains one measure for the FDI attractiveness of a country in a region. This measure includes all deals (greenfield and M) which a country attracts with respect to the total number of deals concluded in its geographic region. 15 [Table 2 about here] METHOD OF ANALYSIS The statistical challenge in this study was to find a method which would allow for the separation of FDI attractive economies from M attractive economies and of M attractive from M unattractive economies. Two statistical methods were utilised to test the variables.

A cluster analysis allowed for countries with similarities based on the variables to be clustered together. A principal component analysis was performed in order to create an M attractiveness ranking of the sample countries. CLUSTER ANALYSIS INTRODUCTION TO CLUSTER THEORY A cluster analysis is a statistical tool which allows for the discovery of meaningful structures within data without explaining why they exist. This allows data to be sorted into groups or categories where the members of each group have a high degree of association with each other and a minimal association if they belong to another group.

Thus this technique places the economies under study into clusters based on well defined similarity rules and finds the most significant groups of objects. (http://www. statsoft. com/textbook/stcluan. html) Clustering is the term used to describe the presence of separate and distinct groups in the data however if clustering is not recognized by failing to visually inspect the data (scatterplots or another graphing technique), the correlation coefficient may suggest that no relationship exists even though within each cluster a clear relationship may indeed exist (Siegel, 2000).

As an initial exploratory step and in order to determine which of the variables listed in Table1 were most successful in dividing the economies a cluster analysis was performed. 16 The data for some variables such as GDP had a very different scale to the some of the smaller scale values e. g. Polcon 3 index. The data was thus standardized to allow each variable an equal opportunity to display significance in the cluster analysis and prevent any one variable dominating (Boudier-Bensebaa, 2008). A cluster analysis was run on the variables listed in table 2 above.

A four cluster solution was accepted as all the clustering variables proved to be significant. PRINCIPAL COMPONENTS ANALYSIS A principal components analysis allows for the identification of underlying factors in the variables which account for the largest variance amongst the data set of 117 countries. Table 3 below shows the variables used in the principal component analysis grouped at the country and regional level. This analysis is undertaken in order to create an attractiveness value per country which allows the developing countries to be ranked based on their M attractiveness score.

Understanding Principal Component Analysis The principal component analysis (PCA) is a data reduction technique that distils the essence of several variables into a smaller number of components which explain the variance in the data. The regional and country variables listed above showed correlations but rather than discard them they are rolled into a two factor composite M attractiveness value one factor for regional attractiveness and one factor for country attractiveness.

The principle of parsimony (simplicity and reduction) is followed by creating an attractiveness value out of the variables, in this way more meaningful and richer measure is created and the dimensions of the data set become more manageable (Siegel, 2000 p586; Berenson & Levine, 1986). 17 The Eigen analysis is the name of the mathematical technique used in PCA. Eigen values show the percentage of variance explained by each component, the largest Eigen value is the first principal component, the second largest Eigen value is the second principal component, and so on. (http://www. fon. hum. uva. nl/praat/manual/Principal_component_analysis. tml). The Eigen values for our study were determined; these values were then plotted on a scree plot to illustrate the importance of each of the components. A factor analysis was performed on the all the variables in table 3 above. The PC analysis will create factors by reducing the data into its underlying dimensions. These factors allow for an attractiveness score to be generated for each country. THE VARIABLE DENOMINATORS [Table 3 about here] The country level variables were expressed as percentages of per country GDP, per country FDI inward stock and total number of per country FDI deals.

Therefore outcome values expressed are all calculated with respect to intra-country measures. The regional level variable denominators included the total FDI flows into a geographic region, the total number of M deals in a region and the total number of FDI deals in a region (e. g. Central America, North Africa etc) and are expressed as percentages. Therefore all values are calculated with respect to regional totals. By separating the variables a richer result is obtained, the analysis is able to pick out regional leaders and interesting countries which may not be FDI attractive but nevertheless are M attractive.

If the analysis had not made the distinction between attractiveness at the country level 18 and regional level the interesting case of Libya where M deals predominate would have been lost as its total FDI is so small. RESULTS: THE FOUR CLUSTER SOLUTION, DESCRIPTIONS AND MEMBER COUNTRIES The results of the four cluster solution is summarised as a profile plot with the means percentages included in table 4 below. The premise that a country level and regional level group exist in the data was confirmed with the cluster analysis.

