Mgt 448 Week 4 Final Global Business Plan

Final Global Business Plan
MGT/448
April 28, 2014
Laura Dickerson, Facilitator

Final Global Business Plan
McDonald’s is a fast growing international business that desires to attract customers in all countries and cater to their needs, wants, and desires. Many countries include the American Cultural Icon that McDonald’s has created but not all desire the soy and beef products, so McDonald’s has decided to cater based on the specific countries desires. When an organization decides to go international, unfamiliar political and governing regulations are presented. The new organization will be considered an outsider and will receive much suspicion from the natives as to how this new venture will operate in their country. As will be obvious throughout this paper McDonald’s is really the king of adapting its business to the various cultures of the countries they operate in. This paper will summarize the findings from previous Learning Team assignments, and include the rationale for selecting a target country based upon previous learning team Country Risk Analysis. This paper will determine the marketing mix specific to the selected global product and service and explain the choice of marketing mix. A marketing plan that addresses product modification,
pricing, promotional programs, distribution channels, and e-business for North Korea to include market indicators and trends for the product and service. * This paper will present a financial overview for the global venture by including a chart that * represents the general budget for the global venture.
This paper will explain how the company * deals with foreign exchange risk for the global operation. Potential domestic and international * sources of financing for the global venture will be identified by including at least two possible * financial institutions within your chosen region. This paper will describe the degree to which the * organization operates as a centralized versus decentralized organization including a chain of * command chart to illustrate how communications would reach senior management from the
field * when events necessitate changes in tactics or strategy. This paper will unfold what types of exit * strategies would be most appropriate for the global venture, strategies to consider will include * divestiture of assets, handing over to a joint venture partner, diversification, shutting down * operation, and contingencies for your global venture. Last, the paper will make final * recommendations base upon findings about the feasibility of this global venture, if to proceed * with the global venture, and an explanation of why or why not.
Regional & Country Analysis
According to Bajoria and Xu, (2014), “China is North Korea 's most important ally, biggest trading partner, and main source of food, arms, and fuel” (1). Regional alliances and economic integration would help bring direct profits to North Korea, and improve infrastructure, earn foreign currency, upgrade production facilities, and management qualifications. A physical environment influences political and economic activities. According to "North Korea" (2014), “North Korea remains isolated from most of the rest of the world” (1). However, recently small attempts to open the economy may turn into reality. The absence of a functioning tax system and an exhausting military budget leave insufficient funds for much else, and monetary instability among workers. The government regulates everything. Dreams of owning companies in the private sector are quickly thwarted. Regardless of how hard one works, the state determines the wage. The financial environment is controlled by the state too. Limited investment opportunities are given on a case by case basis. The absence reigns true for both companies looking to gain internal access, and inhabitants looking for external opportunities. As far as terrorism threats, crimes against humanity do exist with a very corrupt state at its core. Little is understood of the cultural activities regulated by the state. The country claims to be a classless society with ordinary families divided into ranks of origin by history or revolution origins.
China gives much attention to North Korea and is noted as its economic support. Although China has great interest in North Korea, there is minimal to no interference in the internal affairs regulations of the country which, this causes great concern and unbelief from the other countries in the region, if China really cares about North Korea’s growth and development.
China ‘s primary interest for North Korea is for the country to be stable and self-supportive not to allow a collapse of its political strength as this will give room to an uncontrollable non-immigrant persons wishing to cross the border. North Korea has another significant challenge with the other regional countries and the United States of America with its nucleus weapons program. Repeatedly the head of the country has been persuasively asked to stop the program to achieve a unified, collaborative political, economic social structure Singh, 2012).
A company’s political risk is said to be the loss of its assets, or loss of the power it has to control due to political events or actions of the government. When an organization decides to go international, unfamiliar political and governing regulations will be presented. The new organization will be considered as an outsider and will receive much suspicion from the natives as to hoe this new venture will impact the country.
North Korea is experiencing the most notable political unrest since former leader Kim Jong-Il died 2011. It appears as if the government does not have a strategic plan in place to boost growth and development in the country.
