multinational corporation

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INDEX

Sr No Topic Page NoChapter 1 Multinational Corporation 5-24

1 Introduction 52 Characteristics Of MNC’S 83 Classifications Of MNC’S 104 Merits Of MNC’S 115 Demerits Of MNC’S 136 Innovation In MNC’S 157 Government And MNC’S 158 WTO In MNC’S 169 Why Companies Become MNC’S? 1710 Why Are MNC’S Attractive To Developing

Countries?18

11 Why Are MNC’S In India? 1912 Role Of MNC’S In India 2013 Profit Of MNC’S In India 2114 Problems Of MNC’S 2215 Social And Cultural Factors 2316 Globalization 24

Chapter 2 McDonald’s 25-361 Introduction 252 History 273 Goals And Objectives 294 Facts And Figures 305 Global Operations 316 Business Model 337 Environmental Policies 35

8 Financial Performance 36

Conclusion 37

Bibliography 38

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MULTINATIONAL CORPORATION

INTRODUCTION

A multinational corporation/ company is an organization doing business in more

than one country. Transnational company produces, markets, invests, and operates

across the world. It is integrated global enterprise which links global with global

market at profit. These companies have sales offices and/ or manufacturing

facilities in many countries. A corporation (MNC) engages in various activities

like exporting, importing, manufacturing in different countries. MNCs have

worldwide involvement and a global perspective in its management and decision-

making.

1. MNCs consider opportunities throughout the globe through they do the

business in few countries.

2. MNCs invest considerable portion of their assets internationally.

3. MNCs engage in international production and operate plants in the number

of countries.

4. MNCs take managerial decision based on a global perspective. The

international operations are integrated into the corporations overall business.

MNCs are huge industrial/ business organizations. They extend their industrial/

marketing operations through a network of branches or their majority owned

foreign affiliates. MNCs produce the products in one or few countries and sell

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them in most of the countries. Transnational corporations produce the products in

each country based on the specific needs of the customers of that country and

market these. A transnational corporation mostly uses the inputs of the host

country where it operates unlike a multinational company. Large corporations

having investment and business in a number of countries, knows by various names

such as multinational corporations, international corporations and global

corporations have become a very powerful driving force at the world‘s economy.

A multinational corporation is usually a large corporation which produces or sells

goods or services in various countries. It may be attributed as multinational

corporation when a corporation is registered in more than one country or has

operations in more than one country.

The problem of moral and legal guiding behaviors of multinational corporations,

given that they are effectively "stateless" actors, is one of the urgent global

socioeconomic problems that emerged during the late twentieth century.

Multinational corporation's plays an important role in globalization. Arguably, the

first multinational business organization was the Knights Templar, founded in

1120. After that came the British East India Company in 1600 and then the Dutch

East India Company, founded March 20, 1602, which would become the largest

company in the world for nearly 200 years.

MNC‘s are huge industrial organizations which extend their industrial and

marketing operations through a network of their branches or their Majority Owned

Foreign Affiliates. MNC‘s are also know as Transnational Corporation (TNC‘s).

Till 1991, India was more or less a closed Economy. The growth rate of the

economy was limited. The contribution of the local industries to the country‘s GDP

was limited that were the main cause of shortage of funds for various development

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projects initiated by the government. In an effort to revive the industries and to

bring the country back on the right track, the government began to open various

sectors such as Infrastructure, Automobile, Tourism, Information Technology,

Food and Beverages, etc to the Multinational Corporations. The MNCs slowly but

reluctantly began to pour capital investment, technology and other valuable

resources in the country causing a surge in GDP and up liftment of the economy as

a hole. This was the post 1991 era where the government began to invite and

welcome giant MNCs into the country.

DEFINITIONS OF MNCS

According to UNO, multinational companies means, “Those enterprises which

own or control production or service facilities outside the country in which they are

based.”

According to International Labour Organisation, “The essential nature of the

multinational enterprises lies in the fact that its managerial headquarters are located

in one country, while the enterprise carries out operations in number of other

countries.”

According to N.H. Jacob, “A multinational corporation owns & manages its

business in two or more countries.”

