Jamaican Licensing and Exclusivity Requirements - The McDonald's Case Study The four case studies presented relate to the questions on the next slide regarding Professor Pankaj Ghemawat's Harvard Business Review (2001) article on "Distance Still Matters."

1. Distance Still Matters:
Pankaj Ghemawat
The hard reality of global expansion.
Should firms avoid ‘high distance markets’? If so,
why and how?
Does ‘distance’ represent’ an opportunity for the
international expansion of firms? If so, Why… and
how can firms take advantage of such opportunity?
Topic: Theoretical perspective
Tajudeen Ogunsola
Case study – McDonald's Corporation
MOMN009H7: International Business Strategy (MSc. Module)
Case study

2. Agenda
Pankaj Ghemawat
Professor of Global Strategy, Harvard Business Review Journal Article Titled ‘Distance Still Matters’ (2001 )
1 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
1. Should firms avoid ‘high distance markets’? If so, why and how can firms take
advantage of such opportunity?
2. Explore high distance markets
3. Opportunities for the international expansion
4. The Idea in practice: The CAGE Distance Framework
5. Globe Framework - Cultural Dimensions and Culture Cluster
6. Take advantage of such opportunities
7. Global opportunities for MNE’s
8. What the world is telling us
9. The idea in Brief: lesson learned from market entry on Ghemawat argument and
framework
10. Case study: McDonalds Corporation
11. Conclusion

3. Should firms avoid ‘high distance markets’? If
so, why and how can firms take advantage of
such opportunity?
Case study: Jamaican Market Entry
2 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

4. Should firms avoid ‘high distance markets’?
1
3 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
NO Why lose out on potential
market opportunities?
It is impossible in a single market,
companies should NOT avoid ‘high
distance’ market.28,29
““Where globalization
pressures are strong,
managers can’t just build on
their company’s local assets;
they will have to rethink
their business models”. 28
Industry
predictability for a
relevant time horizon

5. Explore high distance markets
1
4 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
04
Growth in emerging marke
06
Star TV – Distance Market
Poor entry strategy was marred by
challenges, but Star TV has learned
from its mistakes in refocusing
marketing efforts to optimize market
penetration, but is now valued at
$11.2 billion (Morgan Stanley,
2015).
01
Total growth, maturity, &
leadership
In a single market, total growth, maturity and
leadership are impossible, and companies should
NOT avoid the "high-distance" market28
02
Strategy, history & resource
capabilities
With regard to clusters, a company needs to have
the supplier relationships to enter the market. Every
country is different, but it depends on strategy,
history and resources..t2, 1
03
Porter’s Generic Strategy
Porter's Generic Strategy (1980 & 1985)
emphasizes that access to employees and the
skills required to meet market needs can provide
greater insight into expansion in such markets.25,
26
Expansion is the future, either
through technology or products /
services, and avoiding high-distance
markets limits the opportunities for
emerging markets (BRIC or MINT
nations) for global growth.

6. Distance affects industries and
countries when a company
enters a market.
 Expand your knowledge base
and potential synergies with
other companies
 Economies of scale (with
globalization a way to reduce
certain costs).
 Shaped people's food
preferences & cultural
influence
 Environment change
 Profitability
 Customer base.
 Elimination of country
borders (for products and
persons).
 Open economy (global
market)
 The international banking
system (which gives
investors the opportunity
to invest abroad) has
facilitated the
international expansion
of organizations.
15 Ghemawat, et la, 2008
9 Chatterjee et la, 2008
5 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
Opportunity
Expansion to countries with lower staff
costs (e.g. relocation of call centres to
India, low infrastructure costs and
employee salaries are lower wages).
Asset-oriented furniture industry consider
South America due to easy access to forests,
reduces material transportation costs and
increases profit margins
Internationalization is an opportunity to
break up the production process in
stages and/or relocate each stage.
Prospect
Enablers
Access to new or raw materials and
natural resources, e.g. Kazakhstan for
uranium, Botswana for diamonds,
Venezuela for crude oil, Russia for vodka
and India for cheap labour, China for
electronics & cheap labour.
Opportunitiesfortheinternationalexpansion

