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International Financial Management Essay

1423 words - 6 pages

---------------------------------------------- International Financial Management
Session 2010-2011
Non-accessed Coursework

A Report of McDonald’s in Terms of Internationalization

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The basic unit remains the nation, even as relations among nations become increasingly necessary and important.” Whilst J. Michael Geringer, Paul W. Beamish, Richard C. daCosta stated that an important phenomenon within international business is the increased role of multinational enterprises (MNEs), particularly large multinationals. However, what are multinational corporations (MNCs) or enterprises (MNEs)? Pitelis and Roger state that “an MNC is fundamentally an organization that extends employment contracts over national boundaries. In other words, the distinguishing characteristics of MNCs are their use of hierarchical methods of coordination (managerial directives) to organize cross-national interdependencies.”
2.2 The expand method of McDonald’s
This passage will discuss the internationalization and financing activities basing on McDonald’s. It is known to all that McDonald’s is a famous fast food restaurant in the world. It was opened by Dick and Mac McDonald in 1940, named McDonald’s Bar-B-Que restaurant and in 1948 it was founded formally with the name “McDonald’s”. It also offered self-service drive-in services and focused on only nine items of food at that time. Cheeseburgers are the most representative. Then in 1949, McDonald’s was the first restaurant which replaced potato chips with French Fries. In the 1950s, the originators of McDonald’s have an idea of expanding their business by nationwide franchising agent. By 1965 there would be over 700 McDonald’s restaurants through the United States and in the year 1967, the first international McDonald’s restaurant opened in Canada whilst today McDonald’s restaurants are in 118 countries around the world.
During the developing of McDonald’s, it benefits from government zoning laws, to create barriers to entry because of the imperfect market. Trade barriers refer that impositions are used by many host countries trying to encourage inward investment. Multinationals set up local production facilities to protect an already developed export market when trade barriers are erected or mooted. (Adrian Buckley, 2004) Government policy is another factor caused by imperfect market. This may have a significant effect on the investment climate in a particular host country, either directly through fiscal investives, monetary policies or the regulatory regime, or indirectly through the prevailing social environment.
In addition, it also has firm-specific advantages. For example, Due to its powerful advertisings, when people talk about the McDonald’s, almost everyone will know that it is a fast food restaurant and the attractive logo of “M”. To some extent, eating McDonald’s has become a fashion style.
Besides that, McDonald’s take the advantages of location-specific as well. For instance, it expanded the market to Asian because of the large consumer market and cheap labour cost. The managers of McDonald’s also consider about the different tastes for people in different areas leading the...

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