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BTEC Business Studies 
5.3 

 
MODEL ANSWER 

Strategic and Operational Approaches to 
Developing International Trade 

 

 

McDonald’s (MCD) 

 
 
 
 
 
 
 
 
 
 
 
McDonald’s is a fast food, limited service franchise with over 35,000 restaurants in                         
more than 100 countries. This global giant employs more than four million people                         
worldwide. McDonald’s serves 70 million customers per day, generating a total of                       
$75.18 million daily.  
 

McDonald’s serves a variety of burgers which alternates with special promotions,                     
alongside their famous fries and a range of branded drinks, such as Coca-Cola. They                           
also sell desserts including Apple Pies and McFlurry ice creams. Generally, their                       
menus vary (in size, options, etc) depending on which country the branch is located                           
in. 

McDonald’s operates in the tertiary sector because they sell their own products                       
themselves. The company operates on a nearly global basis; countries which they                       
don’t operate in include North Korea, Zimbabwe, Iceland and a few more.                       
McDonald’s supply chain is local for meat and vegetable/fruit suppliers, while coffee                       
beans are sourced from South America. McDonald’s serves the food and retail                       
market. 

 
McDonald’s opened their first UK branch in 1974, which has since then expanded to 
1,250 restaurants in the UK. The main method of expanding their business 
internationally is through franchising, along with using licensing from other 
companies to make new products. 

In the UK, there are around 1,250 restaurants with 600 being franchises. Many                         
franchisees own multiple McDonald’s branches. For example, Paul Crocker is the                     
franchisee who owns all restaurants in Dover, Canterbury and Thanet, as well as the                           
Ashford Designer Outlet McDonald’s restaurant. 

 

MCD have also used licensing to create new products under their own name. Their                           

McFlurry range in the UK includes Oreo, Dairy Milk, Toffee Crisp and many more                           
options which rotate throughout the year. They have also used                   
licensing/partnerships for their drinks range, including their famous partnership with                   
Coca-Cola which has been ongoing since 1955. 

The McDonald’s menu f​eatures a wide selection of meals, snacks, drinks, and more.                         
This includes their most famous burgers, the Big Mac, Chicken Legend,                     
Cheeseburgers and many more. The different options available at McDonald’s                   
depend on the country in which the branch is located. ​The Big Mac was introduced in                               
the Greater Pittsburgh area, USA, in 1967 and nationwide in 1968. It is one of the                               
company’s most recognised signature products. It consists of 3 buns, 2 beef patties,                         
pickles, onions, lettuce, tomato, cheese and Big Mac sauce. 

Big Mac 
 

Chicken McNuggets are a type of chicken product offered by McDonald’s, which they                         
introduced in 1983. They consist of small pieces of processed chicken meat that                         
have been battered and deep fried. In the UK, McNuggets can be purchased as a part                               
of a Happy Meal (4), as a regular/large meal (6) or as a box of 6/9/20. 

 
 
 
 
 
 
 
 
 
 

 
 
 

The McDonald’s menu varies around the world due to different cultures, legislations                       
and religious aspects in different countries. For example, marketing used for                     
McDonald’s in India is focused more on vegetarian consumers due to the religious                         

customs of the country but also features meat burgers inspired by Indian cuisine,                         
such as the Chicken Maharaja Mac, the Indian equivalent of a Big Mac. McDonald’s                           
also adapts their own burgers to a traditional meal in that country. In Germany,                           
McDonald’s offers the ​Nürnburger, a mini bratwurst sandwich. 

 

McDonald’s drinks range offers a variety of carbonated beverages in different sizes                       
as well as hot and bottled drinks. Their most popular drink is Coca-Cola, the                           
carbonated drink company which has had a partnership with McDonald’s since 1955.                       
In many countries, beer is also available for purchase. This includes Germany, Spain,                         
South Korea, Holland, Portugal and many others. 

 
 
 
 
 
 
 
 

 
The McDonald’s Apple Pie is a crispy pie filled with hot apple chunks which is deep                               
fried. In the US and other countries, customers can choose between deep fried and                           
baked pies. 

