Multinational corporations have to comply with various regulatory frameworks and hindrances that are necessary to be examined in order to achieve customer satisfaction and enhancing the value of the corporation. The regulatory framework defines a set of regulations and laws that apply to a corporation which provide various guidelines that are necessary to be fulfilled by the company. Being global leaders, firms have to properly comply with such regulations in order to maintain a positive brand image and fulfil their corporate duties. Government treaties and conventions are legal agreements between two nations that focus on improving relationships by providing grants or exemptions to corporations. This report will focus on ‘McDonald’s’ and analyse its regulatory framework in Australia. Further, the report will focus on the impact of agreements, treaties and conventions over McDonald’s operations in Australia.
McDonald’s is one of the most prominent organisations that is situated in Australia; the corporation has a positive reputation which assists in expanding its business overseas. The company was founded in 1940 in San Bernardino, California, United States. The firm offers a wide variety of fast food products to its customers and offers other quick options such as drive-thru, online booking, cashless payments, and other. The revenue of the company in 2016 was US$24.622 billion globally (McDonalds, 2017).
In Australia, McDonald’s is popular as “Macca’s”, and the company has embraced its nickname, and some of its restaurants have changed its signs as “Macca’s” (The Telegraph, 2013). McDonald’s is known for its franchise business in which it allows other small business to get a franchise and open their McDonald’s restaurants. The company started its operations in Australia in 1971 by opening its first restaurant in Sydney suburb of Yagoona. McDonald’s is known for their high-quality services, clean restaurants, family facilities, competitive prices, similar structure and others (Soontiens and Lacroix, 2009).
McDonald’s operates in fast food restaurants industry, and it is located in more than 35,000 locations in more than 120 countries, and it serves around 68 million customers each day. In Australia, more than 869 McDonald’s restaurants are situated which serves around 1.7 million customers visiting each day. McDonald’s economic contribution in Australia is equivalent to 0.2 percent of the GDP in Australia (McDonalds, 2017).
McDonald’s has more than 375,000 employees globally who are dedicated to delivering high-quality food and services. In Australia, the company has more than 90,000 employees working which are equivalent to 7 percent of the total working population in Australian café, takeaway food service and restaurants (McDonalds, 2012). The company has 258 franchises in Australia and 9000 suppliers which provide material to the restaurants. McDonald’s is world’s second largest private sector employer, the first one being Wal-Mart.
The global headquarters of McDonald’s is situated in Oak Brook, Illinois, United States, which operates all functions relating to the franchise, food, services, offers, and others (Corporate Office, 2017).
A multinational corporation that is operating in foreign countries needs to comply with the legislative, regulatory guidelines of the nation carefully. The firm is required to implement such regulation into their business policy to ensure proper compliance. In case of McDonald’s, the company maintains a positive reputation, and it creates a strong connective with its stakeholders, therefore, it is critical for them to comply with the regulatory framework. The corporation is situated in the service industry, therefore, the top-level managers’ focus on bringing diversity to the employees and establishing a workplace environment which is free from discrimination and nepotism (McDonalds, 2017). This initiative assists in providing equal opportunity to each employee, and it increases their productivity. The company focus on establishing healthy diversity in the operations without any discrimination against people from different race, caste, colour, gender or disability by abiding the provisions of Disability Discrimination Act 1992 (Australian Government, 2017).
As per Australian regulations, McDonald’s has to pay Corporation Tax of 30 percent on its profits before distributing them to shareholders (Australia Taxation Office, 2017). The company pays a significant amount to Australian government as taxes to ensure they ethically comply with legal provision; the amount of tax contributes to the Australian economic development. The corporation tax works favourably for the Australian government, but it has an adverse impact on the company’s business since they have to pay a large amount to the government. On the other hand, McDonald’s has to comply with Fair Trading Act in Australia which is implemented by the government to ensure that each company gets good opportunity to practice in an industry efficiently and it reduces monopoly of the large firms. Many firms such as Coles and Woolworth have been sued for not complying with the provisions of fair trade act (Nottage, 2009).
McDonald’s effectively operates with the assistance of local suppliers, therefore, the company is required to assess and implement the provision of the fair trading act. Any failure of regulation by a McDonald’s franchisee resulted in a negative image of the company since it represents the entire brand. The corporation has to comply with the productions of Product Liability Regulations that provide provision regarding proper handling of tangible products. The regulations are enforced by the Australian Competition and Consumer Commission (Richards, Lawrence, Loong and Burch, 2012). The corporation can be held liable for its casualness towards the quality of products which may result in health issue of the consumers. Each outlet tests the quality of food sold by them to ensure they are not against the food health standards. The Australian government ensures that the food and services provided by the corporation to customers meet the entire health quality requirement, so they are not detrimental to their health. The Food Safety Regulation applies to restaurants industry since it provides consumer products and food services. Organisations such as McDonald’s have to comply with several food safety requirements because carelessness can cause serious health issues for customers (Australian Institute of Food Safety, 2017).