Organization and service analysis
It is evident the people of North Korea have the desire to eat a McDonalds Restaurant franchise open with a full menu of succulent fast food meals especially the hamburgers. This significant move will make history in the country as the first international hamburger fast food chain. In 2009 the natives were disappointed when fast food restaurant, Samtaesong Diner opened without hamburgers on the menu instead; customers were served an imitation minced beef with bread to the dis-like of many (Moore, 2009).
Many of the North Korean business persons and natives frequent the United States and other countries that have the McDonalds Restaurant franchise therefore they know the great taste and variety of burgers available.
McDonalds is a fast growing international business that desires to attract customers in all countries and cater to their needs, wants, and desires. Many countries include the American Cultural Icon that McDonalds has created but not all desire the soy and beef products so McDonalds has decided to cater based on the specific countries desires. One example lies within Muslim countries as they offer a chicken Big Mac as opposed to the beef most of us are accustomed to. North Korea is a prime example of how McDonalds implements their unique ability to appeal to various nations.
Globalization has been like an epidemic spreading across the business world in the last few decades. There is no denying that the true pioneers of spreading their business internationally have been the fast food industry. No other industry has had the perfect combination of staying true to its business roots but at the same time adapting themselves to the different countries they operate in better than the fast food industry. No matter where you go in the world you can get a Big Mac and it will taste exactly the same as it does here, but there are also many different options that customers in the United States would have no familiarity with. As will be obvious throughout this paper McDonalds is really the king of adapting its business to the various cultures of the countries they operate in.
In almost every measure of prosperity, North Korea lags far behind most other countries. Barbara Demick points out in her book nothing to envy: real lives in North Korea that "if you look at satellite photographs of the Far East by night, you 'll see a large splotch curiously lacking in light. This area of darkness is the Democratic People 's Republic of Korea" (Demick, 2010, page 3). The country has a strong centrally-controlled economy that aims to be full autarkic but falls short in many respects. The average salary in North Korea is a meager US$47 per month and food rations are essential for survival in most parts of the country and this is what makes McDonalds a needs based company.
Nevertheless the economy is slowly improving and GDP has risen steadily over the past decade: the 2009 growth rate, for example, was 3.7% (129th in the world), which was actually stronger than the same rate in many developed nations such as the United States (160th) and the United Kingdom (189th) (CIA, 2010). This has to be taken in the context of the considerable global recession that has been in play since 2008, the results from which North Korea was largely shielded due to its insularity. In general terms, the North Korean economy is still far poorer than most other Asian nations.
Political Legal & Regulatory Risks
North Korea is statistically high on the list of countries considered to be controversial in its governance, isolated from the modern practices of investing, and very dangerous in regards to human rights and social responsibility. The country government is fully aware of the challenges of attracting foreign investment and is making positive strides address the issues preventing global marketing.
The country has establishment economic zones in strategic locations of the country with unique laws in each. These zones are supervised by an Economic Zone Development Officer within the Cabinet. North Korea is presently in the preliminary stages of establishing its administrative and industrial region to revive the collapsed economy.
Over previous years, North Korea’s economy has declined eventually collapsing. During the last ten years of the twentieth century, the country had negative economic growth contributed mostly to the diminishing trade environment. During the early years of the twentieth century, the Soviet Union was North Korea’s primary trading partner until that ended with the Soviet seeking more profitable regions.
North Korea’s government pursuit to attract global investors implemented various projects in Sinuiju and Gaeseong together with appointing a wealthy international Dutch administrator with a Chinese background. This move was a very desperate and significant one with all attempts to revive and change the segregated, suffering and non-profitable economy of the country.
North Korea political arena operates under the centralized principle. The outdated constitution assures the people of protection against unethical political behaviors and victimization. To the contrary the government intimidates the natives with forceful control. Even though persons predict North Koreans will eventually suffer a drought inclusive of starvation, the country has remained hopeful. The new leader Kim Jong-un is very concern about the wellness of the natives with much interaction with them. The approach of the new leader provides much hope for the economic structure, regularization of international relations and investments, minimizing risk of future international ventures.