Baked (US) Fried (UK) 
 
 
 
 
Many 

McDonald’s processes and products have         
been adapted to better suit different           
countries and cultures. For example, in India             

instead of the Big Mac, McDonald’s serves the Chicken Maharaja Mac, a poultry                         
version of their classic burger. This is due to the Indian culture and religion, which                             
prohibits eating beef. In the US, customers can order baked apple pies, as it is a                               
traditional dessert in the country. In some countries where the legislation for alcohol                         
may be different, McDonald’s serve alcoholic beverages, particularly beer. In general,                     
McDonald’s tends to adapt different items in their menus to different countries as                         
well as adding new and exclusive items to that country. By doing this, they have                             
shown great flexibility as well as an understanding of different cultures. It has also                           
demonstrated that customers are not only just numbers to the company; they                       
actually take their feedback into consideration in order to perfect their services and                         
menu to their consumer base. 
 
 
Subsidiary Business  
A subsidiary business is where a parent company owns 50% or more of another company’s                             
shares. The parent company controls the subsidiary business but they are still able to                           
expand overseas. The subsidiary must pay taxes and follow the laws of the country relevant                             
to them. Companies can expand overseas by establishing a subsidiary business in a                         
different country or by purchasing the rights of another company. Youtube is a subsidiary of                             
Google. The advantages are reduced risks, enables businesses to expand internationally,                     
and subsidiary businesses can use the experience/knowledge of the main business and vice                         
versa. The disadvantages are local knowledge may not be suited for the parent company                           
and some may disagree with being taken over as a subsidiary company by a parent                             
company, leading to disagreements 
  

Joint Venture  
A joint venture is a limited time contractual agreement between two businesses for a mutual 
gain. For example, businesses can share expertise and information to reduce risks. The 
most common type is when producers enter a joint venture with suppliers (e.g.: farmers and 
supermarkets). The 2008 joint venture launched by NBC Universal Television Group ,21st 
Century Fox and The Walt Disney Company to create the enormously popular video 
streaming website “Hulu” is one example of a large scale partnering of companies that has 
been very profitable.The advantages of a joint venture are that it allows for business growth 
without borrowing money, increases the capacity of the companies involved and risks can 
be dealt with by both companies. The disadvantages are that there may be communication 
problems, there may not always be an equal distribution of power and knowledge between 
both companies and cultural differences between the businesses may lead to 
disagreements. 
  
Partnerships  
Partnerships are similar to joint ventures but they are usually indefinite and create a closer                             
pact between the two businesses through legal processes. In partnerships, profits, liabilities                       
and resources (physical and human) are all shared between the two businesses. Firms in                           
partnerships work almost as one combined company. An example of a partnership is Uber                           
and Spotify; this allows passengers to enter an Uber car and listen to their Spotify playlists                               
during their journey. The advantages are that it is easy to establish and start-up businesses                             

(costs are low), more capital is available for the businesses and income splitting can be                             
done as it is an advantage due to resultant tax savings. The disadvantages are that the                               
liability of the partners for the debts of the business is unlimited, each partner is ‘jointly and                                 
severally’ liable for the partnership’s debts; that is, each partner is liable for their share of the                                 
partnership debts as well as being liable for all the debts, there is a risk of disagreements                                 
and friction among partners and management and each partner is an agent of the                           
partnership and is liable for actions by other partners. 
  
Agencies  
Agencies are specialist organisations which help businesses to expand internationally by                     
providing certain services or products. For example, some organisations will help                     
businesses with customs while some can translate contracts and other business related                       
documents. The CIA is a type of agency whose primary mission is to collect, analyze,                             
evaluate, and disseminate foreign intelligence to assist the President and senior US                       
government policymakers in making decisions relating to national security. The advantages                     
are they can exchange information and contacts internationally, identifying opportunities                   
internationally is easier and companies can keep international control of products in new                         
countries. The disadvantages are loss of control in marketing and additional costs such as                           
distribution costs. 
 
Licensing  
Licensing is an agreement that allows businesses to manufacture another business’                     
product. Licensing can give permission to another business to sell services, expertise or                         
even ideas on behalf of the licensor. Licensing agreements can be used to cover copyright                             
patents and other forms of agreements. Disney is a prime example of licensing; companies                           
use their brand image and recognisable characters to sell a certain product, such as clothing                             
or toys. The advantages are support is available for the licensee, it is easy access to new                                 
markets for licensor and low investment required in expansions in new countries. The                         
disadvantages are that licensors can lose track of production and licensees can damage the                           
reputation of licensor if the process is not carried out properly.
 