All the countries in cluster 1 showed a high value for the intra-country number (or volume) of M deals respective to the other clusters. Cluster 1 countries are intra-country performers. They do not perform well at a regional level. Cluster 4 countries are country level performers like cluster 1 but perform better on M dollar sales value than on M volume. For the purpose of this study clusters 1 and 4 are both considered as country level performers, their distinction lies in a difference of measure that is volume of M deals versus value of M deals respectively.

Cluster 2 displays a strong performance on the regional level M variables. Cluster 2 also displays the strongest regional FDI attraction. Cluster 2 countries are regional performers. [Table 4 about here] [Table 5 about here] [Figure 1 about here] Cluster 3 countries do not perform on any of the variables; they may be labelled poor M performers. Table 5 above lists the member countries of each cluster. In light of the descriptions defined above, each of the four clusters has displayed distinctive mean characteristics based on a regional and country distinction and on the strength of the M 19 ttraction. In order to illustrate each clusters level of attractiveness graphically, the clusters have been plotted onto the axes above (Figure 1), the y axis representing country attractiveness and the x axis representing regional attractiveness. PC ANALYSIS AND EIGEN VALUES: The PC analysis in table 6 below shows the reduction of the five variables into a two factor solution which explains 80, 3% of the variance of the underlying variables. The Eigen value is the variance explained by each factor of the underlying variables. [Table 6 about here] The PC analysis onfirmed the premise held of there being both a regional and a country effect in the data by loading all the regional variables on factor 1 and the country variables on factor 2. Factor 1 is a regional M attractiveness factor and factor 2 is an intra- country M attractiveness factor. The 117 countries on the data table are run against these attractiveness values in order to obtain a regional and a country level attractiveness value for each. This is accomplished by multiplying each country’s variable score by the factors in the table.

The regional PC factor value allows for the generation of a regional attractiveness value for each country whilst the intracountry PC value allows for the generation of an intra-country attractiveness value for each country. Two lists are thus created, a list of the 117 developing countries with regional attractiveness values and another containing the same 117 developing countries with intra-country attractiveness values. PER COUNTRY ATTRACTIVENESS VALUES AND RANKING: 20 In order to make sense of the country and regional attractiveness values each list was ranked and ordered so that the countries appear in order of attractiveness.

The top quartile or quartile 1 (Q1) is the least attractive to M activity, the bottom quartile or quartile 4 (Q4) is the most attractive. Therefore the higher the ranking the more M attractive the country is. The following countries were not ranked as they had no M activity: Azerbaijan, Brunei Darussalam, Cameroon, Equatorial Guinea, Eritrea, Ethiopia, Guyana, Honduras, Myanmar, Nepal, Paraguay, Qatar, Senegal and Suriname. At the regional level the most M attractive economies were India, RSA and Brazil, Russia, Turkey and Mexico, Table 7 below lists and ranks the most regionally M attractive economies.

Table 8 ranks the least attractive regional economies with Burkina Faso, Yemen and Albania being the most unattractive M economies regionally. The countries most attractive to M at the country level that is those countries attracting a greater number of intra-country M than greenfield deals are listed in Table 9, the top ranked countries are Mauritius, Burkina Faso, Bulgaria, Panama, and Ghana. The most unattractive country level economies for M activity are listed in Table 10, with the UAE as the most unattractive followed by Tanzania and Saudi Arabia. Table 7 about here] [Table 8 about here] [Table 9 about here] [Table 10 about here] [Figure 2 about here] 21 Figure 2 above is a scatter plot of the country level economies list on the ‘y’ axis and the regional level economies list on the ‘x’ axis. The most attractive country level economies (attract more M than greenfield internally) can be seen on the upper left section. The most attractive M economies on the regional list can be seen on the lower right section of the plotted area. These economies attract the most M deals in their geographic regions.

The line drawn through the origin recreates the M attractiveness axes shown in Figure 1 which can be superimposed over this plot. DISCUSSION For both sets of analyses the regional FDI leaders correlated. This list included the Cluster 2 countries and top ranked regional M attractive countries (India, RSA and Brazil, Russia, Turkey and Mexico). The large market sizes of these regional leader countries have several implications in terms of M attraction. First, large markets attract market seeking MNE’s, the literature shows that these firms are likely to utilise M as a mode of entry (Buch and De Long, 2001).

