Global Market Opportunity Harvard Case Solution & Analysis

Country Risk

McDonalds has grown globally and is also present in china but there are factors for McDonalds to consider or to be more specific, risk in the country especially political that will disrupt the operations of McDonalds in China. China offers political risk in many forms and although the country is politically stable and is a growing an attractive market for many private firms for manufacturing but the political risks in the recent years have grown. The risks in China are very hazardous and is a discouraging factor for foreign investors. Although McDonalds has settled himself in the Chinese market, but assessing the political risks that are likely to occur are important for McDonalds in order to specify their future in China.

Confiscation is a major issue that is being practiced in China and is an alarming situation for McDonalds. The government is on the verge of seizing the properties of the foreign investors and chains that brings McDonalds in a situation to revamp its expansion plans in China. Similarly expropriation is another big concern for McDonalds or any other business that is operating in China, as McDonalds sells products to customers through franchises and any acquisition of its franchises by government bodies will discourage local businessmen to do business with them. Also, these practices will disturb the operations of McDonalds and its aim to reach a larger consumer base.

On the other hand, the legal and political systems are also taken into account by McDonalds while formulating its strategies in China. McDonalds has been a global success, but operating in china is a bit different. China offers potential in many areas, but the political and legal conditions can offer constraints for foreign investors as the government emphasizes more on supporting the local or domestic market.

The tension between the central government and a provisional government is also a concerning factor for companies like McDonalds. The governments are in an argument for the adoption and the implication of laws that is creating confusion among foreign companies. The companies are not getting a clear direction about the law and are confused in following the law. The political condition is changing rapidly in China, which is increasing the political risks for McDonalds and other international chains in China.

On the other hand, the country has evolved from communism to socialism, and the authoritative style of governance is digested in the roots. This aspect is also a factor to concern while analyzing the risks. Foreign companies like McDonalds will have to suffer from this as the government involvement is likely to occur at some point of time. The involvement of government will hurt the business a great deal. On the other, the country is also under totalitarianism where the government holds authority over major aspects of social and private life. This is a major concern as the company will have to focus on establishing good relationships with the government to portray a positive image in the mind of consumers.

Besides these factors, the company has been suffering from corruption deeply which is a concerning factor for private firms like McDonalds. Corruption is deeply linked with foreign companies in China that is why the companies are hesitant to invest in China. China is a land of opportunities for firms wanted to enjoy low cost and high revenues. China offers cheap labor that is why major companies are shifting their production capacity to china. But for fast food chains like McDonalds china is an emerging market, but due to its political risks as mentioned above, the country is discouraging fast food chains like McDonalds to expand. China has a growing economy and size of the population is very attractive for fast food chains, but the political risks are a discouraging factor for such companies.

McDonalds has managed its global expansion strategy very effectively and has utilized opportunities offered by the global market. The company faced constraints and challenges in India as well and similar to China; India also offered many political risks. Although the company was able to settle there, but was not able to generate high revenues. Similarly, in China the company has to face additional challenges of confiscation and expropriation. These challenges or risks are very important to analyze as these will eventually destroy the companies aim to expand and explore the Chinese market. The authoritative nature of governance is also discouraging for McDonalds as the company wants to expand, but the interference from the government bodies is a factor hindering its growth. Besides these risks, corruption is a growing concern along with a weak legal system to handle the factor of corruption. Besides that the dispute or tension between local, provisional and central governments over the implication of laws is a confusing factor adding more risks to the cart................................

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