Table of Contents
With the onset of popular social media such as Facebook, Instagram and Twitter, a variety of media audiences around the world are aware of products that are not available in their own countries such as McDonald’s products that are only available in specific locations and targeting specific types of customers. Due to the already established market saturation of the company, owning a McDonald’s franchise is a viable business idea which takes advantage of the company’s market establishment and brand name around the world through product placement on popular television shows and motion pictures. In this regard, I look forward to starting a McDonald’s franchise in South Africa’s city of Vereeniging. Based on a report published by Business Tech (2015), the urbanization and growth of the city as of 2015 was 887% per year making it one of the most attractive emerging markets for uptown products such as McDonald’s menu.
The viability of the idea is related to the business opportunity associated with population growth and expansion of economic powerhouse in terms of the development and sustainability of urban centers. Due to rapid economic growth and accumulation of available opportunities, financially stable and business investor types of customers are the current target markets for the McDonald’s products based on the assumption that popular media and the brand name of the company are not new for the target market. Additionally, political stability and general economic growth of a state ensures that businesses can thrive with revenue sustainability attached to the opportunities influencing urbanization. For instance, South Africa is a Gold mining nation which sustains the economy of the nation and promotes it to international levels as an emerging economic powerhouse. Essentially, the strategic placement of South Africa within a general tropical climate and access to the Indian and Atlantic oceans makes it a tourist destination capable of supporting these and more types of foreign investments that consider franchising an option.
Industry Related Issues
Some of the major issues related with the fast food industry include the changing behaviors of consumers and the active responsibilities assumed by healthy eating activists. With reference to the pressure by activists, a variety of international fast food and beverage companies such as McDonald’s, Wendy’s, and Starbucks among others have been forced to labor their recipes if a customer asks following policy and regulation changes initiated by active anti-junk activism. In this regard, it is more profitable for new entrants other than expansion of current businesses or the integration of such policies to active business models. However, given that the parent organization is responsible for the regulation of product qualities and recipes as well as marketing, the risk of incurring further costs is limited but time as a resource is affected in the long-term operations of a franchise (Panmore Institute, 2017).
Additional challenges that are facing the franchise in South Africa include the disadvantages of open markets where new entrants and more capable rivals can enter and exit the market at will causing further challenges in the sustainability of current market share. Without a reliable market share and a sustainable number of target customers, the long run economic sustainability and operation of the franchise will be compromised due to unreliable revenue generation and the possible accumulation of expenses that cannot be met in both the short and the long run.
Target Market and Consumer Issues
The target market in this case is a fast-growing South African city, Vereeniging, which provides reliable features for the development and growth of business franchises. The fast growth of the city is influenced by an influx of both local and international investors such as investments in modern businesses and technological solutions have increased government expansion of critical infrastructure providing a reliable platform for business establishment and sustainability. In addition, the economic force driven by young entrepreneurs provides a perfect target market whose value for time offers the franchise a reliable platform for the growth of revenue and sustainability of revenue expansion for fast food joints. In addition, while traditional beliefs and cultural underpinnings play a major and significant role in the determination of consumer behavior, observed that fluctuations in demand based on customer churn will be moderated by increased curiosity to consume McDonald’s products for most residents taking into account rural to urban and semi-urban to urban migrations.
In addition, the population growth is another factor that has to be taken into consideration with reference to business development and sustainability. Studies indicate that an increase in population influences higher demand for products and at the same time inflates the costs of unit products. In this regard, as more people continue to flock the city the franchise will have more reasons to hike the prices ensuring that the low productivity capacity as compared to the increased demand by the growing population optimizes the revenue generation from sales (Ingram, 2018).
Founder Related Issues
As a franchise, the business model does not have founder issues but is concerned with human resource management and internal controls. For starters, the McDonald’s marketing strategy is to ensure that customers, irrespective of their location, are provided with location relevant products sustaining cultural heritage and social values attached to eating habits. Therefore, forging a reliable team to manage and operate the business model is a challenge based on the understanding of South African traditions as well as emerging resistances to Western influence on culture and the erosion of values. Therefore, the business model faces the challenge of having to integrate various team members that are culturally diverse and intelligent to meet the demands and expectations of modern and traditional but socially motivated target customers. From this approach, some of the expected challenges include conflict resolution approach for the socially diverse team of employees. Additionally the use of Western values in the integration of the franchise in a developing economy will also be faced by the challenge of pricing since more economically stable nations of a significantly higher purchasing power to its citizens as compared to emerging markets that are comprised of a few financially stable and large proportions of financially struggling groups.
The approach of using franchising strategy to enter into new market is considered advantageous to the business model because most of the strategic decisions are made by the parent company and the franchisee is only left with the production and distribution responsibilities. Nonetheless, the capital of starting the franchise must comprise of the license buying fee and the establishment setup costs not accounting for research and developments associated with a specific location and have expenses of procurement and logistics. Therefore, in the development of the business plan financial issues associated with the specific setup of a McDonald’s establishment take into account all modern technology and information systems used for both accounting and ordering of products. Based on former studies, it is observed that the designing of a McDonald’s franchise is also a challenge because internal controls require all establishments to be uniform in terms of external and interior designs and raw materials such as bricks may have to be made by a qualified contractor and delivered in specific proportions as outlined by the organization’s operational and sustainability policy.
Overall Business Potential
The overall business potential of a McDonald’s franchise is significantly higher than the expected competition’s following an established brand name, cultural sensitivity in product development, social diversity in labor selection, financial stability of the parent company, aggressive market campaigns to sustain revenue expansion and relevance of the business, worldwide recognition of both brand and establishment designs, and the strategic placement of establishments to ensure optimal operational capacity. Given the financial stability and brand recognition internationally, the acquisition of a reliable and sustainable market share is easily achievable given the sustaining factor of rapid population growth and urbanization of the city (Panmore Institute, 2017). Additionally, the introduction of an international brand within an emerging foreign market creates business potential based on reliable service and quality products. Finally, the political stability and calm in the state of South Africa supports infrastructure development and protects key resources from external vulnerabilities such as political pressure and the policy disruption regarding business and economic development within the state. With regards to this feasibility study on the business investment potential in the state of South Africa, McDonald’s franchise is decent addition to the city of Vereeniging in the balance of emerging business models within the target market.
We can do it today.
- Ingram, D. (2018). Advantages & Disadvantages of a McDonald’s Franchise.
- Panmore Institute. (2017). McDonald’s SWOT Analysis & Recommendations.