The fact that they are economic hubs and attract greater volumes of FDI than other developing countries also results in an increased presence of foreign affiliates operating in their markets (Qian and Delios 2008; and Kolstad and Villanger, 2008). These affiliates are likely to be followed by service industry firms (following their domestic clients) into these foreign markets (Qian and Delios 2008) thereby creating a virtuous circle for increased FDI and M activity. These countries are FDI poster boys in their respective regions and are M attractive by virtue of being FDI attractive.

A distinct group of countries emerged as country level M leaders in the PC analysis and as the members of clusters 1 and 4. These comprise an interesting and eclectic mix of countries which include amongst others Mauritius, Burkina Faso, Bulgaria, Panama, Ghana, Kyrgyzstan, Armenia, Croatia, Ukraine, Colombia, Yemen and Azerbaijan. They are not regional FDI leaders but 22 attracted a greater amount of M activity than greenfield activity. In these countries, M attractiveness is not distorted by the regional leader effect and associated FDI attractiveness; hence M host location attractiveness can be studied in a purer form.

Differences exist between the regional leader group and the country level leader groups which make these groups unique. The Cluster 4 and top ranked country level M attractive economies must possess some interesting locational features considering that these are smaller economies which do not comprise the largest markets in the sample. Given that M are more frequently used as a mode of entry in developed countries, location features may exist in the country level attractive group which mimic certain developed market conditions. M attractiveness at the country level may be a marker for development.

The cluster 2 and regional leader groups whilst attracting large volumes of M activity within a region were not attracting a greater number of M deals internally. Greenfield deals continue to dominate these markets. In other words, it is partly true that these countries were M attractive by virtue of being FDI attractive. Examining however the PC analysis at the country level of M attraction and the cluster 4 countries in the cluster analysis, we are able to identify true M attractive economies i. e. economies attracting a greater ratio of M activity to greenfield investments.

It can now be stated that FDI attractiveness does not automatically mean M attractiveness as the analysis has isolated clear groups of countries which are FDI attractive and which attract more greenfield activity and those which are M attractive. Lipsey comments on the absence in the literature of the effects which FDI may have on a country’s consumers. Mergers and acquisitions may result in the consolidation of industries increasing the monopoly power of firms with resulting higher prices (Haller, 2008; Nocke and 23 Yeaple, 2007).

Greenfield operations would have the opposite effect by reducing the power of local producer monopoly positions and increasing local competition. At the same time superior technology and innovation brought in by the acquiring firms may improve local production efficiencies thereby lowering the local cost of goods (Lipsey, 2002). The dissimilar spillover effects of greenfield versus M is a clear motivation for the two modes of entry to be analysed and understood as distinct entities, even though much of the literature on the developmental role of FDI treats FDI as a single entity (Dunning & Narula, 1996; Dunning 2001; Rugman & Li, 2007).

The effects of M investment into developing regions, local linkages and their impact on growth and development in the host may also be areas of great interest especially to policy makers. Future research directions would be to identify exactly what the macro-economic markers of development are which attract M to certain developing economies. An understanding of location factors and macro-economic markers of development in developing countries may also be beneficial to MNC’s searching for optimal M locations in new global neighbourhoods. 24

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An analysis of firms’ growth options, Journal of International Business Studies, Vol 39, No 3, p 387-405 UNCTAD (2008) World Investment Report 2008, Transnational Corporations and the Infrastructure Challenge, Chapter 1 Global Trends, p 7-9 27 TABLE 1: REGIONAL DIVISIONS OF 117 ECONOMIES No. 1. 2. 3. 4. 5. 6. Regional Divisions North Africa West Africa Central Africa East Africa Southern Africa South America No. 7. 8. 9. 10. 11. 12. Regional Divisions Central America Middle East (West Asia) South Asia South-East Asia Southeast Europe CIS (Transition economies) 8 TABLE 2: EXPLANATION OF VARIABLES Variables for the Cluster Analysis Value Based or Volume Explanation of Variable Distinction A – Country level attractiveness variables 1 – M deals per country as a % of total number of country deals 2 – MA sales as % of GDP avg 2004-2006 volume based Examines the volume of per country M deals relative to the total number of FDI deals entering that country. The intra- country proportion of M to FDI in terms of volume. Examines the value of per country M deals relative to the GDP of the same country.

An intra-country measure of the proportion of M to GDP in terms of value. Examines the volume of per country M deals relative to the M deal volume of countries in the region. An inter-country but intra-regional measure. Examines the volume of per country M deals relative to the volume of total FDI deals (greenfield & M) of countries in the region. An inter-country but intraregional measure. Examines the value in $’s of per country M sales relative to the value of all FDI inflows into the region showing the country’s share or proportion of M sales value in the region.

