External factors and cultural differences
In this assignment I will be discussing a country that a selected business could target for international trade
and will evaluate the impact of cultural differences on international business. I will justify why by
investigating external factors and the cultural differences that influence international businesses. The
countries which I will be using are China and the USA as they contrast in strengths and weaknesses and
also are the two most prominent countries. Also, the business I will be using is McDonalds.
McDonalds was established in 1955, California, USA and has amassed $billions in wealth and power in
the last 65 years. They operate internationally with 32,000 restaurants around the world contributing to the
$21.08 billion revenue in 2019. McDonalds was one of the first fast food chains and offers cheap tasty and
convenient goods for people who are looking for a quick meal. Over the years, they have been able to
perfect their strategy which has solidified McDonalds as the market leader with 21.7% market share with
2nd, YUM!Brands Inc, with 8.1%. As of 2019, McDonalds is present within 117 countries with the likes of
Russia, China and the USA. In the USA, they have the largest number of stores with 14,146 which
generates $8.1billion in revenue. McDonalds have 7 core values inplace which every branch and
employee must follow. These consist of operating ethically, giving back to communities, striving to
improve, growing business profits, customer satisfaction, committing to the team and belief in the
Mcdonald's system. By having these in place, McDonalds can be sure that their employees value their job
and the people around them which allows for the business to operate swiftly and encourage consumers to
purchase their goods.
https://strategicmanagementinsight.com/mission-statements/mcdonalds-mission-statement.html
https://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/
https://www.worldatlas.com/articles/countries-with-the-most-mcdonald-s-restaurant.html
International business support systems are networks which allow for international trade to take place in the
most coordinated way. They allow for all parties to seamlessly communicate to relay information through
various methods. For McDonalds, having an international business support system is crucial to continue
business as usual as it ensures that all the 60million customers per day are served adequately by the
32,000 restaurants in 117 countries. keeping that international support system is essential to coordinate all
McDonalds restaurants and ensure they follow the core values. Having the international business support
systems in place for McDonalds has enabled them to conduct international trade as they have provided
unlimited connectivity between customers and employees and also given a global audience for marketing.
This has ultimately created McDonalds a global brand with 60million plus customers daily.
https://www.ukessays.com/essays/marketing/the-international-market-strategy-of-mcdonalds-marketing-
essay.php#:~:text=They%20have%20spread%20across%20117,business%20model%20pioneered%20by
%20McDonald's.
The most prominent way to help international trade is the use of the internet. The internet provides
business with unlimited opportunities for communication which can be used to communicate with
consumers or employees. This inturn allows for employees to receive information faster and for the
businesses to communicate with more customers at once. With the evolution of the internet, businesses
have had to evolve to match competition. Consumers now expect ease, speed and communication from
businesses using the internet which has caused businesses to adapt. Businesses have adopted new
payment methods such as PayPal, contactless and other online payments to suit consumers which want a
fast and easy payment.
From the evolution of the internet, the delivery food industry has exploded and is worth $94billion in 2019.
Mcdonalds have seen this growth and have adapted to provide a McDonalds delivery service. By having
this service, they are able to provide customers who may not want to travel to receive a fast food meal.
This inturn contributes to the total revenue and increases their customer base. By providing a service
which is easily accessible through the internet, McDonalds are able to make significant sales by targeting
consumers convenience. As a result, delivery sales are estimated in 2021 to reach 8.6% of the total
revenue. Also, McDonalds have third parties such as deliveroo and uber eats receiving orders which
provides additional revenue. As deliveries are made online, Mcdonalds have needed to adopt an online
payment system for consumers to use which is much more customer friendly as it's quicker and more
convenient. In summary, with the evolution of the internet, it has caused McDonalds to join a new industry
and adapt to new methods to suit consumers and drive growth.
, https://www.ukessays.com/essays/marketing/the-international-market-strategy-of-mcdonalds-marketing-
essay.php#:~:text=They%20have%20spread%20across%20117,business%20model%20pioneered%20by
%20McDonald's.
