Good Essay On Formulating Adaptive Strategies In Increasingly Complex World Economy
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Businesses are increasingly operating in environments that are subject to various factors. In that respect, it needs identification and consideration of relevant factors as a way of applying suitable strategies. In addition, globalization and technological advance are opening up the market for businesses to expand their operations with international ventures. However, the differences in customer needs and market factors require a balance between integration and local responsiveness as a means of enhancing long-term stainability and performance. In that view, this analysis uses the case of McDonalds to analyze application of the Integration responsiveness framework. To achieve the objective, the analysis explainsMcDonalds operations and the framework and then demonstrates he framework application in addressing issues facing McDonalds.
McDonald's is the leading foodservice retailer in the global market with over 30,000 local restaurants that serve over 52 million people in over 100 countries each day. Over, 70% of the Brand's restaurants, are owned and operated as Franchises by independent local investors. Is is one of the world's well-known brands and holds the largest share of the branded quick service restaurant market providing informal eating-out market that is in every country in which it does business. The brand’s rich history began with its founder, Ray Kroc. It has a firm foundation that continues with McDonald's vision and commitment through talented executives to keep the shine on McDonald's arches for many years to come. Serving billions of hamburgers has put a shine on McDonald's that has more than 35,000 restaurants serving fries and burgers in about 120 countries. The chain is well-known for Quarter Pounders, Chicken McNuggets, and Big Macs. Most of its outlets are free-standing units that offer and drive-through service and dine-in but also having many eateries that are located in retail areas, airports, as well as in other high-traffic areas. (McDonalds, 2015)
The business success is highly attributed to its system that relies on franchisees and supplier. Thus, it leverages on is partners o achieve competitive advantage in specific markets. In that respect, the business model enhances the business to deliver products and services in a locally relevant manner meeting local tastes and preferences. The business focuses on customers experiences hence seeking o be an integral part of the communities it operates within. That aligns the brands global business allowing for local adoption through the common framework. In its strategy, the business continues op focus on their key priorities including modernization of customer's experience, menu optimization as well as broadening accessibility o McDonalds brand. That is achieved through initiatives support by the brands’ people, price, products and promotions well as a place as a means of enhancing customer's experience. The company believes those priorities to be crucial in aligning is operations with the evolving customer needs, and advancing is a competitive advantage, menu variety as well as achieving geographical diversification in addition o system alignment. (Kostova, & Roth, 2003) That has been crucial in enhancing he brands long terms sustainability. The business have its international operations divided into reporting segments including Europe, US, AIME and other countries and corporate including Lain America and Canada. Currently, the brands restaurants the ownership can be summarized as follows:
- 57% are conventional franchises
- The company owns 18%
- About 24% are licensed o developmental licensees and foreign affiliates. (McDonalds, 2015)
However, the business considers is business model as a franchise as he model is crucial in meeting is customer's needs and drive profitability. By the end of the year 2014, over 80% of the brands restaurants were franchised. (McDonalds, 2015)
Integration-Responsiveness Framework works
Multi-domestic industries are those Industries in which competition is on a country-by-country basis. In such settings, each country tends to have unique competitors. Companies operating in food and beverage, as well as consumer products, may often resort to a country-by-country strategy and marketing for specific tastes, needs, and laws, as well as regulations. Formulating and implementing strategies is more critical for the global industries than for multi-domestic ones. In addition, most global industries are characterized by the presence of major players competing head-on in several markets.
Global integration is the coordination of a company’s value chain across various regions as a means of achieving synergy and cross-fertilization and develop a competitive advantage of he similarities between the countries. However he flexibility aspect relating o, local markets are the local responsiveness that entail meeting specific needs in heir individual regions.That integration responsiveness framework addresses he needs for organizations o achieve boh local responsiveness, as well as global integration. An understanding of he pressure factors in both local and international markets is crucial for managers in making international strategies decisions. That is because it require a trade-off o achieve he to objectives For a company ha is locally responsive, it require adjusting some of is practices for the purpose of suiting each market’s distinctive conditions. That entails adjusting to the competitive environment, as well as customer needs and distribution structure. (Ambos, Andersson & Birkinshaw, 2010)
Applicaion in identifying generic environments, firms face when internationalizing
In that view, the McDonalds, management in US adjust is operations through practices ha suit each market in terms of their restaurant locations, environment, and compensation, as well as employees raining. In that respect, the menu mix as well as the marketing tools applied is he US market environment. In addition, other factors such as cultural factors, lifestyles as well as economic conditions determines the company; ’s strategies as they influence heir customers behavior. In regard to global integration, the company seeks economic efficiency by reaching ou o international markets. That enhances its learning, and promotion is learning within the global network as well as reducing the company’s redundancy. Some of the favors ha drive globals integration include the makes converging needs, the company’s spread brands in the global market, need to monitor competitors, and market environment as well as he diffusion of he uniform technologies. Thus, the company’s practices of varying are restaurant brands designs and environment for individual markets he brand more suited o he international markets and their different cases. (Cavusgil, Zou & Naidu, 1993)
If a company has some geographical strength in some area, it needs o consider the different strategies needed for other regions of the world market. In that respect, it would need establishing beer strategies in areas where hey are weak or nonexistence. However, even in regions where the business has the strength, here is a need for he business o adapt is strategies to the local customers. That would address local various depending on the generic environment forces. (Andersson, Forsgren & Holm, 2002) However, such adaptation is an addition to the business cost hence denying it the economies of scale advantage. In addition, some adoption would address conflicts with local market aspects such as regulations. That involves balancing of the global and local strategies. Some basic principles can be followed for clarification of the balancing strategies essentially focusing on the degree of standardization of products and services. The assumption in that principle is that standardization has the benefits of globalization.