Examines which country in a region attracts the most FDI deals in total (greenfield & M) to show regional FDI leader. value based in US $’s B – Regional level attractiveness variables 1 – M deals per country as a % of total regional M’s 2004-2006 2 – no of per country MA deals as a % of all regional deals 2004-2006 3 – M sales per country as a % of total regional FDI inflow ( US$ millions) 20042006 no of deals per country as % of total regional deals 20042006 volume volume value in US $’s C – Overall FDI attractiveness variable volume 29 TABLE 3: PRINCIPAL COMPONENT VARIABLES

Level attraction Country level of Combined Country Level And Regional Level Variables In Order To Create Component Attractiveness Values At The Country Level And At The Regional Level M sales per country as a % of FDI inward stock per country (US $millions) 2004 -2006 MA sales as % of GDP average 2004-2006 M deals per country as a % of total regional M’s 2004-2006 no of per country MA deals as a % of all regional deals 2004-2006 M sales per country as a % of total regional FDI inflow ( US$ millions) 20042006 Regional level 30 Table 1: profiles of cluster means for a 4 cluster solution 31 Table 5: CLUSTER COUNTRY MEMBERS Cluster 1 Belize Brunei Daruss Burkina Faso Congo Guatemala Kyrgyzstan Libya Macedonia, Mozambique Nicaragua Paraguay Qatar Rwanda Swaziland Zimbabwe Cluster 2 Brazil India Indonesia Malaysia Mexico Romania Russian Fed South Africa Thailand Turkey UAE Cluster 4 Armenia Bulgaria Colombia Croatia Ghana Mauritius Panama Ukraine Cluster 3 Albania Algeria Angola Argentina Azerbaijan Bahrain Bangladesh Belarus Bolivia Bosnia & Herz Botswana Cambodia Cameroon Chile Congo, DRC Costa Rica Cote d’ Ivoire Ecuador Egypt El Salvador Equatorial Guinea Eritrea Cluster 3

Ethiopia Gabon Georgia Guinea Guyana Honduras Iran Iraq Jordan Kazakhstan Kenya Kuwait Lao PDR Lebanon Madagascar Mali Mauritania Moldova Morocco Myanmar Namibia Nepal Cluster 3 Nigeria Oman Pakistan Peru Philippines Saudi Arabia Senegal Sierra Leone Sri Lanka Sudan Suriname Syria Tajikistan Tunisia Turkmenistan Uganda Tanzania Uruguay Uzbekistan Venezuela Viet Nam Yemen, Zambia 32 Table 6: Results of PC Analysis Level Of Attraction Country level Regional level Combined Country Level And Regional Level Variables In Order To Create Component Attractiveness Values At The Country Level And At The Regional Level.

M sales per country as a % of FDI inward stock per country (US $millions) 2004 -2006 MA sales as % of GDP average 2004-2006 M deals per country as a % of total regional M’s 20042006 no of per country MA deals as a % of all regional deals 20042006 M sales per country as a % of total regional FDI inflow ( US$ millions) 2004-2006 Expl. Var Regional Attractiveness Factor 1 Intra-Country Attractiveness Factor 2 %Variance Explained Components by -0. 015066 0. 857492 0. 085347 0. 847898 0. 936657 0. 036875 0. 962411 0. 013174 0. 864350 2. 558174 0. 051764 1. 458437 80. 3 % 33 Table7: REGIONAL LEVEL ATTRACTIVENESS- most attractive ranking

