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The research report introduced below is obtained from the research of the data from the different resources available. Focus groups were conducted to clarify the themes of the report. This report is based on the data collected from online journals, books, case studies, online web resources and the material provided during the lecture notes provided during the study period.
Chapter 1: McDonald's Corporation
McDonald's is the leading global foodservice retailer in fast food industry. It has become a part of routines of millions of people due to one of the world's most valuable leading brand in fast food. It was established in 1940 as a small drive through and developed its own identity and culture. McDonald's has grown from a small restaurant into a most popular global brand in the fast food industry. McDonald's corporation primarily selling hamburger, breakfast, French fries, chicken and cold drinks, recently it introduced salads, snacks wraps and carrot sticks. The organization has become a symbol of American culture.
The most important aspect of McDonald's business is that it emphasis on the ethical behaviour. McDonald's created a good working atmosphere by doing the right things internally and externally. Many ethical issues are subjective and based on one's beliefs and values. These issues are difficult to enforce and result in enormous debts to society. During the operations of its business success McDonald's faced different ethical issues from different areas of the society. Since McDonald's global expansion it has been shadowed by a wide variety of ethical issues.
1.2: Ethical Issues and McDonald's
First time in 2002 from its beginning it is reported that McDonald's corporation experience loss as a result of closing some of its outlets. According to Sweeney (2004), its profits slumped from £83.8 million to £23.6 million. Since its expansion McDonald's has been shadowed by a wide range of the ethical issues and ethical criticism.
1.2.1: Ethical Criticism on McDonald's
Fast food giant McDonald's faced ethical criticism in Europe. These issues consist of food health, ill treatment of animals, and exploitation of children. Baker (2005), described that McDonald's has been shadowed by a wide variety of ethical issues. People organized an event by the name anti McDonald's day on the 16th of October every year. These peoples are the first to hit McDonald's stores in London during the notorious anti capitalist may day riots.
Food offered in stores is another main area of the ethical criticism faced by McDonald's. According to the critics McDonald's is the major contributor to the increasing level of obesity in US. Walsh (2003), says that medical studies shows that waistlines are expanding and adults are dangerously overweight in UK and other countries. According to McMans Depression and Bipolar Weekly (2004), in US due to obesity death rate are higher than cigarette smoking. In 2001 it was reported that 300,000 people are died due to obesity. As a result of McDonald' unhealthy nature of fast food it does not meet the US dietary requirements.
1.2.2: Marketing Related Issues and McDonald's
McDonald's faced criticism due to its marketing advertisement film Super Size Me, which shows the impact of McDonald's diet. In this advertising film the Spurlock ate nothing but McDonald's for whole one month. According to McMans Depression and Bipolar Weekly (2004), the result of this example on Spurlock was very dramatic. Spurlock gained 25 pounds and rose in cholesterol by 60 points. He also experienced headaches, depression and become addicted to McDonald's products. McDonald's marketing strategy established by Kroc with Ronald McDonald's clown character was successful. According to Baker (2005), about 96% of American children are similar to television advertising character and more children recognize him than a picture of Jesus. Schlosser (2001), says that 90% of the children in America visit McDonald's each month between age 3 and 9. These children are faced obesity problem due to McDonald's diet and are the major ethical concern. McDonald's has been also criticised for exploiting children with advertisement by offering toys with Happy Meal.
1.2.3: Corporate Social Responsibility and McDonald's
Corporate social responsibility is of the branch of ethics. Carroll and Buchholtz (2000), refers this to the legal ethical and economic expectations of the organizations by society at a given point in time. Wells (1998), states that this theory deals with purposes for which organizations act and liability attached to an organization for action done in its name. This has lead to increase the pressure to meet the ethical demands and expectations of society. This pressure is a result of increased number of stakeholders who are affected by achievements of the organizations objectives. McDonald's published its corporate responsibility reports to know the impact of its activities on the society and the environment.
1.2.4: Rights Ethical Issues and McDonald's
McDonald also experiences some of the internal ethical issues related to the employee rights and working conditions. According to the report of McSpotlight.org: McDonald's and Employment (2005), McDonald's Employee over 1 and a half million people worldwide and half of them are under 21 years old. McDonald's also adopt poor working conditions, illegal working hours and poor safety conditions. McDonald's adopted the theory of stakeholders to the importance of neds and expectations of the customer only.
