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Table of Contents

4. GLOBALISATION AT McDONALDS ..................................................................... 2


4.1 Industry Based view .......................................................................................... 2
4.2 Resource Based View ...................................................................................... 3
4.3 Institution based view ....................................................................................... 3
5. EVALUATION OF MARKET ENTRY STRATEGY INTO UK ................................ 4
6. STRENGTHS OF THE MARKET ENTRY STRATEGY .......................................... 5
7. CONCLUSION AND RECOMMENDATIONS ........................................................ 7
7.1 Recommendations ............................................................................................ 8
7.1.1 Local Sourcing ........................................................................................... 8
7.1.2 Healthy Food .............................................................................................. 8
REFERENCES ........................................................................................................... 9

AN EVALUATION OF THE MARKET


ENTRY STRATEGIES ADOPTED BY
McDONALDS IN UNITED KINGDOM
4. GLOBALISATION AT McDONALDS
The purpose of this study is to critically evaluate the market entry procedures that
were followed by McDonalds in their entry strategies in United Kingdom. The
researcher would focus the study on the activities that are undertaken by McDonalds
in their growth strategies. The methodology that would be adopted by the researcher
would be that of deductive approach where the data is analysed based on the
proven theories that are existing in the areas of market entry. There are three ways
through which the strategy can be analysed and they are Industry based view,
Resource based view and Institution based view.

4.1 Industry Based view


The industry based view has been defined by Peng (2007) as the initial
understanding of the company in terms of the operations that it undertakes. Like
whether it is in high-tech or low-tech. Some industries are location bound and others
are non-location bound. For example in the case of semi-conductor chips the
location does not impact as the customers would not have any preference to where
they are manufactured. However, in the case of foods they may have certain
preferences, hence location becomes important.
In the case of McDonalds, as the company operates in the food industry, the raw
materials that it sources and the manufacture coupled with the location becomes
important for this kind of industry. When the company entered the United Kingdom
market in the 1970s consumer awareness towards local sourcing was not so
prevalent. However, with the advent of globalisation and the associated issues
surrounding global warming and the inherent linkage to local sourcing has created
the necessity. These factors have necessitated the need for the company to look
towards sourcing their products locally and also at the same time ensure that the
produce meets the needs of the consumers through the delivery mechanism that
they have adopted.

4.2 Resource Based View


The resource based view is another element in the strategic tripod where the
strategic resources that are available to the company are reviewed. The resources of
a company can be identified through the various advantages that they offer like
being valuable (Mahoney and Prahalad, 1992); rare (Barney, 1986); In-imitable
(Conner and Prahalad, 1996); Non-Substitutable (Barney, 1986).
From the above it can be seen that the resources can be of variable nature
especially in the case of McDonalds the distinctive advantages in relation to the
above identified factors are as follows. The value of the brand in itself offers a great
differentiation in the market place for the company. Even though the products are not
rare the service is becomes the differentiator for the company to sustain their
operations. The service as a commodity cannot be easily imitated by the competition
and hence service becomes a resource that the company can utilise in the strategic
scope. The product being fast food is non-substitutable as it is necessary for all the
customers. These distinctive advantages enable the organisation to ensure that the
products that they are offering meet the needs of the customers and ensure that they
are able to offer strategic position to the company.

4.3 Institution based view


The last element in the strategic view is the aspect of institutional rules or the
restrictions that are prevalent in a country. The rules and restrictions may create a
disadvantage for newcomers in a new country. There needs to be a clear
understanding of the rules and regulations in combination with other external factors.
This would enable the company to leverage these issues to the benefit of the
organisation.
From McDonalds perspective it is necessary to understand that their entry into
United Kingdom is relatively easy. The reason being the rules and regulations
followed by United Kingdom are similar to the rules that are prevalent in United
States especially in the case of fast food industry. Hence, it became easy for the

company to start its operations with minimalistic roadblocks in their growth in this
country.

5. EVALUATION OF MARKET ENTRY STRATEGY INTO UK


The researcher would now evaluate the success of the strategy that the company
has undertaken with regards to its market growth in the United Kingdom. This study
would enable the researcher to conceptualise and provide a clear review of the
different factors that played a key role in the growth that the company has been able
to achieve in this country.
The company has entered into the United Kingdom in the early 1970s and since then
has been growing consistently in the market place. The various factors that have
contributed to its growth can be attributed to the fact that the United Kingdoms
market is homogenous to the home market of McDonalds which is the United States
of America. This similarity enabled the company to quickly deploy its products and
adapt the same to meet the needs of the market. In addition the large population
base that had similar tastes enabled the company to quickly replicate the product
range that is being offered in the United States of America to the local customers.
On the other front if the marketing mix is to be studied and compared it can be seen
that the 7Ps (Price, Product, Place, Promotion, Physical Evidence, People and
Process) have been carefully planned by the company which enabled them to
achieve the growth in the market place. All the factors which are mentioned above in
the 7Ps are relevant when a company enters a new market. This in combination with
the Political, Economical, Sociological, Technological, Environmental and Legal
analysis enable the company to gain a relative market share in the new market.
The United Kingdom market being homogenous to the home market has also
enabled the company to diversify its operations into other markets in Europe. This
enabled the company to create the necessary growth prospects to ensure that they
are able to achieve the desired results. The United Kingdom market is relatively big
in comparison to the size and offers a diverse customer base which needs to be

tapped and the same has been effectively addressed by McDonalds which enabled
them to gain the required market share.
The United Kingdom market with its strategic location enabled the company to
penetrate its operations into the European markets. In this regard, the entry and
sustainability of the United Kingdom operations has been of prime importance for the
companys success in the other markets that they have penetrated. In this regard it
can be seen that the company has been able to utilise the market position that it has
created in United Kingdom for its foray into the European market in general. This
added advantage has been derived by the company as the factors like cultural links
and the other commonalities enabled the company to effectively ensure that they are
able to reach the customer bases in different parts of the continent.