7. The Idea in practice: The CAGE Distance Framework
Source: Pankaj Ghemawat , “Distance still matters: The hard reality of global expansion” Harvard Business Review, 2001
6 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

8. Globe Framework - Cultural Dimensions and Culture Cluster
Source: Adapted from House R.J. et al. (eds.), Culture, Leadership, and Organizations: The GLOBE Study of 62
Societies. Thousand Oaks, CA: Sage, 2004
Source: Adapted from Thom Wolf, Globe 9 Cultural Dimension Origins Chart. New Delh: University
Institute. From House, Hanges, Javidan Dorfman, and Gupta (2004), 9-90
Country Clusters According to GLOBE
7 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

9. Take advantage of such opportunities
Individualistic
vs. Collectivistic
Personal needs and goals are prioritized vs. the
needs and goals of the group or organization
Masculine vs.
Feminine
Fundamental issue is what motivates people,
wanting to be the best (Masculine) or liking what you
do (Feminine).
Uncertainty
Avoidance
Index
Strong UAI maintain rigid codes of belief and
behaviour, and are intolerant of unorthodox
behaviour and ideas. Weak UAI societies maintain a
more relaxed attitude in which practice counts more
than principles.
Power distance
Index
Degree people are comfortable with influencing
upwards. Accept the inequality in distribution on
power in society.
Time
perspective
Long-term perspective, planning for future,
perseverance values vs. Short time past and present
oriented
Indulgence vs.
Restraint
Allowing gratification of basic drives related to
enjoying life and having fun vs. regulated through
strict social norms.
Hofstede’s Cultural Dimension Model
18 Hofstede et la, 2007
11 Ghemawat, et la, 2008
Hofstede’s
Cultural
Dimension
Indulgence vs.
Restraint
Time
perspective
(Long/Short –
term)
Power
distance Index
Masculine vs.
Feminine
Uncertainty
Avoidance
Index
Individualistic
vs.
Collectivistic
Source: Adapted from Hofstede, G. (1966) ‘An American in Paris: The influence of nationality on organisation theories. In: Organisation Studies 17/3
8 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

10. Global opportunities for MNE’s
Source: Adapted from Brent Adamson, Matthew Dixson and Nicholas Toman, ‘Dismantling the Sales Machine’, From The November 2013 Issue
9 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
07
Find geographic
barriers to trade
Ghemawat suggests that
companies that find
geographical barriers to
trade are often expected
to turn to direct
investment in local plants
and equipment as an
alternative to access the
target.1, 15 & 11
*Multinational Enterprises = MNE’s

11. What the world is telling us
1
Source: Adapted from International Monetary Fun: BCG (The Boston Consulting Group) 2014
“As protectionist barriers crumble
in emerging markets around the
world, multinational companies
are rushing in to find new
opportunities for growth”.
Adamson, Dixon, and Toman et la, (2013)
10 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
08
Maximise new
opportunities
Ghemawat's
reasoning is clear and
serves to discuss how
companies could
maximize new
opportunities. For
example, if a country's
institutional
infrastructure is
strong, if it has a well-
functioning legal
system, it is much
more attractive to
outsiders.1, 29
MINT
Economies
ASIAN TIGER
E c o n o m y

12. Where did all go WRONG?
Ghemawat ‘s framework;
 It could be argued that much has
been said in recent years about
the death of distance.
 Scientists say, Information
technologies and global
communication are shrinking the
world, making it a small and
relatively homogeneous place.
 Ghemawat suggests; ‘…[it]’s not
only an incorrect assumption,
but it’s also a dangerous one.
Distance still matters, and
companies must explicitly and
thoroughly account for it when
they make decisions about
global expansion.’1
Achievement
1. Burgers were too Small
2. Extensive Licensing
Requirements &
Exclusivity
3. Required Capital
Investment
4. Low market penetration
5. Declining Economy s
Why did McDonalds exit?
Lesson learnt
11 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
The idea in Brief: lesson learned from market entry on Ghemawat argument and framework.
Cultural factors played a
key role in McDonald's
exit, including
administrative factors
(colony-colonization
trade agreements) that
were not consistent with
Jamaican economic
factors (income,
distribution channel
quality)