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CHARACTERISTICS OF MULTINATIONAL CORPORATIONS (MNCS)

The distinctive features of multinational companies are as follows.

1.Large Size: A multinational company is generally big in size. Some of the

multinational companies own and control assets worth billions of dollars. Their

annual sales turnover is more than the gross national product of many small

countries.

2.Huge Capital: These companies can easily raise huge capital by way of issuing

shares to general public, within & outside the country. They exercise great degree

of economic dominance. A large part of the capital assets of the parent country are

owned by the citizen‘s of the home country.

3.Worldwide operations: A multinational corporation carries on business in more

than one country. Multinational corporations such as Cococola has branches in as

many as seventy countries around the world.

4.International management: The management of multinational companies are

international in character. It operates on the basis of best possible alternative

available anywhere in the world. Its local subsidiaries are managed generally by

the nationals of the host country. For example the management of Hindustan Lever

lies with Indians. The parent company Unilever is in The United States of

America.

5.Mobility of resources: The operation of multinational company involves the

mobility of capital, technology, entrepreneurship and other factors of production

across the territories.

6.Integrated activities: A multinational company is usually a complete

organisation comprising manufacturing, marketing, research and development and

other facilities.

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7.Several forms: A multinational company may operate in host countries in

several ways i.e., branches, subsidiaries, franchise, joint ventures. Turn key

projects.

8.Centralized Control: These multinational companies have their branches

worldwide. They control all its branches through head office which is situated in

home country of those companies.

9.Employment: It provides with employment opportunities to a large number of

unemployed individuals in the respective countries of their operation. In 2006,

foreign affiliates of MNCs employed over 73 million people, compared to 25

million in 1990.

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CLASSIFICATION OF MNCS

MNCs can be classified on the basis of several criteria, such as function, control,

investment, origin, turnover, products, etc.

On the basis of functional criterion, the MNCs are broadly grouped into:

1. Service MNCs: A service MNCs is defined as a transnational company which

derives more than 50 per cent of its revenues from services. Service MNCs are

found in areas such as banking, insurance, finance, transport, tourism, etc.

2. Manufacturing MNC: A Manufacturing MNCs is one which derives at least 50

per cent of its revenue from manufacturing activity. A large number of MNCs has

entered into the manufacturing sector. Out of the top 200 MNCs, 118 firms are

manufacturing MNCs. They produce a variety of goods. For example, Parry and

Cadbury Fry produce Chocolates, Colgate and Palmolive produce soaps and

detergents, Ponds -cosmetic goods, Olivetti -Teleprinting equipments, Dunlop,

Good Year, Ceat-tyres and tubes.

3. Trading MNCs: A trading MNCs is the one which derives at least 50 per cent

of its revenue from trading activity. These are the oldest form of multinationals.

Trading MNCs control about 60 per cent of the world's export trade. Tatas,

Liptons, Brooke Bond, Hindujas etc. are the trading MNCs.

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MERITS OF MNCs

1) Economic Development: The Developing countries need both foreign capital

and technology to make use of available resources for economic and industrial

growth. MNCs can provide the required financial, technical and other resources to

needy countries in exchange for economic gains.

2) Technology Gap: MNCs are the instruments of transfer of technology to the

host country. Technology is necessary to bring down cost of production and

produce quality goods on a large scale. The services of MNCs can be of great help

to bridge the technological gap between developed and developing countries.

3) Industrial Growth: MNCs are dynamic and offer growth opportunities for

domestic industries. MNCs assist local producers to enter the global markets

through their well established international network of production and marketing.

And there by ensure industrial growth.

4) Marketing Opportunities: MNCs have access to many markets in different

countries. They have the necessary skills and expertise to market products at

international level. For example, an Indian Company can enter into Joint Venture

with a foreign company to sell its product in the international market.

5) Work Culture: MNCs introduces a work culture of excellence, professionalism

and fairness in deals. The sole objective of Multinational is profit maximisation.

To achieve this, they use various strategies like product innovation, technology up

gradation, professional management etc.

6) Export Promotion: MNCs assist developing countries in earnings foreign

exchange. This can be done by promoting and developing export oriented and

import substitute industries.

