McDonald's Business Operation In Pakistan example essay topic

McDonalds first opened a store in Pakistan in September 1998. Since then they have opened seventeen new stores through Pakistan. Today millions of Pakistanis place their trust in McDonald's everyday to provide them with food of a very high standard as well as good service. In the past five years, the response to McDonalds coming to Pakistan has been overwhelming. Today Lakson Group Companies has taken over McDonalds Corporation, USA and a local partner making it a 100% owned and operated Pakistani company.

McDonalds located in Pakistan are currently employing about 1,000 Pakistanis and each store is managed by Pakistani managers. They have also contributed in other ways than food service. McDonalds has investment of over Rs 300 crore in the country and payment of taxes and duties amounting to more than Rs 100 crore. Since McDonalds is doing so well in Pakistan they will continue to grow and add more stores in more cities in the future. In the twenty-first century; international business continues to experience profound changes that will reshape the challenges and opportunities that managers face.

The broad, long-term trend is the continued growth of international business, something that will increasingly weave national economies together. This ongoing process of globalization, "ultimately will increase international cooperation and reinforce overall growth". In attempting to do business in a country such as Pakistan, a company must go through certain steps, which is seen as a drawback to many companies. This can be a challenging process because there are many steps a company must take.

It can take up to six months to get a business off the ground where as in some countries you can start a business within a week. This puts Pakistan at a disadvantage because many companies do not want to wait that long. The cost of doing business in Pakistan is very high. The main 'factors' of cost of business in Pakistan are raw material, utilities cost of finance, human resource, technology, infrastructure and supporting institutions. Companies doing business in Pakistan must also register with the Registrar of Companies under the company's ordinance. This can cost anywhere between 200 and 5000 rupees.

The graph below presents, some of the challenges of launching a business in Pakistan are shown below through four measures: procedures required to establish a business, the associated time and cost, and the minimum capital requirement. Entrepreneurs can expect to go through 11 steps to launch a business over 6 months on average, at a cost equal to 36.0% of gross national income (GNI) per capita. Starting a Business (2004) Indicator Pakistan Regional Average OECDAverageNumber of procedures 11 9 6 Time (days) 180 245 32 Cost (% of income per capita) 36.0 45.4 8.0 Min. capital (% of income per capita) 0.0 0.0 44.1 However, the Overseas Private Investment Corporation (OPIC), which supports economic development by promoting U.S. private investments in developing countries and transition economies; can make starting a business in a country such a Pakistan not so tedious after all. OPIC evaluates all projects it may support for their contribution to development in 25 areas, and measures the organizations performance on the basis of the contribution of projects OPIC supports to development. OPIC helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy. McDonald's corporation on several occasions has used the support of OPIC to start a restaurant in various countries.

OPIC has insured McDonald's up to 90 percent of an eligible investment. OPIC statute generally requires that the investor bear at least 10 percent of the risk of loss. In large corporations such as McDonald's, OPIC frees this large corporation to invest - at no risk to them. However, when McDonald's decided to expand there business to Pakistan instead on going through OPIC, they went through the Lakson Group of Companies, the leading business house in Pakistan. Another disadvantage Pakistan faces is the high taxes placed on businesses. Since Pakistan's January 1, 1995 membership into the World Trade Organization there have been very little disputes regarding trade regulations.

The World Trade Organization has helped Pakistan become a more competitive and spur additional foreign investment. However, as a result, the tariff rates of electricity for industry and commercial concerns are considerably higher in Pakistan than competing countries basically due to the more than 50 percent of line losses and theft. Businesses are also required to pay innumerable federal, provincial and local taxes under a complex taxation system. It can also take over six months to secure electricity, gas and phone connection. Since the phone service in Pakistan is pretty much mediocre many companies have established their own private service.

Another issue's companies must deal with is the instability of the government at this time. Currently Pakistan is having problem with their President Pervez Musharraf, which is causing some problems. There is also the conflict with Kashmir which could cause U.S. relations to deteriorate and cause statistics for Pakistan to drop dramatically. At this time since Musharraf is backing President Bush in the war on terror the United States is giving a large amount of aid and highly beneficial trade deals to Pakistan.

