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Musterlösung Fallaufgabe

Case study about McDonald's from hkuspace

2.205 / ~10 sternsternsternsternstern_0.2 Petra Ts. . 2017
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Fallaufgabe
Betriebswirtschaftsle­hre

HKU Space Hong Kong

2016

Petra Ts. ©
14.00

0.09 Mb
sternsternsternsternstern_0.2
ID# 67750







Question 1

At the end of the last century, McDonald’s has gone in China. Nevertheless, there are several forces which could affect or have affected the development of McDonald’s, including political-legal, economic, socio-cultural and technological forces would have analyze below.


Political-legal force

Due to the socialistic country, China emphasizes the labour right and benefits and forbidden any unreasonable deprival to workers. If the unfair incident is occurred, the China government will interfere and magnify the justice. In 2007, the government reported McDonald’s have underpaid their part-time employees through the state-owned newspaper. After that, McDonald’s adjusted the salary from 12%-56% higher than the minimum wages when having comparison under the great pressure.

Therefore, the corporate image of McDonald’s has been impaired.


In legal force, the modification of franchise law has affected the development of McDonald’s. China appeared the first franchise relative law in 1997 for domestic enterprises only in order to protect the survival of them. According to the commitment between China and World Trade Organization, China creates the basic law frame to permit the foreign company can have franchise application until 2004. The operating pattern of McDonald’s adopted the joint venture and wholly foreign-owned enterprises (WFOEs).

However, joint venture has caused a series of problem. For instance, McDonald’s’ partners are easier to recognize the unique commercial secret which facilitates them to establish another similar fast-food restaurant. This will trigger the dispute among them in long-run. Even they suggest the legal litigation and seek the court to make theadjudication. On contrary, WFOEs have several advantages; this can protect the intellectual property right and have the whole personnel management so that McDonald’s has no concern to introduce advance technology and equipment further so as to expand business scale quickly without any obstacle.


Economic force

China has achieved the tremendous economic growth in last two decades. Simultaneously, there was the increasing number of the middle-class, especially in southeastern districts. They have the plenty purchasing power and pursue the high quality of goods and services. McDonald’s can fulfill their expectation ideally. Even through the selling price of foods in McDonald’s are more expensive than the local restaurants, which charges 3 US dollars per meal, they tend to make preference to McDonald’s that enables it to open branches more and more.

As a result, McDonald’s has 879 branches o.....

Therefore, the selling price of food is higher relatively because of the cost from the comprehensive service.


The majority of young people get the late sleep habit. McDonald’s adjusts its business strategy and launch the 24 operating hours, also the delivery service due to it. Convenience and fast delivery service attract young people to have the purchasing desire for the McDonald’s’ meals at night. Those can boost the sales turnover and profit earnings.

After China succeed to applicate the right to host the Olympic in 2008, McDonald’s started to advertise the slogan “I’m lovin’ it when China wins” in order to arouse the recognition with Chinese. In fact, there are many anti-America campaigns in developing countries because McDonald’s symbolize the American culture typically. The American hegemony is the first impression in their ideology.

McDonald’s has the deliberation to shout the pan-Chinese slogan to eliminate the concern and hostility meticulously. After that, McDonald’s achieves the practical effectiveness and establish the positive image in Chinese society. McDonald’s take advantage of nationalistic strategy ap.....




Conclusion

China is the socialistic country which does not allow McDonald’s has the excessive deprivation to labors. In addition, McDonald’s operates through the pattern of joint venture and WFOEs. WFOEs can make McDonald’s introduces advance technology without any concern rather than joint venture. Moreover, income growth is uneven distribution between urban and rural area that make McDonald’s adopts the tier pricing model flexibly.

McDonald’s also transfer the operating cost to customers because of the rapid inflation. On top of that, McDonald’s uses the pan-nationalistic strategy and put in Chinese elements like stick the fai-chun to arouse the favorable impression from Chinese. What is more, internet buyers purchase any product in Taobao.com, they would achieve the McDonald’s coupon beneficiated from technology in progress.

On the whole, the external environmental forces are positive rather than negative towards the d.....

Although they have the updating and standardized system, they lack of the ability of raising fund which resists them to expand the scale of business. Reversely, McDonald’s has the vast capital and advance technology, also the traditional and famous brand effect. In addition, most of the young Chinese look forward to the Western culture. Those are the superiority that facilitates McDonald’s to be the second ranking of the largest fast food store in China market.

Therefore, the dominant status of McDonald’s would be invincible under this circumstance.


The bargaining power of suppliers is high when standing in the McDonald’s’ viewpoint. In early-1990s of last century, McDonald’s has the close cooperation with the state-owned companies which are in different domains including farm, industry and trade. As a result, McDonald’s has imported 95% raw materials from the local market in 2006. Owing from the mass procurement, McDonald’s have obtained the concessionary wholesale price that reduces the operating cost substantially.

In addition, McDonald’s has assisted the local farmers and companies to establish the infrastructure and advance equipment which can guarantee the higher quality of the raw materials. Nevertheless, the ferocious inflation from rapid economic development, the suppliers raises the wholesale price of raw materials continuously. McDonald’s accepts the increase price of wholesale from the state-owned supplier who obtains the absolute monopoly reluctantly and transfers the cost to its customers.

The state-owned suppliers are very difficult to be substituted in McDonald’s’ viewpoint. The quality of raw materials would not be guaranteed if McDonald’s switches the supplier. Therefore, McDonald’s has no any better al.....

With regard to the drivers, drive-through service has the tremendous attractiveness to them. Even McDonald’s has multitudinous branches, all of them render the 24 operating hours. In addition, when the internet users have bought any product in Taobao.com, they can get the 20 dollars of McDonald’s’ food coupons for free. These unique superiorities overwhelm other fast-food shops because they lack of it.

Therefore, those buyers have low bargaining power to resist the monopoly of McDonald’s.


The threat of new entrants is low when standing in the McDonald’s’ viewpoint. After McDonald’s entered the China’s fast-food industry in the early 1990s of last century that were be described the booming period of the industry. Because of the success McDonald’s has gained that stimulate other foreign fast-food restaurants such as Burger King and Mos Burger have the investment desire in China.

Even the locals open the business more and more like Daniang Dumpling, Eastern Dumpling King, YongHe King and Kungfu Catering etc. Although there is no barrier to entry and require small amount of capital to enter the industry, they cannot have the effective threaten to the development of McDonald’s. Nevertheless, McDonald’s has a strong traditional brand reputation and numerous branches, also has the excellent interaction with the state-owned companies of farm, industry and trade that McDonald’s can get the unlimited supporting force practically.

The new fast-food entrants usually lack of those dominance when having the .....

Also, in spite of the food from McDonald’s may be substituted by the Chinese fast-food in certain extent, young people and the middle class pursue and prefer it inveterately. Therefore, McDonald’s can occupy the dominance in these groups of people. Moreover, drive-through service and operates 24hours are the distinct features of McDonald’s so that the bargaining power of buyers would be lowered.

What is more, even if more and more new entrants enter the industry that formulated the dramatic competitiveness, McDonald’s continue to occupy the dominant status in the market and their branches are distributed in different region reversely. On the whole, the competitiveness of McDonald’s is high.



Reference

  • Kotler, P., Keller, K.L. et al. (2013) Marketing Management: An Asian Perspective, 6/e. Pearson.

  • Charles W. L. Hill, Chow Hou Wee and Krishna Udayasankar, International Business 2nd Edition, McGraw Hill, 2015


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