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7) Tax Revenues: For the host country, there is a likelihood that the MNC will

have to be subject to the tax regime in that country. As a result, many MNCs pay

large sums in taxes to the host government. In less developed countries the

problem might be that there is a large amount of corruption and bad governance

and as a result MNCs might not contribute the tax revenue they could and even if

they do it might not find its way through to the government itself.

8) Improvements in Infrastructure: In addition to the investment in a country in

production or distribution facilities, a company might also invest in additional

infrastructure facilities like road, rail, port and communications facilities. This can

provide benefits for the whole country.

9) Raising Standards: Multinational corporations bring about competition in the

foreign markets they venture in. Multinationals produce goods and services that

adhere to the best possible standards. Since consumers are willing to spend their

money on only the best products, local businesses are forced to improve on the

quality of their products. This competition to produce good quality ends up

benefiting consumers who get good value for their money.

10) Job Creation: Multinational corporations play a big role in creating

employment in the foreign countries they venture in. Because of their massive

operations, they employ many local people in those countries to work there. They

also employ some to work in their headquarters, thereby giving foreign nationals a

chance to gain international career exposure. In 2006, foreign affiliate of MNCs

employed over 73 million people, compared to 25 million in 1990. Greater part of

increase of employment in foreign affiliates in recent times has taken place in

developing countries.

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DEMERITS OF MNCs

1) Profit maximization: The basic purpose of MNCs in the maximization of profit

through exploitation of host country's resources. MNCs hardly bother about the

economic development of the host country.

2) Plunder of wealth: MNCs plunder wealth to their home countries in the form

of transferring the huge amount of foreign exchange gamed through royalties, fees,

dividends etc. to their home countries.

3) Useless transfer of technology: The technology transfer which takes place is of

the nature of capital intensive and import oriented which doesn't suit to the

underdeveloped countries. Generally it is observed that the MNCs do not transfer

their advanced technology to the underdeveloped countries.

4) Effect on Employment: Employment might not be as extensive as hoped, many

jobs might go to skilled workers from other countries rather than to domestic

workers. Moreover, the amount of new jobs are created depends on the type of

investment. Investment into capital intensive production facilities might not bring

as many jobs to an area as hoped.

5) Misuse of weak Government: The size and power of multinationals can be

used to exploit weak or corrupt governments to get better deals for the MNC. The

MNCs may use their economic power to turn the political table in their own

favour. They may even see to it that the choicest party Govt. should get elected by

hook or crook.

6) Undermining Local Cultures and Traditions: The MNCs have been criticized

for their business strategies and practices in the host countries. They may

undermine local cultures and traditions, change the consumption habits of the

people for their benefit against the long term interest of the local community,

promote conspicuous consumption, and dump harmful products in the developing

countries.

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7) High tempo of show and advertisement: The MNCs may take undue

advantage of their financial strength in terms of lavishly spreading the huge

amount in unnecessary showrooms and advertisement as a result of which the

prices of goods zoom like anything in the host country.

8) Repatriation of profits: Profits might go back to the headquarters of the MNC

rather than staying in the host country. Hence, the benefits might not be as great.

These funds will not be beneficial for the domestic country which is allowing

MNCs to establish their base in the home country.

9) Destruction of Local Industries: Multinationals usually have more money in

terms of capitalization than local businesses. This means that they are able to

finance operations for a long time even without making a profit in the knowledge

that, once they have developed brand loyalty, they will start making sustainable

profits thereafter. This means that they can deliberately set very low prices so as to

take the market share of the companies they have found in that market. This may

therefore lead to the local companies to close down as they cannot afford to charge

these low prices.

10) BOP Problem: The MNCs transfer the technology which is import oriented

due to which the host countries imports increase. On the contrary due to high

prices prevailing in the host country its exports curtail. Thus the B.O.P. problem

gets aggravated.

11) Monopoly: The MNC's being the joint companies establish their monopolies

and iron out competition in the host country.

12) Evasion of taxes: The MNC's may evade the taxes by manipulating their

accounts. In the era of Liberalization we are not suppose to look towards MNCs as

a agents of exploitation but they also act as agents of development by helping the

host countries to increase domestic investment and employment generation, boost

exports, transfer of technology and accelerate economic growth.