Regional Level M Attractiveness Quartile 4 -Most Attractive Rank Regional Attractiveness M Attractiveness Value Above Average India South Africa Brazil Russian Federation Turkey Mexico Indonesia Malaysia Thailand Romania Argentina UAE Egypt Bulgaria Ukraine Chile Colombia Peru Pakistan Philippines 87 86 85 84 83 82 81 80 79 78 77 76 75 74 73 72 71 70 69 68 4. 47456 3. 59947 3. 11423 2. 70295 2. 18032 2. 10503 1. 96844 1. 83932 1. 50218 1. 00295 0. 95504 0. 71507 0. 58127 0. 49219 0. 48130 0. 41931 0. 40345 0. 13893 0. 12567 0. 10631 34 Table 8: Regional level attractiveness- least attractive east attractive Regional Level M Attractiveness Quartile 1Least Attractive Rank Regional M Attractiveness Attractiveness Value Below Average Regional Level M Attractiveness Quartile 1Least Attractive2 Rank Regional M Attractiveness 2 Attractiveness Value Below Average 2 Burkina Faso Yemen Albania Tajikistan Belize Turkmenistan Lao PDR Gabon Sri Lanka Botswana Guinea Kuwait Cote d’ Ivoire Kyrgyzstan Iran Swaziland Sierra Leone Mali Libyan Arab Jamahiriya Mauritania Armenia Algeria Bolivia Cambodia Moldova, Republic of Belarus Macedonia, TFYR Lebanon Nicaragua Congo, Republic of Angola Congo Democratic 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 -0. 81391 -0. 62301 -0. 59695 -0. 58134 -0. 56980 -0. 56586 -0. 55855 -0. 54206 -0. 53908 -0. 53824 -0. 53655 -0. 53403 -0. 53331 -0. 52797 -0. 52388 -0. 51088 -0. 51028 -0. 50993 -0. 50966 -0. 50856 -0. 50707 -0. 50669 -0. 50637 -0. 50389 -0. 50075 -0. 49762 -0. 49691 -0. 49085 -0. 48372 -0. 48345 -0. 48291 -0. 48068 Costa Rica El Salvador Rwanda Madagascar Syrian Republic Bangladesh Uzbekistan Georgia Iraq Viet Nam Bosnia Herzegovina Tanzania Kenya

Mozambique Namibia Oman Bahrain Saudi Arabia Zimbabwe Zambia Ecuador Uganda Panama Sudan Venezuela Kazakhstan Mauritius Ghana Tunisia Nigeria Jordan Croatia and Arab 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 -0. 46264 -0. 46137 -0. 46100 -0. 45911 -0. 45391 -0. 45035 -0. 44220 -0. 42553 -0. 42284 -0. 41269 -0. 41006 -0. 40278 -0. 37712 -0. 37626 -0. 36841 -0. 35828 -0. 35541 -0. 35395 -0. 35140 -0. 34751 -0. 31359 -0. 31281 -0. 31113 -0. 30115 -0. 25848 -0. 22807 -0. 21374 -0. 21133 -0. 17359 -0. 13017 -0. 12656 -0. 09001 35 Uruguay Guatemala 33 34 -0. 46757 -0. 6471 Morocco 67 -0. 07754 Table 9: Country level M attractiveness- most attractive countries Country Level M Attractiveness Quartile 4 Most Attractive Rank Attractiveness Value Above Average Mauritius Burkina Faso Bulgaria Panama Ghana Kyrgyzstan Armenia Croatia Ukraine Colombia Yemen Romania Turkey Sudan Tunisia Uzbekistan Mauritania Peru Ecuador Indonesia Lao PDR South Africa Macedonia Pakistan Belize Kuwait 87 86 85 84 83 82 81 80 79 78 77 76 75 74 73 72 71 70 69 68 67 66 65 64 63 62 5. 44211 4. 67217 2. 45823 2. 04796 1. 89195 1. 06603 0. 90303 0. 87151 0. 82457 0. 81623 0. 78430 0. 77845 0. 71227 0. 65421 0. 2570 0. 36499 0. 32190 0. 26612 0. 24742 0. 23859 0. 20139 0. 10116 0. 04362 0. 04359 0. 03089 0. 01879 36 Table 10: Country level attractiveness- least attractive Country level M attractive Q1- least attractive UA E Tanzania Saudi Arabia Angola Libya Belarus Sri Lanka Algeria Guinea Iraq Iran Sierra Leone Mali Zimbabwe Cote d’ Ivoire Viet Nam Mozambique Bahrain Madagascar Oman Tajikistan Cambodia Congo Turkmenistan Mexico Zambia Lebanon Venezuela Congo Swaziland Rank Attractiveness value below average -0. 69652 -0. 68043 -0. 68009 -0. 67564 -0. 67419 -0. 66567 -0. 66410 -0. 66351 -0. 66076 -0. 66060 -0. 64409 -0. 3906 -0. 62707 -0. 62270 -0. 62038 -0. 61471 -0. 61461 -0. 59631 -0. 58028 -0. 57740 -0. 57596 -0. 56811 -0. 56112 -0. 55555 -0. 55058 -0. 54445 -0. 53035 -0. 51967 -0. 50304 -0. 48027 Country level M attractive Q1- least attractive2 Rwanda Russian Fed Guatemala Philippines Gabon Brazil Bangladesh Uruguay Costa Rica Botswana India Moldova Bolivia Egypt Nigeria Argentina Thailand Namibia Albania Bosnia & Herzeg Malaysia Kazakhstan Kenya Georgia Morocco Chile Uganda Nicaragua Jordan Syria El Salvador Rank2 Attractiveness value below average2 -0. 46953 -0. 46579 -0. 46387 -0. 45862 -0. 43042 -0. 40607 -0. 39852 -0. 8454 -0. 38399 -0. 33595 -0. 31087 -0. 30362 -0. 28460 -0. 28442 -0. 28428 -0. 25341 -0. 23769 -0. 22207 -0. 22091 -0. 22082 -0. 21129 -0. 18592 -0. 18396 -0. 16633 -0. 14784 -0. 09800 -0. 06308 -0. 03914 -0. 03806 -0. 01932 -0. 00700 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 37 Figure 1: M attractiveness axes -regional/country 38 Figure 2: REGIONAL LEVEL ATTRACTIVENESS COUNTRIES PLOTTED ON ‘Y’ AXIS; COUNTRY LEVEL M ATTRACTIVE COUNTRIES PLOTTED ON ‘X’ AXIS. 39 APPENDIX 1-EXCLUDED DATA