International payment methods are the exchange of money between parties which are situated in different
countries using different currencies. The methods consist of Cash in advance, letters of credit, open
account, consignment, international credit cards, international bank transfers and commercial payment
systems.
Cash in advance is a method of international payment which is built upon trust as payment is received
before the goods/service is delivered. Paying cash in advance may also be necessary for suppliers to
produce the goods as they may not have the funds to manufacture the goods without prepayment. Cash in
advance can usually take place before the shipment however, can occur anytime before that. This binds
both parties to the agreement which can make it a more secure and convenient transaction.
https://www.investopedia.com/terms/c/cashinadvance.asp
Mcdonalds provides consumable goods to consumers who are paying low amounts of cash as mcdonalds
provides cheap produce. Therefore cash in advance does not apply to customers however, when
mcdonalds is sourcing raw materials, they may pay cash in advance towards suppliers. This ensures the
supply of the raw materials meets the demand of the customers and binds the suppliers and purchasers to
the agreement. Although this may impair cash flow, mcdonalds is an organisation where the payment will
go unnoticed financially. Due to the above, this is a viable option and may be used by McDonalds as it
secures the agreement between suppliers.
Letters of credit are to provide more security to the seller and purchaser. letters of credit give a guarantee
to the seller that they will receive payment for the good/service within the set time period. letters of credit
are made with the Bank so they guarantee payment from the buyer by setting strict rules for both parties to
follow to ensure payment is made. Having a letter of credit inplace reduces the risk for the seller to receive
no payment for delivered goods.
https://www.mondaq.com/turkey/international-trade-investment/100456/advantages-of-using-letter-of-
credit-in-international-transactions#:~:text=Letters%20of%20credit%20are%20indispensable,with%20that
%20of%20the%20banks.
Mcdonalds are worth $163billion in assets, inventories and available cash. Therefore they are guaranteed
to make payment to suppliers. In that sense, a letter of credit may not be applicable however, to provide
strict rules for parties, a supplier may commission a letter of credit to ensure security against Mcdonalds.
Mcdonalds may be intimidating to suppliers so having a letter of credit ensures a smooth transaction
between parties. Therefore, a transaction between Mcdonalds and supplier is secure and the supplier feels
more confident having support from a big entity such as a bank.
An open account is a form of international payment which can be made within 30,60 or 90 days. These
systems are often put in place when both parties have been in a long term relationship as these take a lot
of trust. An open account for sellers can disrupt cash flow as there is still expenditure with no incoming
cash. Sellers often commit to an open account to compete with other suppliers who provide this method to
retain importers. Also, if any disruptions to either parties can cause major issues to the deal which may
cause a high risk of the customer not paying or the supplier unable to deliver. However, for the buyer, cash
flow is strong as when receiving the goods, there are no outgoings until the set date of repayment. This
gives the importer a set time period to make sales which contribute to the final payment. As a result, the
importer can use their revenue of sales to contribute towards the open account. Therefore, this gives the
importer more capital to invest in order to make the sales required to pay off the debt.
https://www.shippingsolutions.com/blog/methods-of-payment-in-international-trade-open-
account#:~:text=The%20Advantages%20of%20an%20Open%20Account&text=Obviously%20this
%20option%20is%20advantageous,exporters%20for%20open%20account%20terms.
Consignment is a form of an open account which payment is sent directly after the goods have been sold
to the customer. A contract between the seller and importer is made which ensures that the seller has legal
ownership of the goods until they are sold. However, although they own the goods, the importer has the
goods in hand which put the seller at high risk as they are stored in a different country out of their
protection. If anything happens to the goods, the seller would lose out as the importer has no financial
commitment to the goods. Sellers may overlook the risk because using consignment, sellers are able to
sell more goods through importers which reduces storage costs and brings in additional revenue streams.
