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Lecture 4

chapter 3


Department
Global Management Studies
Course Code
GMS 200
Professor
Sui Sui
Lecture
4

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[GMS- 200 CHAPTER 3]
September 19/ 26 , 2012
Study questions:
1) What are the management challenges of globalization?
Image: The world: a business view
oGDP, profit, economy.
oMost multinational companies are in US or UK.
Image: the world: a forward- looking business view
oIndia and china are growing: economy is bigger depended on the GDP
oFast technology.
oEmerging market.
oLots of potential in India, China and Brazil.
oCompanies look for future customers.
oCultural challenges the business.
Global companies face a critical question when they enter emerging
markets.
oHow far should they go to localize their offerings?
oShould they adapt existing products just enough to appeal to
consumers in those markets?
Typical western approach to foreign expansion is to try to sell core products or services
pretty much as they’ve always been sold in Europe or the US
oDomino’s pica nearly failed in Australia because it underestimated the need
to adapt its offerings to local tastes; only after it turned the country over to a
local master franchisee did Domino’s become the largest pizza chain there.
CASE STUDY: McDonald’s and KFC in china

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[GMS- 200 CHAPTER 3]
September 19/ 26 , 2012
oIn 2011 MCDs and KFC are the two world’s largest chain of fast food
restaurants, having.
oIn china KFC was much more successful than MCDs.
One of the most impressive stories of a US multinational in an
emerging market is in China: KFC is opening one new
restaurant a day.
Image: KFC’s international expansion.
The dominant logic behind KFCs growth in US: a limited menu, low
prices, and emphasis on take out.
KFCs management impressively adapted its business model
to better suit China recently and it’s in no danger of losing
momentum.
KFC in china
oFirst Chinese KFC started in 1987 with 15,070 square feet and 500 seats.
oRestaurant became the highest selling single KFC store in world after 4
month after opening.
oFrom day 1 KFC used local food ingredients and local talents.
oHired high school graduates. Why? Want people who don’t have people that
are too qualified or have past experience in working in a restaurant.
oSelf- developed logistic and distribution system
oImplemented a supplier rating system to find suppliers that perform best.
oLocal food R&D team and a test kitchen
oFocusing on ownership rather than franchising.
KFC accumulated and competencies that now pose formidable barriers to
competitors.

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[GMS- 200 CHAPTER 3]
September 19/ 26 , 2012
MCDs in china
oFirst Chinese MCDs opened in 1990 in Shenzhen.
oConsistent global supply chain partners
oDid not successfully penetrate many 3rd and 4th tire cites
oThe menu in china was essentially the same as in the US.
In china, MCD’s sale is far behind KFC because it
underestimated the need to adapt its offerings to local tastes.
KFC china offers important lessons for global executives who
seek to determine how much of an existing business model is
worth keeping in emerging markets and how much should be
thrown away.
Image: yum brands vs. MCDs. Shares of KFC, Taco bell, and Pizza hut parent yum are
more richly valued that those of larger rival MCDs, because yum is the largest US
restaurant brand operating in china, the world’s fastest growing economy.
Key concepts:
Global economy
Global value chain dell video
Globalization
International management
Global manager.
2) What are global businesses and what do they do?
What are the forms and opportunities of international business?
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