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INNOVATIONS IN MNC’S

Innovations are a growing trend in today’s world and MNC’s are successful till

they maintain their innovativeness and creativity. Innovation does not necessarily

come from the home country but it can also be sourced in the local country. The

MNC’s hire the employees of the local country so it can be possible that

innovations are from the local country.

GOVERNMENT AND THE MNC’S

There are differences among the MNC’s about the Government policies and

regulations. Government’s encouragement or inhibition for the oil and gas industry

depends on the type of country and the requirement of such an MNC in the

country. There are also significant differences across various locations for the

involvement of Government in the MNC activities. This depends on the need of

the country to grow and develop and also on the economy of the country. The

Government involvement depends on the asset availability of the country which is

location specific.

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WTO IN MNC ACTIVITY

WTO and regional trade agreements influence the MNC activities in many ways.

The fundamental principles of WTO are non discrimination, free trade,

encouraging competition and extra provisions for less developed countries.

Through non discriminatory trading system, all the MNC’s are provided with their

rights and obligations to be used while performing their operations. Each country

and MNC receives fair exports and fair treatment in the markets of other countries.

It provides responsibilities regarding implementation of agreements, technical

cooperation and increased participation in the global trading system. These

agreements help in removing trade barriers and duty free access. It also helps in

protecting industrial property rights and dispute settlement. The trade agreement

system helps in promoting peace, provides more choices of products and qualities.

Export processing zone refers to one or more specific areas of a country where

some of the normal trade barriers are ruled out and bureaucratic necessities are let

down in the desire of attracting new business and foreign investments. This zone

also refers to the manufacturing centers, which are labor intensive involving the

import of raw materials and the export of factory products. This zone is of great

importance for the operations of MNC’s.

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WHY COMPANIES BECOME MULTINATIONAL COMPANIES?

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WHY ARE MNC’S ATTRACTIVE TO DEVELOPING COUNTRIES?

Developing countries are attracted to MNCs mainly because of the FDI that they

bring. Aid and financial grants have declined since the 1980s, so developing

countries’ Governments are increasingly focused on FDI . FDI creates employment

opportunities and new economic sectors though technology and skills transfer, and

helps with external debt payments. Although some scholars are skeptical

of FDI’s he debate, FDI plays an important role in many developing economies.

One benefit of MNC investment in developing countries is increased productivity

inexpert sectors. Tybout and Erdem analyzed trade liberalization’s countries’

productivity from the early 1970s to the mid 1990s and found that productivity

increased as supply chain integration intensified, but was uncorrelated to the

overall growth rate. Similarly in Bangladesh’s apparel industry, FDI increased

employment opportunities and raised gender equality, but had little effect on poverty

reduction. Sector is low-skilled, not unskilled, and thereby excludes the extreme

the poor. Another reason to attract FDI is that MNC operations bring technological

and other spillovers. However, these spillovers are industry-specific and only

become significant to economic growth when appropriate local capabilities already

exists, particularly in high to middle level technology based industries. This is not

pertinent for the apparel industry because it uses low-level technology that is easily

learnable, replaceable, and fixable with low investment.

Also, some countries Bangladesh and Myanmar do not have the initial platform for

technological innovation, and the exploitation of cheap labour is more profitable

than improving technology. While developing countries compete to receive or retain their

share of FDI, the playing field is not level. Investment-money follows proven

success. 2006 FDI in flows to Asia maintain an upward trend at 15%, with the

highest share destined for China. This concentration of FDI exacerbates South-

South competition and negatively effects labour standards.

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WHY ARE MULTINATIONAL COMPANIES IN INDIA?

There are a number of reasons why the multinational companies are coming down

to India. India has got a huge market. It has also got one of the fastest growing

economies in the world. Besides, the policy of the government towards FDI has

also played a major role in attracting the multinational companies in India.

For quite a long time, India had a restrictive policy in terms of foreign direct

investment. As a result, there was lesser number of companies that showed interest

in investing in Indian market. However, the scenario changed during the financial

liberalization of the country, especially after 1991. Government, nowadays make

continuous efforts to attract foreign investments by relaxing many of its policies.

