International Business Plan Project

 

 

  • This project is designed to provide the foundation for an international business plan on McDonald's

International Business Plan Project

Executive Summary:

The purpose of this report is to portray the international market expansion strategies of McDonald’s. The brand is one of the most reputed fast food chains in the world that has its origin in the US. But, the company has undertaken several global expansion strategies and has been successful in most of its international ventures. The current expansion plan is in the Indian fast food sector that is one of the most developing fast food industries in the Asian region. The management has undertaken comprehensive market analysis including profitability projections and consideration of various other factors before deciding to continue the expansion strategy in India. In this regard it can be said that the several marketing, global supply chain and advertising strategies have been formulated by the management to promote the products and services to the Indian customers consisting of both elements of globalization and localization. It is predicted that the international expansion strategy for McDonald’s in India will be a rewarding venture for the management and the company will achieve success.

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Introduction:

The report has been prepared with the aim of providing a foundation for an international business plan. The analysis has been done on the basis of one of the reputed companies in the world. The company is Coca Cola Company which is one of the leading beverage companies in the world. Internationalization provides huge scope to the business to spread their wings beyond the national borders. The business houses can enjoy the economies of the large scale of business. The customer base also gets enhanced. It is very important for any company to analyze the pros and cons of the markets in which the companies want to enter. The detailed analysis of various aspects in relation to the international business plan has been provided in the report. The planning for the global business enterprises has been provided in the report. Different units of organizing global business activities have been covered in the report. The implementation of the global market plan has also been covered in this report. The entire aspect of the international business plan project has been divided into three phases and each one has been discussed in details. 
The company that has been chosen for the analysis is McDonald’s. It is one of the reputed business organizations in the fast food and restaurant chain businesses. The company has been founded in 1954 in California and since then it has been operating with its 36000 restaurants in more than 100 nations across the globe (mcdonalds, 2018). McDonald’s wants to open its office in India. The international business plan has to be prepared with the analysis of the Indian market to identify the feasibility and suitability of different factors. 

Planning the Global Business Enterprise:

Identifying Global Business Opportunities: 

The transnational strategy of the company helps it to enjoy the local responsiveness along with international integration. It is true that in case of overseas business the local responsiveness is an important requirement for the successful survival of the business. The international business expansion depends on the strategies that are directed towards the local responsiveness. There are different opportunities in the global market like early warning, systems of forecasting, energy automation, initiatives for rural growth, adaptation to cost effective strategies, regulations of the government and other policies which influence the international business scenario. The global market can provide cheap labor and other resources at reasonable prices. The company can get huge base of customers. There can be more opportunities in the international market place. The company can be profitable if the feasibility analysis has been done. The identification of the strengths, weaknesses, opportunities and threats is very important. The stakeholders of the companies feel confident in the global business scenario. The regulations have to be abided by the company. The customer base gets increased with the help of the global business. 

The modern technologies could help the company to reach the potential customers. The investors’ relation can be built excellently. The company can also enjoy the efficiency of the workforce and the new talents and skills. The company can operate cost effectively and can achieve long term sustainability. The market of India in respect to the fast food and restaurant chain is highly growing and there are huge opportunities for the growth of the business in the similar sector. The availability of cheap labor and resources cost effectively is the main reasons for which the business of McDonald’s will have a suitable market for expansion (Singh, 2017).

Analyzing International Competitors:

The international market is highly vulnerable to the threats of steep competition. There are various reputed companies which are also doing business in the international market with high level of excellence. McDonald’s face tough competition from the big brands like KFC, Subway, Pizza Hut, Domino’s and some of the local restaurants which serve the substitutes. The strategies of the rival companies are also much aggressive. The number of the outlets of the rival firms is also higher. The cost of switching to the hands of the customers is very low (GREGORY, 2017). The biggest rival of McDonald’s in the international market is Mos Burger. Other rivals of the company in the international market are Burger King, Taco Bell and Wendy’s. The rural market is much tough for the company to handle the competition. The demands for fast foods have been highly growing in the international market along with enhanced consciousness for healthy meals (Mourdoukoutas, 2013). The company has to be responsive to this aspect also and it has been seen that McDonald’s has already introduced many items and dishes which are absolutely less in fats and oil and dishes full of vegetables have also been introduced. In India the companies like KFC, Pizza Hut, Domino’s and Subway can be the major rivals of McDonald’s. 

Assessing the Economic-Geographic Environment:

The economic environment is much significant in case of the international business. The economic insecurity like unemployment, inflation, deflation, interest rates etc affect the business of the global organizations. In India the development of the economy has been faster with the increase in employment, stability in prices, specialization, increase in income of the nation, increase in foreign trade and investment. These factors will enhance the feasibility of McDonald’s in the market of India. The increasing population of the country will serve huge base of potential customers to the company (Wright, 2017).

The international market is attractive for the investors and at the same time it can be said that there are certain economic and geographic factors that influence the business of the companies in the global scenario. The extremes of weather impact the feasibility aspects of the global business. Global warming, threats of insufficient water and droughts and other climatic factors impact the international business. India is a nation with richness in natural resources and can be feasible for the company as the raw materials or the ingredients can be obtained in abundance in this country. The geographic location of any country also exerts immense pressure on the business of the global organizations. The development of the international trade depends on the geographic location so that the potential customers can be reached conveniently, raw materials can be readily available, workforce can be communicated well etc. 
The US India partnership has been one of the most important strategic relations which will help the growth and development of the international business. The relationship has been formed on the basis of the common values which direct towards the establishment of political security and stability between the countries and to increase the economic prosperity (export gov, 2017). 

