why does entry into a market occurs? course hero

Why do companies enter different countries for business?

Because of exchange rate it is possible that you end up paying different prices for same product in different countries. McDonald’s mainly open their shops in major cities targeting middle and upper class citizens as they can afford the prices. After this they start targeting lower middle class citizens.

Why is McDonald's a local company?

McDonald’s emphasize on local management for better responsiveness to the external environment. Moreover hiring locals would bring more acceptance of the company in local market by customers and company can gain easy access to bureaucracy associated with local government. This brings up the culture of innovation, accountability, and better customer responsiveness. Having local management also enables franchisee to address employees’ issues more effectively taking into consideration of local culture. Through franchise model McDonald’s are able to reduce the cost of setting up new businesses in different region.

What is political risk?

Political risk is that political decisions, events or conditions which may affect country’s business environment in ways that may affect the investments badly or may have to accept lower returns. The political risk factor is quite important for McDonald’s since there can be several countries which might not allow FDI in fast food industry or disallow franchise kind of business model.

How many McDonald's are there in Germany?

Germany has more than 1,200 restaurants and Australia has some 700 McDonald’s locations. The company’s footprint in France and England are also along similar line with 980 restaurants in France and more than 1,200 restaurants in the United Kingdom.

Where did McDonald's start?

The McDonald’s concept was introduced in San Bernardino, California by Dick and Mac McDonald of Manchester, New Hampshire. Later on, Ray Kroc, one of the business partners, of Oak Park, Illinois, modified and expanded the business, who subsequently bought the business to incorporate McDonald’s Corporation.

Who is Den Fujita?

Japan came as one of the most promising and initial success story in their path of international success, where Den Fujita, owner of an import company , became McDonald’s joint venture partner in 1971.

Why is it important to have a standardized system and process in place?

As a transnational company it is essential to have a standardized system and process in place for effective and efficient management of the businesses running in different territories. E.g. McDonald’s force standard operating procedures like make to order make to stock and just-in-time processes. Implementation and integration of ERP system across businesses of various countries and with business associates would standardization in their business processes. This would help McDonald’s reduce their cost, reduce manual work, more transparency and efficiency in information sharing, better responsiveness to stakeholders etc.

What are the problems that companies face when entering a new market?

When a company enters a new market, there are various problems it might encounter, such as, cultural differences . The whole concept regarding culture is quite wide and rather hard to comprehend. Companies have to take cultural differences into consideration, differences like; languages, religions, social standards and demographics. If the company has the information and knowledge it needs, the entering process and the cultural shock will be less painful. Mode of entry is also a vital matter for companies, for example what mode of entry is the best to use for the chosen market, and how to combine the mode of entry process with cultural differences .

What is the entry mode of export?

When using the entry mode of export the company’s products are manufactured in either the domestic market or in a third country and then directly or indirectly exported to the market in the new country. The use of export is the most common mode for company’s initial entry into a new market, and is a useful way of determining the markets growth potential (Ibid). Export is usually the typical way for companies to initiate entry to a foreign market which more and more evolves towards foreign-based operations. There are three major types of export channels, indirect export, direct export and cooperative export (Ibid).

Why is culture important to companies?

Culture differs from country to country and therefore poses a problem for companies, since due to it they have to plan their marketing strategy to fit the individual country’s culture in order to be successful. Since culture is a combination of values, beliefs and attitudes, what works in one country may not work in another. The tradition part of culture is one of the most important aspects of cultural differences, mainly so for food and beverages companies, since eating habits vary between different countries and cultures (Hill, 2007). Culture also plays an important role for companies when it comes to understanding customer behaviour and their decision-making process, so in the end culture affects people’s consumption (Jobber et al., 2006).

What does it mean when a company moves to a foreign market?

When a company moves to a foreign market, it must learn how to deal with that market’s particular culture. A country’s culture can mean its language, religion, norms and so on. A company needs to take many different factors into account when moving to a foreign market and certain markets are riskier than others. If a Swedish company would expand to Norway, there may not be that many cultural differences, but if the new market is South Africa for example, then certain questions regarding cultural differences would come up.

Where is the company Culinar located?

Culinar is a Swedish company, with the main office located in Fjälkinge in the south of Sweden. The company’s history goes back to the early 20th century, when the Svenska Stärkelsefabrikernas association was founded. This association assembled almost all of the 140 starch factories that existed at the time in the province of Skåne. In present time, Culinar is part of the Lyckeby Stärkelsen Group, a co-operative owned by about 1000 farmers from Southern Sweden. The company’s core business is “taste solutions”, meaning that it is manufacturing spices, seasonings and other things that can improve the taste of food. In 1991, Culinar made its first efforts to get into Eastern Europe, this through Latvia. Nowadays the company is present in many countries such as Russia, Poland and China (Culinar, 2008).

Who is the most famous author of cultural differences?

The most famous author is probably Hofstede , who has written several books on the subject. We are also looking at other authors’ work when writing the theoretical review. When choosing the information for the dissertation, we have three criteria that the literature has to meet. It must be

Why do we conduct interviews?

In order to find answers for our aim, we conduct interviews with some companies that have moved into the markets that are selected for our research. Those companies are picked because of various reasons, for instance our own knowledge of them. The interviews will hopefully give us a deeper understanding of the problem, and provide enough information to draw a good conclusion which can give other companies, thinking of moving to emerging markets, a helping hand. The interviews are held during personal meetings with representatives from the selected companies. Mostly, because we hope that a personal meeting will give us better understanding of the problem. If something is misunderstood during the interview, it will be easier to correct the error when sitting face to face with the respondent. The risky part of the interviews is of course the respondent, since he or she will be crucial for our research. It is up to a company to choose the representative, and we can only hope that the company will choose a person with a lot of important information on our field of choice.

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