MNB3701 ASSIGNMENT , REPORT 3

MNB3701
Principles of Global
Business Management



REPORT 3

(UNIQUE NUMBER: XXXXX)


by


XXXXXX


(XXXXXXXXX)




DEPARTMENT BUSINESS
MANAGEMENT

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,DECLARATION




Note that the portfolio or any part thereof will not be marked if this
declaration has not been completed.



Declaration of own work




I hereby declare that the material which I now submit for this assessment is
entirely my own work and has not been taken from the work of others. Work that
was constructed from other sources has been duly referenced.




Full name and surname: XXXXX




Student number: XXXXXXX




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Table of Contents
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 ......................................................................... 13
Challenges trading internationally.................................................................................................... 15
Implication for management ............................................................................................................. 18
Foreign Direct Investment (FDI) evaluation ................................................................................... 19
Exchange rates ...................................................................................................................................... 22
Fluctuations in exchange rates and currency risk exposures ............................................................... 23
Strategies to manage exchange rate fluctuations ................................................................................. 23
Global, regional and bilateral economic integration ............................................................................. 25
Socially responsible business ................................................................................................................. 26
Conclusions ........................................................................................................................................... 29
References............................................................................................................................................. 31




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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
business sectors towards BRICS community. Regardless of these challenges,


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