The foreign exchange risk includes, exchange rate risk, interest rate risk, and country and liquidity risk just to name a few of the major risk. For investors, it is important to understand the risks in the international market trade. The significant risk like exchange rate risk can be damaging to an investor portfolio because it is based on the market perception. The exchange rate risk also factors a largely unregulated Forex off-exchange trading. Another risk involved in the international market is the interest rate risk. They can reduce interest rate risks; by fluctuating in the forward speeds and forward mismatch of in maturity gaps, in the transaction of the foreign exchange. To include with the following risk would be the country and liquidity risk in the foreign market. The investor does risk the potential of the country or liquidity of stocks overseas in a foreign exchange market. Even though there is supposed to be some protection to the investor, because it is overseas the time change could offset the security to an investor in other countries and could lose his shares in a volatile market without notice. Offsetting the security will hinder many business aspects of McDonalds exchanging business in North Korea and the risks are conceivably high. Based mainly on probable risks and allocating them first will assist in tweaking their processes. Repatriation risk will not be of concern as all dealings will be through the bank of China, where conversion is unnecessary. The currency used in the Bank of China is the American and Chinese.
The main distribution risks are related to international trade laws and some internal risks as McDonalds would prefer to have inventory come from local distributors but are also dependent on their own distribution center. Have millions of goods shipped across the world is not only timely but costly as will. Some supply chains are fine with have their product go to different countries but some are not. Chains where most of the supply risks are associated along with North Koreas local laws on different items allowed to be distributed and the ties they have to some suppliers. One area that will need close attention is the cost pressures because North Korea has a special interest in their economy and pressures from distributors and suppliers will interfere and may cause conflict. Supplies and distributing them may experience bottlenecks within the channels because of the distance and the demand is fairly different.
Even though McDonald’s proves to be an industry leader in venturing into new territory, the task is never easy. Whenever a new location in the country is decided, competitive risk assessment takes place. “When introducing a new product, there are four primary risks: Product risk; Market risk; Business risk; and Financial risk”, ("Risk Assessment", n.d.). In applying the article to McDonald’s, adding unique products that represent the brand, and that consumers will continually embrace through the times. Also, they will have to fully understand business risks as it relates to distribution cost, acceptance among consumers, and the life cycle of the differing products. Business risk needs to be taken into accounts such as expertise in management, innovation, and technology. Last, business risk need to be ascertained. Investment strategies need to remain strong with revenue and expenses realized. The main competitive risk associated with business in North Korea is the restaurant Lotteria. Lotteria is currently a popular eatery infiltrating South Korea. They have a proven reputation and brand recognition amongst Korean natives. This could prove to be a challenge if McDonalds is not diligent about research the Korean demographic.
The four P’s of Marketing include Product, Place, Price, and Promotion. McDonald’s is known for tailoring its product to the country where it wants to locate. So, a traditional hamburger will not be an option on the North Korean menu. Food choices will be based upon Korean consumer’s consumption and competition from surrounding food services industry. Second, to be determined is the place. The place must be accessible, and free to provide consumers products in a pleasant environment. For example, locating a McDonald’s across the street from the prison would not be wise. Next, the price a customer pays for the product must be reasonable. The product has to deliver in quality for pricing. Lastly, the product needs to sell to the customer. Strategy on how to advertise a business and product comes into focus. Advertisement can be achieved through television, radio, newspaper, flyers, or word of mouth.
There are many physical and environmental challenges that McDonald’s faces when entering the North Korean market. The government rules with a firm hand and controls all business activity. Government keeps the cities of North Korea plain and mono-colored. McDonald’s symbol is the golden arches and they may not be allowed to present the symbol above restaurants in North Korea. The North Korean government fears residents may gain political independence after high exposure to commercialization. This will affect attempts in marketing for McDonald’s. In addition, the infrastructure is weak. Government will not support McDonald’s in financing improvement to a building. Therefore, financial adjustments will be necessary to reach the North Korean market.