In this assignment I will be discussing a country that a selected business could target for international trade
and will evaluate the impact of cultural differences on international business. I will justify why by
investigating external factors and the cultural differences that influence international businesses. The
countries which I will be using are China and the USA as they contrast in strengths and weaknesses and
also are the two most prominent countries. Also, the business I will be using is McDonalds.
McDonalds was established in 1955, California, USA and has amassed $billions in wealth and power in
the last 65 years. They operate internationally with 32,000 restaurants around the world contributing to the
$21.08 billion revenue in 2019. McDonalds was one of the first fast food chains and offers cheap tasty and
convenient goods for people who are looking for a quick meal. Over the years, they have been able to
perfect their strategy which has solidified McDonalds as the market leader with 21.7% market share with
2nd, YUM!Brands Inc, with 8.1%. As of 2019, McDonalds is present within 117 countries with the likes of
Russia, China and the USA. In the USA, they have the largest number of stores with 14,146 which
generates $8.1billion in revenue. McDonalds have 7 core values inplace which every branch and
employee must follow. These consist of operating ethically, giving back to communities, striving to
improve, growing business profits, customer satisfaction, committing to the team and belief in the
Mcdonald's system. By having these in place, McDonalds can be sure that their employees value their job
and the people around them which allows for the business to operate swiftly and encourage consumers to
purchase their goods.
https://strategicmanagementinsight.com/mission-statements/mcdonalds-mission-statement.html
https://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/
https://www.worldatlas.com/articles/countries-with-the-most-mcdonald-s-restaurant.html
International business support systems are networks which allow for international trade to take place in the
most coordinated way. They allow for all parties to seamlessly communicate to relay information through
various methods. For McDonalds, having an international business support system is crucial to continue
business as usual as it ensures that all the 60million customers per day are served adequately by the
32,000 restaurants in 117 countries. keeping that international support system is essential to coordinate all
McDonalds restaurants and ensure they follow the core values. Having the international business support
systems in place for McDonalds has enabled them to conduct international trade as they have provided
unlimited connectivity between customers and employees and also given a global audience for marketing.
This has ultimately created McDonalds a global brand with 60million plus customers daily.
https://www.ukessays.com/essays/marketing/the-international-market-strategy-of-mcdonalds-marketing-
essay.php#:~:text=They%20have%20spread%20across%20117,business%20model%20pioneered%20by
%20McDonald's.
The most prominent way to help international trade is the use of the internet. The internet provides
business with unlimited opportunities for communication which can be used to communicate with
consumers or employees. This inturn allows for employees to receive information faster and for the
businesses to communicate with more customers at once. With the evolution of the internet, businesses
have had to evolve to match competition. Consumers now expect ease, speed and communication from
businesses using the internet which has caused businesses to adapt. Businesses have adopted new
payment methods such as PayPal, contactless and other online payments to suit consumers which want a
fast and easy payment.
From the evolution of the internet, the delivery food industry has exploded and is worth $94billion in 2019.
Mcdonalds have seen this growth and have adapted to provide a McDonalds delivery service. By having
this service, they are able to provide customers who may not want to travel to receive a fast food meal.
This inturn contributes to the total revenue and increases their customer base. By providing a service
which is easily accessible through the internet, McDonalds are able to make significant sales by targeting
consumers convenience. As a result, delivery sales are estimated in 2021 to reach 8.6% of the total
revenue. Also, McDonalds have third parties such as deliveroo and uber eats receiving orders which
provides additional revenue. As deliveries are made online, Mcdonalds have needed to adopt an online
payment system for consumers to use which is much more customer friendly as it's quicker and more
convenient. In summary, with the evolution of the internet, it has caused McDonalds to join a new industry
and adapt to new methods to suit consumers and drive growth.
, https://www.ukessays.com/essays/marketing/the-international-market-strategy-of-mcdonalds-marketing-
essay.php#:~:text=They%20have%20spread%20across%20117,business%20model%20pioneered%20by
%20McDonald's.