Franchising  
Franchising is an agreement where businesses pay to run a franchise of their original                           
business in another country. The franchisor distributes their goods through a legal                       
agreement to the franchisee. Franchising is a popular method of expanding and has been                           
used by many businesses, especially fastfood and takeaway restaurants such as                     
McDonald’s and Pizza Hut. The advantages are that ​franchises offer the independence of                         
small business ownership supported by the benefits of a big business network, business                         
experience is not required to run a franchise – franchisors usually provide the training you                             
need to operate their business model, franchises have a higher rate of success than start-up                             
businesses, it is easier to secure finance for a franchise. It may cost less to buy a franchise                                   
than start your own business of the same type and franchises often have an established                             
reputation and image, proven management and work practices, access to national                     
advertising and ongoing support. The disadvantages are that buying a franchise means                       
entering into a formal agreement with a franchisor, franchise agreements dictate how you                         
run the business, so there may be little room for creativity – there are usually restrictions on                                 
where you operate, the products you sell and the suppliers you use, bad performances by                             
other franchisees may affect your franchise’s reputation, buying a franchise means ongoing                       

sharing of profit with the franchisor and the franchisor do not have to renew an agreement at                                 
the end of the franchise term. 
  
Subcontracting  
A business practice where the main contractor hires additional individuals or companies                       
called subcontractors to help complete a project. The main contractor is still in charge and                             
must oversee hires to ensure the project is executed and completed as specified in the                             
contract. Chiplime is a British subcontracting construction company. They acquire contracts                     
for large scale projects, such as the Emirates Stadium, then subcontract other companies to                           
complete the project that they were assigned. The advantages are that this method is useful                             
for specific projects, low investment required, lower costs due to self employment of                         
subcontractors and fixed costs for the contractor. The disadvantages are that it is expensive                           
in the long term, there is less loyalty from subcontractors, loss of control from the service                               
provided is possible and less motivation from self contractors. 
 
Outsourcing 
Outsourcing is a method of choosing an external agency to perform certain services or                           
provide certain products. This includes payroll systems, call centres, telesales, etc. An                       
example of a famous outsourcing company is IBM, a firm which specialises in technology                           
outsourcing services such as credit/debit card readers. The advantages are that the                       
outsourced vendors have specific equipment and technical expertise, most of the times                       
better than the ones at the outsourcing organization. Effectively the tasks can be completed                           
faster and with better quality output. ​Outsourcing certain components of a business                         
process helps the organization to share many responsibilities with the outsourced vendor.                       
The disadvantages are that when an organization outsources HR, Payroll and Recruitment                       
services, it involves a risk of exposing confidential company information to a third-party.                         
Outsourcing can be very cost effective, but at times there are many hidden costs regarding                             
signing contracts internationally. 
 
 
 
 
I believe that McDonald’s has used franchising effectively because their image is very easy                           
to sell, therefore people will be attracted to their restaurants. This will also persuade                           
franchisees to take the McDonald’s franchise on and invest in the company, which is                           
beneficial for McDonald’s in many different aspects. Expertise and intellectual costs have                       
been well spent because McDonald’s is able to understand international markets in depth                         
and adapt their menus and restaurants to different countries. McDonald’s has also invested                         
heavily in staff training in order to be able to run their restaurants efficiently, interact with                               
customers in the correct manner and ensure the safety of the food produced in the kitchens.                               
The company’s organisational structure is both centralised and decentralised; the menu for                       
all the McDonald’s restaurants in one region or country is the same but they differ from other                                 
countries due to religious/cultural reasons. Furthermore, decisions made by managers from                     
each restaurant are adapted in order to apply the most suitable solution to their problem.                             
This is very effective because it allows McDonald’s to be versatile and adaptable while still                             
maintaining their image and original values. 
 
 
 

 
 
Influencing Factors of International Businesses 
 
Organisation is the structure and coordination of systems. It includes the formal 
arrangement of roles, responsibilities and relationships within an organization. Organisation 
is a tool which relates to the strategy of companies and is a success factor that is greatly 
important. In companies, organisation is used for hierarchical role structures. In international 
businesses, multiple hierarchical structures must be produced which determine the roles of 
different districts, regions and whole countries. 
 
Capital Costs 
 
Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings,                         
construction, and equipment used in the production of goods or in the rendering of services.                             
It is the total cost needed to bring a project to a commercially operable status. Examples of                                 
capital costs include land on which the project is built, permits and licenses, work equipment                             
and more. 
 
Capital costs are costs that represent high levels of investment in permanent assets that are                             
required to operate the business. Businesses must be able to determine the appropriate way                           
of investing; these capital costs include franchising or licensing and many other methods of                           
investment. 
 