Government sets all wages in North Korea. When setting wages in a new location, one must consider the economy and adhere to state or government mandated minimum wages. However, in North Korea, government dictates wages ("2014 Index of Economic Freedom", 2014). North Korea offers employees incentives to produce goods. Typically, a goal and date is determined to encourage workers. McDonald’s will have to adhere to goals and dates, as Korean government requires it. McDonald’s will face pressures of local responsiveness since government controls all activity with unique standards. Korean leader Kim Jong-un runs a strict regimen that influences the opinions of his people. In addition to controlling access to the outside world, citizens are reminded daily of the great liberties their wonderful leader provides them. The citizens are very loyal to Mr. Jong-un. Therefore, it will be imperative to maintain positive relations with their leader. McDonald’s will likely take advantage of a friendly relationship with Kim- Jong-un by using his influence to ensure a positive view of the company.
The North Korean government controls internet access. An intranet has been set up for inhabitants. The intranet focuses on information for students and government officials. This will make it difficult for McDonald’s to utilize technological means of communication with customers. The intranet has an estimated 5,500 websites, all of which government regulates (Talmadge, 2014). In North Korea, technology is slow to progress due to conscious isolation by government. Overall technology is a means to pass information rather than entertain, communicate, or advertise. Strict cyber technology regulations will force McDonald’s to succumb to the pressures of local responsiveness.
McDonald’s in North Korea will wish to be “another beginning-we have our hearts set on”. Objectives include improving infrastructure, increasing profit share, improving government, improving political and economic activities, improving monetary stability and social, health, and environmental conditions.
SWOTT Analysis
Strengths: North Korea’s is strategically situated away from the rest of the world with a strong defense team. A strong defense team will minimize any potential threat from surrounding external forces. The new McDonalds franchise will see tremendous production because no other international eatery will be in proximity.
Weaknesses: The dependency on other countries is high with many natives not able to provide for families due to the lack of jobs. The lack of complete local laws and unethical practices will continuously threaten operations.
Opportunities; this new venture will provide the United States of America the opportunity to encourage North Korea to participate in international trades and not allow China and South Korea to continue control.
Threats: The political instability of North Korea will prove to be the biggest threat. The degree to which natives are comfortable with the black market will require extensive training of the staff. Local customs and attitudes may decrease the integrity of the brand.
McDonald’s strategy is Global Standardization strategy. The goal is international expansion with an emphasis on reducing cost of value creation. McDonald’s core competencies include managing fast food chains and marketing. The team agrees that the strategy is to be reviewed quarterly and adjusted to government laws and regulations.
The appropriate mode of entry for McDonald’s in South Korea is a wholly owned subsidiary while implementing the Greenfield strategy. Because customization is crucial in this global venture, The Greenfield strategy is the best option. The Greenfield strategy allows for more control over customization, which is critical to the North Korean market. McDonald’s has enough resources to make up for the cost of building a new business in a foreign country. Obstacles to enter may prove to a benefit in the future. In recent years, North Korea has attempted to open up the market. For example, On March 15, 2012 North Korea opened their market to U.S. automakers and reductions on tariffs ("Office Of The United States Trade Representative", 2014). This is a step toward progress for business relations between The United States and North Korea. In Experiences have been difficult and may prove to be a challenge for McDonald’s. Patience and routine risk analysis will be effective.
Internal controls and risk assessments are an integral part for a business to be successful. Management at McDonalds International must review the flowcharts and apply learning curve concepts as to streamline information on controls that will be required. Risks are not to be a negative event occurring in a company’s productivity. Internal controls are the policies and procedures put to reduce unforeseen occurrences associated with the risks. McDonalds will implement a new Accounting Information System (AIS) evaluated by the Team and incorporate the controls into the flowcharts, design internal controls to mitigate risks to the systems, evaluate the application of internal controls to the systems, and discuss other controls, outside the system, that McDonalds may need.
Business enterprises face a variety of risks, including business, audit, security, and continuity risks. When analyzing McDonald’s current information system the team found that they lacked internal controls and risk evaluations needed to run their information system. Several concerns were brought up as significant potential risks. The three risks focused on are those of business, security, and continuity. Several of McDonald’s risks within the system were noted in regards to payroll, accounts payable, accounts receivable, and the inventory system.
