DISCLAIMER
The MNB3701 Report 2 is a framework that students can use to understand the
concept and important steps to complete assignment 4. In this sense, the
document gives examples and explanation of a real company that can be
changed to suit students needs. For further assistance contacts are a s follows:
CONTACT NUMBER:
071 751 3144
EMAIL
i|Page
,0717513144 MNB3701 report 2
Table of Contents
DISCLAIMER.......................................................................................................................................... i
Executive summary ................................................................................................................................. 1
Background ............................................................................................................................................. 3
Literature search ..................................................................................................................................... 5
Institution-based view ............................................................................................................................ 5
Formal institutional framework .............................................................................................................. 5
Informal institutional frameworks .......................................................................................................... 8
Resource-based view ........................................................................................................................ 11
Resources in McDonald’s South Africa .......................................................................................... 11
Evaluation of McDonalds’ resources using VRIO ......................................................................... 14
Challenges trading internationally.................................................................................................... 15
Implication for management ............................................................................................................. 18
Foreign Direct Investment (FDI) evaluation ................................................................................... 19
Conclusions ........................................................................................................................................... 22
References............................................................................................................................................. 23
IMPORTANT NOTES TO CONSIDER ........................................................................................................ 27
2
, 0717513144 MNB3701 report 2
Executive summary
Over the past years, enormous expansion has been evidenced in business
environment with many business trading and operating beyond the borders of their
home countries, leading to increased international trade flows. This resulted in
formation multinational entities such as McDonald’s which is the focus of this report.
McDonalds is one of the food giants in South African fast food industry. The company
originates from America, and has operations in many countries globally. The company
entered the South African market in 1995. Since then, the company has managed to
defend and sustain its existence in the country. McDonald’s has successfully grown
and to date has more than 300 outlets in all 9 provinces of South Africa. Over these
years of success, the company has encountered various threats and opportunities
from the political, economic, cultural and social environment in South Africa. With
bundle of its resources, the company managed to seize various opportunities, and
overcome a number of challenges, although it had some weaknesses in certain areas
with increased the severity of challenges and sometimes failed to grab the
opportunities.
This report revealed that growth and success of international business is strongly
dependent on external and internal forces. These forces are viewed from two
perspectives namely institution-based perspective and resource-based perspective.
With a specific focus on the case of McDonalds, the implication of organisational
resources and various forces within the institutional framework such as legal systems,
socio-economic forces, politics, and various elements of culture were appraised. The
four identified resources of McDonalds are human resources, physical assets,
reputation and capabilities in marketing and production. While McDonalds has
continued to strive in the turbulent economy of South Africa, its resources have proved
to give a mild advantage to the firm over its competitors. However, the company has
suffered various blows from institution perception. In the early years after
independence, McDonalds has benefited from the country’s opens policy which saw
many foreign investment companies including McDonalds coming to South Africa.
However, later on there was change in economic focus of South Africa from foreign
investment to local investment and the country also shifted its trade flows in various
1
The MNB3701 Report 2 is a framework that students can use to understand the
concept and important steps to complete assignment 4. In this sense, the
document gives examples and explanation of a real company that can be
changed to suit students needs. For further assistance contacts are a s follows:
CONTACT NUMBER:
071 751 3144
i|Page
,0717513144 MNB3701 report 2
Table of Contents
DISCLAIMER.......................................................................................................................................... i
Executive summary ................................................................................................................................. 1
Background ............................................................................................................................................. 3
Literature search ..................................................................................................................................... 5
Institution-based view ............................................................................................................................ 5
Formal institutional framework .............................................................................................................. 5
Informal institutional frameworks .......................................................................................................... 8
Resource-based view ........................................................................................................................ 11
Resources in McDonald’s South Africa .......................................................................................... 11
Evaluation of McDonalds’ resources using VRIO ......................................................................... 14
Challenges trading internationally.................................................................................................... 15
Implication for management ............................................................................................................. 18
Foreign Direct Investment (FDI) evaluation ................................................................................... 19
Conclusions ........................................................................................................................................... 22
References............................................................................................................................................. 23
IMPORTANT NOTES TO CONSIDER ........................................................................................................ 27
2
, 0717513144 MNB3701 report 2
Executive summary
Over the past years, enormous expansion has been evidenced in business
environment with many business trading and operating beyond the borders of their
home countries, leading to increased international trade flows. This resulted in
formation multinational entities such as McDonald’s which is the focus of this report.
McDonalds is one of the food giants in South African fast food industry. The company
originates from America, and has operations in many countries globally. The company
entered the South African market in 1995. Since then, the company has managed to
defend and sustain its existence in the country. McDonald’s has successfully grown
and to date has more than 300 outlets in all 9 provinces of South Africa. Over these
years of success, the company has encountered various threats and opportunities
from the political, economic, cultural and social environment in South Africa. With
bundle of its resources, the company managed to seize various opportunities, and
overcome a number of challenges, although it had some weaknesses in certain areas
with increased the severity of challenges and sometimes failed to grab the
opportunities.
This report revealed that growth and success of international business is strongly
dependent on external and internal forces. These forces are viewed from two
perspectives namely institution-based perspective and resource-based perspective.
With a specific focus on the case of McDonalds, the implication of organisational
resources and various forces within the institutional framework such as legal systems,
socio-economic forces, politics, and various elements of culture were appraised. The
four identified resources of McDonalds are human resources, physical assets,
reputation and capabilities in marketing and production. While McDonalds has
continued to strive in the turbulent economy of South Africa, its resources have proved
to give a mild advantage to the firm over its competitors. However, the company has
suffered various blows from institution perception. In the early years after
independence, McDonalds has benefited from the country’s opens policy which saw
many foreign investment companies including McDonalds coming to South Africa.
However, later on there was change in economic focus of South Africa from foreign
investment to local investment and the country also shifted its trade flows in various
1
