Since the business world has turned global, strategists’ efforts do not stop at the company level. Several global events in different parts of the world affect international business. While it is challenging to cope with interchanging circumstances, some cross-cultural management concepts might help you adapt swiftly.
Below, we will discuss those concepts and try to apply them to McDonald’s Corporation. But before we begin, knowing the pros and cons of entering the international market is equally important.
Pros and Cons of International Business
There are multiple benefits firms can gain from expanding outside the national borders. This expansion allows the firm to be subjected to new consumers and thus increase its market share and revenues.
Potential pros for Cross-border expansion include but are not limited to the following:
- Gain new customers for their products.
- Absorb excess capacity, reduce unit costs, and spread economic risks over broader markets.
- Establish low-cost production facilities in locations close to raw materials and/or cheap labour.
- Competitors may be less intense or even absent in comparison to the domestic market.
- Reduced tariffs, lower taxes, and favourable political treatment.
- A chance to be open to cross-cultural differences. Firms to learn other people’s technology, culture, and business practices.
- An opportunity to expand potential suppliers, creditors, and distributors in foreign countries.
- Economies of scale can be achieved from operations in global rather than solely Domestic markets.
- Larger-scale production and better efficiencies allow for higher sales volumes and lower-price offerings.
Potential Cons for Cross-border Expansion Include but are not limited to the following:
- The ability of the company to adapt to foreign social, cultural, demographic, environmental, political, governmental, legal, technological, economic, and competition.
- Cultural communication is difficult inside the firm because of different languages, customs, and beliefs.
- The ability to do detailed market research with accurate results regarding the competitors’ weaknesses and strengths.
- Being constantly updated regarding competitors’ status is challenging in international business.
- Managing more than one monetary system can complicate global business operations.
Cross-Cultural Management Concepts to Consider in Foreign Markets
There are three main concepts that you should consider when moving abroad:
- Building ethics culture.
- Abide by social responsibility standards.
- Ensure a sustainable approach towards the environment.
Below, we will discuss each item in detail.
Do you know the reason strategists’ expected salary is high? Have you thought about the responsibilities a strategist takes?
One of the strategists’ responsibilities is to build an ethical culture that maintains the firm’s position. They do that through developing, communicating, and setting the code of business ethics for their organisations. Managers in the same organization share with the strategists the responsibility for being role models through ethical leadership practices. Together, they communicate and develop the code of ethics that defines the firm’s internal culture.
Managers occupy roles that grant them the authority to exert influence and educate numerous individuals. Managers, as per their definition, bear the responsibility of formulating and executing ethical decision-making processes. Although specific ethical norms may vary across different communities, there exist overarching ethical principles that corporations must adhere to.
The foundation of business relationships predominantly rests on mutual trust and one’s reputation. This underscores the importance of providing ethics training to employees, featuring a message from the company’s owner or CEO. This approach aids in cultivating the essential ethical culture that aligns with both international and national standards.
Companies can synchronize ethical and strategic decision-making by integrating ethical considerations into their long-term planning efforts through the following steps:
- Incorporating ethical decision-making into the performance appraisal process.
- Develop an announced reporting method of unethical practices.
- Monitoring departmental and corporate performance regarding ethical issues.
“If business is not based on ethical grounds, it is of no benefit to society and will, like all other unethical combinations, pass into oblivion.”C. Max Killan
Cross-Cultural Ethical Decision-Making Challenges
When talking about cross-cultural differences, ethical standards are a controversial subject. We can agree that, for instance, stealing is against law and ethics, but what about controversial issues that differ from one culture to another?
Bribery, for example, is a crime in most countries, but some countries consider paying bribes and kickbacks acceptable. Bribery is a gift bestowed to influence a recipient’s conduct. The gift may be any money, good, object of value, or a promise to influence a person’s action in any domain.
There are many other examples; that is why, in your cross-cultural study, you cannot disregard the ethical standards of local communities to enter a foreign market. This action will help you in your endeavours to achieve the second concept, Corporate Social Responsibility (CSR).
Corporate Social Responsibility
Strategists are divided into two groups regarding corporate social responsibility. One group advocates that companies do not need to participate in non-legal practices. According to this group, the primary responsibility of any business must be to make enough profit to cover future costs.
