In the following analysis, the selected scope will be the operations of McDonald’s in the French market in relation to global strategies. In order to analyse the adopted strategy, it first needs to be identified. A strategy is a plan of action designed to achieve a vision and to reach a competitive advantage which is directly linked to profit. In the context of global business operations, there are four major strategies, which are employed depending on external and company-specific pressures for local responsiveness (namely adaptation to local conditions) and overall cost reduction:
International Strategy: Companies transfer skills and products derived from distinctive competencies to foreign markets while undertaking some limited customization. (Low cost pressures e.g. as a result of low competition in the relevant market; low pressure for local responsiveness) Localization Strategy: Companies customize their product offering, marketing and business model to national conditions. (Low pressure for cost reductions; high pressure for local responsiveness for increasing value for the products) Global Standardization Strategy: Companies focus on reaping the cost reductions that come from scale economies and location economies. (High pressure for cost reductions; low pressure for local responsiveness) Transnational Strategy: This strategy involves a simultaneous focus on reducing costs, transferring skills and products and being locally responsive. Because localization is generally expensive, this often makes cost-reductions difficult. (High pressure for cost reduction; high pressure for local responsiveness)
When McDonald’s entered the French market they had a global standardization strategy. This can be assumed because they did not have a nationally diversified menu and tried to change the French culture into an “American way of life” to save costs. By the 1990´s, external factors changed the consumer profile and thereby created strong pressure for local responsiveness. Public concern about the “foot and mouth” and “mad cow” diseases, increasing concern about fatty diets and growing anti-American sentiment kept customers away from fast food outlets. Also, the French began to prefer organic foods. In order to counter decreasing sales, McDonald’s heavily invested in market research and adapted its operations to local preferences (f. ex. by tailoring décor and recipes to the French market). This way, McDonald’s changed their model of global operations from a purely standardized to a transnational approach. The negative aspect for McDonald’s using a transnational strategy is that economies of scale are less efficient than before entering the French market by running a global standardization strategy. Despite this disadvantage, the positive aspects are far more significant. Namely, revenues and sales raised and led to greater profit because the localization rendered customer sets that could previously not be targeted accessible. Additionally, McDonald’s was able to profit from the globally established standardization-aspect of the transnational strategy and could thereby offer low prices which gave it a significant edge against both international and local in the financial crisis.
Critical success factors
Governmental tax decreases by 14,1%, enabling McDonald’s to reach competitive advantage of efficiency over most competitors (bistros, restaurants, brasseries,..) •
Financial crisis damaged most competitors due to their efficiency being inferior •
Adaption to demands of the French population:
Negative external factors (“Super-Size-Me”-trend, mad cow disease) that forced McDonald’s to adapt, thereby getting ahead of the competition (f. ex. through “transparent marketing” in order to demonstrate hygiene) o
Ingredients from local suppliers
Localized recipes, store designs, etc.
It is likely that McDonald’s will remain market leader for several reasons. Firstly, figures over the last years have shown a steady trend...
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