However, at the same time natives of Pakistan have been extremely pleased to have McDonalds come into their country. They feel it gives them and their children the opportunity to enjoy things at a reasonable price like foreigners do. Although, the disadvantages of doing business in Pakistan may seem overwhelming, when doing business in Pakistan there are some incentives. Companies who invest in Pakistan can receive numerous tax exemptions. Major exemptions include interest income on foreign currency accounts, capital gains on sales, and many others. Leading global food service retailer with more than 30,000 local restaurants serving nearly 50 million people in more than 119 countries each day; McDonald's is one of the world's most well-known and valuable brands and holds a leading share in the globally branded quick service restaurant segment of the informal eating-out market in virtually every country in which they do business.

McDonald's success is built on a foundation of personal and professional integrity. Hundreds of millions of people around the world trust McDonald's. They earn that trust everyday by serving safe food, respecting their customers and employees and delivering outstanding Quality, Service, Cleanliness and Value (QSC&V). They build on this trust by being ethical, truthful and dependable.

At McDonald's, responsibility means striving to do what is right; being a good neighbor in the community, and integrating social and environmental priorities to each and everyone of their restaurants and their relationships with suppliers and business partners. It also means communicating about their efforts to address social and environment issues that matter to their customers and other stakeholders. Corporate responsibility is part of the McDonald's heritage, dating back to founder Ray Kroc. It is also an integral part of the successfully business strategy that they encompass. McDonald's customers' trust is a precious asset and one they strive to preserve and build every day. Without that trust McDonald's Corporation would not be able to effectively achieve their vision of being, "our customers' favorite place and way to eat".

Working hard to understand the complex issues that confront their industry and how they can make a significant difference; McDonald's as you will see, will invest in a commitment to industrialized leadership. No policy, booklet, committee or compliance office can guarantee good, ethical behavior, so McDonald's believes; "Only each one of our founders, managers, and employees can". It is up to every person who is a part of McDonald's to keep their good name shining by doing the right things the right way. "The basis for our entire business is that we are ethical, truthful and dependable". Almost 50 years ago, Ray Kroc thought this would still be important today.

Honesty and integrity are at the heart of QSC&V and success. Years ago, McDonald's Standards of Business Conduct was as simple as, "We are ethical, truthful and dependable". Today, they operate in an environment of complex laws and regulations, and many expectations of how they should and will conduct business. The Standards of Business Conduct provides guidance for many of the most complicated areas faced within the industry. McDonald's standards are just as important as their customers.

They provide basic guidance, but are not a substitute for communicating openly. As founder, Ray Kroc states, "It is each and every one of ours responsibility to straight talk-asking questions and raising issues, even when doing so might be difficult". The Standards of Business Conduct is a guide to the ethical and legal responsibilities shared by members of the McDonald's work family. It is not a complete rule book that addresses every ethical issue that might arise. It is not a summary of all the laws and policies that apply to McDonald's business. It is not a contract.

And it does not replace good judgment. Rather, the Standards of Business Conduct gives corporation guidance and directs them to resources to help make the right decisions. McDonald's firmly believes that they will not pay bribes, or provide anything of value in order to influence or appear to influence the judgment or actions of another. They will exercise good judgment and moderation in providing business gifts or entertainment; while still respecting the policies of the recipient's organization.

The purpose of any type of business gifts or entertainment in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with customers. "No gift, entertainment or other personal benefits should be offered, given, provided or accepted by any Company employee, family member of an employee or agent". As our textbook points out, most US managers are seen as highly individualistic and, as a result feel that the individual is the main source of ethical values; as does the McDonald's Corporation. That is why there are great emphases placed in the corporate codes and business codes of conduct across all nations. Ambassadors for McDonald's state, "You know, there's like a million and a half people that work for McDonald's around the world, so everybody has to work hard at doing their part to keep the culture of playing by the rules, of integrity, of all the other things the Arches stand for... everybody has their responsibility to be ambassadors for McDonald's goodwill"-McDonald's employee in focus group Most of the countries in which McDonald's operates in around the world have fair competition or antitrust laws in place to safeguard the rights of consumers to the best products at the best prices.