Article research
The article used in this research is titled “Reforming North Korea: Law, Politics, and the Market Economy” by Darren C. Zook. The article is an appropriate means to understanding the current and future environment of the North Korean Government and laws in that country. Improving government and political activity, will serve as strong platform to grow from economically (Zook, 2012). With proper regulations and governances, McDonald’s can enter the North Korean market with peace of mind.
In recent years, North Korea has slowly opened their market to outsiders. Although North Korea is synonymous with instable politics, McDonald’s is looking to take advantage of the opportunity to be part of a new emerging economy. It is apparent that North Korea must make changes to the infrastructure of its political system. McDonald’s will perform research to understand the road map to conducting business within the political system in North Korea.
Surviving Food Insecurity in North Korea
The economy of North Korea proves shaky evidenced by Diana Park, “View from the Ground” (2010). The article summarizes how North Korea struggles with the following: feeding its population, providing basic human needs, and providing solid infrastructure. The article shows that when the government acts favorable, the economy has a positive reaction. For example, when the government allowed people to find their own food instead of rationing food out, private trading began, and it enhanced access to food for everyone. Nonetheless, the government refuses to act favorable for the people at all times, however they are beginning to feel the dwindling power over the people and things are looking up.
“I was even more surprised to see food kiosks, bike shops, and other signs of entrepreneurship throughout the city. Although the 2002 reforms had caused hyperinflation, private sector activity subsequently flourished and emerged as a continuing trend during my visit in 2007” (Park, 2010, p. 137. para. 3).
This research was chosen to show the struggles North Korea faces; to serves as a risk analysis for McDonalds, and to show the potential investing growth the country is in dire need of along with the challenges.
Visit Korea Year 1994 and the marketing mix
This article spoke about an event called Visit Korea Year 1994 (VKY). This event is geared to generate in bound tourists and all the foreign currencies they could leave behind. VKY offers foreign tourist the opportunity to experience the Korean culture, as it is perceived, conceived and celebrates by the locals.
The article explained that the events of VKY have been developed and especially for the foreign tourist consumption. Mcgahey spoke about the four Ps and what it means to make VKY a successful tourism event. He mentioned that products in Korea with its positive and negative connotations to potential tourist around the world. He explained that price is tricky because party of the mix in VKY is to generate enough inbound tourism revenue to offset Korean outbound expenditures. Place is the distribution network which is the VKY’s attraction. Mcgahey mentioned that promotions are left in the professional’s hands for publicizing.
Rationale for selecting North Korea North Korea is one of the many countries without a McDonald’s Restaurant franchise. With a population of over $24 million, the country will obtain significant benefits from the establishment of the American fast food eatery. The unemployment rate will decrease with the restaurant chain of stores providing a significant amount of jobs for the citizens. Additionally, the economy will receive a much-needed boost in revenue resulting from the productivity of the store. North Korea poses great potential of entering the global market and participating in establishing a chain of McDonald’s Restaurant as the citizens have a desire to enjoy the wide variety menu and great taste. North Korea government is known to be against global investing and positively enhancing its human rights and social responsibility practices, but over the previous years, it appears as though the new regime under the leadership of Kim Jong-un is aware of what is required to become involved in foreign investments and the challenges associated. The new leadership is aggressively implementing an administrative and industrial area with a new administrator to begin strategic planning for the collapsed economy turn around. With the appointment of the new Dutch administrator who hails from China to oversee the pending revitalization projects in Sinuiju and Gasseong, will send a positive message to other countries. McDonald’s restaurants are very successful and productive in China. This new venture will show that the United States and North Korea are gradually moving closer to actively participating in the global investment market, propelling the birth of new foreign investments. The people of North Korea are desperately seeking a change from the isolated, deprived, and nonproductive economical state. Kim Jung-un is very concerned about the wellbeing of the people. He demonstrates this concern by providing a positive outlook for the future of the country. It is evident that Asia could be the next region of prosperity in the world, with China becoming the hedged country. With a new leader possessing Chinese background, a unified Korea could only yield positive results within the labor forces, available natural resources, new trade, new ports of entry for investors and a chain of McDonald’s restaurants.
Marketing Mix Marketing mix is a trade tool often used by marketers for marketing purpose. The marketing mix is frequently decisive when deciding products offer and is often associated with price, product, place and promotion. The marketing mix offer different nature of service offers.