With respect to the criticism related to the rights of stakeholders, customers and society, McDonald's has been criticized due to its treats with animals before they killed to turn into fast food. Stakeholders are not only human because animals are also a part of the society and they deserve same treatment. McSpotlight.org: McDonald's and animals (2005), describe that McDonald's corporation is the largest promoter and user of the beef and second of chicken and faced claims aimed at slaughterhouses. As clamed in McLibel trial (1995), that chickens were crammed into sheds without daylight. As a result 44% had leg abnormalities and other health problems. McDonald's also faced ethical criticism on the method of killing the animals.
1.2.5: Legal Ethical Issues and McDonald's
McDonald's experienced legal action on the basis of the ethical issues. A small activist group start campaign against McDonald's on the basis of the variety of issues. They launched Anti McDonald's day which has been held on 16th of October every year. They start their activities by distributing leaflets on the streets with the topic What's Wrong With McDonald's. The leaflet covers all the ethical issues. The Judge ruled that the defendant had proved many of allegations and the company would be awarded half of the claimed damages of £60000.
McDonald's also faced legal proceeding related to the hot coffee. It is important to know some points that McDonald's coffee is not only hot it was scalding; it is capable of skin destruction, flesh and muscle. Stella Liebeck was severely burned by McDonald's coffee when she was in the passenger seat of her grandson's car. Mcdonald's also received about 700 claims by peoples burned by its coffee. Court awarded Liebeck $200,000 in compensatory damages and this amount reduced to $160,000 because jury found that Liebeck 20 percent at fault in the spill.
According to Vrontis and Pavlou (2008), McDonald's faced a legal issue in Russia in 1993, when a law was passed in Russia that all the organizations require to have a Russian name. This mean the company have to translate its name to. Daniels and Redebaugh (1998), says that the same situation occurred in Japan where the pronunciation of its name was changed to MaKudonaldo.
In 2001 McDonald's corporation was fined £12,400 by British Magistrates for employing people illegally and overtime child labour in one of its restaurant in London. This is the largest fines imposed on McDonald's for breaking laws relating to child working condition.
1.2.6: Technological and Communication Ethical Issues and McDonald's
Technological and communication development have made McDonald's to enable to deliver product demand and how products can be sold to the consumer. These issues are related to develop new products. McDonald's successful internationalization can be partly attributed to the way company has overcome the Technological and communication issues.
It concludes that the ethical issues are very important to consider. These issues affect the performance and repetition of the organization. An organization need to be ethical to achieve its future objectives.
It concludes that McDonald's has become the market leader in fast food. McDonald's have $40 billion annual turnover worldwide. It performs very well from the day of its establishment and maintains a high level of performance. Baker (2005), says McDonald's is one of the most despised corporate symbols in the history of private enterprise. McDonald's marketing strategy established by Kroc was so successful. McDonald's achieve this success not only in US but in whole world. It is important for a global organization to keep concentrate on the ethical issue and their effect on the performance and profitability of the organization. Since the expansion, McDonald's has been shadowed by a wide range of the ethical issues. This results in the loss of the profit of the McDonald's and its market reputation. McDonald's corporate responsibility reports show that it attempts to make change to overcome on the ethical issues. McDonald's attempts to improve its ethical conduct, much of its attempts based around meeting future goals.
After all the ethical issues and ethical criticism, McDonald's success looks set to continue into the future. It is suggested that to handle the future ethical issues and behaving ethically. McDonald's need for an ethical officer and ethics department, comprised of experts who can analyze the performance of the company subjectively and set accurate goals for the future objectives. There is also need for full transparency for the trust of the public that the company is ethical.
Chapter 2: Pakistan
Pakistan emerged as an independent state on 14 August 1947 and known as Islamic Republic of Pakistan. Islam is the state religion and constitution requires that laws be consist with islam. Islamabad is the federal capital of Pakistan. More than 97% of population of Pakistan is Muslim. Pakistan consists of four provinces, Punjab, Sindh, North West Frontier Province (NWFP), and Balochistan. Also the tribal areas adjoining NWFP is managed by Federal Government of Pakistan and is named Federally Administrated Tribal Areas (FATA). Azad Kashmir and Northern Areas have their own respective political and administrative machinery; some of their subjects are under the care of the Federal Government through the Ministries of Northern Areas and Kashmir Affairs.
Pakistan is located in South Asia and shares boarders with India, China, Iran, Afghanistan with Arabian Sea. Pakistan has a total area of 796,095. Pakistan has had three constitutions adopted in 1956, 1962 and 1973 since its creation in 1947.