The political and legal environment is very crucial for the success of international business. The political stability is one of the major aspects that influence the development of the international business. India is a democratic country. The government regulations impact the development of the international business. India is a politically stable country where the government has introduced several regulatory frameworks where the international business can be successfully developed. McDonald’s will find a feasible market in India where the political factors will be able to support the growth and development. 

The legal structures of different countries are different. The company has to abide by the legal norms in India. The legal structures and modified industrial policies have helped the country to enjoy enhanced foreign investments. McDonald’s will find a feasible legal structure in India for the expansion of the business in the international platform.

 Assessing the Social-Cultural Environment:

The socio cultural environment has been found to be highly influential for the development of the global business. The social factors exert impacts on the different aspects of the business. It has been seen that the middle class section of the society in India has been growing in the last few decades. The income of the population has always been one of the most important factors that impact the development of the global business. The demography of the target customers is also essential to be identified and analyzed for the formulation of different strategies. The socio-economic factors are changing and the changes are influential for the development of international business. McDonald’s has to be responsive to the different cultural aspects of India. The customs, values, beliefs, ethics, behaviours of the population are important factors that exert impacts on the international business. The socio-cultural factors of the country have to be analyzed so that the strategies can be formulated on that basis. The social issues of the country have to be identified and have to be managed well with matching strategies. The cultural challenges have to be dealt with effective cross-cultural management tactics.  In India cultural diversity is found to exist and the international business scenario has to adapt the cross-cultural management practices (K.Sharma & Singh, 2015).

Measuring International Business Success:

From the financial projections for the five years it can be said that McDonald’s has a positive opportunity to achieve success in the Indian market, if the management can effectively apply the proposed strategies. The success criteria will be measured by the market acceptability, growth and sustainability of the organization in the Indian fast food sector. The success of the business can also be measured by the effectiveness of the offerings of the company. The quality of the deliverables and the inputs is also another key indicator. The sales volume and the number of the customers can also be taken as the success factor. The market dynamics have to be measured and analysed in subjective terms to identify the areas where the business needs to be very careful about the competition and needs of the competitors (The Muse , 2011).
The success of the international business depends on the abilities of the global organizations in capturing the international market and in catering the target customers with excellence. If the expectations are met by the operations of the business then it can be said that the success of the business has been achieved. 

Organizing for Global Business Activities:

Financing Sources for Global Business Operations:

The above table depicts the start-up costs those need to be incurred by McDonald’s in opening up its first retail outlet in India. The start-up costs consist of the various areas of expenditures those need to be incurred by the organization for starting up the business in India. The table depicts the total start-up requirements those need to be procured by the business in order to start-up the retail store in India. The management will utilize its own source of funds for starting up the business mainly. But, it might also need to borrow some amount from the banks in the form of loans. For the first year, a loan amounting to $1, 10,000 (Referred to in Financial Projections section) will be borrowed from a bank that agrees to finance the expansion project of McDonald’s in India. Thus, the start-up costs and the Loan amount have been determined. This will help in future planning of the business in the Indian market in terms of the revenues generated and the profitability earned by the organization. 
 
Start-up Costs $
   
Legal 1,100
Stationery 2,000
Consultant Fees 17,250
Brochures 4,550
Insurance 450
R&D 15,500
Rent 750
Equipment & Machinery 10,450
Total Start-up Costs (A) 52,050
   
Start-up Assets Required  
Opening Cash Balance 5,25,000
Other Short-term Assets 6,500
Total Short-term Assets 5,31,500
   
Long-term Assets Required 0
Total Assets (B) 5,31,500
Total Requirements (A+B) 5,83,550

Managing International Financial and Business Risks:

McDonald’s has to be very careful about the financial and business risks associated with the international business. It currently operates in many foreign markets and hence it has ample idea about the international financial and business risks. The financial risks can be in relation to the changes in interest rates and foreign exchange rates. The changes and fluctuations in the exchange rates of the currency might pose financial risks to the business. The exchange rate is highly volatile in nature and that poses serious impacts on the international business. It is very important that the business identifies and forecasts the potential risks. Business risks are different for different countries. The other business risks include changes in legal regulations, prices of raw materials, systematic and liquidity risks. The business has to be able to calculate the impacts of the risks with the use of the contribution ratio, operating leverage ratio, financial effect and total leverage ratios. The company has to be able to use statistical data and methods to calculate the various potential risks which can be severe to the business operations in international market. Accepting risk is also another vital business risk. Managing international risks is very important and it starts with the identification of risks. The risks have to be defined properly. The third step is to prepare an effective mitigation plan that will help in fighting back the risks. Important resources have to be incorporated in the mitigation plan. The mitigation plan has to be implemented successfully. The organization must ensure a risk management culture which will assist the employees and other members to support the major areas of risk management. The value and significant role of the risk management has to be known by the stakeholders of the company (Pihlajarinne, 2015). 
To Be Continued...

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