As a result many of multinational companies have shown interest in Indian

markets.

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ROLE OF MNC’S IN INDIA

Profit maximization.

International network of marketing.

Diversification policy.

Concentration on consumer goods.

Location of central control offices.

Techniques to achieve public acceptability.

Existence of mordern and sophisticated technology.

Existence of modern and sophisticated technology.

Business, but not social justice.

No concern towards social responsibilities and business ethics.

MNC‘s and process of planned economic development in INDIA.

Cultural erosion.

Unconcern for environmental pollution and ecological balance.

PROFIT OF MNCS IN INDIA

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It is too specify that the companies come and settle in India to earn profit. A company enlarges

its jurisdiction of work beyond its native place when they get a wide scope to earn a

profit and such is the case of the MNCs that have flourished here. More over India

has wide market for different and new goods and services due to the ever

increasing population and the varying consumer taste. The government FDI policies

have somehow benefited them and drawn their attention too. The restrictive policies that

stopped the company's inflow are however withdrawn and the country has shown

much interest to bring in foreign investment here. Besides the foreign directive policies the

labour competitive market, market competition and the macro-economic stability are some of

the key factors that magnetize the foreign MNCs here. Following are the reasons why

multinational companies consider India as a preferred destination for business:

Huge market potential of the country

FDI attractiveness

Labor competitiveness

Macro-economic stability

PROBLEMS OF MULTINATIONAL COMPANIES

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Language

Of course, this part is so important, how could multinational companies

expand their market if those companies don't able local languages.

Culture

This aspect is must be considered by multinational companies because when

they want to advertise the products to local, they must thing what they can

do and what they can't do. Actually, not just in advertising aspect, but also

employment.

Geography

Multinational companies must consider this thing because it is impossible if

those companies build their branch offices at jungle or mountain. Who will

buy their product or services?

Transportation

To avoid high cost on product distribution, this aspect is must be considered

by multinational companies

SOCIAL & CULTURAL FACTORS

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The MNC’s are also affected by social and cultural factors of the local country.

They have to conduct the business according to the conditions in that country. The

products should be manufactured according to the needs and requirements of the

people. The cultural and social sentiments of the people should be taken care of.

For example, when Mc Donald’s started its business in India, it made beef burgers.

But this was failed in India, as it was against the cultural, religious and social

sentiments of the people of India, because Indians worship cows so they would

never prefer a beef burger.

But many a times it happens that MNC’s also shape the social, cultural, political

and even the legal framework of the local country. The people of the local country

many a times adapt to the products of the MNC’s. For example, Pizza Hut,

Dominos, etc. have totally changed the eating habits of the people wherever they

have spread their business. The dressing style of the people changes, e.g. Indians

started wearing western style clothes. They also convince the Government to make

its legal policy flexible to suit their business conditions because the country is

being benefited by the MNC’s.

GLOBALIZATION

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Multinational corporations are important factors in the processes

of   globalization .  National and local governments often compete against one

another to attract MNC facilities, with the expectation of increased  tax   revenue,

employment, and economic activity. To compete, political  powers push towards

greater autonomy for   corporations ,  or both. MNCs play an important role in

developing the economies of developing countries like investing in these countries

provide market to the MNC but provide employment, choice of multi goods etc.

The number of MNCs have increased greatly from 7000 in 1970 to over 78,000 in 2006. What

many people aren't aware of is that MNCs account for over half of the industrial

output of the world. The names of some of the largest MNCs include Wal-mart,

General Motors, Exxon-Mobil, Mitsubishi, and Siemens. However, according to data

from 2005, only one of the 200 largest MNCs are based in a developing nation which happens

to share a border with the United States, Mexico.

 The North holds a monopoly when it comes to large corporations including MNCs and this

power difference continues to create a rift between the North and South.

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MCDONALDS

INTRODUCTION

The McDonald's Corporation is the world's largest chain of hamburger fast food

restaurants, serving around 68 million customers daily in 119 countries across

35,000 outlets. Headquartered in the United States, the company began in 1940 as

a barbecue restaurant operated by Richard and Maurice McDonald. In 1948, they

reorganized their business as a hamburger stand using production line principles.

