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Global business environment feasibility report for expansion - academic assignment - www.topgradepapers.com Document Transcript

  • 1. GET YOUR WORK DONE BY www.TopGradePapers.com 2009 Global Business environment Feasibility report for the expansion of MacDonald rs (Pakistan or Saudi Arabia) pe MacDonald a (MNC) is seeking the opportunity of doing or expanding its cross-border business in two countries Pakistan and Pa Saudi Arabia. This report evaluates which country is more suitable for the business expansion of the MacDonald. This report also focuses on the broad objective and strategy of the business expansion of MacDonald and this report also includes an analysis of business environment factors of both levels at country and de industry levels. rapGTo Ibrahim University 8/4/2009 GET YOUR WORK DONE BY www.TopGradePapers.com
  • 2. GET YOUR WORK DONE BY www.TopGradePapers.com Table of Contents Global Business Environment ................................................................................................................. 3 rs Introduction (Macdonald):...................................................................................................................... 3 Objective ............................................................................................................................................. 3 Strategy ............................................................................................................................................... 4 pe Countries for expansion ...................................................................................................................... 4 Analysis of Saudi Arabia .......................................................................................................................... 5 Politics of the Saudi Arabia: ................................................................................................................ 5 Pa Economy of the Saudi Arabia: ............................................................................................................. 6 Social and cultural Factors of Saudi Arabia:........................................................................................ 6 Technological factors of Saudi Arabia: ................................................................................................ 7 Analysis of Pakistan................................................................................................................................. 7 de Politics of the Pakistan: ....................................................................................................................... 8 Economy of the Pakistan: ................................................................................................................... 8 Social and cultural Factors of Pakistan: .............................................................................................. 9 Technological factors of Pakistan: .................................................................................................... 10 ra Brief Comparison between both economies ........................................................................................ 10 Conclusion ............................................................................................................................................. 11 References ............................................................................................................................................ 13pGTo GET YOUR WORK DONE BY 2 www.TopGradePapers.com
  • 3. GET YOUR WORK DONE BY www.TopGradePapers.com Global Business Environment Introduction (Macdonald): rs McDonald is the worlds largest chain of fast food restaurants. It serves as a multinational company that is serving nearly 47 million customers daily. McDonalds basic products are hamburgers, cheeseburgers, chicken pe products, French fries, breakfast items, soft drinks, milkshakes, and desserts. Now it has added salads, snake wraps and fruit in its product line in order to capitalize on growing consumer interest in health and wellness. Pa The most attractive feature of attraction for McDonalds restaurants is that it includes playground for children and advertising geared toward children, and in most of the restaurant’s the interior design is manufactured in such a way that it compels customer comfort and relaxation within the place. For de example it introduces lounge areas and fireplaces, and most comfortable chairs, sofas and tables. The MacDonald’s business operation model is based upon franchises. Each McDonalds restaurant is operated by a ra franchisee that may be affiliated to the company or the corporation has it. The company’s revenues are generated from the rent, royalties and fees paid by the franchisees, as well as sales in company-operated restaurants wherepG company sells the end products to the customers. McDonalds revenues grew 27% over the three years ending in 2007 to $22.8 billion, and 9% growth in operating income to $3.9 billion due to its expansion of its worldwide and huge success in the diverse cultures.To Objective MacDonald’s basic objective is the Market Expansion worldwide. Macdonald has a great success story in the market expansion and going globally. The globalization of the MacDonald’s is getting up and up. Its market expansion has an aim to: GET YOUR WORK DONE BY 3 www.TopGradePapers.com
