mgmt 7.8

Hernandez 1

Thomson Crafting and Executing Strategies

Osiris Hernandez

Professor Phillips

MGMT 3900

10/21/20

In the following paper, I will be discussing chapters 7 and 8 as well as incorporating information that relates to my company of choice. In chapter 7, “ Strategies for competing in international markets”, speaks about why and how companies choose to go international as well as the precautions and strategies they take in order to be successful in those markets. In chapter 8 “Corporate strategy: diversification and multi-business company”, speaks about the benefits and the downsides to making a company diversify and the steps to take to be able to diversify successfully.

Chapter 7 Strategies for competing in international markets

LO 4 The three main strategic approaches for competing internationally

In learning objective 4 it speaks about the different strategic approaches the companies take in order to successfully compete internationally. The three approaches consist of multi-domestic strategy, global strategy, and transnational strategy.

Example 1: Transnational approach. This approach is a “think global act local approach” it incorporates both elements of the other two strategic approaches. In this approach, the company will provide its services globally but will bring a home feeling in every new country that it decides to establish a location. Meaning it adapts to its environment. Mcdonalds uses this approach when establishing new locations. It provides different foods and services depending on its location. For example in India they offer a chicken maharaja burger complementing their culture, in France, they offer macaroons as a pastry, in china Chinese peoples preference is dark meat for their chicken so instead of using chicken breast in china McDonald’s uses thighs and legs to make its patties, and lastly, on Chinese new year they serve grilled chicken burgers with the Chinese zodiac for their customers showing that they respect every culture.

Example 2: Using location to build its competitive advantage companies customize its products to match the tastes and locations in each country it is established. Mcdonald’s has locations all around the world even in the most famous and luxurious cities McDonald’s manages to fit in. In its location in Milan Italy, its location is a 4 story building with the finest silverware all served with a fork and knife. In hong Kong, McDonald’s has launched what it calls its first prototype for what it plans to make its future McDonald’s restaurants. This location offers a gourmet outlet with a salad bar. It offers the widest selection of food that customers can choose from almost incorporating its menus from around the world.

Example 3: Building a resource-based competitive advantage requires you for example to use powerful brand names to extend a differentiation-based competitive advantage. One example of this would be Mcdonald’s collaboration with famous musical artists. Recently Mcdonalds has collaborated with singer/ rapper Travis Scott to make his go-to burger a meal for his fans and McDonald’s customers to try. Mcdonald’s chief marketing officer spoke about the reasons behind its collaboration saying that McDonald’s “the company's goal is to reconnect with their multicultural and African-American consumers, and will be taking steps to do so.” This is a very powerful approach seeing as what is going on in the world right now with the BLM movement McDonald’s chose to empower this movement when creating this meal.

LO 3 The five major strategic options for entering foreign markets

In learning objective 3 it speaks about the different options you have in entering the competitive market globally. This includes maintaining production at home base, license foreign firms to create your products, employ franchising, establish subsidiary in a foreign market, and lastly rely on strategic alliances or joint ventures.

Example 1: licensing and franchising strategies. There are many advantages that come from using this approach. It requires low resource requirements, there is income from royalties and franchising fee’s without lifting a finger, and there is rapid expansion in the market. Mcdonalds is 93% franchised based and has the largest number of locations globally with over 38.5 thousand locations it ranks one of the most powerful companies in the world. They plan on making 95% of their locations franchised to increase revenue but for the most part, McDonald’s uses this strategy and they are very successful. The rapid expansion I due to this strategic approach.

Example 2: Export strategies. In this strategy, companies use resources from the country that their specific locations are at versus shipping their resources from their home country. Mcdonalds uses this approach while using its franchising strategy. Mcdonalds has removed some items from the menu’s across the world and incorporated items that are a part of those people’s lives and preferences. By incorporating those items McDonald’s starts using resources from those specific countries as well as franchising its restaurants allows owners from around the world to use resources from those specific countries of origin.

Example 3: Greenfield strategy for developing foreign subsidiary. The greenfield investment is starting a company from the ground up with no joint ventures or resources. Mcdonalds is known for taking this leap of faith as they call it. They are known to expand their business all across the world but their most recent project is in Ukrainian cities. They realized that Ukrainians have the biggest appetite when they established their first restaurant and it made huge sales within the first few weeks. They started establishing many restaurants over there and now the restaurants in that country are the ones that are making some of the top sales out of their entire 38,000 restaurants.