McDonald's supports and complies with these laws. These laws generally prohibit, among other things: o Entering into any formal or informal agreement or understanding with competitors that fixes, controls or affects prices, products, terms of sale, costs, profits or profit margins, markets or market share, or distribution practices. o Agreements or understandings with competitors to allocate customers or products, to boycott suppliers or persons with whom they would otherwise transact business, or to bid or not to bid on business generally. Competition laws also govern our relationships with suppliers and owner / operators. Employees who work with supplier councils, local advertising cooperatives or OPN AD (Operators National Advertising Fund) should consult the Legal Department about antitrust issues. Pakistan, an impoverished and underdeveloped country, "has suffered from decades of internal political disputes, low levels of foreign investment, and a costly, ongoing confrontation with neighboring India". However, IMF-approved government policies, bolstered by generous foreign assistance and renewed access to global markets since late 2001, have generated solid macroeconomic recovery the last two years.

The government has made substantial inroads in macroeconomic reform since 2000, although progress on more politically sensitive reforms has slowed. According to some analysts, the slow pace of inflow, in the recent past, of the US investment into Pakistan was due to some external and internal factors. It is understood that there was a shift in investment strategy of the US investors. They preferred to make investment in the member countries of the North American Free Trade Agreement (NAFTA) rather than in other regions. It is evident that when the GoP opened energy sector for private sector investment, in early nineties, American companies did not show keen interest. However, later on, the US companies realized the 'lost opportunity' and tried to capitalize wherever possible.

Another important area where the US investment has come lately is foreign food franchise. Pizza Hut, the first in the long chain of fast food restaurant entered Pakistan during the last quarter of 1993. KFC started its operations during the first quarter of 1997. Some of the other franchise which have come to Pakistan are McDonalds, Dunken' Donuts, Nacho Nana and T acco Maker. When McDonald's first opened doors in Pakistan they were in part with Lak son group of companies, as previously mentioned. The first set of golden arches began shining back in September 1998 in the city of Lahore.

The opening was met with great excitement and about a week later the McDonalds in Karachi opened. There are currently 18 restaurants in Pakistan: 7 in Karachi, 1 in Hyderabad, 9 in Lahore, and 1 in Faisalabad. Until recently, "McDonald's Corporation and local partners of Pakistan worked hand-and-hand to make McDonald's the successfully entity that it has become today". The managers working for Lakson, reportedly monthly to the McDonalds headquarter located in Illinois.

In the eighteen restaurant located in Pakistan all of the employees, managers as well as those working for Lakson are of Pakistani descent. These various monthly reports which averaged more than fifty pages outlined: the gross income for that month, information of new employees and their credentials, any health or safety issues, what they anticipated next months income to be, any charities or fund raises that they planned to pursue within the next six months, among various other things. Along with these monthly reports, McDonald's Corporation would send franchising operators over quarterly. Executive Franchising Operator, Carrie Sal one and her team do not do these trips unexpectedly they do them to keep the lines of communication open between them and their partners. During the duration of these trips which usual last for no longer than two weeks these franchising operators would help assist in any way possible with problems that may be occurring, especially if these problems could not be worked out via email or phone conference. As of two weeks ago, a company which is merely 5 years old in Pakistan; McDonald's is being ran completely by the Lakson Group of Companies.

