Discuss about the Report for International Business of Price Discrimination Strategy.
The main aim of the report is to highlight the political, cultural, economic and technological environment of Nepal. Because McDonalds wants to extend their business in Nepal and it is very important for a company to study the market thoroughly before entering the market. So this report provides a detail of the country Nepal, which will help the company to highlight the required changes that they need to make.
This report also suggests different strategies that McDonalds need to follow before entering the market of Nepal and also highlights the company McDonald’s. This report highlights the company’s marketing strategies, strength, weaknesses and different aspects of the company.
McDonalds was started in 1995 by Ray Kroc, at 400 North Lee Avenue in Des Plaines, Illinois near Chicago. It is the most famous and largest fast food brand in the world. It is a successful company. From 2015 the country started operating in 36,258 locations in 119 countries and every day the company serves around 69 million customers (“Ambition & Corporate Mission – McDonald’s : AboutMcDonalds.com”, 2016).
The business model of the company is simple, which provides persistent dining experience, fast services, and quality food in the location. Almost 80 percent of the McDonalds restaurants are franchised, which means that the restaurants are owned by an entrepreneur who buys the right to use the brand name and sell their products. All the owner of the franchise gets access to the brand cooking system, selling food and its extended marketing and advertising resources. No doubt that the company operates globally but it depends heavily on the American markets. 40 percent of the McDonald’s operating income is generated by the outlets in the America and another 40 percent is generated by the countries, which includes Canada, Australia, UK, France, and Germany (“Ambition & Corporate Mission – McDonald’s : AboutMcDonalds.com”, 2016).
The greatest strength of the company is its highly famous brand name. The company is equated to fast food by many people and products such as French fries and hamburgers. And many people credit McDonalds for introducing fast food and changing the eating habits of the worlds.
In the recent years, McDonalds have been witnessing a decline in market share and revenues. The company reported a 2.28 billion dollars fall in revenue in 2015 as compared to 2014. The fall in the market share indicated that the sales of the company are declining and it is facing difficulties in maintaining the market share (Jurevicius, 2016).
Despite the falling market share the profitability of the company remained unaffected. The company reported an 18.5 percent of profit margin and 4.18 billion dollars net income on June 30th, 2015.
The greatest strength of the company is the number of countries where the company operates. 60 percent of the company’s revenue is generated outside America which means that the company can survive with the declining market share in America, in comparison to another brand such as Burger king, which earns 98 percent of its income from the US (Jurevicius, 2016).
The greatest fear of the company is the increasing competitive fast food market in the United States. The company is also facing the changing needs and tastes of the customers and the increasing variety of the direct competitors. The main competitors of the company in the USA are Starbucks, Taco bell, KFC, pizza hut etc (Makos, 2015).
According to many observers, the greatest threat for the company is Chipotle Mexican Grill. Chipotle on 30th June 2015 reported revenue of 4,441 billion dollars, which is four times more than that of another food chain Jack in the Box. And in the recent years, the revenue of Chipotle has increased from 2.04 billion dollars in 2011 to 4.441 billion dollars in 2015 (Makos, 2015).
One more threat faced by the company is that many people are of the view that the food provided by the company is not high quality as compared to its competitors. And many customers are of the view that the foods of McDonalds are not healthy. With the increasing competition the company was forced to make drastic changes in its operation. The company announces an increased in salary in the stores that are owned by the company in 2015, the company also decided to serve breakfast throughout the day and eliminate eight food items from their menu.
However, the nature of the changes was unidentified but it will involve a high cost, further cutting down their revenues. Other problems that may arise is the franchisees revolt, because of the changes they may lose potential customers who value their menu (Makos, 2015).
The company serves a menu which is relevant to the locality and also provides several food and drinks at an affordable price across 100 countries. The global system of McDonalds comprises both of franchised restaurants and company-owned. The franchised restaurant of McDonalds is operated and owned based on one of the following structures, which includes conventional franchise and development license and affiliated. The franchisee of the company signs an agreement with the company to maintain the quality and name of the brand.
The main entry strategy followed by the company is a franchisee, with the majority of the restaurant of McDonalds, are owned and operated by the independent franchisees (82%). The franchise contributes to the revenue of the company by paying the rent and royalties, which is based on the percentage of sales. The agreement for the conventional franchise last for twenty years and this practice is followed all across the globe (“McDonald’s – Official Global Corporate Website: AboutMcDonalds.com”, 2016).
The company offers a uniform menu but there are variations based on the geographic location of the country to suit the taste and preferences of the localities. The menu of the company includes cheeseburgers, hamburgers, quarter pounder, big Mac, several chicken sandwiches, chicken McNuggets, coffee, cold drinks and much more. The restaurant also sells varieties of product within a limited period of time. The company in the USA and in many other international destinations offers a limited of full breakfast menu. The breakfast menu includes egg muffins, McGriddles, biscuit, sausage muffin with eggs and much more. The company believes in providing quality and nutritious food to its customers (“McDonald’s – Official Global Corporate Website : AboutMcDonalds.com”, 2016).
The business of the company is not dependent on a small group or single customer.
Price discrimination is the phenomenon adopted by the companies, where they sell identical products at different prices. The income distributions of different countries are different, so it is not possible for the companies to keep the same price for their products in every country.
Thus, the company has introduced different low price menu in different countries, which helps them in reaching out a huge number of customers, this also serves the purpose of sales maximization and also increase the popularity of the company among common people (“→ Price Discrimination Strategy”, 2016).