Product or service mix describes the product itself. The objective of the marketing mix is to find the best product to benefit the consumer. From the product itself, the customer may be able to determine what he requires from the product. This means that he/she evaluates the product if it satisfies his defined needs. A customer purchases a product expecting benefits from the product. So a customer will purchase a product which best meets his needs and requirements.
A customer evaluates a product according to what features it comprises to meet his specific needs. When a customer goes for a product, he/ she looks at the feature that the product has and compares it with his needs and wants. If the product is suitable to meet the requirements, the customer is most likely to purchase the product. A good example is the physical appearance of a mobile phone. Customers will choose a mobile handset, which suits their characteristics like size, color and modification. A customer is most likely to purchase a mobile phone that contains the physical characteristics that he/she desires. A customer will choose a slim and lightweight phone because he may not want to feel the weight of the phone inside the pocket.
When a customer is in the process of purchasing a product, what mostly attracts his/her attention is the first impression. The most important characteristic is the color, size, name, brand, and how it is different to its competitors. A product should be appealing to the customers eyes and should possess characteristics better than its competitors should. For example, women may prefer bright colored mobile phones because they are attracted to bright colors, whereas males may stick to neutral tones.
Product and service physical characteristic is important in marketing because it is the first impression that the customer gets. This will determine whether the customer will get the urge to know more about the product or service. Companies should make their products as appealing as possible so as to attract shopper’s attention.
The marketing plan for a McDonald’s restaurant should be suitable and have menu options that suits most of the citizens residing in this geographical area. Majority of the people living in North Korea live in remote places. This shows that majority of people will require some type of technology to be exposed to the McDonald’s brand. Intranet is used by the majority of the people, which can only be used for means of educational or business purposes. Majority will prefer communication through the government-monitored intranet. This shows that in order to make successful sales in North Korea, product modification is essential. A product that is not complicated means that the pricing is also affordable. Most of citizens residing in the country are low-income earners so they will go for a cheap device.
Promotion refers to raising customer knowledge of the product or service. Promotion transmits information by way of, advertisements, personal selling and sales promotion. For a product to gain recognition in North Korea, sellers should be able to ensure that the residents of the most remote areas of the country are aware of the product. This can be achieved through media advertisements, publicity and promotional selling. A plan should be strategized to reach every part of the country to enhance product acceptance and to achieve competitiveness. The menu should be clearly distinct from our competitors’ products. This will enable people to differentiate easily between two products and will easily enhance recognition of the McDonald’s brand.
The product should be affordable to the people of North Korea since most of the citizens are low-income earners. In a country that is growing economically, you may find that there is a small population of people with a high income and a large population earn of low-income workers. A marketer is supposed to understand the target group and be able to create a product that is tailored to the target market.
Market indicators refer to a series of market indicators used by traders to forecast the direction of major economic index. In North Korea, the statistics shows that the region is Declining economically mostly because of lack of resources. Local farmers should be enlightened on how they would be able to use e-commerce to advertise and sell their products via the intranet.
Organizational Structure
An organizational structure is a summary of a company guideline for managing the definite business operations. Small business owners are mostly liable for creating companies’ organizational structure, which mostly describes the owners’ personality and characteristics. There are two organizational structures in the business environment, which are the centralized and decentralized business operations. Centralized business operation involves individual making decisions of a particular business solely and is responsible for the business operations. Decentralized operations involve several individuals making business decisions for running the company.
Financial Overview
Preparing a budget for business is not an easy task. Estimates of cost and expenses have to be allocated properly for a business to operate correctly. Accountants take into reason every perceivable assumption pertaining to a budget along the lines of production operations, marketing, labor cost, supplies, services, and so forth. Keeping that in mind, makes preparing a budget for McDonald’s in North Korea extremely challenging. North Korea remains isolated from the rest of the world due to its weak infrastructure, and poor economic and political conditions to name a few. None the less, according to the McDonald’s (2010-2014) website, “Since the total cost varies from restaurant to restaurant, the minimum amount for a down payment will vary. Generally, we require a minimum of $750,000 of non-borrowed personal resources to consider you for a franchise.” Other expenses include facility, area of the country, labor, pre-opening expenses, inventory, selection of kitchen equipment, signage, and style of decor and landscaping. Below is a general budget for McDonalds’ in North Korea taking into reason expenses and potential income.