Standardization could enail
Savings in production, marketing, and sourcing as well as other cost areas
Economies of scale and scope in R&D and production
Common operating procedures and training standards
Rapid response o service needs and inventory needs (Blumentritt & Nigh, 2002)
Customization could entail
Sophistication and varying the customers’ needs
Addressing government requirements and other regulations
Differing usage and climate conditions
High skills for necessary changes in the local market. (Devinney, Midgley & Venaik, 2000)
In view of the framework, the four key factors defining international environment for McDonald can be summarized as follows.
Political factors play a great role in determining a business operations and performance. Such factors include the political suitability within a market and he policies related o business operations. In that respect, there is a need for a business to consider the potential effects of aspects such as business and investments limiting policies or competition control and promotion laws. Would help the business o redesign is models and sailor is business to use the political environment and avoid conflict with authorities. For McDonald, here would be need o assess issues like he franchise laws in various countries and consider their effects on its ventures. Some of the policies could relate to sourcing of raw materials and business ownership. An example is the Brazilian environment where McDonald has established is operations and has been successful. However, the business is currently facing challenges owing o is brand’s policies conflict with he country’s labor laws. That resulted in the brand being banned from further expansion in the country until he issue is fully addressed.
Economic factors play a great role in determining a business performance and operations. That is because variation in economic factors affects con summers purchasing powers or the businesses’ ability to serve the market needs. In that respect, it is crucial for a business to consider the economic status of a country in determining the suitable strategies to adapt its products to the markets needs. Such factors include inflation, interest rate, and unemployment as well as exchange rate and income level. In respect to McDonald’s barns, the business should identify the pricing strategies as well as products position and that suits specific economies as a means of adapting its brand to markets needs.
Social factors are crucial in determining a business’s suitability in a specific market. That is because the factors entail people’s tastes and preferences as well as preferences and lifestyles. In that respect, those aspects determine customers’ preference for the brand and how it satisfies those needs. Thus, here is a need for a business o consider social factors within a market in determining he most suitable ways it can adapt its products to the varying social factors. In reference to McDonalds’ operations the increasing health concern over the effects of food products, the business should be able to identify such worries in various markets and devise ways of managing hem. That would help enhance products and services adaptability.
Technological factors are a great determiner of business performance and operation owing o is ability o influence efficiency and innovation. In that respect, considering he factors is crucial in a bid to identify the opportunities and challenges it poses to a business in local and in international markets. Some of the effects of technology on business include advanced production, marketing and operations methods that can be used to enhance the business efficiency, cost reduction as well. In respect to McDonalds’ operations, technological factor would be crucial in providing advanced Medias for reaching is customers in varying segments. Example is technology’s ability to reach the increasingly growing youthful market in the US that can be reached through the social media. In addition, managing supply chain would also depend on technologies available and applicable in various regions.
Given the above factors and heir effects on the business, the following is he strategy summary for McDonalds in line with the Integration Responsiveness Framework.
The business has a model that enhances is reached the international market. That entails venturing into international markets through franchises. The franchises strategy is identified as suitable for addressing the generic forces owing to the ability for the local investors and franchisees o address local needs.
With the business presence in various countries, it serves different needs that requires variation of the business strategies o adapt to the specific market needs. In that respect, the business can count on is franchisees to tailor the brand to suit specific market needs.
Although McDonalds operates in a global market serving many countries with varying needs, it views the international market as a single market that can be served by is a standardized model. The model lowers operation costs related to its developing new ones for each market. (Birnik, A. & Bowman, 2007)
In view of the analysis, the Integration responsive framework is a model used for identifying needs for local market responsiveness and integration of the global operations. Achieving the balance requires undemanding of he favors the influences business operations the international operations. Those factors have been identified to include political, economic, social and technological as well as social factors. In that view, it has been established that McDionalds need a balance between tailoring is operations for specific market needs that respond to the four factors while also treating the marked as a single unit that can be m,manage efficiency through is model to ensure longer sustainability.
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