13. Case study: McDonalds Corporation
McDonalds – Jamaican Market Entry
Est. May 15, 1940 Ray Kroc founded the McDonald's Corporation
Founder: by Richard and Maurice McDonald
Brand: McDonalds Corporation
Origin: USA
Market objective: Jamaica market entry
Niche: Fast food restaurant
Goal: Launch 11 stores across the island in 1995
Exit: 10 years later
Global position: McDonald's is the seventh-largest private employer in the
United States
Headquarters: Oak Brook , Illinois, U.S. (moving to Chicago in 2018)
Chief Executive Officer: Steve Easterbrook President/CEO
Revenue: $24.622 billion USD (2016)
Number of locations: 36,900(December 31, 2016)
Subsidiaries: domestic and 49 wholly-owned subsidiaries of the Company
Limit or avoid risks and costs before expanding
Result
As the Jamaican economy continued to slow, McDonald's struggled to attract
new consumers or lure customers from rivals. In addition, Jamaican consumers
preferred larger burgers and noticed McDonald's burgers did not compare
favourably to those of competitors.
Lesson Learned – Choose new markets wisely
Challenge: Burgers that are too small, extensive licensing requirements and
exclusivity. Attractive franchise and property investment required. The
slow economy is hampering local supply, which is essential for market
penetration.
Lost revenue: Undisclosed but closed all of its 11 stores and operations
The CAGE Distance Framework
Theoretical perspective: McDonald focused on distance's geographical
dimension but failed to consider the dimensions of cultural factors
(religion, race, social norms, language); administrative factors (colony-
colonizer links, currencies, trading arrangements); and economic factors
(income, distribution-channel quality).
Conclusion: Mcdonald’s market entry in Jamaica encapsulates every aspect
of Ghemawat (PG ) journal - ‘distance still matters,’ as it demonstrates the
unequivocal exaggeration firms predict and positively assess foreign market
territories.
McDonald’s has a sizable international presence; 65% of sales occur
outside of the United States. For example, in developed markets like
the UK, however, McDonald’s operates in fast-growing emerging
markets like China, India, Russia and Eastern Europe. Why did the
company fail to adjust its strategy in a volatile market like Jamaica?
12 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

14. Conclusion: McDonald’s
13 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY
Ghemawat's article contains some thoughtful arguments about
companies operating in new markets and how managers need
to rethink the way we analyse and evaluate foreign markets for
market penetration. The CAGE Distance Framework and other
types of strategic business models are shared for managers to
maximize a comprehensive approach to market entry.
Distance
matters
McDonald's has misjudged Jamaica in administrative,
economic and cultural terms. McDonald's also failed to
adapt accordingly as the economy began to decline.
Redefine.
Reinvent. Target
to Conquer