2.2: The Legal System of Pakistan
The legal system of Pakistan is based on English common law with provision to accommodate Pakistan's status as an Islamic state, most notably in the area of personal status, but also to some extent in the area of commercial law and criminal law. After partition in 1947, the legislation relating to Muslim family law introduced under British rule continued to govern personal status. Pakistan's first constitution was promulgated in 1956. Constitution of 1956 included a provision known as repugnancy clause, affirming that no law repugnant to Islamic injunctions would be enacted and that all existing laws would be considered and amended in the light of this provision.
Pakistan has had three constitutions adopted in 1956, 1962 and 1973. The constitution of 1973 was represented in parliament after the consensus of political parties. The constitution of 1973 was enacted by national assembly on April 10, 1973. The constitution of 1973 declares Pakistan's official name as Islamic Republic of Pakistan. Article 2 declares Islam the state law and Article 2A declares that all the laws to be brought into consonance with Quran and Sunnah.
2.3: Sources of Law in Pakistan
Sources of law in Islamic Republic of Pakistan are following:
Constitution of Islamic Republic of Pakistan
Ministry of Foreign Affairs
This includes Supreme Court, High Court and Four Provisional Assemblies of Pakistan.
It consists of Majlis-e-Shoora, further consists of two houses Senate and National Assembly.
Legal Guide consists of law comes from institutes and research at local level.
Law came from different resources from outside and inside the country. It depends on reports and study and the background of the country.
2.4: Court Structure of Pakistan
The Supreme Court is the higher court of Pakistan and a Supreme Judicial Council. There are High Courts in each Province and district courts in every district of each province, having both civil and criminal jurisdiction. The Supreme Court and High Court have been established under the Constitution and other Courts have been established under the acts of Parliament or Provincial Assemblies. The High Court of each province has jurisdiction over civil and criminal appeals from lower courts within the province. Supreme Court has jurisdiction over dispute between Federal and Provincial government and appellate jurisdiction over High Court decisions. There is also a Federal Shriat Court has jurisdiction on whether or not a law conforms to the injunction of Islam. An Islamic advisory council assists the federal Shariat Court in this capacity.
2.5: Forms of Business in Pakistan
Common forms of business organizations adopted by private sector in Pakistan are,
Limited liability Company in Pakistan
Sole Proprietorship in Pakistan
Joint Venture in Pakistan
Partnership in Pakistan
These forms of the business organizations are adopted by public sectors. The government wishes to undertake an enterprise, either a limited liability company or a statutory corporation. The most favourite business organization for medium and large scale business in Pakistan is a limited liability company. Legal regime for regulation and establishment of business in Pakistan is given in the Companies Ordinance, 1984. The function of administration is vested in the Securities and Exchange Commission of Pakistan. Securities and Exchange Commission of Pakistan appointed the registrar of the companies.
Under the provision of Companies Ordinance, 1984 a company is a body corporate with separate legal entity and a perpetual succession. A company may be formed by persons associating for any lawful purpose by subscribing their names to the Memorandum of Association and complying with other requirements for the registration of a company under the provisions of the Ordinance.
2.6: Dispute Resolution Procedures
Dispute resolution encourages and promotes settlement of dispute. Strategies in dispute resolution procedure include mediation and negotiation, balance of power, initial investigation, preparation, preliminary negotiations and meeting the parties, information gathering and facility negotiation. Negotiation system creates a structure to encourage and facilitate direct negotiation between parties to dispute without the intervention of a third party. Terminating mediation and recording agreements and post terminating phase. It covers both civil and commercial matters.
Parliament of Islamic republic of Pakistan is the legislative body in Pakistan and makes all the laws relating to despite resolution. Two kinds of dispute resolution procedures have been practiced in Pakistan, traditional dispute resolution procedure and public bodies based dispute resolution procedure. The former refers to the traditional, centuries old system including Panchayat and Jirga. The later includes dispute resolution attached to public bodies and included arbitration councils, union councils, conciliation courts. Recent Initiatives regarding dispute resolution in Pakistan
Code of Civil Procedure (CPC) which is the primary procedural law for civil matters in Pakistan, has been amended for providing enabling mechanism for Court Annexed ADR in Pakistan (section 89-A).
Small Claims and Minor Offences Ordinance 2002 has been promulgated for providing exclusive forum at district level for facilitating the resolution of smaller disputes. This Law provides ADR mechanism for facilitating the resolution and settlement of disputes within the framework of the formal court system. This could be transformed into an excellent forum for addressing disputes in the emerging justice sector in Pakistan.