In 2012, McDonald’s was sued for not complying with the food safety requirements, and it had to pay a fine of $180,000; the company conducted breach in food storage, presence of pests and cleanliness (Stewart, 2012). From 2000, Australian government started levying Goods and Services Tax which is imposed on the products and facilities provided by the corporations. Currently, the GST rate in Australia is 10 percent which applies to consumer products and food services (Australian Taxation Office, 2017). The Environmental Protection and Biodiversity Conservation Act 1999 compel each corporation whether domestic or foreign to maintain appropriate standards for the protection of the environment and reducing their carbon footprint. McDonald’s deals in food products which creates a lot of waste and the company is required to properly dispose of such waste to ensure it did not pollute the environment. McDonald’s is known for high-quality services which include cleanliness, safety, and environmental friendliness; therefore, they have comply with environmental regulations to maintain their reputation.
Treaties are the agreement between two or more counties in order to improve trade, social and political relations to enhance the economy and GDP of the company. Most of the times, treaties assist corporations in improving their business, but sometimes they act against the operations of the business. McDonald’s Australia Enterprise Agreement 2013 is the original contract that drives the operations of McDonald’s in Australia (SDA, 2016). The agreement defines various method of functionality and procedure of service that is necessary to be compiled by the company. The Fair Work Act approves the agreement, and it consists of five main parts. Firstly, the clause provides provision such as shift supervisor, employer, weekly employees and other related condition. The entire process is structured in a way to promote transparency and objectivity. Further, the part provides provision for classification and wage rates which include various topics such as working hours, leaves, long service leave and others.
The agreement contains several clauses for the protection and welfare of employees and environment which are necessary to be compiled by the firm. To regulate the food standards between Australia and New Zealand, a treaty called FSANZ has been established by the governments. The Food Standards Australia and New Zealand Act 1991 provide provision relating to standardising the food quality that is offered by the corporations in both countries (Tapsell, 2008). The treaty monitors the activities of fast food corporations such as Subway, KFC, and McDonald’s and ensures that these companies are complying with the requirements. Due to this treaty, the corporations are able to sell their products in both countries without any hassle which assist in improving their performance and market share. McDonald’s should carefully comply with the requirements of this treaty because it improve and ensure that the quality of food is according the health requirements which eventually increase McDonald’s reputation (Henderson, Coveney, Ward and Taylor, 2009).
The Free Trade Agreement between Australia, Japan, USA, China, Malaysia, Indonesia and Singapore assist McDonald’s in providing its services without the hassle and at a minimum expense. The agreement benefits McDonald’s because it is able to get supplies at lower costs and provide its services effectively. The treaty conducted between Australia and China, China Australia Free Trade Agreement (ChAFTA), assists McDonald’s because it helps in establishing its services in China without any legal problems. The tax treaty conducted between the United States and Australia assists US-based multinational corporations to reduce tax liabilities in Australia. McDoanld’s can use this treaty to avoid double tax, tax evasion, and fiscal evasion (Australian Taxation Office, 2017). Also, the corporations have right to bring business profits to the countries of their origin which is a significant benefit for the firm. Multinational companies such as McDonald’s provide various benefits to Australian economy such as employment, national income and competitive market and other.
In order to promote multinational corporations to establish their business in Australia, the government enters into various treaties to provide various benefits such as taxation reliefs, business profit attribution, and other. The Comprehensive Economic Cooperation Agreement (CECA) conducted between Australia and New Zealand assist firms in providing their services in both countries. It increases the business of firms between the countries that create new business opportunities for local businesses. McDonald’s has to pay dividends from its Australian profits, and due to the taxation treaty, it saves a lot of its profit. Therefore, the treaty assists in inviting the investments from the US to Australia which aid in the expansion plan of McDonald’s and it helps them maintain a positive position in the competitive market environment. McDonald’s top-level management is required to assesses and evaluate various treaties between governments and use them to their advantage because they assist the firm in expanding its operations globally.
Conclusion
From the above observations, it can be concluded that multinational corporations are required to comply with various international regulatory frameworks to properly operate in the foreign country. Every international company has to assess its regulatory framework and implement it into the business model to effectively operate in the foreign country. McDonald’s is a multinational corporation which operates in multiple countries; the company is required to analyse various regulatory frameworks and properly comply with them to maintain a positive brand image. In Australia, the corporation deals with several legal regulations such as Disability Discrimination Act 1992, corporation tax, goods, and services tax, food safety regulations, Environmental Protection and Biodiversity Conservation Act and others.
Treaty is an agreement between two or more countries to improve and promote trade, social and political relations among them. Australia has entered into various treaties that benefit the business of McDonald’s such as Food Standards Australia and New Zealand Act, Comprehensive Economic Cooperation Agreement, McDonald’s Australia Enterprise Agreement and many others. The Australian government has established various taxation treaties that provide various benefits to McDonald’s and its shareholders. It can be said that various tax treaties and conventions assist McDonald’s in expanding its business in Australia and other countries.
References
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