The other group argues that one of the core responsibilities of any business is to influence and support social causes. However, strategists should examine social problems regarding potential costs and benefits to the firm. Accordingly, focus on social issues that could benefit the firm most.
To combine between both groups is the best option. Businesses have to be present on the ground but at the same time secure future revenues. For example, you can only donate to a charity if you have enough cash to pay your tariffs or salaries. Though this approach sounds logical, it is tricky when applied to multi-cultural organisations or franchises.
This cross-cultural dilemma will be discussed below in McDonald’s case study. The CSR topic paves the way to discuss the importance of environmental responsibility for any firm.
Sustainable Development Responsibility
When discussing sustainability, one often thinks of the United Nations Sustainable Development Goals (SDGs). These goals, introduced by the UN in 2015, serve as a guiding framework for humanity to address five crucial areas by 2030: people, planet, prosperity, peace, and partnership.
Companies and countries are now assessed based on their environmental practices. Adopting eco-friendly actions has become essential for the success of businesses in most communities. For instance, major corporations like Wal-Mart not only consider the prices offered by their suppliers but also scrutinise the production methods of the products they source. Maintaining a reputation as an environmentally responsible entity is highly desirable, both from a legal and public perception standpoint. Some governments even mandate the submission of sustainability reports.
This sustainability-oriented approach has a significant impact on both a company’s consumer behaviour and its legal standing. Consequently, it is a fundamental concept that warrants careful examination, particularly in cross-cultural contexts.
McDonald’s Franchise Case Study
McDonald’s is a global leader in fast food, with famous branches operating in various parts of the world. Their branches reached 36,000 branches. One of the aspects that helped in their ongoing success is their adaptation to cultural beliefs and solid social responsibility practices in any market they enter.
Integrating countries’ cultures into their business strategy is not an easy task in cross-cultural management. The company’s insistence on abiding by the local market codes allows it to maintain a competitive advantage.
How Has Mcdonald’s Maintained Success Among Different Cultures?
McDonald’s has carefully built a business model to follow in a cross-cultural management setting. Probably everyone has eaten the “happy meal” at least once. So, what are the main aspects of their business model?
We can answer this question by summing up their business efforts into 3 categories:
- Market segmentation that is tailored to each community.
- Social responsibility and awareness.
- Products are redesigned according to local cultural preferences.
Examples of McDonald’s Business Model
It is expected that McDonald’s has faced many challenges to achieve this huge success. Being an American company, studying the values of foreign communities is a must.
The Japanese generally consume more seafood and rice and less meat. Therefore, McDonald’s customised new menu items to accommodate their preferences. For instance, we can find a collection of newly invented burgers like Rice Burgers, Teriyaki burgers, and shrimp Burgers. As for the drinks and desserts, they added Seaweed shakers, green tea milkshakes, and ice cream.
The average German customer’s diet includes beer with meat. Through careful market research and remarkable adaptation techniques, McDonald’s redesigned their menu items to include a burger that combines beef with Nürnberger sausages. They also added beer to their drinks menu.
The Indians are a different culture altogether. Some communities in India consider cow meat sacred. Therefore, it was very challenging and risky for the burger industry. Mcdonald’s approach, as usual, was respect and adaptation. They introduced a vegetarian menu tailored to Indian customers’ tastes.
McDonald’s Focus on Social Responsibility and Sustainability
McDonald’s focuses on implementing a strategy that advocates sustainability. For example, they use low-energy white bulbs in their branches, and most of their packaging materials can be recycled. Additionally, McDonald’s focuses on supporting the local community in any country they expand to. They sponsor events, donate to charity, and so on.
McDonald’s Current Threats
A franchise the size of McDonald’s is constantly challenged with new threats. These threats need careful analysis by business strategists and swift accommodation to new conditions. Here are some examples:
- The rise of different competitors in the local market.
- The currency fluctuations.
- The advocacy for healthy food versus fast food.
- The constant political changes might conflict with the company’s position depending on the country.
As mentioned before, business ethics, social responsibility, and environmental sustainability are interrelated and vital strategic issues. The market and consumer behaviour study cannot be waivered for any franchise or international company penetrating a foreign community.