Strategy and Entry Mode Use by McDonald's to Gain Access to Foreign Markets

Paper: Strategy and Entry Mode to Gain Access to Foreign Markets
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Strategy and entry mode use by McDonald has to gain access to foreign markets
When companies expand their coverage entering international markets, they use different tactics; these can be in the form of joint ventures, direct investment, franchising, licensing and export. Before choosing the best strategy, companies weigh the pros and address some of the emerging issues that might limit their activities in foreign markets. McDonald Corporation is one of the largest multinational corporations dealing with fast food. Its presence can be felt in more than 118 countries in the world (Schlegelmilch, 2016).
McDonald restaurants operate through franchising, affiliate or corporation itself. Most of its revenues come from rent, royalties and payment franchising also sales from restaurants. McDonald specializes in Hamburger, French fries, breakfast items, soft drinks like coke, desserts (Schlegelmilch, 2016). In response to customer needs, the company has included salads, fish, smoothies, and fruits in their menus. McDonald's popularity over many years is attributed to its strategic expansion at international levels. McDonald has used several entry modes, becoming the leading fast food restaurant in the world (Schlegelmilch, 2016).
Global Market Entry Strategies
By 1940, McDonald operated one restaurant, but today it owns 33,000 restaurants in more than 118 countries all over the world (Madanoglu & Castrogiovanni, 2017). McDonald utilizes different international market entry modes during its expansion process. Its global strategy includes sole venture, franchising and joint venture. More than 15 percent of investments are sole ventures this involves huge direct investment, giving them a higher degree of control (Madanoglu & Castrogiovanni, 2017).
McDonald prefers operating in foreign market through franchising; allowing them to benefit from local knowledge, which is evident on their menu, is various countries. A combination of franchising and local knowledge has facilitated its expansion as it maintains significant control (Madanoglu & Castrogiovanni, 2017). Market entry strategies vary and a company’s success depends on the company's entry choice. According to Michael, (2014), the commonly used entry strategies, including licensing, direct investment, export, strategic alliance, and franchising.
Many manufacturing organizations prefer using licensing. Licensing requires a local player obtaining licenses to manufacture products in the country on behalf of a foreign manufacturer (Michael, 2014). The local partner sells the product using the brand name of the company and pays royalty annually to the company they obtain the license from (Michael, 2014). Many companies rely on this strategy to enter foreign y markets due to several advantages. Licensi...