15. References
[1]P. Ghemawat, "The Cross-Border Integration of Markets and International Business",
SSRN Electronic Journal, 2001.
[2]O. Shenkar, "Beyond cultural distance: Switching to a friction lens in the study of
cultural differences", Journal of International Business Studies, vol. 43, no. 1, pp. 12-17,
2012.
[3]"Business Opportunities and Risks: Plan Before You Expand Overseas", National Center
for the Middle Market, 2018. [Online]. Available:
http://www.middlemarketcenter.org/expert-perspectives/business-opportunities-and-risks-
plan-before-you-expand-overseas. [Accessed: 16- Jan- 2018].
[4]M. Alexander, "When you shouldn't go global (companies' ill-fated globalization
strategies)", Strategic Direction, vol. 25, no. 5, 2009.
[5]J. Dunning, "Location and the multinational enterprise: A neglected factor?", Journal of
International Business Studies, vol. 40, no. 1, pp. 5-19, 2009.
[6]S. Zaheer, M. Schomaker and L. Nachum, "Distance without direction: Restoring
credibility to a much-loved construct", Journal of International Business Studies, vol. 43, no.
1, pp. 18-27, 2012.
[7]B. O'Brien, "4 lessons learned from famous market entry failures - Trade Ready", Trade
Ready, 2018. [Online]. Available: http://www.tradeready.ca/2015/trade-takeaways/4-
lessons-learned-famous-market-entry-failures/. [Accessed: 16- Jan- 2018].
[8]"Forbes Welcome", Forbes.com, 2018. [Online]. Available:
https://www.forbes.com/sites/steveculp/2012/08/27/political-risk-cant-be-avoided-but-it-
can-be-managed/#7c0c3a543acb. [Accessed: 18- Jan- 2018].
[9]D. Chatterjee, "Morgan Stanley values STAR TV at $11.2 billion", Business-standard.com,
2018. [Online]. Available: http://www.business-standard.com/article/companies/morgan-
stanley-values-star-tv-at-11-2-billion-115082900813_1.html. [Accessed: 18- Jan- 2018].
[10]T. Friedman, "It's a Flat World, After All", Nytimes.com, 2018. [Online]. Available:
http://www.nytimes.com/2005/04/03/magazine/its-a-flat-world-after-all.html. [Accessed:
18- Jan- 2018].
[11]P. Ghemawat, "Distance still matters. The hard reality of global expansion.", Harvard
Business Review, no. 0, 2001.
[12]P. Ghemawat, "The world is still round - like a soccer ball: redefining global strategy",
Strategic Direction, vol. 24, no. 3, pp. 3-5, 2008.
[13]R. Thakur, "Redefining Global Strategy: Crossing Borders in a World Where Differences
Still Matter Pankaj Ghemawat", Paradigm, vol. 12, no. 1, pp. 106-108, 2008.
[14]J. Frankel and A. Rose, "An Estimate of the Effect of Common Currencies on Trade and
Income", SSRN Electronic Journal, 2001.
[15]P. Ghemawat, "Competition and Business Strategy in Historical Perspective", Business
History Review, vol. 76, no. 01, pp. 37-74, 2002.
14
[30] House R.J. et al. (eds.), Culture, Leadership, and Organizations: The GLOBE Study of 62
Societies. Thousand Oaks, CA: Sage, 2004.
[16]O. Shenkar, "Cultural distance revisited: Towards a more rigorous conceptualization
and measurement of cultural differences", Journal of International Business Studies, vol.
43, no. 1, pp. 1-11, 2012.
[17]D. Dow and A. Karunaratna, "Developing a multidimensional instrument to
measure psychic distance stimuli", Journal of International Business Studies, vol. 37, no.
5, pp. 578-602, 2006.
[18]G. Hofstede and G. Fink, "Culture: organisations, personalities and nations. Gerhard
Fink interviews Geert Hofstede", European J. of International Management, vol. 1, no. 12,
p. 14, 2007.
[19]S. Sakarya, M. Eckman and K. Hyllegard, "Market selection for international
expansion", International Marketing Review, vol. 24, no. 2, pp. 208-238, 2007.
[20]N. Dawar and J. Ramachandran, "Defending Turf: Marketing Strategies for
Emerging Market Companies", SSRN Electronic Journal, 1998.
[21]M. Hitt, M. Dacin, E. Levitas, J. Arregle and A. Borza, "PARTNER SELECTION IN
EMERGING AND DEVELOPED MARKET CONTEXTS: RESOURCE-BASED AND
ORGANIZATIONAL LEARNING PERSPECTIVES.", Academy of Management Journal, vol.
43, no. 3, pp. 449-467, 2000.
Reference for Figure/tables
[22]Lorraine Eden, , Stewart R Miller, (2004), DISTANCE MATTERS: LIABILITY OF FOREIGNNESS, INSTITUTIONAL DISTANCE
AND OWNERSHIP STRATEGY, in Michael A. Hitt, Joseph L.C. Cheng (ed.) "Theories of the Multinational Enterprise: Diversity,
Complexity and Relevance" (Advances in International Management, Volume 16) Emerald Group Publishing Limited, pp.187
– 221
[23] House, R. J., Hanges, P. J., Javidan, M., Dorfman, P. W., & Gupta, V. (2004). Culture, Leadership, and Organizations: The
GLOBE Study of 62 Societies. Thousand Oaks, CA: Sage Publications.
[24] Sema Sakarya, Molly Eckman, Karen H. Hyllegard, (2007) "Market selection for international expansion: Assessing
opportunities in emerging markets", International Marketing Review, Vol. 24 Issue: 2, pp.208-238,
https://doi.org/10.1108/02651330710741820
[25]Porter, M.E. 1985. Competitive advantage: creating and sustaining superior performance: with a new introduction. New
York: The Free Press
[26] Porter, M.E. 1980. Competitive strategy: techniques for analyzing industries and competitors: with a new introduction.
New York: The Free Press
[27] Chuck Leddy, 2013, Business Opportunities And Risks: Plan Before You Expand Overseas Source: (National Center for
the Middle Maket, 2018)
[28] Dawar, N., Frost, T., ‘Competing with Giants: Survival Strategies for Local Companies in Emerging Markets’
MARCH–APRIL 1999 ISSUE
[29] Brent Adamson, Matthew Dixon and Nicholas Toman (2013)Dismantling the Sales Machine
FROM THE NOVEMBER 2013 ISSUE HTTPS://HBR.ORG/2013/11/DISMANTLING-THE-SALES-
MACHINE
MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