Businessman Ray Kroc joined the company as a franchise agent in 1955. He

subsequently purchased the chain from the McDonald brothers and oversaw its

worldwide growth.

A McDonald's restaurant is operated by either a franchisee, an affiliate, or the

actual corporation itself. The McDonald's Corporation revenues come from the

rent, royalties, and fees paid by the franchisees, as well as sales in company-

operated restaurants. In 2012, the company had annual revenues of $27.5 billion

and profits of $5.5 billion. According to a 2012 BBC report, McDonald's is the

world's second largest private employer—behind Walmart—with 1.9 million

employees, 1.5 million of whom work for franchises.

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McDonald's primarily sells hamburgers, cheeseburgers, chicken, french fries,

breakfast items, soft drinks, milkshakes, and desserts. In response to changing

consumer tastes, the company has expanded its menu to include salads, fish, wraps,

smoothies, fruit, and seasoned fries.

HISTORY

The business began in 1940, with a restaurant opened by brothers Richard and

Maurice McDonald at 1398 North E Street at West 14th Street in San Bernardino,

California (at 34.1255°N 117.2946°W). Their introduction of the "Speedee Service

System" in 1948 furthered the principles of the modern fast-food restaurant that the

White Castle hamburger chain had already put into practice more than two decades

earlier. The original mascot of McDonald's was a man with a chef's hat on top of a

hamburger-shaped head whose name was "Speedee". By 1967, Speedee was

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eventually replaced with Ronald McDonald when the company first filed a U.S.

trademark on a clown-shaped man having puffed-out costume legs.

On May 4, 1961, McDonald's first filed for a U.S. trademark on the name

"McDonald's" with the description "Drive-In Restaurant Services", which

continues to be renewed through the end of December 2009. On September 13 that

same year, the company filed a logo trademark on an overlapping, double-arched

"M" symbol. By September 6, 1962, this M-symbol was temporarily disfavored,

when a trademark was filed for a single arch, shaped over many of the early

McDonald's restaurants in the early years. Although the "Golden Arches" logo

appeared in various forms, the present version as a letter "M" did not appear until

November 18, 1968, when the company applied for a U.S. trademark.

The present corporation dates its founding to the opening of a franchised restaurant

by Czech American businessman Ray Kroc in Des Plaines, Illinois on April 15,

1955, the ninth McDonald's restaurant overall; this location was demolished in

1984 after many remodels. Kroc later purchased the McDonald brothers' equity in

the company and led its worldwide expansion, and the company became listed on

the public stock markets ten years later. Kroc was also noted for aggressive

business practices, compelling the McDonald brothers to leave the fast-food

industry. Kroc and the McDonald brothers all feuded over control of the business,

as documented in both Kroc's autobiography and in the McDonald brothers'

autobiography. The San Bernardino restaurant was demolished in 1976 (1971,

according to Juan Pollo) and the site was sold to the Juan Pollo restaurant chain.

This area now serves as headquarters for the Juan Pollo chain, as well as a

McDonald's and Route 66 museum. With the expansion of McDonald's into many

international markets, the company has become a symbol of globalization and the

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spread of the American way of life. Its prominence has also made it a frequent

topic of public debates about obesity, corporate ethics and consumer responsibility.

GOALS AND OBJECTIVES

McDonald‘s vision is to be the world‘s best quick service restaurants

experience.

McDonald‘s is committed to maintaining and developing the best food

products in the quick service restaurant market.

In order to deliver this, the company has made a number of commitments to

food safety and nutrition.

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Lead the Quick Service Restaurant market by a program of site development

and profitable restaurant openings, and by attracting new customers.

Increasing sales through promotions will enable them to continue their

program of expansion.

McDonald‘s have an objective to continual enhance and improve their menu.

This will better satisfy their customers and give customers more reason to

visit. Many ideas for new items on the menu come from the franchisees

responding to customer demand. Consumer tastes change over time and

McDonald‘s has to respond to these changes.