Under the Access to the justice program, the review of Arbitration Act represents a significant policy action. This review needs to be undertaken and capacity building initiatives put in place to promote effective arbitration regime in Pakistan.
A new local Government system has been introduced in Pakistan establishing elected local governments at a level of the Union Council, Tehsil and the District level. The Musalihat Anjuman has been provided at a level of Union Councils for dispute resolution through ADR. The Finalization of the rules of business for these bodies is essential to popularize the use of ADR.
The conference will explore the opportunities to promote and encourage use of dispute resolution and highlight its importance in strengthening good governance.
2.7: Laws Relating to
Copyright protection is governed in Pakistan by the provision of the Copyright Ordinance 1962. This Ordinance is based on English Act of 1914. Pakistan is a member of Berne Copyright Union and the Universal Copyright Convention. The Ordinance of Copyright provides strong penalties for offenders and compensation to the person whose rights have been infringed. Section 37 of the Ordinance has been amended to restrict granting of licences to produce and publish translation of literary work in English, French, or Spanish. The Ordinance has a distinct provision for Pakistan and foreign works in section 6(1). Section 71 of the Ordinance provides that where the offence under the Ordinance is committed by a company. The period of copyright of literary, dramatic, musical and artistic work is the life of the other and 50 years thereafter. In case of the cinematographic and photographic work copyright time period subsists until 50 years. There are two remedies for the breach of copyright in Pakistan, civil proceeding and criminal proceeding.
According to the Pakistan Trademarks Ordinance 2001, Trademarks means any mark capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertaking. Registration of trademarks in Pakistan appointed under section 7 and trademarks registry established under section 9 of the Trademarks ordinance 2001 of Pakistan. A trademark is entitled to limited protection in Pakistan, even it is not registered in Pakistan it is considered a well known trademarks under the Paris convention. The Trademarks Ordinance 2001 is relevant in respect of trademarks, unfair competition, registration and protection of trademarks.
There are some circumstances in the Ordinance in which an international trademark may be protected in Pakistan. Under section 25 of the Ordinance where a person has duly made a convention application in respect of trademark and within six months from the date of such a convention application that person in title applies to the registrar in Pakistan for the regulation of the same trademark under the ordinance in respect of some of the same goods or services in respect of which registration was sought in the convention country. In such case the person may claim priority for the registration of the trademark in Pakistan.
Under the section 86 of the Ordinance a trademark protected under Paris convention, as a well known trademark it is protected in Pakistan if it is a trademark of a national of the convention country. International business undertaking in Pakistan advised to get registered their trademarks in Pakistan for the trademark protection.
Patents Ordinance was promulgated by president of Pakistan in 2000. Section 2(c) of Patents Ordinance 2000 defines invention to include any new and useful product including chemical products, arts, process, method or manner of manufacture, machine, apparatus or other article substances and product produced by manufacture and include any useful and new improvement of any of them and an alleged invention. As a signatory to the agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs) and member of WTO the Ordinance provide priority for all WTO member countries if the Pakistan application is filed within 12 months of the priority country filing. Term of patent is 20 years from the date of application. The law provides that the exploitation of a patented invention in Pakistan by a person other than owner of the patent shall require the letters agreement.
An industrial design consists of shape, patterns, lines and colours. Under section 63B an application for the registration of a design must be made on prescribed form and accompanied by the prescribed representation of the design. The Design Ordinance 2000 provides priority arrangements for all member countries of the World Trade Organization (WTO) if application in Pakistan made is filed within 6 months of the priority country filing. Under the section 11 of Design Ordinance 2000, any person who has filed an application to register a design in any of the member countries of WTO is entitled to make an application for the registration of the same design in the Pakistan, claiming priority of date for his registration.
Chapter 3: Changes faced by McDonald's
Every organization wants to initiate a strategy and management system that could maintain the organization capability, strength and competitiveness. It is important that the management and organization need to ready to adopt changes that happens in the outside market environment. These changes bring development and improvement in the performance of the organization. Changes may adopt by organizations for various reason like improvement of peoples life and innovation. Organizations are integrating change into their work system to satisfy customer needs and achieve competitive advantage. An organization adopt changes when management encountered problems or to enhance overall performance.