16. Adaptation of the CAGE Distance Framework
Spain/
Latin America
USA/ Britain
Anglophone Africa
Americas &
the Caribbean/
Parts of Asia &
"Down Under
France/Canada &
French francophone
African
countries Cultural/
Different
Social norms
Economic
Growing middle-
class
Total
addressable
market
GDP Trends
Political/Administrative Economic Operations
Colonial examples
account for 900%
increase
Monitor, analyse and to make better market entry decisions: like “invest” or “divest”
FIRST IN-BETWEEN SECOND
IMPACT OF DISTANCE
– National Pride
Airlines, Commodity
(Oranges, Coffee)
– National Security
(Telco's)
– National Defence
(Software, Arms)
Governments will protect these
industries and restrict trade,
especially for “distant” sellers
America and Cuba’s conflict
Sephora entry into Japan
Ikea fight Russian corruption
Target’s exit from Canada
Geographic
Travel to and within
Technological distance
(modern/ traditional )
Trade costs (Shipping costs)
Time zones
Perhaps the best
known/understood
Logistical limitations
Geographic distances
are shortening
through Technology
& Coat
Geographic
Cultural differences
More countries are meeting the
minimal level of critical mass to
attract global attention (i.e. Walmart,
Starbucks, Dominos Pizza)
Industry and product offered by distance Attributes creating distance
The group ‘s adapted from the CAGE Distance Framework developed by Pankaj Ghemawat Source: P. Ghemawat, 2001
Siemen Nigeria issue
Starbucks Polish
disaster
15 MOMN009H7: INTERNATIONAL BUSINESS STRATEGY

17. Thank you!
Q&A
Tajudeen
Ogunsola
Case study – Hofstede, G. (1966) ‘An American in Paris: The influence of nationality on organisation theories.
In: Organisation Studies 17/3
Pankaj Ghemawat article on Distance Still Matters: The hard reality of global expansion.
MOMN009H7: International Business Strategy