Chapter 8 Corporate Strategy: Diversification and the Multibusiness Company

LO 1 When and how business diversification can enhance shareholder value

Learning objective number 1 speaks about different ways that companies can diversify in order to be able to be more successful by receiving multiple streams of income.

Example 1: there are different ways to diversify as a company one of the ways is to diversify into something that is related to your company or really unrelated. Mcdonalds has owned many different companies completely unrelated to food like red box they owned red box until 2009. They currently own Krispy cream donuts which is one of the most famous donut bakeries in the US. They also currently own other sister companies called Ronald McDonald’s house and McD labs. Mc D labs is a company that specializes in technology for Mcdonald’s restaurants.

Example 2: Not all diversification is the best for your company so there is a justification for diversifying tests. The three tests consist of the attractiveness test which is are the industries profits as good as the present investment, the second one is the cost of entry test which is asking if it cost too much before you make any profits, and lastly, the better-off test which is evaluating how strong will this idea make the company. Mcdonalds had all of these trials and errors they began investing in companies in the mid-’90s but sold within 3 years of buying. They started Redbox but only kept it for a couple of years before they sold it as well. They realized that all the little companies it was investing in were not doing better than their mother company Mcdonalds. The only restaurant they have managed to keep was Krispy Kreme and that is because it has become one of the most famous donut shops in the US.

Example 3: Joint venture is when a company basically merges with another existing company and they both run both of the companies together. Mcdonalds did that before with Fazioli’s restaurants they had a joint venture that only lasted a couple of years when it was dissolved in 2003. Both of the companies had very different ideas on product plans and how the business should be run. In a way, the other company was bringing down Mcdonalds because when calculating its synergy through better performance, McDonald’s was the one that was bringing in all this knowledge to that company with little in return.

LO 5 what four main corporate strategy options a diversified company can employ for solidifying its strategy and improving company performance

In this learning objective, it talks about the four strategies for improving company diversification. These four strategies include stick with the existing business line up, broaden the diversification base, divest and retrench to narrower diversification and reconstruct through acquisitions.

Example 1: An example of divesting and retrenching your business diversification is Mcdonalds. When divesting you remove joint businesses that do not benefit you as much as your main business. Mcdonalds has been doing that in the past years. They have been going in and out of contracts buying and selling different restaurants but then they realize that these businesses don’t make them any more money than their main brand.

Example 2: sticking to narrower diversification is another way companies solidify their strategy to be successful in the business world. For example, McDonald’s used to have a large variety of restaurants that it co-owned making it harder for them to perfect their own restaurant as well as the restaurants it co-owned. It used to have businesses in technology, movies, and food. Now the only other restaurant that McDonald’s owns is Krispy Kreme, it has become one of the most famous restaurants in the united states and it is easier to manage because there is a limited menu and it is a food restaurant just like McDonald’s.

Example 3: Company reconstructing is also something that companies do, that is there completely change their entire company for example having a new face for their company as a logo or something completely different. Mcdonalds hasn’t done major changes like that in a while but when they were first starting off they didn’t have a mascot for their company so since they were targeting kids they decided to go for a clown mascot. The clown mascot brought McDonald’s more sales and became the new face of McDonald’s around that time.

In conclusion, both chapters 7 and 8 speak about diversification and how companies need to evaluate what strategies to take in order to become successful in a diverse environment.

Works Cited

“$1 $2 $3 Dollar Menu Items: McDonald's.” $1 $2 $3 Dollar Menu Items | McDonald's, www.mcdonalds.com/us/en-us/full-menu/123dollarmenu.html.

“McDonald's Franchise Opportunities: McDonald's.” McDonald's Franchise Opportunities | McDonald's, www.mcdonalds.com/us/en-us/about-us/franchising.html.

“McDonald's U.S. Real Estate: McDonald's.” McDonald's U.S. Real Estate | McDonald's, www.mcdonalds.com/us/en-us/about-us/franchising/real-estate.html.

“Ronald McDonald House Charities: McDonald's.” Ronald McDonald House Charities | McDonald's, www.mcdonalds.com/us/en-us/community/giving-back-with-ronald-mcdonald-house.html.