Internationalization Strategy: McDonald’s in Vietnam

Introduction

The adoption of an internationalization strategy is often followed by the setting up of the necessary structures that will ensure its success. The fact that, in this case, McDonald’s seeks to increase their global presence and their scope in the international fast food market means that they are more interested in the effectiveness of the strategy to increase the number of customers that they serve in the market (Peng, 2010).

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This can only be achieved through the careful management of their resources available in the market during the implementation of the strategy and in the management of the new market thereafter (Minbaeva and Michailova, 2004). The fact that Mcdonalds’ already has elaborate and successful organizational structures as well as market entry strategies that have been effective in its entrance into other international markets, means that the new managers in the Vietnam market may not have to deal with basic market entry challenges.

There is, however, a need to understand the new market to ensure that it is appropriate for the current market and organizational strategies that are being applied by the parent company. Where this may not be the case, the new managers can formulate new strategies that will ensure that they maximize their output in the new market (Shi and Gregory, 1998). The need to promote the overall brand perception in the international market has meant that the entrance into the new market may warrant the identification of any weaknesses or threats that may lead to the poor performance of the brand (Chakravarty, Ferdows and Singhal, 1997).

Market research

The management of an internationalization strategy requires the managers responsible to be aware of the underlying issues in the market, which may have an impact on their performance in that particular market (Stoll, 2007). It has already been identified that the Asian market is quite viable for the fast-food industry because of the fact that it already has one of the fastest-growing economies in the world, which then translated to a bustling middle class that forms the backbone of the main fast food market (Chakravarty, Ferdows and Singhal, 1997).

The need to increase the performance of the company is pegged on the inherent competition in the market, and the only way to ensure that the company is successful in this new market is by identifying the market trends and customer preferences as far as fast food establishments are concerned. The fact that there are already a number of local fast food joints in the region means that the company’s entrance into the new market may not be as smooth as it is expected (Haberberg and Rieple, 2008). There is a need to understand local trends without making the assumption that the locals will immediately adopt the new products that the company has to offer (Van-den-Bosch, Volberda, and Boer, 1999).

This may warrant the development of specially designed products that will maximize the new customer’s satisfaction as well as increase their loyalty to the company (Minbaeva and Michailova, 2004). The netting of a huge chunk of the market should also be followed by the identification of the opportunities that exist in the market to ensure that the company avoids competition from any new entrants especially with the increased motivation by international fast-food franchises to join the Asian market because of the growth of Asian economies (Fleury and Fleury, 2003).

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Change management

The management of an international strategy means that one has to be exposed to new environments and cultures, which warrants the identification and implementation of an elaborate change management policy. Most companies choose to implement an internationalization strategy through the transfer of top managers to the new market. The line managers and the lower-level employees are then identified and trained from the local labor market (Brown, Dev, and Zhou, 2003).

The fact that there are always different orientations and personalities among the staff who are supposed to implement the new internationalization strategy means that the new manager has to identify any conflict of interest, which may be inherent in the new staff as well as the new working environment, and move to solve it. This should ensure that all the individuals involved in the implementation of the new strategy adopt and adhere to a common organizational strategy (Colotla, Shi and Gregory, 2003). There may also be the need to train all the employees in the new market afresh to ensure that they are aware of the industry practices as well as the strategies adopted by McDonald’s (Minbaeva, et, al. 2003).

There may be the need to change the organization’s structure, especially where the new managers may find limitations in terms of resources in the new work environment (Liyanage and Barnard, 2003). The difference in the environment may also warrant a change in management strategy to ensure that any new structures in human resources that may be inherent in the new market are incorporated into the existing strategy in a perfect balance that ensures that the company maintains its originality as it is expected by its parent company (Van-den-Bosch, Volberda, and Boer, 1999).