General Budget McDonald’s in Korea
Income
Estimated Sales $900,000.00
Total Income $900,000.00
Expenses
Rent $ 45,000.00 Labor $300,000.00 Opening Expenses (marketing) $110,000.00 Inventory $100,000.00 Equipment $125,000.00 Signage $ 45,000.00 Décor/Landscaping $ 25,000.00
Total Expense $750,000.00
Remaining Income After Expenses $150,000.00
McDonald’s is no stranger to entering into the global markets. In fact, they are an industry leader in the endeavor. Therefore, McDonald’s will take full advantage of spot exchange rates, forward exchange rates, and currency swaps when presented. McDonalds’ will deal with foreign exchange risk by participating in currency swaps, since they will buy from Korea and the United States.
Sources of Financing McDonald’s has researched the economic environment of North Korea, and has decided to finance internally. Due to the unstable conditions of the North Korean market, internally investing is the best option. In addition, no bonds will be issued. The South Korean McDonald’s has proven to be a successful venture. For example, North Korea McDonald’s is doing so well that they plan to open 500 restaurants by the end of 2015 (Da-ye, 2013).Therefore; we will model our business plan according to the McDonald’s in South Korea. The North Korean Government operates in an unconventional fashion, to include a black market. McDonald’s is preparing for a successful venture in North Korea; internal resources are the best option to guarantee that happens. Currency in North Korea, the Won, has lost its value within the past few years. Today North Koreans prefer the American Dollar or Chinese remnimbi during business transactions. After years of using Chinese and American currency, the Won’s value decreased. Due to multiple factors, it is obvious that the most efficient option is internal financing. If for any reason McDonalds found it beneficial to use international finance sources, The Bank of China would be the primary choice. The bank of China offers extensive knowledge of direct foreign investments. The cooperative relationship between China and North Korea will assist McDonald’s throughout this business venture. In addition to a vast knowledge of foreign services, currency is exchanged per the investor’s preference. Payroll services are also available. Due to illicit activity within the North Korean government, it is best to use a neighboring country with a positive relationship to finance this venture. This will ensure an ethical system with documentation of funds. The Bank of China offers stability, with knowledge of business operations within North Korea.
Chain of Command
An organizational structure is a summary of a company guideline for managing the definite business operations. Small business owners are mostly liable for creating companies’ organizational structure, which mostly describes the owners’ personality and characteristics. There are two organizational structures in the business environment, which is the centralized and decentralized business operation. The centralized business operation involves an individual solely making decisions of a particular business and is responsible for the daily operations. Decentralized operations involve several individuals making business decisions to meet the objectives of a company.
A chain of command is how dedicated people carry out orders from the senior management to the field or vice versa. One is not supposed to go over their boss in order to acquire something done. From the field, information should be communicated to the field manager who will take it to the companies’ management and further to the strategic management body which is the top management body of an organization.
Exit Strategy An exit strategy is always considered during the conception of a successful business plan. It is in the best interest of all parties involved to exit with dignity and grace. Therefore, McDonald’s primary strategy is a strategic sale. A partner is chosen by McDonalds to purchase the restaurant. This allows for flexibility and control of options. The partner can be a supplier, customer, or even a competitor. By selling the store, McDonald’s is released of all obligations to the restaurant. McDonald’s would prefer to sell to a customer within the industry. If the political state of North Korea improves, McDonald’s would sell to a diligent employee. This option will guarantee the integrity of the brand and provide an opportunity for the community. Without a stable government, McDonald’s fears the employee will not be guaranteed to retain ownership of the restaurant. It would be wise to make a friendly exit, to ensure positive business communications in the future.
In the event that McDonald’s North Korea is not a success, we oppose any sale to our competitor, Lotteria. The fast food chain, is currently taking over the South Korean market. They have established at least 1,000 restaurants in South Korea. That is more than double the presence of McDonald’s in the same area. McDonald’s is still in the early stages of understanding the Korean market. We will benefit from practicing patience throughout this venture before exiting.