  • 4. GET YOUR WORK DONE BY www.TopGradePapers.com  It has aim to provide good food in a friendly environment accompanied with fun.  MacDonald wants to be a socially responsible company  It plans good dividends for the shareholders.  It has aims to provide swift food in reasonable price and quality. rs Strategy pe MacDonald’s is a company that operates in the world in the form of franchises. It has franchises all over the world that are some self operated Pa and rests are operated by franchisee. McDonalds has a strategy to provide a franchise with its share in it. So that it can also share profits with the franchisee. Similarly in the real profitable areas the full control is administrative by the MacDonald’s itself. MacDonald’s exports the basic de ingredients of its products from its head offices to protect its recipes, while it outsources the cold drinks and stuff from the local market. This is the basic strategy on which MacDonald functions. The basic strategy for Macdonald ra for these countries would also be Export.pG Countries for expansion Here in this business model we are evaluating two countries for the business expansion of the MacDonald. We have selected Pakistan and theTo Saudi Arabia for the target markets. Pakistan is an asian country that is situated in south west of the asia. It has its physical and geographical importance. This is a big country with the population of about 160 million people. In camparison to it saudi arabia is also an asian country that is situated in the middle east of asia. This country is also with huge population of 27.6 million people. The common thing in these two countries is this that both of them are muslim countries. Saudi Arabia is contating the holy places for the muslims like Khana Kaba and Holy Mosques of Makka and GET YOUR WORK DONE BY 4 www.TopGradePapers.com
  • 5. GET YOUR WORK DONE BY www.TopGradePapers.com rs pe Pa de rapGTo GET YOUR WORK DONE BY www.TopGradePapers.com
  • 6. GET YOUR WORK DONE BY www.TopGradePapers.com country. The law and order in Saudi Arabia s very strong. There have never been rituals or any terrorist activities in the Saudi Arabia. The Saudi Arabia constitution is Quran (the Holy book of the Muslims) that is governed by the Sharia (Islamic Law). That is why the kingdom of Saudi Arabia is very peaceful and crime and terrorist ratio is nearly zero as Islam has very strict rs punishments for the law breakers. Economy of the Saudi Arabia: pe The economy of the Saudi Arabia is entirely depends upon the oil resources. The Saudi Arabia has big reserves for oil. Till the time of 1950, 1960, the Saudi Arabia reduced its poverty to the huge level. Now there poverty is Pa almost vanished. Similarly the kingdom is promoting foreign investments in the country in the fields of like power generation, telecom services and insurance. Similarly it also promotes the entertainment, restaurants and de building hotels for the people. They have to do joint venture with the government. In the Saudi Arabia there are certain fields that are exclusive to the government while some of them restrict foreign investments in the country. The basic benefit of the Saudi government is that if you are ra functioning there you have not to pay huge taxes. All you just have to pay is the 2.5% of the annual income’s Zakat. Similarly there is huge number ofpG foreign labour in the Kingdom of Saudi Arabia. About 5 Million people from different countries are working in Saudi Arabia. Similarly Saudi Arabia is one of the top 20 countries where doing business is very easy and operates. Social and cultural Factors of Saudi Arabia:To The social and culture factors are totally interrelated with the traditions and the practices of Islam. The people of here were very poor in the past 3 decades. But due to the grooming industry and development works in the country people are getting attractive life style here. Now people are engaging with the acts of the world and contributing in the world renowned activates and the event aggressively and with effort. Saudi Arabia has its own football GET YOUR WORK DONE BY 6 www.TopGradePapers.com
  • 7. GET YOUR WORK DONE BY www.TopGradePapers.com rs pe Pa de rapGTo GET YOUR WORK DONE BY www.TopGradePapers.com