McDonald’s uses different promotional techniques, which includes personal selling, advertisement, sales promotion, direct marketing and public relation. With the help of these five promotional techniques allows McDonald to integrate communication program of marketing, allowing the company to access the communication channel properly, easily transfer products and messages to the targeted audiences (“McDonald’s – Official Global Corporate Website : AboutMcDonalds.com”, 2016).
There are several human resources issues that are face by the companies, the employers and the employees. In the present scenario with the rapid development of both the small-scale and large scale industries the need for human resource management, ability to avoid and forecast the issues that arises with it, is growing. There are different issues that every company faces and they are as follows:
Recruitment and outsourcing: the manager of the firm can manage his workforce better if he knows how to recruit the best workforce, because it becomes much easier to work with a bunch of people who are familiar with the recruitment process. The manager can minimise the problem by improvising different features of this process, by attending careers events, writing accurate and effective job advertisements and improving his/her way of conducting the interview process. In the recent years the recruitment has become more a marketing process, it is very crucial for the company to generate interest in the job to recruit the perfect employee. The human resource management also face the problem of outsourcing; outsourcing is the phenomenon when the human resource management decide to hire a freelance worker during the time of economic meltdown instead of employing salaried employees (“The Most Common Issues Faced By Human Resource Managers – CMI”, 2016).
In fact in Nepal the human resource management of McDonalds will face the problem of recruitment as the country face the problem of shortage of skilled labours. This might be a great problem because the company has to put in a lot of effort and time in the recruitment process.
Rights, Discrimination and Conflict Resolutions: Almost all the countries now have very strict laws against discrimination and abusing that may take place in the workplace. So it is the responsibility of the HR manager to be aware of any such happening in the workplace and take necessary actions (“The Most Common Issues Faced By Human Resource Managers – CMI”, 2016).
In Nepal the businesses are highly affected by the culture, and no business can survive if they function against the culture of the country. So it is the duty of the manager to make sure that their activities are not impacting the culture of the country. And in Nepal beef products are strictly banned, so the managers need to make sure that they do not deal with any beef products in their restaurant.
Leadership development: One bigger problem that is faced by the human resource management is the leadership development. It is the responsibility of the human resource managers to provide essential processes, tools, structures and point of views to develop future leaders for the organization (“The Most Common Issues Faced By Human Resource Managers – CMI”, 2016).
The country where McDonalds want to expand their business faces the problem of shortage of skilled labours, so the managements will face a great problem in developing future leaders for the organization. So the management need to develop the essential skills that are paramount in the recruitment process.
All the marketing managers of the firm face different issues relating to the marketing of their products. With the expanding marketing world the role of the marketing managers are also increasing to keep pace with the developments in the marketing and promotion arena. The different marketing issues that are faced by the businesses are highlighted below:
Inexperienced team: With the expanding internet marketing, the role of the employees is also increasing. A team may be equipped with different specialities but many of the time they may miss out of different key factors. The managers may face the problem of inexperienced team, which makes it tougher for them to operate efficiently (Lael, 2016).
Problem with interpretation of marketing data: With the rapid expansion in the marketing, the lingo of the marketing keeps on changing every year, so it become tough for the managers to keep pace with the changing marketing lingo and it becomes tough for them to interpret the market data. So it is important for the managers to know the general idea that covers CTA’S (call to action), CRO (conversion rate optimization), CTR (click through rate) and many more (Lael, 2016).
Providing Return on Investment of their marketing activities: according to the 2015 state of inbound report, one of the most important problem that is face by the marketers is to measure their return on investment. It is really tough measuring the ROI for every single marketing activity if the marketers do not have two way communications between the marketing activities and the sales report. So to provide the ROI the management have to dedicate plenty of time and resources, in order to establish a link between the sales report and the marketing activities. For this the managers can use both CRM solution and marketing software and then try to establish a link between the marketing and the sales efforts (Lael, 2016).
The above discussion highlights different marketing and human resource management issues and different strategies to overcome such problems. McDonalds is planning to expand their business in Nepal, but the country face the problem of shortage of skilled labours, which may cause further problem for the organization.
After highlighting the environment of Nepal it is important for McDonald’s to concentrate on few things before entering the market of Nepal. Nepal is not economically stable, which is because of the unstable government in the country. The country has witnessed 23 governments in 23 years. And the country also faces a shortage of skilled labours, which may affect the business of the company. The economy of the country is unstable, so it may also affect the business. The corruption level of the country is too high, and the businesses in Nepal are highly influenced by the culture of the country and any business that operates against the culture of the company, will not survive for too long in the market. So it is important for the company to study the market thoroughly before expanding their business in Nepal. And if the company operates in Nepal than they have to set the price of their product low because the economy of the country is not strong.
The country also has the potential for business, as in the recent years the political environment is changing, with the commitment of the government increase the national production optimally. Economic policies are becoming more liberal to make a free market. Monetary policy is tuned finely; the country has also realized the importance of the private sector. Government invest mainly in infrastructure. New trade policies promoted exports and helped reducing trade imbalance. Different import licensing system and quantitative restriction were also abolished. Export procedures were simplified and there were rapid financial reforms, which will benefit the business.
The country has considerable potential for tourism, benefiting the company to acquire new customers. During the peak seasons, the restaurants will get many customers increasing their sales. In Nepal, there is widespread of family patronage of the business. So franchisee technique of entering the country will help the company to start their business in Nepal.
The business in Nepal is highly affected by the cultural values of the country so it is important for the company to concentrate on the cultural values of the country and the employees of the company need to improve their intercultural communicational skills because cultures are highly valued in the country.
References
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