McDonald's is a leading global organization in fast food chain. It was developed in 1940 as a small drive through. McDonald's grow from a small drive through to a global organization. Today McDonald's is operating more than 31,000 restaurants in about 120 countries. McDonald's serve average of about 54 million customers each day, it employed 398,000 people in all over the world. McDonald's revenue in December 2005 reached at a record position of US $20 billion. McDonald's 75% franchise stores are owned by independent people in different countries of the world. McDonald's top brands are Big Mac, Quarter Pounder with Cheese, File-o-Fish and Chicken Nuggets.
3.2: Globalisation and McDonald's
Globalisation has affected almost every aspect of life in almost every nation and organisations as well. From economic to social to culture, widespread of goods, services and ideas have influenced changes through the world. McDonald's is one of the leading fast food corporations. McDonald's adopt the glocal strategy which means think globally and act locally. Globalization effect McDonald's through its expansion. Due to globalisation McDonald's Expand its business in all over the world and today McDonald's operates its Franchisees in more than 120 countries. McDonald's required that franchise holders in the daily management of the restaurants. According to McDonald's Annual Report (2007), that franchise holders required to report to headquarter regularly. McDonald' corporation sets objectives for the franchiser that they must operate how the hamburger should be assembled through the photographs and the design of uniforms of the staff. McDonald's running its business due to the effective strategy of thinks global and act local.
3.3: Information System and McDonald's
Information system and communications are the most important part for successful marketing strategy. Marketer scans the world for information about opportunities and threats via a management information and communication system. McDonald's develop its management information and communication due to the effect of development of information and communication systems of the market competitor. McDonald's enable to get feedback from its franchisee from all the world due to the development in management information and communication system. The head quarter closely monitors development of the stores to keep the standard of the quality for which the company is famous. According to the McDonald's Annual Report (2007), if any of its stores develops any successful menu idea, this idea will be operated in other stores.
3.4: Culture and McDonald's
Culture could be defined as institutions and other forces that affect a society's basic values, perceptions, preference and behaviours. Culture includes traditions, habits, religion, art education, language, and reference groups.
Culture influence in globalization is of slight significance to the policy maker. The power of culture has tremendous consequences to the nations involved and its people. Food is an important element to define culture. In the process of McDonald's global expansion it culture affect it from country to country. McDonald's strategy of thinks globally and act locally was very successful on different areas of the world. By following its strategy McDonald's changes its management environment according to the local culture. It is impossible if an organization try to change the culture. Organizations changed their strategies as culture affects them.
McDonald's changed its menu according to the demand and culture in different countries. Vrontis and Pavlou (2008), says that in America McDonald's focused on children and teenager in advertisement because of the existing social trend of children made decision of the palace to eat. Consumer behaviour and buying power also effect any organization.
McDonald's management decide to change in their main menu when it entered in Indian culture. Due to the Hindu prohibition against beef consumption McDonald's decided not to launch Its Big Mac burger in India. McDonald's developed new products. It introduced chicken, fish and vegetable burgers. Maharaja Mac was introduced made with the patty of lamb. In Singapore and Malaysia according to Muslim law the beef used in burgers must be slaughtered.
3.4: Politics, Law and McDonald's
Politics, legal rules and regulations influence and limit an organization in a given society. Political and legal forces are highly important as they cover many aspects of organizations policy. Management need to build their policies according to the Government polices. Political background is different across the regions of the world. In some of the countries business proposal for joint venture will be accepted.
Vrontis and Pavlou (2008), argued that the legal ramifications of marketing a product internationally are complicated. McDonald's also faced some political and legal problem in some countries which leads to change in its strategy. In Russia one legal issue affect McDonald's. When a law was passed that every organization need to have Russian name. Law in Russia states that three quarter majority required in important decisions. Therefore McDonald's representative and city council agree on all major decisions. Daniels and radebaugh (1998) says that McDonald's also faced same situation in Japan where the pronunciation of its name was changed to MaKudonaldo.
It is concluded that a good management will be able to run the organization on the path of success. A good management handle the problems of the organization and find the solution of the problem. If a company changed its strategy at exact time and focus on its objectives.
McDonald's faced a number of problems on its way to success. These problems are related to globalization, culture, legal and political. McDonald's is still running on the path of success after facing all the problems. McDonald's faced loss in profit due to the effect of the issues in the market but McDonald's management take right decision to face these problems. McDonald's change its strategy to meet its objective. These changes depend on the problems it faced. The strategy of McDonald's thinks globally and act locally was very successful. McDonald's developed its strategy to meet the demand of its customer, consumer and stakeholders.