6. STRENGTHS OF THE MARKET ENTRY STRATEGY


The different market entry strategies that are available for a company have been
discussed by Proctor (2000). The different types of options that are available for a
company can be better understood by looking at the following diagram (Figure 6.1).

Source: Strategic Marketing: An Introduction (Proctor, 2000)

From the perspective of the new market entry it can be seen that there are two types
of approaches that were available for the company when they entered the market.
Firstly it is related to market development where new customers or new users are
attracted to the products. This process enables the company to ensure that they are
able to reach the desired target base and ensure that the organic growth is
sustained. On the other hand the other approach is based on the concept of
diversifying the product base. This has a distinctive challenge as the company would
be entering the new market and at the same time with new products which would
become critical as the new products are not tested in any market.
In the case of McDonalds the company had the advantage of negating the previous
challenge of new product and new markets. This process the company ensured that
the same existing products are marketed in the new markets that they have entered.
This new matrix differentiates between the organic and the acquisitive market
penetration. The former indicates reaching more of the target users through growth
in the core, existing product offering. Egan placed the concept of vertical integration
in the area of diversification. However, Aaker (1995) has differed from this view and
has placed vertical integration as a third dimension to Ansoffs Matrix. He implies that
vertical integration can occur alongside penetration, product or market development.
From McDonalds perspective the company has followed the strategy of new market
entry. They have not diversified their product offerings or other aspects of the 7Ps.
This has enabled them to sustain the market operations over long periods of time.
The competition is still not so robust as they lack the necessary process skills in their
operations. In addition the company has planned the location of the stores with
concentration in the urban areas where the growth is considered to be relatively
higher. This strategy in combination with the option of franchising the stores to
various entities has enabled the company to quickly grow in the markets and ensure
that they are able to reach the desired market position.
The market entry strategy especially pertaining to the franchisee option has enabled
the scaling up of the company activities in a fast way. The franchisee option has
ensured that the penetration of the stores is achieved in the market and thereby
enabled them to build the brand. The company in addition to franchisee operations

has opened some company operated stores to ensure that the quality standards are
maintained especially in larger and high footfall areas.
All the above factors have contributed to the growth of the company in United
Kingdom to its present state. The combination of the various factors have ensured
that the company is able to achieve the desired results in terms of engaging the
customers and also ensuring that the competition is handled in the best possible
way.

7. CONCLUSION AND RECOMMENDATIONS


The researcher has analysed the various factors and would now summarise the
findings of the research in this chapter. The main points that have been observed in
this study are that the company has followed a judicious mix of different strategies in
terms of marketing and strategic positioning. The combination of the strategies like
franchisee operations and entering the homogenous markets has enabled the
company to harness the growth. These factors have ensured that the brand value is
also created in the customers minds as they are continuously shown the
commercials, along with the sales promotion activities which are continuous have
ensured that they capture the market share in the highly competitive United Kingdom
fast food market.
The company accessed the other markets through the initial building of the capacity
in United Kingdom and then penetrated the various other markets in the Europe
continent. This has ensured that they were able to create a strong competence in the
operations which was then replicated in the different markets that are present in the
area of operations that they cover.
However, the company is facing multiple threats in the recent years especially in
terms of increased competition and health issues that are being raised against the
company products. This needs to be addressed to ensure that the company is able
to sustain its operations in the long term in United Kingdom.

7.1 Recommendations
Based on the above conclusions the researcher has identified certain key
recommendations that need to be implemented by the organisation to ensure the
long term sustainability of the operations in United Kingdom.

7.1.1 Local Sourcing


The first recommendation that the researcher has identified is related to the sourcing
of products locally. The company has been criticised in the sourcing activities that it
undertakes by various quarters. Hence, the local sourcing activities that are
undertaken by the company needs to be verified and certified to ensure that they are
able to indicate the sources from where the products are sourced. This would ensure
that any backlash or negative criticism in terms of the sourcing activities is best
avoided in the first place.

7.1.2 Healthy Food


The company offers a lot of its food which is refrigerated and the same is considered
to be of low quality especially with regards to health conscious consumers. Hence,
they have launched different menus to capture the health conscious customers
through the food basket and other menu options. However, there is still scope for
improvement especially in the areas of the staple foods. The company can combine
the local sourcing to this aspect and bring out fresh food to the consumers which
would enable the company to attract and retain the LOHAS (Lifestyle of Health and
Sustainable) consumers. This would ensure that the company is able to attract and
retain the right mix of consumers in its market share.

REFERENCES
Barney, J.B., (1986), Strategic Factor Markets: Expectations, Luck and Business
Strategy. Management Science; 32, (10), pp. 12311241.
Mahoney, J.T.; Pandian, J.R. (1992), The Resource-Based View Within the
Conversation of Strategic Management. Strategic Management Journal; 15, (5),
pp. 363380.
Conner, K.R.; Prahalad, C.K. (1996), A Resource-Based Theory of the Firm:
Knowledge versus Opportunism. Organization Science; 7, (5), pp. 477501.
Peng, M.W. (2007) Global Strategy, Understanding and Leveraging the Rules of the
Game, University of Texas.
Aaker, D., (1995) Strategic Marketing Management, 4 th edn, New York: John Wiley
& Sons.
Proctor, T., (2000) Strategic Marketing: An Introduction, London: Routledge