FACTS AND FIGURES

By 1993, McDonald's had sold more than 100 billion hamburgers. The once

widespread restaurant signs that boasted the number of sales, such as this one in

Harlem, were left at "99 billion" because there was only space for two digits.

The McDonald's in Northport, Alabama commemorates President Ronald Reagan's

visit

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McDonald's restaurants are found in 118 countries and territories around the world

and serve 68 million customers each day. McDonald's operates over 35,000

restaurants worldwide, employing more than 1.7 million people. The company also

operates other restaurant brands, such as Piles Café.

Focusing on its core brand, McDonald's began divesting itself of other chains it

had acquired during the 1990s. The company owned a majority stake in Chipotle

Mexican Grill until October 2006, when McDonald's fully divested from Chipotle

through a stock exchange. Until December 2003, it also owned Donatos Pizza. On

August 27, 2007, McDonald's sold Boston Market to Sun Capital Partners.

Notably, McDonald's has increased shareholder dividends for 25 consecutive

years, making it one of the S&P 500 Dividend Aristocrats. In October 2012, its

monthly sales fell for the first time in nine years. In 2014, its quarterly sales fell for

the first time in seventeen years, when its sales dropped for the entirety of 1997.

GLOBAL OPERATIONS

McDonald's has become emblematic of globalization, sometimes referred to as the

"McDonaldization" of society. The Economist newspaper uses the "Big Mac

Index": the comparison of a Big Mac's cost in various world currencies can be used

to informally judge these currencies' purchasing power parity. Norway has the

most expensive Big Mac in the world as of July 2011, while the country with the

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least expensive Big Mac is India (albeit for a Maharaja Mac—the next cheapest

Big Mac is Hong Kong).

Thomas Friedman once said that no country with a McDonald's had gone to war

with another. However, the "Golden Arches Theory of Conflict Prevention" is not

strictly true. Exceptions are the 1989 United States invasion of Panama, NATO's

bombing of Serbia in 1999, the 2006 Lebanon War, and the 2008 South Ossetia

war. McDonald's suspended operations in its corporate-owned stores in Crimea

after Russia annexed the region in 2014. On 20 August 2014, as tensions between

the United States and Russia strained over events in Ukraine, and the resultant U.S.

sanctions, the Russian government temporarily shut down four McDonald's outlets

in Moscow, citing sanitary concerns. The company has operated in Russia since

1990 and at August 2014 had 438 stores across the country. On 23 August 2014,

Russian Deputy Prime Minister Arkady Dvorkovich ruled out any government

move to ban McDonald's and dismissed the notion that the temporary closures had

anything to do with the sanctions.

Some observers have suggested that the company should be given credit for

increasing the standard of service in markets that it enters. A group of

anthropologists in a study entitled Golden Arches East looked at the impact

McDonald's had on East Asia, and Hong Kong in particular. When it opened in

Hong Kong in 1975, McDonald's was the first restaurant to consistently offer clean

restrooms, driving customers to demand the same of other restaurants and

institutions. McDonald's has taken to partnering up with Sinopec, the second

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largest oil company in the People's Republic of China, as it takes advantage of the

country's growing use of personal vehicles by opening numerous drive-thru

restaurants. McDonald's has opened a McDonald's restaurant and McCafé on the

underground premises of the French fine arts museum, The Louvre.

The company stated it will open vegetarian-only restaurants in India by mid-2013.

BUSINESS MODEL

McDonald's Corporation earns revenue as an investor in properties, a franchiser of

restaurants, and an operator of restaurants. Approximately 15% of McDonald's

restaurants are owned and operated by McDonald's Corporation directly. The

remainder are operated by others through a variety of franchise agreements and

joint ventures.

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The McDonald's Corporation's business model is slightly different from that of

most other fast-food chains. In addition to ordinary franchise fees and marketing

fees, which are calculated as a percentage of sales, McDonald's may also collect

rent, which may also be calculated on the basis of sales. As a condition of many

franchise agreements, which vary by contract, age, country, and location, the

Corporation may own or lease the properties on which McDonald's franchises are

located. In most, if not all cases, the franchisee does not own the location of its

restaurants.