The cultural differences between the parent company and its traditional American market and the new market may mean that there must be critical changes not only in the human resource management strategies but also in the production strategies that may be adopted in the international market (Rudberg and Olhager, 2003). Some of the main cultural differences may be applied in the formulation of production strategies as well as the identification of the new products that the market demands (Dess, Lumpkin, and Eisner, 2009).

Market entry models

The choice of marketing strategies should also be based on the prevailing strengths that the company enjoys in the new market (Minbaeva and Michailova, 2004). The fact that Vietnam has a large population of young people, who are highly internet savvy in its main urban centers, means that the company can employ some of its existing marketing as well as public relations strategies such as the use of social media in the new market (Colotla, Shi and Gregory, 2003).

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The nature of the fast-food industry is identified to rely heavily on service delivery as much as the products themselves (Liyanage and Barnard, 2003). This means that in as much as the company may have perfected its market research to identify the products that the new market needs, the managers have to ensure that they adopt local service delivery expectations and satisfy them (Lane and Lubatkin, 1998). The fact that the parent company already has clear service delivery structures that ensure that serving of customers especially during peak hours is as smooth as possible should ensure that the company maximizes its customers’ satisfaction in the new market (Fleury and Fleury, 2003).

Distribution

The channel of distribution adopted by a manager implementing a new global strategy should often be tailored to fit that specific market. There may be some aspects of the parent company that may be applied, but the basics should always be in reference to the new market (Rudberg and Olhager, 2003). There is a general need to identify the market trends in this case as well as cultural backgrounds in the market. This should ensure that the budgets formulated for the distribution of products is effective in satisfying the company’s goals.

The adoption of franchising, in this case, should allow the company to serve more customers while maintaining high customer service because of the fact that most of the employees interacting with the customers will be locals who understand the customers as well as the business dynamics of the new market. The nature of the fast-food industry does not allow a company to transport its products from one location to another and this calls for the adoption of franchising as a market entrance strategy.

This should ensure that the company manages to service all the main urban centers in the country without having to increase its investment budget (Brown, Dev, and Zhou, 2003). This should also serve to ensure that the line managers have a better understanding of the market forces that are inherent in this new market especially those related to customer preferences so as to identify the different customer needs and satisfy them effectively (Shi and Gregory, 1998).

Logistics

The procurement structures, in this case, may not be the same as those in other industries since there are few raw materials that the company can import into the new market considering the fact that most of the products that they are introducing into the market are perishable (Pontrandolfo and Okogbaa, 1999). There is a need to identify suppliers as soon as the company launches the market entry strategy to ensure that it has a constant supply of raw materials (Van-den-Bosch, Volberda, and Boer, 1999). This should also include the identification of product qualities that should be procured to ensure that the company maintains the high food quality standards that are associated with the brand all over the world (Chakravarty, Ferdows, and Singhal, 1997).

Risk and insurance

The identification, as well as the management of the risks that are inherent in the market, should also be among the first steps taken as soon as the company enters the new market (Albino, Garavelli, and Gorgoglione, 2004). The fact that the Vietnamese society, as well as the urban market, is highly perceptive of the business sector means that the social and political risks are quite manageable (Zhang, 2008). The procurement of appropriate business insurance cover should also serve to manage the economic and financial risks associated with the establishment of the company’s outlets in this new market (Shi and Gregory, 1998).

The setting up of a number of fast-food outlets in different locations as well as urban centers should serve to reduce the concentration risks involved with the failure of one outlet (Rudberg and Olhager, 2003). The fact that the company already has reliable international insurance partners who have served it well in the past means that their success in the new market may not be affected too much by the identified risks.

International trade pricing

The entrance into a new market may often warrant the evaluation of the whole portfolio of products that the company presents into the market (Temporal, 2011). This evaluation is not only limited to the nature of the products but also the prices of the same products to ensure that they are suited for that market (Liyanage and Barnard, 2003). The difference in the nature of international markets means that the brand perception that a company enjoys in one region may not be the same as the new one due to different cultural and personal orientations in the market (Brown, Dev, and Zhou, 2003).