In addition to the developed economy data, the following economies were also excluded from the study: Caribbean and Oceania economies (many of these island economies were very small, atypical and had missing data); China (over 48 % of the total number of deals for South and SouthEast Asian region were concluded in China in order to avoid skewing the findings for the rest of the region, Chinese data was excluded); Hong Kong, Singapore, Taiwan and Korea (these economies exhibit higher levels of development and sophistication than the rest of the sample and exhibit FDI levels higher than the typical developing countries of the sample group of this study); St Helena, Guinea Bissau, Mayotte, Reunion, Falkland Islands, French Guiana, Palestinian Territory, Afghanistan, Bhutan, Maldives and Timor Leste (these

In 2008 McDonald’s management made a decision that was publicly criticized by all of the Dollar Menu enthusiasts. The fast food company decided to remove that second extra slice of cheese from the infamous fan-favorite Double cheeseburger. They have also experimented in various markets what the reaction would be when they introduce the McDouble burger with only one slice of cheese versus the Double cheeseburger.

This decision of theirs resulted in a staggering global reduction of costs calculated to be nearly $279 million for 2008.

After all their tests of the Double Cheeseburger changes the McDonald’s global management discovered that most of the consumers prefer to keep the second slice of cheese and pay more cash for it.

All in all, it has been calculated that one piece of cheese would save the franchise about 6 cents per burger. Evidently by just making a simple change removing a slice of cheese, the mega corporation was able to boost the cash flow globally by nearly $15,000 a year per restaurant.

They both saved money, by reducing the dollar menu burger to one piece of cheese and made a larger profit by charging more for the burger that was originally on the dollar menu, but is not now. SO, they did save money by removing a piece of cheese from the dollar menu burger.

The McDouble has one slice. The double cheeseburger has two slices. They removed the double cheeseburger from the dollar menu and created the McDouble. They also don’t “save” money this way. They made a larger profit.

Read about Castro’s economic policies

McDonalds Marketing techniques: Ansoff matrix – growth strategy.

Description:

a) Product development

Product development is an Ansoff matrix technique when a business will, change certain characteristics of an existing product to meet customer’s needs; they may call the changed product “new and improved” or may give it a new title all together. McDonalds has done this in the past in 2007 when they tried to develop a new burger called the “Big ocean burger” this was used to replace another fish based burger which was not selling as well. Within the first week the “big ocean burger” was not selling well and was taken off the menu in only a few months of its initiation.

B) Downsizing

Downsizing is when a business will fire some employees in order to make more space, or be able to focus on one place at a time. McDonalds has done this in November 2002 the business said that they wanted to close up to 175 restaurants and terminate up to 600 jobs and close down in three countries that were located in the middle east and northern America because it needed to get rid of some worldwide costs. But the consequences of this were that McDonalds missed its 2002 earnings forecast.

C) Making redundancies

Making a redundancy is when a company will fire an employee on the basis that they were not fulfilling their post properly, and want to get someone to replace them. McDonalds has done this because in 2011 over 1,000 employees were made redundant in Saudi Arabia because the company could not afford it, so they had to cut some employers.

D) Brand building

Brand building is when a business will enhance their brand by advertising directly and promoting it though event sponsorship. McDonalds does this by advertising everywhere possible, they have posters in the subway advertising cheaper prices and flyers on the bus about new products they have made.

