Jovan Belkhu Unit 5 22/01/2021
Unit 5 - Assignment 2
C: Investigate the external factors that influence international businesses
D: Investigate the cultural factors that influence international business
Introduction
In this assignment I will be weighing up the pros, cons and reasons as to why McDonalds should look
at operating in countries that they currently are not, such as Iran and North Korea. McDonalds
operate in more than 100 countries worldwide with a restaurant in over 36,000 locations.
McDonalds is of the most well-known brands across the globe.
5/C. P5 Explain the external factors that influence a selected business considering trading
internationally.
There are four different types of ways businesses run their trade internationally, these include;
exporting businesses, importing businesses, multinational businesses and associated businesses.
Exporting is described as the selling of goods and services within foreign countries originating in or
manufactured in the country of origin. Export is the opposite hand of the export. Importing relates
to the procurement of products and services from overseas markets and the return of them to the
home country. In reality, the McDonald's franchise is a structure made up of a number of tiny units
and individual franchisees - McDonald's entrepreneurs. McDonald's is a pioneer in this industry,
since it is both a multinational and a local service corporation and a franchise company. The
company's corporate model relies on launching new restaurants, maximising revenues and revenue
levels. McDonalds own many companies such as Pret a Manger and Krispy Kreme, McDonald's
generates revenue by leveraging its commodity, quick food, to franchisees that have to lease
locations, mostly at broad market-ups, operated by McDonald's. As recorded in their 10-K 2019,
36,059 out of 38,695 restaurants were franchised with McDonald's running the remaining 2,636
restaurants.
Why do Businesses Trade Internationally?
Foreign trade enables nations to widen their economies and to access products and services that
would not already have been rendered accessible domestically. The economy became more dynamic
as a consequence of foreign exchange. This eventually results in more competitive demand and
takes the customer home to a cheaper commodity. Foreign trade enables nations to widen their
economies and to access products and services that would not already have been rendered
accessible domestically. The economy became more dynamic as a consequence of foreign exchange.
This eventually results in more competitive demand and takes the customer home to a cheaper
commodity. Foreign trade enables nations to widen their economies and to access products and
services that would not already have been rendered accessible domestically. The economy became
more dynamic as a consequence of foreign exchange. This eventually results in more competitive
demand and takes the customer home to a cheaper commodity. Many firms are developing globally
to diversify their holdings, an action that will secure the bottom line of a business against
unexpected incidents. For example, businesses with foreign operations may compensate for
negative development in one sector by performing efficiently in another. Companies may often
leverage overseas markets to launch new goods and services that can help sustain a positive sales
stream. McDonalds is a business that diversifies through global activities. This year, the business
announced a rise in revenue in China, India and South Korea, which helped McDonalds worldwide.
McDonalds has recently incorporated a lot healthier meals rather than having a whole menu of food
,Jovan Belkhu Unit 5 22/01/2021
which people love to taste, but isn’t always the best option if you’re on a diet. McDonalds has
broadened their target market so that anyone who is eating healthy can sit and enjoy a meal of
either a premium salad or a yogurt parfait for health conscience customers. McDonalds stated that
they have seen an increase in revenue but as of right now are looking to expand in countries they
have not yet dominated in terms of the food industry. Companies entering different countries for
business must evaluate their pricing of products based on the distribution of citizens' income, local
inflation and other factors such as currency exchange rates. Because of the exchange rate,
companies will end up paying different rates for the same commodity in different nations.
McDonald's mostly open their stores in big cities serving middle-and upper-class people as they can
afford. After this, they continue attacking lower middle-class residents. Maximizing revenue and
profitability at established restaurants can be done by improved operations, reinvestment, new
creation and refinement, successful promotion and reduced development and maintenance costs.
McDonald's claims that its long-term survival and success rely on partners — franchisors,
manufacturers and consumers. They assume that as long as franchisors and vendors are successful,
the business will be profitable as well. Improved multinational sustainability is understood when
economies of scale are reached in individual markets and as the business profits from the global
infrastructure. McDonald's receives from two outlets, one from their native nation, the United
States, and the other from international markets. With globalisation, the share of international
earnings is increasing rapidly. The table below displays the number of shops in the host nation of
their home country.
Why should McDonalds trade in Iran and North Korea?
Iran
Iran is one of the middle east’s biggest countries, Iran, historically known as Persia, is centred at the
crossroads of Central Asia, South Asia and the Middle East Arab states. This geographical position—
and its proximity to the Persian Gulf in the south—has rendered Iran a significant nation in its
existence. For a good deal of time McDonalds have responded to the people of Iran and mainly
Tehran (capital of Iran) and have set up an application for instituting McDonalds in several parts of
Iran but nothing has happened yet. There are many advantages as well as disadvantages for setting
up a McDonalds in different parts of Iran, the obvious advantage being that the predominate
population of Iran are Muslims and if McDonalds were to make a halal menu for their customers,
they would generate a high percentage of revenue turnover and it is almost certain that McDonalds
vegetarian menu which is doing well all over the world will be a big part of the Iranians fast food
intake.
, Jovan Belkhu Unit 5 22/01/2021
North Korea
North Korea is one of the places in the world where fast food isn’t a great deal and there is not much
of as appose to the rest of the globe where fast food dominates the food industry. Patrick Soh
introduced the hamburger to North Korea along with their first fast food franchise. Waffletown,
North Korea, currently has five large eateries, more than 20 take-away stores, and an entire food
manufacturing plant in the city of Pyongyang, which has a population of over 3 million. Patrick Soh
considers the company 'healthy.' The largest outlet is in a three-story structure. The manufacturing
centre is situated in the cellar, the first-floor restaurant and the third-floor administrative office.
When asking why he felt the restaurant was going so good, Soh indicated that it could be attributed
to the cold weather. Locals love the fried chicken which is served hot, whilst it is incredibly cold
during the winters of North Korea.
5/C. P6 Explain how business support systems enable a selected business to trade internationally.
Influence of the Internet
The advancement of technology has opened up the Internet to cross-border cooperation and has
created a whole new spectrum of economic activities, including online shopping, big data and online
ads. The Internet led McDonalds up to 21% of GDP growth in the developing world and 11% in Brazil,
Russia, India and China. This article would address the international trading opportunities of the
Internet and the dangers associated with cross-border online exchange. The Internet is providing
new possibilities for McDonalds in developed countries to invest in the global economy. McDonalds
and other fast-food chains are able to thrive internationally when the Internet has provided them
access to affordable telecommunications, information on diverse and potential employers not to
mention the practical side such as international markets, legal and consultancy services. Through a
clear website, McDonalds have made it far simpler to meet their consumers and vendors all around
the planet. The Internet is also developing a forum for small and medium-sized companies to pursue
low-cost vendors and to discover alternative sources of demand. This greatly cuts the cost of doing
business overseas and opens the way for companies smaller or similar to McDonalds to operate
internationally.
Use of Social Media
McDonalds use social media and digital marketing to their full potential when it comes to
international trade and also just business in general. McDonalds are on a variety of different social
media platforms such as Facebook, Instagram, Snapchat, YouTube, and Linked In, for platforms such
as Instagram and Snapchat McDonalds target teenagers and young adults whereas you see a change
in the way they advertise on Facebook which is clever given that Facebook is no longer used by
young people anymore. McDonalds take pictures and videos of their mouth-watering burgers fries
and even their healthy meals when setting new trends such as tasty vegan fast food which has
shown to increase their revenue not to mention improve their revenue.