International payment methods are the exchange of money between parties which are situated in different
countries using different currencies. The methods consist of Cash in advance, letters of credit, open
account, consignment, international credit cards, international bank transfers and commercial payment
systems.
Cash in advance is a method of international payment which is built upon trust as payment is received
before the goods/service is delivered. Paying cash in advance may also be necessary for suppliers to
produce the goods as they may not have the funds to manufacture the goods without prepayment. Cash in
advance can usually take place before the shipment however, can occur anytime before that. This binds
both parties to the agreement which can make it a more secure and convenient transaction.
https://www.investopedia.com/terms/c/cashinadvance.asp
Mcdonalds provides consumable goods to consumers who are paying low amounts of cash as mcdonalds
provides cheap produce. Therefore cash in advance does not apply to customers however, when
mcdonalds is sourcing raw materials, they may pay cash in advance towards suppliers. This ensures the
supply of the raw materials meets the demand of the customers and binds the suppliers and purchasers to
the agreement. Although this may impair cash flow, mcdonalds is an organisation where the payment will
go unnoticed financially. Due to the above, this is a viable option and may be used by McDonalds as it
secures the agreement between suppliers.
Letters of credit are to provide more security to the seller and purchaser. letters of credit give a guarantee
to the seller that they will receive payment for the good/service within the set time period. letters of credit
are made with the Bank so they guarantee payment from the buyer by setting strict rules for both parties to
follow to ensure payment is made. Having a letter of credit inplace reduces the risk for the seller to receive
no payment for delivered goods.
https://www.mondaq.com/turkey/international-trade-investment/100456/advantages-of-using-letter-of-
credit-in-international-transactions#:~:text=Letters%20of%20credit%20are%20indispensable,with%20that
%20of%20the%20banks.
Mcdonalds are worth $163billion in assets, inventories and available cash. Therefore they are guaranteed
to make payment to suppliers. In that sense, a letter of credit may not be applicable however, to provide
strict rules for parties, a supplier may commission a letter of credit to ensure security against Mcdonalds.
Mcdonalds may be intimidating to suppliers so having a letter of credit ensures a smooth transaction
between parties. Therefore, a transaction between Mcdonalds and supplier is secure and the supplier feels
more confident having support from a big entity such as a bank.
An open account is a form of international payment which can be made within 30,60 or 90 days. These
systems are often put in place when both parties have been in a long term relationship as these take a lot
of trust. An open account for sellers can disrupt cash flow as there is still expenditure with no incoming
cash. Sellers often commit to an open account to compete with other suppliers who provide this method to
retain importers. Also, if any disruptions to either parties can cause major issues to the deal which may
cause a high risk of the customer not paying or the supplier unable to deliver. However, for the buyer, cash
flow is strong as when receiving the goods, there are no outgoings until the set date of repayment. This
gives the importer a set time period to make sales which contribute to the final payment. As a result, the
importer can use their revenue of sales to contribute towards the open account. Therefore, this gives the
importer more capital to invest in order to make the sales required to pay off the debt.
https://www.shippingsolutions.com/blog/methods-of-payment-in-international-trade-open-
account#:~:text=The%20Advantages%20of%20an%20Open%20Account&text=Obviously%20this
%20option%20is%20advantageous,exporters%20for%20open%20account%20terms.
Consignment is a form of an open account which payment is sent directly after the goods have been sold
to the customer. A contract between the seller and importer is made which ensures that the seller has legal
ownership of the goods until they are sold. However, although they own the goods, the importer has the
goods in hand which put the seller at high risk as they are stored in a different country out of their
protection. If anything happens to the goods, the seller would lose out as the importer has no financial
commitment to the goods. Sellers may overlook the risk because using consignment, sellers are able to
sell more goods through importers which reduces storage costs and brings in additional revenue streams.