E) Diversification

Diversification is when a business will begin by making a product or delivering a service in one market, but then moving into a new market altogether for example Nokia began by selling tires, but they went into selling mobile phones. McDonalds has begun this by selling toys in children’s happy meals they have begun to manufacture toys for children and sell them and make profit off of them.

Oxfarm – Marketing techniques: Ansoff matrix – growth strategy.

Description:

a) Product development

Oxfam does this but not with products with their services, with fair-trade they have begun spreading their businesses to different parts of the world such as Africa and India.

b) Market development

Oxfam does this by trying to develop with the private sector and working alongside them.

The Human Resources department in McDonald’s will look after all the employees that work at McDonald’s whether they work at the tills or work at the office. McDonalds will look at each employee; they will look at how they are working and whether they deserve a promotion. The Human Resources department will also have records of former employees and what position they had in the company, this will determine the amount of pension money they will receive when they turn fifty-five years old. When there is an accident in the business then the human resources department will provide compensation for the employee.

Take for example at McDonalds if somebody is burned by something hot falling on them and it wasn’t their fault then they are eligible to seek compensation. With regards to Recruitment the Human Resources department at McDonald’s will have to identify that there is a vacancy then they must decide where to advertise it and then when all applications have been gathered in then they have to decide which applicants should be interviewed. Then along with that the human resources department have to interview the applicant or arrange the meeting with the applicant who will then see the person in charge. Then the Human Resources department has the tough decision of deciding who will take the job and then they have to write to inform the unsuccessful candidates.

The human resources department uses ICT to create spreadsheets which store the employee’s data such as their address, Date of birth and Postcode. The Human Resources department will also use ICT to inform employees of changes within the business whether it is redundancies or some other news. They will also use ICT to inform people of Job vacancies such as on the website or by creating posters to be pinned up around the town or in Job centres.

When a person is interviewed for a job they should be interviewed they should be told about their conditions. The terms and conditions of employment are found in the contract of the employee, which relates to the location, hours in which working,holidays,sick pay, pension and how much time in advance to be given if the employee wants to leave. Which other departments do the human resources department work with? The human resources department work with the finance department and Production. They work along side the finance department for many reasons; they have to find out via the finance department how much money to pay the employees.

Marketing

The marketing department have to be one step ahead of the customer, they have to predict what the customer will buy and then the design department will try and produce what the marketing department requests, Such as recyclable packaging or a specific design on the happy meal box say if a new film has come out then the marketing department will have the box created so as to attract the customer to buy the product as it contains the stars from their favourite movies. In order to find out what a customer wants they will first have to do some market research, look at what is already being done so as to try and better that. Market research also requires getting to the customers level and asking them what they think of different products and what they think should be brought in.

The most common way in which to find out the customer’s opinions is through questionnaires which are used on many occasions and in multiple businesses. Marketing department will also take part in promotional activities such as advertising on the internet, TV adverts and in magazines. They will make the advert in a way which will make the customer think “I wouldn’t mind that” and then this will persuade the customer to then go out and buy the Big Mac or whatever the product is. Marketing department will also have sales representatives which try and find the right product for that customer.

If someone for example wanted to buy a computer but they needed on that computer some specific specs then the sales representative will listen to the customer then find the appropriate computer required for the job they need it for. Market research will also carry out a test on new products which are yet to be released so a select number of people from the public will test the product and then they will feed back on the product and say what they think is good but also what they think is bad so the department can make final changes to the product so as to make the product the best it possibly can be.

How do they use ICT

Numerous activities will require ICT; they will use ICT to create posters which advertise their product. They will use ICT to make the poster look fancy and attractive with various effects that can only be done on a computer. They will also use ICT to create the surveys and the questionnaires, they will also have a database in which they keep all the opinions of the customer and see via the database which is the most common fault the customers have with McDonalds on the surveys.

This paper is about Wendy’s and Mc Donald’s, two fast-food chains in America that are now world renowned names too in this sector. This paper discusses their marketing strategies, positioning and competitiveness.