The United Kingdom and Ireland business model is different from the U.S, in that

fewer than 30% of restaurants are franchised, with the majority under the

ownership of the company. McDonald's trains its franchisees and others at

Hamburger University in Oak Brook, Illinois.

In other countries, McDonald's restaurants are operated by joint ventures of

McDonald's Corporation and other, local entities or governments.

As a matter of policy, McDonald's does not make direct sales of food or materials

to franchisees, instead organizing the supply of food and materials to restaurants

through approved third party logistics operators.

According to Fast Food Nation by Eric Schlosser (2001), nearly one in eight

workers in the U.S. have at some time been employed by McDonald's. Employees

are encouraged by McDonald's Corp. to maintain their health by singing along to

their favorite songs in order to relieve stress, attending church services in order to

have a lower blood pressure, and taking two vacations annually in order to reduce

risk for myocardial infarction.

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Fast Food Nation also states that McDonald's is the largest private operator of

playgrounds in the U.S., as well as the single largest purchaser of beef, pork,

potatoes, and apples. The selection of meats McDonald's uses varies to some extent

based on the culture of the host country.

ENVIRONMENTAL POLICIES

It can be argued that as an organization, McDonalds is comprehensively

environmentally friendly and does reach most of the stated aims and objectives.

The aim in terms of ‘encouraging environmental values and practices’ needs to be

addressed more clearly to employees and managers alike as opposed to the

specialized McDonalds Environmental Management System so that all employees

of this organization are aware of its environmental duties. Applying this correctly

will help the company to improve on environmental friendliness. Also, there needs

to be a way of quantifying all necessary environmental data in order to ensure that

all employees are accepting an environmental responsibility. Finally, McDonalds

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as an environmental conscious organization also believes in asking the right

questions, challenging themselves, their system and their partners. Having looked

at the environmental policy of McDonalds it can be concluded that as an

organization it can be classed as socially contributive. This essentially means that

McDonalds wishes to be socially constructive in the community it serves to help

protect the natural environment. Recycling is a core part of their policies and helps

to avoid any unethical business actions.

FINANCIAL PERFORMANCE

McDonald’s hopes to close these gaps by a heightened focus on restaurant level

execution and marketing. It can be argued that a reduction in significant item costs

and an improvement in worldwide economic conditions will both also help to close

the gaps. Jim Cantaloupe, the Chairman and ChiefExecutive,2003, believes that

McDonald’s priorities are ‘to fix the existing business, to take a more integrated

and focused approach to growth, and to ensure McDonald’s has the right

Organizational structure and resources’. He anticipates that earnings per share

growth will be somewhere between 10% and 15%.

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The key to McDonald’s success will be a continuation of their product consistency,

better location choices and improved retail business model execution, particularly

with regard to the training of employees

CONCLUSION

In conclusion, MNCs are beneficial to less developed countries. They improve the

foundations of a "backwards" economic environment through the diffusion of

capital, technology, skills, and exports. MNCs have a direct effect on the

development of a more citizen welfare conscious government. Accordingly, the

number of jobs increases, consumer spending increases, the tax base grows and

health care is more widely accessible. They also have an apparent lasting effect on

the values and institutions of the host country. The values of the country change to

reflect a country committed to staying in pace with a rapidly changing global

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environment; extending to political norms and nationalistic tendencies. Once there

is openness to capitalism, or a more developed capitalist society emerges then there

will be a more stable global society. However, in the end there really is no other

more reliable way to improve the social, economic, and political environment of a

state than by allowing a MNC to invest. The MNCs is fascinating and important

for understanding economic globalization. There has been substantial progress in

the literature in the past couple of decades. Multinational companies are not

disadvantage to our country. India needs MNCs to become developed country. But

employees of these companies should not take responsibility for overloaded work

just for high salary. So that, there can have fulfillment of passion and also

fulfillment of personal life.

BIBLIOGRAPHY

http://en.wikipedia.org/wiki/MNC

www.indoinfoline.com

www.cii.com

http://en.wikipedia.org/wiki/McDonalds

http://www.mcdonalds.com/us/en/home.html

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