  • 8. GET YOUR WORK DONE BY www.TopGradePapers.com the light of the different factors that may cause our launch of MacDonald in the country. Politics of the Pakistan: Pakistan has a democratic structure for its government. It is named as rs Islamic republic of Pakistan. It has a federal republic system of government. It has two legislations, Upper and lower house. President and the prime pe ministers are the executives of the country. There is huge number of political parties in the country. Pakistan is a country that is facing political instability till the time it has been founded. Three martial laws have been implemented in the country. From 1947 till now Pakistan has the 35 years Pa of military rulers. Similarly it is very rare in Pakistan that a part get it major majority in the legislation houses. Governments are very uncertain in the Pakistan. In the history of 61 years of Pakistan, only one government de complete it tenure of five years. It is seen rather the assemblies are dissolved or the martial law was implemented before the time of tenure. Similarly Pakistan has ethnic conflicts within its provinces. In last 8 years Pakistan has been in great trouble due to terrorist activities of Taliban and Al-Qaida. ra Many of suicide attacks, bomb blast and terrorist activities occurred due to Pakistan’s policies against al-Qaida and its support to USA. Due to thesepG reasons Pakistan is very unstable in last 8 years. Pakistan also has uncertainty on its borders too. Pakistan and India has done three wars with each other due to unresolved Kashmir and water issue. So their remain a tension on each other borders but now the politicians are trying to resolveTo these issues like Kashmir and water by dialogue. Economy of the Pakistan: Pakistan is a very poor country in 1947, despite this fact, Pakistan’s economic growth rate was better than the global average in its first four decades, but weak policies led to a slowdown in the late 1990s. The economy of Pakistan has many fruitful natural resources. Pakistan is also very famous for its agro products like best cotton and rice in the world. But GET YOUR WORK DONE BY 8 www.TopGradePapers.com
  • 9. GET YOUR WORK DONE BY www.TopGradePapers.com if we see the development of Pakistan, It is very slow. In last three years Pakistan is in a great recession due to the terrorist activities and the weak trust of the foreign investments in Pakistan. Due to the global crisis of 2008, a large inflation rate of 24.4% is seen in Pakistan and a low savings rate, and due to other economic factors, it has become difficult to sustain its rs growth. Similarly a huge unemployment is seeing in last few years. The doing business status of Pakistan is at 77th number among 181 countries. That is very low to take a risk to start a business. Similarly there is a huge pe corruption in the country. At the same level, the new investors have to face many problems in Pakistan to launch a business now a day due to political instability and war against terrorism. Pa Social and cultural Factors of Pakistan: Pakistani has a social hierarchical system, with high influence of the de traditional Islamic values; despite this fact Pakistan has strong traditional joint family structure. A lot of social and family constraints are embedded with its basic culture. If we see rationally, Pakistan is a country that has ra strong cultural values that was developed by the Muslim Mughal emperors. Pakistan has four big provinces and a number of languages are spoken in Pakistan. Except the values of Islam, regionally Pakistan has many diversepG values in different areas. For example we see, above 30 languages are spoken in Pakistan. The people of the Pakistan have a guest respecting nature. People always love to have entertainment and love for each other. Education level of Pakistan is very low. Literacy rate is about 37% accordingTo to the survey by the ministry of education of Pakistan in 2008. While in the big cities like Lahore, Islamabad and Karachi literacy rate is up to 82% according to this survey. A lot of companies like pizza hut, KFC and subway are doing their businesses in major cities. People of big cities love to visit parks, joy lands and such fast foods restaurants of the cities. GET YOUR WORK DONE BY 9 www.TopGradePapers.com