Recommending to proceed with McDonald’s in North Korea
Establishing a chain of McDonald’s restaurants in North Korea is indeed a good and profitable venture for both the investor and the country. Recently, North Korea has made small efforts to open up to foreign investors. Even though it appears that the leadership is focused on having dictatorship parades, building tanks, and missiles, and focusing resources on political pursuits, there is still great potential for economic growth and development as the country has a tremendous amount of natural resources and citizens interested in a positive change.
North Korea’s leadership should make every effort to build the tourist industry to provide jobs for the citizens who are spending long hours building bombs for negative ventures. With the establishment of the American fast food chain, it will diversify the North Korean economy away from exporting weapons for illegal and immoral practices and profit.
The opening of McDonald’s restaurants throughout North Korea will allow the natives to become skilled in various job levels including store hosts, cashiers, food line workers, delivery drivers, store cleaners, and store management. This new venture will also require a change in the infrastructure of the land to accommodate the new modern facilities. This will require new and improved roads, airport and port of entry enhancements, to service the influx of visitors and foreign investors. A significant amount of jobs will be available to the natives to assist with these improvements. The economic structure of the country will yield tremendous growth, as tourist from around the world will begin to visit the once isolated country because of the new positive movement and development. South Korea, China, Russia, and Japan who in recent times provided support and assistance to North Korea will eventually return to assist in the transformation. The anticipated revenue from the tourist dollars will assist with expanding the economy and turn the leadership mindset away from bomb making and starting wars. Opening the door and borders to McDonald’s fast food chain will give birth to other potential foreign investors who were previously not interested in investing with North Korea. North Korea over the years have seen the decline and non-use of the local currency, Won. When the country lost control of the economy, the locals stopped using the local currency due to the increase of unemployment and the request for the use of foreign currency due to the lack of favorable local items to purchase. The North Korean Won currency is exclusively for use of the citizens. We recommend an approval be granted for the country to participate in the Euro foreign exchange market and the United States exchange market in an effort not to hinder negotiations between McDonald’s and suppliers because of exchange rates and currency issues. This approval will also be beneficial for other foreign investor providing minimum negotiating risk as it relates to foreign currency issues.
Conclusion
In conclusion, there are many risks associated with international business. The North Korean market will prove to be a challenge. With a history of political unrest, economic instability and questionable leadership, North Korea may seem like an unlikely venture. Nevertheless, there is an untapped market that is taking baby steps to globalization. We want to be the first major fast food chain in North Korea and grow with the economy. Through research and a background in foreign dealings, McDonalds is confident in our ability to meet the challenge. McDonalds believes that the people of North Korea will benefit from the income opportunity we will present. Should our initial investment prove to be successful, McDonald’s would look into opening up stores to franchisees. Doing so would enhance the economy and living standard. In addition, the presence of a restaurant with a history of success will assist North Korea in attracting foreign investors. This paper has summarized the findings from previous Learning Team assignments, and included the rationale for selecting a target country based upon previous learning team Country Risk Analysis. This paper has determined the marketing mix specific to the selected global product and service and explained the choice of marketing mix. A marketing plan that addressed product modification, pricing, promotional programs, distribution channels, and e-business for North Korea to included market indicators and trends for the product and service. This paper has presented a financial overview for the global venture by including a chart that represented the general budget for the global venture. This paper has explained how the company deals with foreign exchange risk for the global operation. Potential domestic and international sources of financing for the global venture will be identified by including at least two possible financial institutions within your chosen region. This paper has described the degree to which the organization operates as a centralized versus decentralized organization including a chain of command chart to illustrate how communications would reach senior management from the field when events necessitate changes in tactics or strategy. This paper has unfolded what types of exit strategies would be most appropriate for the global venture, by including strategies to consider such as divestiture of assets, handing over to a joint venture partner, diversification, shutting down operation, and contingencies for your global venture. Last, the paper made final recommendations based upon findings about the feasibility of the global venture, if to proceed with the global venture, and an explanation of why or why not.

References
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