Introduction
This study aims to explore international strategies from a broader perspective. In the context of international strategies, an international strategy is an approach with lower local reactivity and global integration. That explicitly suggests that the company centralizes all authority, information and decision-making processes for the international markets to organize the business at the headquarters. This report looks to discuss the international strategies of two well-recognized fast food industries: McDonald’s and Domino’s. Mcdonald’s is one of the famous food service retail chain operators and Domino is a pizza restaurant chain in America.
Literature Review
According to Madureira et al (2023),theForeign direct investment (FDI) strategy of McDonald’s is mainly focused on the restaurants and food industry in any nation. The firm invests long-time, with various reasons for making profits. McDonald’s is a multinational company, thus the company has various strategies to enhance its presence globally such as franchising, Joint ventures, Acquisitions, local preferences adaptation, investment in technology and innovation, market research and localization, and CSR strategies.
The company mainly focuses on franchising which helps to reduce financial risks and operational burdens. McDonald’s merges with local enterprises and provides them with proper training and support for operating McDonald’s outlets properly (Kuzey et al, 2021). This is leading to rapid expansion into various markets.
Sometimes the company forms joint ventures with local companies for controlling the operations and quality of the services with leverage resources and expertise of the local partners. The company also invests in technology and innovation that helps in improving consumer experience, operational efficiency and making competitive advantages of the company. There are various initiatives taken by the company such as digital menu boards, delivery services, mobile ordering apps, self-service kiosks and so others.
On the other hand, according to DENİZ and ABBASALİYEVA (2022), Domino’s is a leading pizza delivery company that has various FDI strategies such as master franchise agreements, joint ventures and partnerships, adaptation to local preferences, market research localisation and CSR strategies. Domino’s sometimes make master franchise agreements with partners who are experienced in specific nations. The master franchises mainly focus on the development of the company’s various locations and oversee these franchises. This strategy helps the company to gain knowledge about the market partners’ expertise while maintaining the brand value and quality (Wang, 2022).
They also focus on joint Ventures and partnerships with local companies that provide an in-depth knowledge of the local business environment. By making partnerships and joint ventures the firm effectively manages the challenges and focuses on expansion. In order to understand the cultural norms, customer preferences and other factors the company always focuses on market research before the time of entering a new market. This approach helps to make proper decisions about store location, marketing strategies, customer preference, cultural nuance and so other operational practices.
The study of Setiawan and Ellitan(2023) stated that McDonald’s uses outsourcing as an effective strategic approach. The strategy focuses on various areas supply chain management, food production and processing, human resources and training, marketing and advertising and so on. The company outsources various aspects of the supply chain management. They are sourcing food processing, logistics, packaging and raw materials.
They also focus on reliable suppliers that lead to improved quality, cost-efficiency and reliability in their operations of supply chain management. McDonald’s also outsources human resource operations such as payroll processing, specialized HR service providers, training, recruitment and so others. This approach helps the company manage the workforce effectively and understand the market regulations about labour as well as cultural differences (Roffman, 2023).
On the contrary, as per Kolhe (2023), Domino’s uses outsourcing to improve efficiency, lowering costs and so others. There are some key aspects present in the international outsourcing strategies of Domino’s such as technology solutions and digital platforms, call centre and customer support, facility management and maintenance, food production and ingredients and so on. The company outsources technology-based services such as digital ordering, delivery apps and so others.
They outsource different technologies such as website maintenance, Mobile app development and cybersecurity (Ternova, 2022). It helps in improving customer engagement and enhancing customer experience. The company also outsourced call centre services and customer support services. This approach is very beneficial for the company to enhance customer loyalty and awareness. The company takes facility management and maintenance from third-party suppliers. It helps the company to maintain health and safety standards.
Empirical Part
Industry Analysis
The market size of global fast food stood at USD 527 billion in the year 2021 (skyquestt.com., 2024). It has been explored that in the year 2022, the market size of the fast food industry is estimated to grow from USD 548.08 billion to USD 750.08 billion by the year 2030. Fast food indices to the food items that are quick to serve and prepare. According to the record of 2024, 536,825 fast food restaurants come under the fast food industry such as Starbucks, pizza-hut, etc. It has been observed that McDonald’s holds the biggest market share in the fast food industry which is the largest fast-food chain. This sector is highly competitive as the food industry keeps reinvigorating its food items to increase consumer engagement.
Empirical literature review
According toLafarga et al. (2020), many external factors can benefit the fast-food industry such as the new market segments, expansion of the new market, intervention of new dishes, and utilization of modern aged technologies etc. Moreover, the proper internationalization strategy can numerously benefit the fast-food industry by exploring new market trends. This factor can increase consumer engagement and consumer satisfaction to a great extent. Moreover, the internationalization strategy enables the fast food industry to analyze the competitors in their sector that can affect its business growth. The fast food industry can grow its profit rate by understanding consumer preferences as well as it can adopt the best tactics to stay competitive in the current market position.
In contrast, Katsikeas et al. (2020), states that there are major challenges of the fast-food industry that can detrimentally affect the business growth of the fast-food industry. For instance, the excessive supply chain pressure, increasing food costs, changing demand of the consumer, and proper abiding safety standards can appear as a hindrance to the rapid success of the fast-food industry. Adding to this, the fast-food industry can face challenges regarding the implementation of internationalization strategies such as labour shortages, increasing rivalry, consumer shifting to a healthy habit of food practices and others. There are many challenges adjacent to international business that can be fatal for the rapid development of the fast-food industry such as cultural diversity, supply-chain issues, language barriers, political and environmental issues, trade and tariff barriers, foreign policies, recruitment and others.