Demographic and Socio-Cultural Trends and Changes

Today, we see a growing demand for such type of food and an increase in competition also as new and new places/names open up to cater to yet again the fast food consumer market. Over the years, McDonalds has changed its marketing strategies to suit each location it’s been catering to. One basic thing always being part of Mc Donald’s has been that of marketing not its products rather the “McDonalds experience. This has obviously, been in accordance with the type of culture and values Mc Donald shares with its customers. (McDonald’s Website, 2006)

Wendy’s on the other hand has started in 1969 has continuously added new items to its list of products. (Wendy’s Website, 2008) Wendy’s always has focused on quality as the logo promotes “quality is our recipe”. Wendy’s however didn’t venture out much, but it has set a firm ground in the fast food industry.

Socio-cultural factors for both are hence also very important because it’s important to adapt to the culture and norms of the place you are operating in. for the fast food industry, this includes things like eating pork, hamburgers, where they are eaten and where pork is considered “haram”. Hence, for such countries like Pakistan, McDonalds has changed its menu and included beef as a replacement to pork.

Advertising

Its new strategy is about not letting its customers go elsewhere. This it does by focusing even more closely on each market segment. This it does specifically through television through motion advertising and also through print ads like newspapers, magazines, bulletin boards etc. (Gregg Cebrzynski, 2005)

Wendy’s also has announced of marketing through a character by the name of Smart Square to make further use of television advertising. McDonalds on the other hand is also making use of this form of advertising through a new concept called product placement and not just through TV commercials. Commercials, it says are not cost-effective and not efficient otherwise also as the audience takes them as time consuming, and hence they don’t pay much attention to them. (Jake Swearingen, 2008).

Positioning

As far as positioning of both is concerned, Wendy’s stands in the fifth place in America. However, McDonalds stands at number one. This might just be due to the basic factors like taste and promotion tactics also affordability. People have rated McDonalds much higher than Wendy’s. McDonalds positioning hence we can say is way better than that of Wendy’s. (Tigerx’ Website, 2001)

However Wendy international is now beginning to explore places outside America also. This it’s doing by broadcasting an advertising campaign focusing on serving fresh food and the tagline “do what tastes right”. This might impact its sales and eventually make its position go up worldwide. (Gregg Cebrzynski, 2005)

Strategy for my Company

Keeping all that we discussed in perspective, it is evident that these two are thriving business in America. However, McDonalds definitely taking the largest share in the entire market. They both cater to different market segments. I would for my company makes sure that I focus on the adult as well as the kids segment so that I get a wider share eventually if my campaign and promotions go well.  It has been found that customers are attracted to new menus and outlets that care about your health. Hence my campaign would definitely be in touch with the consumer’s health and lifestyle by opting for and promoting food that’s not harmful to the body.

Convenience is another reason why people go to fast-food outlets; hence I wouldn’t exactly make my chain more available in terms of better offered prices and accessibility by being at almost every nook and corner. (QSRweb, 2008)

All in all my entire marketing strategy will be about social responsibility and “a better environment” so that the environment deserves equally good as the people who are consuming fast food.

Corporate Citizenship

We hear news all over claiming how garbage especially in the form of packaging material and paper is harmful to the environment. Hence, my company would make sure that along with advertising and delivering the right taste and maintaining quality, the issue of environment care is handled well because this is something that these two companies have not exactly done too well.

It was in the news that the biggest consumers of paper are fast food giants like McDonalds, pizza hut and Wendy’s who litter millions of pounds of litter that eventually litters our road fills and clog our landfills. This will help my company be more intelligent towards the environment by being corporate and socially responsible. And hence, help make it a corporate citizen. (Mongabay Web Site, 2008)

Works Cited

1. Gregg Cebrzynski (2005). Wendy’s revamps ad, media strategies to zero inon diverse targets. Retrieved 31rst July, 2008, from Nation’s Restaurant News, FindArticles Web Site: http://findarticles.com/p/articles/mi_m3190/is_22_39/ai_n13803606
2. Jake Swearingen (2008). A new arena for product placement: TV news programs. Retrieved July 30^th 2008, from CNET Networks, Inc., a CBS Company. BNET’s Web Site: http://industry.bnet.com/advertising/2008/07/24/a-new-arena-for-product-placement-tv-news-programs/?tag=content;col1
3. McDonalds Website (2006). A History of McDonald’s Advertising Themes. Retrieved July 31rst 2008 from McDonald’s Web Site: http://www.mcdonalds.ca/en/aboutus/marketing_themes.aspx
4. Mongabay Web Site (2008). Fast Food industry destroying forests in the Southern U.S. Morgan Erickson-Davis. Retrieved July 31, 2008 from Website: http://news.mongabay.com/2008/0428-davis_nofreerefills.html
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