The fact that the Vietnam region offers business cheaper agricultural raw materials, as well as labor, means that the company may be comfortable in adjusting its prices accordingly and still manage to maintain its intended profit margins (Ernst and Kim, 2002). The adoption of pricing as a marketing strategy should also serve to increase the performance of the company in the new market especially with the high price perception that exists among the Asian middle-class (Wesley, Levinthal, and Daniel, 1990).

Strategy evaluation

The need to evaluate the whole internationalization strategy as well as any other management and market entry strategies that the company may have applied in its quest to maximize its market share in the new market is advised by the fact that there has to be a measurement of the progress made or failure thereof (Lane and Lubatkin, 1998). There has to be a clear strategic audit that identifies the strengths and weaknesses that the company has in the new market (Brown, Dev, and Zhou, 2003). These can then be matched to the inherent market opportunities as well as threats to ensure that the company’s main strategy remains viable, and maintains its profit margins (Liyanage and Barnard, 2003).

The need to apply subsequent strategies that should serve to increase the performance of the company even further should be identified as key in the auditing of applied strategies to ensure that the success of market entry is consequently followed by growth strategies that will ensure that the company increases its capacity in the market (Pontrandolfo and Okogbaa, 1999). There may be the need to maintain some of the core strategies that define the McDonalds brand even though they may be in conflict with some of the cultural practices in the market (Schermerhorn, 2010).

Conclusion

The management of a new market should be approached from a strategic point of view where the main strategies and organizational structures that are already in application in the parent company, as well as in other international markets that the company already operates in, should be applied (Peng, 2010). However, there has to be some level of flexibility to ensure that the company has a positive footing in the new market by understanding the market forces as well as cultural preferences that exist in the new market (Ernst and Kim, 2002).

The nature of the business should also advise the strategic managers on the marketing as well as management strategies that they can adapt to ensure that they achieve their market targets. The key to succeeding in a new market is identified to lie mainly in the new manager’s ability to satisfy the new customer’s needs efficiently while maintaining the profits that were expected when choosing to enter the new market.

Reference List

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Brown, J., R, Dev, C., S, and Zhou, Z. 2003. ‘Broadening the foreign market entry mode decision: separating ownership and control’. Journal of International Business Studies. Vol 34. Pp 473–488.

Chakravarty, A., K, Ferdows, K, and Singhal, K. 1997. ‘Global operations and technology management: A note from the editors of the special issue’. Production and Operations Management. Vol 6(2). Pp 99.

Corolla, I, Shi, Y, and Gregory, M., J. 2003. ‘Operation and performance of international manufacturing networks. International Journal of Operations & Production Management. Vol 23(10). Pp 1184.

Dess, G, Lumpkin, G, and Eisner, A. 2009. Strategic Management: Creating Competitive Advantages. McGraw-Hill Irwin: New York.

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Fleury, A, and Fleury, M., T. 2003. International manufacturing strategies of TNCS as members of supply networks. Springer: New York.

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Lane, P, and Lubatkin, M. 1998. ‘Relative absorptive capacity and inter-organizational learning. Strategic Management Journal. Vol 19(5). Pp 461.

Liyanage, S, and Barnard, R. 2003. ‘Valuing of firms’ prior knowledge: a measure of knowledge distance’. Knowledge and Process Management. Vol 10(2). Pp 85.

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Peng, M., W. 2010. Global Business. Cengage Learning: Upper Saddle River.

Pontrandolfo, P, and Okogbaa, O., G. 1999. ‘Global manufacturing: a review and a framework for planning in a global corporation’. International Journal of Production. Vol 37(1). Pp 1-19.

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Stoll, M. 2007. Success in changing environments: strategies and key influencing factors. DUV: New York.

Temporal, P. 2011. Advanced Brand Management: Managing Brands in a Changing World. John Wiley and Sons: New York.

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