Information of Mcdonald’s and Domino’s
Size
It has been observed that the size of McDonald’s is a well-recognized fast-food chain that has 40,031 restaurants worldwide in the year 2021. In the year 2024, the market capitalization of the company is $211.04 Billion (companiesmarketcap.com., 2024). Moreover, the Dominos has reached nearly 20 thousand people in the year 2022 (companiesmarketcap.com., 2024). The market capitalization of Domino Pizza is $15.53 Billion (ir.dominos.com., 2024).
Market Share
It has been observed that McDonald’s offers home delivery in over 47 countries (corporate.mcdonalds.com., 2022). The annual revenue of the company in the year 2023, stands at $25.494 B which has increased from the previous year to 9.97 % from the year 2022 (macrotrends.net., 2023). Adding to this the market share of Dominos has increased to 7.8% in the first quarter from 6.4% in the previous year (independent.co.uk. 2023).
FDI activities
It has been explored that McDonald’s has brought a large-scale meat processing plant in Canada to increase the meat supply chain in the target nation which would be considered as a vertical FDI. Also, the restaurant opening case of McDonald’s in Japan would be considered horizontal FDI (corporatefinanceinstitute.com., 2024). Three FDI activities of Dominos have been identified at the time of entering the Chinese market such as Franchising, Joint venture and licensing (Singh, 2022).
Exports
It has been noticed that McDonald’s has broadly used the franchising exporting strategy to expand its business on a global level by partnering with local entrepreneurs to perceive the condition of the local market (Rajawat et al. 2020). Adding to this, there are several exporting strategies of Dominos in the foreign market such as direct and indirect exporting that have helped them to reduce the business expanse along with risk (Rattaya, 2021).
Outsourcing
McDonald’s uses outsourcing to get the raw materials in their branches. It has been explored that the company provides its raw ingredients in refrigerated trucks to keep the food items fresh (Setiawan and Ellitan, 2023). Along with this, Dominos is outsourcing the delivery labour to the customer (Zhao et al. 2020).
Graphical representations
Figure 1: International strategies of McDonald’s
(Source: fourweekmba.com., 2024)
Explanation of the graph
From the graph, it is perceived that McDonald’s food chain is a heavily franchised business model. In the year 2022, the franchised restaurants took a major part in achieving 60% of the revenue. The long-term goal of the company has been understood which is the transition of 95% of the franchised restaurants (fourweekmba.com., 2024). Moreover, the company has generated over $23 billion in revenue in the year 2022. It has earned greater revenue from the franchised restaurant than its owned restaurant.
Figure 2: Domino’s International Strategy
(Source: dennisfoodservice.com., 2024)
Explanation of the graph
Domino’s holds a strategy of getting closer to the customer called fortressing. By adhering to this strategy this company has increased its consumer retention than the other companies and the company has also increased carryout sales in comparison to other food chains (dennisfoodservice.com., 2024).
Interpretation and critical analysis of the data
According to Wu (2020), Franchising is the most effective international business strategy followed by the largest food chain McDonald’s which has helped to achieve its revenue top 60%. Adding to this, this strategy has helped to increase its sales rate to 60% more than the owned restaurant. On the other hand, LIEN (2021), opined that the fortressing strategy has numerously assisted Dominos in growing its position which has been the useful and effective international strategy of Dominos (dennisfoodservice.com., 2024). By getting closer to the consumers the food chain has been able to perceive consumer preference which has helped to increase the profitability of the other companies.
Link between theories and empirical evidence
There are many theories in international strategy such as international trade, National competitive advantage theory, strategy, Mercantilism, Product life cycle theory etc. Mcdonalds’ has adhered to the business strategy named Franchising, and FDI theory to improve their business condition. On the other hand, Dominos has followed the franchising, joint venture theory and fortressing strategy to increase its sales revenue (Paul, 2020).
Demonstrating theoretical knowledge with empirical issues
In the existing study, the major issue of McDonald’s has been identified at the time of franchising as an excessive discount on the food items has detrimentally affected the profit rate of the company (Jackson et al. 2020). On the other hand, Dominos also faces issues at the time of the joint venture due to financial trouble for rapid expansion. Yet both these internationalization strategies are highly prioritized in theory and considered to be the best measures of business expansion (Fayziev and Sultanova, 2023).
Globalized world
Based on the above analysis it can be said that We are living in a globalized world where distance among countries does not remain a big concern. It can be said that people by staying in one country can enjoy the food flavors of other countries and states around the world.
Conclusion
Based on the above analysis it is concluded that the key concern of the study is to compare the international strategies of both the food supply chain McDonald’s and Dominos. Moreover, the study has reviewed the Size, market share, and FDI activities and also illustrated the graph of the international strategies. Based on the above analysis, it can be stated that both organizations have been very successful in their international strategies resulting in better operations and sustainability of the organization. The internationalization strategies of both McDonald’s and Dominos have been so successful that both of them have gained immense competitive advantages and have significantly grown their consumer base in the industry. Eventually, the strategies have become so significant that they have become highly globalized and have gained high profitability and revenue in last few years resulting in greater sustainability.
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