Country Risk and Strategic Planning Analysis

Country Risk and Strategic Planning Analysis

Opening up a business in another country can be risky. There are many risks involved in this type of venture. McDonalds has been successful in the United States and this is due to McDonalds realizing a need and implementing that need. Opening a McDonald’s chain in China will be a challenge and many risks involved and a strategic planning analysis will have to be done before this venture can proceed. One of the biggest obstacles that will be facing McDonalds will be the Communist Country itself. The cultural differences, competition, distribution and control are the other challenges.

When dealing with a communist state, a company, like McDonalds, must realize that China would like to have some type of control and monetary rewards. Even though dealing with a communist country may contain a huge risk, the benefits of opening a fast food chain like McDonalds in China can be rewarding. More than a billion people live in China that is a huge consumer pool waiting to be tapped. The benefits outweigh the risks; there will be political, legal and regulations that will need to be addressed. The Chinese government lacks predictability in its business environment due to lack of a consistent body of laws and regulations. There exists corruption on all levels and every district will have its own laws and interpretation of the laws. The Chinese government will set certain laws into place and contracts will be addressed in order to appease other countries but in reality other types of payment will be asked for (American Management Association, 2007).

McDonalds knows the risk involved in dealing with a Communist country. Under and behind the laws exist the payments that are not known about in the open. China has a government that has made a partial transition to a market economy but parts of its bureaucracy still tends to protect local firms and state-owned firms from imports while encouraging exports. The practices of...