  • 10. GET YOUR WORK DONE BY www.TopGradePapers.com Technological factors of Pakistan: Being a developing country Pakistan has developed its technological needs for the local industry too much extent. But still that is not enough to fulfill the necessities of the industry. Pakistan does a lot of export for the rs machinery from other countries to develop its industry that is still in developing face. pe Brief Comparison between both economies The table below shows the brief comparison between these two countries on Pa the basis of findings of my research. This really depicts the differences in both countries that will help us to draw a conclusion for the MacDonald to implement its real objectives in a specific country. de Pakistan Country Saudi Arabia federal republic Government monarchy 25.795.938 note: includes ra 159.196.336 (July 2004 Population 5.576.076 non-nationals est.) (July 2004 est.) Purchasing power parity - GDP Per Purchasing power parity - $2.100 (2008 est.) Capita $11.800 (2008 est.)pG Southern Asia. Bordering the Arabian sea. between Middle east. Bordering the India on the east and Iran Location Persian gulf and the red sea. and Afghanistan on the north of Yemen west and china in theTo north total: 803.940 sq km land: total: 1.960.582 sq km 778.720 sq km water: Area water: 0 sq km land: 25.220 sq km 1.960.582 sq km Mostly hot. dry desert; Harsh. dry desert with great temperate in northwest; Climate temperature extremes arctic in north GET YOUR WORK DONE BY 10 www.TopGradePapers.com
  • 11. GET YOUR WORK DONE BY www.TopGradePapers.com Punjabi 48%. Sandi 12%. siraiki (a punjabi variant) 10%. pashtu 8%. urdu (official) 8%. balochi rs 3%. hindko 2%. brahui 1%. Languages Arabic English (official and lingua franca of Pakistani elite and most government ministries). burushaski. and other 8% pe Conclusion Pa In the previous section we have discussed both countries on the basis of the political, economical, social and technological factors. According to the political constraints of both countries we have fond that Saudi Arabia is a de country that has stable political structure that is able to rely on while in the Pakistan it is very different. Pakistan political structure is very unreliable. There is huge risk of terrorism, political and peace situations. Similarly Saudi Arabia has a strong economy as compare to the Pakistan. Saudi ra Arabia is a wealthy country where the GDP per capita is about $467,700 as compare to the GPD per capita of Pakistan of $160,800 according to CIA factpG book 2008 that shows a huge difference between these two countries. As the purchasing power parity of Saudi people is stronger than Pakistani people. At the same level Pakistan rupee currency is much devalued so it will be tough for Pakistani person to purchase a burger of $2 that becomes equal toTo Pakistani 200 rupees that is a considerable amount for a Pakistani. On the other side of coin, it is not very much expensive to buy a $2 burger in Saudi Arabia. If we analysis on the basis of doing business we would find that it’s very easy to launch and continue a business in Saudi Arabia as compare to Pakistan as rankings from the Doing Business 2009 report, covering the period April 2007 to June 2008. According to this report it is also mention that tax rates in Pakistan and Saudi Arabia has a huge difference that is also a point for the MacDonald to consider. Pakistan is at 124th number and GET YOUR WORK DONE BY 11 www.TopGradePapers.com
  • 12. GET YOUR WORK DONE BY www.TopGradePapers.com Saudi Arabia is at 7th number. 1 is for most low rates and 180 are for most high rates rank for paying tax. If we see in the reference of the social and cultural level, it is very tough for the MacDonald to launch a single strategy for the Pakistani environment as there are a lot of languages are spoken and very diverse culture that varies according to the distances within the rs country. As Saudi Arabia has one language spoken in the whole country and almost have the same culture in the whole territory. So it becomes very easy for the Saudi Arabia context to launch a single strategy for the whole pe country. Technological factors are also very open for the MacDonald that Pakistan is a developing in technology and industry, on the other side Saudi Arabia has much more expertise in this level as compare to Pakistan. As a Pa whole I suggest MacDonald to launch its operation in Saudi Arabia at first due to the suitable, flexible and profitable factors in the economy based upon my research findings. de rapGTo GET YOUR WORK DONE BY 12 www.TopGradePapers.com
  • 13. GET YOUR WORK DONE BY www.TopGradePapers.com References  McClatchy-Tribune (2009) Saudi business outlook brightens [Arab News, Jeddah, Saudi Arabia]  Economist Intelligence Unit ViewsWire (Jul 10th 2009) Pakistans rs economy remains in bad shape, despite emergency help from the IMF (www.economist.com) pe  The Saudi network (Saudi government) http://www.the-saudi.net/saudi-arabia/government.htm  Official web gateway to the government of Pakistan: http://www.pakistan.gov.pk   Pa CIA World Fact book (September 2008) U.S. Dept. of State Country Background Notes (February 2008) de  The rankings are from the Doing Business 2009 report, covering the period April 2007 to June 2008. http://www.doingbusiness.org/EconomyRankings/ ra  MacDonald official website http://www.mcdonalds.com/pGTo GET YOUR WORK DONE BY 13 www.TopGradePapers.com