Lakson has taken over from McDonalds Corporation, USA and local partner, making it a 100 percent Pakistani owned and operated company. Although, there is not much information available yet in regards to the terms and conditions of this transaction. The McDonald's Pakistan website does proudly announce that they will, "continue to achieve the worldwide vision held by the McDonald's Corporation, USA". Since Lakson has taken over 100 percent of the Pakistani McDonald's operation the way they plan to uphold the worldwide vision is to: Be the best employer for our people in each community Deliver optional excellence to our customers in each of our restaurants Achieve enduring profitable growth by expanding the brand and leveraging the strengths of McDonald's system through innovation and technology. Since McDonald's first opened in Pakistan back in September of 1998 they have been able to add things to their menu that cater to the needs of the Pakistani's culture. Almost all the people of Pakistan practice Islam, the Muslim religion.

The Islamic dietary laws are called halal. Halal is also the term for permitted foods. Prohibited foods as described in the Koran are called harm. Some of these foods include pork and birds of prey, alcohol is also prohibited and stimulants, such as coffee and tea, are avoided by the most devout.

There are also guidelines on how meat must be slaughtered. McDonalds has tried to work with this by offering menu choices such as the Mc Arabia that are acceptable for Muslims. In Muslim countries all of McDonald's meat is slaughtered and prepared according to Islamic Halal standards. Not that long ago McDonalds change their burgers, cookies, and hamburger buns so they do not contain any lard making more acceptable to more people in Pakistan. They also keep the classics on the menu. A current ad that they are running in Pakistan states that "A Big Mac is a Big Mac!

Some things are just great the way they have always been!" On the menu they do offer what they call a Mc Arabia, which is chicken on flatbread with a special sauce and they also offer many of the originals such as the Big Mac and hamburger with chicken. As does the McDonalds in the United States, the McDonald's in Pakistan also caters to the children of the community. They offer four types of happy meals, which of course include a toy. Currently with the purchase of a happy meal the kids get a hot wheel car. So while McDonalds has modified their menu to include some local favorites they have also kept the infamous burgers and meals. Another exciting fixation that McDonald's Pakistan is doing is they are now offering their Mc Delivery service free of charge.

This delivery service will deliver all menu items to customers with order of RS 150 or more. Since this service is relatively new it is only offered at two stores at this time. They include Karachi and Lahore, but other locations will be added to this list soon. Just like the McDonalds in the United States they also hold birthday parties at McDonald's in Pakistan. They even offer birthday packages with food and surprises for the kids. McDonalds has also become involved in the Pakistani community by taking part in local projects and charities.

As stated in their vision McDonalds is firmly committed to giving back to the communities they operate in. They take part by giving money they receive in stores every month to Darul Soon (orphan house). McDonalds also takes part in activities such as beach cleaning, visits to local schools, and hospital visits to try to put a smile on people's faces. McDonald's is inevitable ly the world's largest community restaurant. They are proud of their long-standing commitment to a workforce that is diverse. McDonald's worldwide firmly believes in developing and maintaining a diverse workforce that will strengthen the McDonald's system.

Diversity at McDonald's is to understand, recognizing and valuing the differences that make each person unique. McDonald's has been recognized for its many contributions in the following areas: o Top 25 Companies for People with Disabilities o Best Employer for Asians o Top 50 Places for Hispanic Women to Work o Fortune Magazine - Top Places for Minorities to Work o Working Mother Magazine - Top 10 Diversity Champions o Hispanic Magazine - Top 50 Corporate Women in AmericaMcDonald's is committed to recognizing the talents and job performance of all employees and values the contributions that come from people with different backgrounds and perspectives. Although in Pakistan the literacy rate is still abysmally low, the number of literate persons in the country has climbed up 17- fold; that does not effect their employment with McDonald's. However, in Pakistan the number of universities has increased from four to 25 and there are an equal number of private universities, including specialized management, engineering, and medical universities. There is now a large cadre of professionals in every field that can excel by international standards. In 1947, female education was virtually unheard of, except in a few big cities and their vicinities.

Today, there are hundreds of thousands of female teachers in the country, including the rural areas. "Female primary and secondary enrollment rates have moved up 23- and 27-fold, respectively. Women professionals were once the rare exception; now they are the norm in almost every field, although not in all parts of the country". As globalization involves enterprises and workers of nearly all the world's countries in the goods as well as in the service sector.