Revenue Costs 
Revenue costs are the costs which businesses must consider when expanding. These costs                         
are paid using the revenue generated from sales of their service(s) and/or product(s). This                           
includes wages for staff, rent, advertising, utilities, raw materials and any other extra costs. 
 
Expertise/Intellectual Capital Costs 
Expertise and intellectual capital is the cost of expert knowledge from specialised staff                         
working in a company. These are skills that have either been developed through training and                             
experience, however, companies can hire staff who are specialists in certain areas of work. 
 
Training Costs for Local Labour 
Training costs for local labour are the costs for training new staff in different countries or                               
the training for current staff in order to adapt to new environments. Companies must invest                             
in staff training, especially in international markets, in order to maintain their versatility in                           
different markets. This includes training on how to operate machinery, sales training or how                           
to offer specific services or products. 
 
Organisational Structure of International Business 
Organisation is the structure and coordination of systems. It includes the formal 
arrangement of roles, responsibilities and relationships within an organization. Organisation 
is a tool which relates to the strategy of companies and is a success factor that is greatly 
important. In companies, organisation is used for hierarchical role structures. In international 

businesses, multiple hierarchical structures must be produced which determine the roles of 
different districts, regions and whole countries. 
 
Centralised Decision Making 
Centralised decision making is the process of undertaking all decisions from the core of the                             
business. Companies offering a branch or franchise in another country control many aspects                         
of their operations such as the products, services, packing and delivery method. However,                         
there are many disadvantages to centralised decision making in international business;                     
many aspects of a business in one country may not be equally appropriate for a different                               
country. 
 
Decentralised Decision Making 
 
Decentralised decision is the opposite of centralised decision making. This means that                       
decisions are made by local managers for their branch of a franchise in order to make the                                 
most appropriate decisions. The authority for decision making entirely depends on the                       
structure and hierarchy of a business, it is what permits people in certain roles to undertake                               
important decisions. 
 
 
McDonald’s has used a variety of different strategies and resources in its US market in order                               
to expand exponentially and eventually become a multi-billion business. Their main method                       
for expansion was the franchising strategy, where franchisees can start a business under                         
the franchisor’s name. Currently there are over 14,000 franchises in the US and the main                             
reason for this global presence is because of McDonald’s friendly and almost nostalgic                         
image which attracts customers to their restaurants every day. Franchising has allowed the                         
company to generate a large amount of income, most of which is used to continuously                             
expand. Their capital has been well invested in order to continue opening new locations all                             
over the US. Their expertise and thorough analysis of the American market has allowed                           
McDonald’s to determine the correct menu items, size and service that should be provided to                             
customers. The reason for the difference between US sizes and other global counterparts is                           
because people in different countries have different dietary needs. This differentiation has                       
been proven to be effective because although the resources required to make a normal meal                             
are increased, their prices are proportionate to the meal and the average consumer will likely                             
still purchase these meals. McDonald’s has invested into employee training heavily in                       
different markets, especially in the US where their largest consumer base resides.  
 
Their customer service, which revolves around being fast and friendly, understanding                     
customer needs and enjoying their job, is what makes McDonald’s employees provide                       
customers with the best service possible. They are also trained to work in a team dynamic,                               
with different sections of the restaurant working together as one. For example, the kitchen                           
must have good communication with the front counter to ensure that specific details are                           
met in order to satisfy the customer as much as possible. Similarly, the kitchen must                             
communicate with workers managing the stock, so that they may continue to operate the                           
kitchen with no interruptions. 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
Resources 
 
(​https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEwjQsN_jytjTAhXJLMA
KHb-uCE8QFggqMAE&url=https%3A%2F%2Fen.wikipedia.org%2Fwiki%2FYouTube&usg=AFQjCNH_w4Qq-f5VqQvuml2XvpP2x6

a5kA​) 
 
(​https://legaldictionary.net/joint-venture/​) 
 
(​https://www.forbes.com/sites/michellegreenwald/2014/12/11/11-of-the-bestsmartestmost-interesting-strategic-brand-partn
erships-of-2014/#261e7a3738f8​) 
 
(​https://www.cia.gov/about-cia/todays-cia/what-we-do​)  
 
(​http://www.licensemag.com/license-global/top-100-licensors​) 
 
(​http://www.franchisedirect.com/top100globalfranchises/rankings/​) 
 
(​http://www.chiplime.com/projects.php​) 
 
(​http://www.supplychaindigital.com/scm/top-10-outsourcing-companies-world​) 

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