Consequently, the majority of the world's labor force is experiencing the effects of international competition. In Pakistan, "except for the government servants there has been an increase in the wages in the informal sector as well as wages of the production workers since 1999". As far as education is concerned, although the literacy rate is still low, the number of literate persons in the country has climbed up 17-fold and the number of universities has increased from four to 25. As with any company, there are various difficulties that come with hiring and firing employees. The McDonald's industry and Pakistan in particular are no different from the others. In Pakistan, three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker.

Conditions covered by the indices include: availability of part-time and fixed-term contracts, working time requirements, minimum wage laws, and minimum conditions of employment. In the graph presented below, each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. For Pakistan, the overall index is 49, compared with the regional average of 42.3 and OECD average of 34.4. Firing costs are calculated on the basis of the number of week's worth of salary in severance, notification and penalties that must be paid to dismiss a worker. Hiring and Firing Workers (2004) Indicator Pakistan Regional Average OECDAverageDifficulty of Hiring Index 78 37.0 26.2 Rigidity of Hours Index 40 36.7 50.0 Difficulty of Firing Index 30 53.3 26.8 Rigidity of Employment Index 49 42.3 34.4 Firing costs (weeks of wages) 90 84.7 40.4 Along with the hiring and firing of employees, McDonald's corporation has several standards in place outlining the minimum conditions necessary for employment.

In both, the United States and Pakistan, the Human Resources department require that all employees at the beginning of employment be giving these employment conditions after their first ninety days at the job. These minimum conditions of employment include but are not limited to paid maternity leave for a maximum of twelve weeks, paid holidays (11 days / Annual), paid annual leave (14 days / Annual), paid sick leave (16 days / Annual), and paid casual leave (10 days / Annual). Incentives such as they are upheld nationwide by all McDonald's restaurants. Although, there are many smiling faces in Pakistan, thanks to all the support from the McDonald's Corporation to better the community. Due to the current war on terror McDonalds has been faced with some hurdles in Pakistan. As discussed in our text-book some of the McDonalds in Pakistan decided to cover up their signs when the military took action in Afghanistan.

Some people who were angry about the bombings immediately related McDonald's back to the United States and began to vandalize the property. Many people believe that McDonald's in one of the most popular American symbols, which of course puts it at risk when political upheaval begins. So while many Pakistanis enjoy McDonalds others see it as an American company and proceed to vandalize it due to what is going on with the war. Another worry that could cause future problems for McDonalds would be if the United States were to pull out the aid they are providing Pakistan for any reason. This could cause vandalism and even boycotts because McDonalds is seen as an American company. There has been protesting against U.S. led attacks against Iraq and some groups have chosen to boycott against all western products including McDonalds.

Along with these boycotts sales dropped a little, but there were not any drastic changes. Since McDonalds first opened its doors in 1998 they have added another 17 restaurants. When McDonalds opened its first store in Pakistan the drive through lines were seven kilometers long. With lines this long is was obvious that many Pakistanis were happy to welcome McDonalds into their homes. According to The News International McDonalds in Pakistan has sold more burgers in Pakistan than anywhere else in the world. With only 18 stores currently in Pakistan this shows how busy McDonalds is.

Many people are excited to have McDonalds because it is a "brand-name" and it gives them the opportunity to enjoy the same things that foreigners enjoy. McDonald's costs the same in Pakistan as in the US, and given the per capita GDP disparity between the two countries, it is the cheapest food in the United States, while being one of the most expensive in Pakistan. Even with the high cost people are still flocking to McDonalds some in their "Sunday Best". McDonald's business operation in Pakistan overall has been a complete success for the McDonalds Corporation as well as the Pakistani community. Both parties involved have gained more than their anticipated outcome from the arrival of McDonalds back in 1998. In the future we believe that McDonalds will continue to grow within Pakistan and throughout the world.

We also feel that the Pakistani people will work very hard to keep McDonalds name and food service at the high quality people are use to.

Bibliography

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