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Business success or failure is indicated by numerous factors. Among these factors is business entity’s ability to merge, acquire or get acquired by another company. In the past, companies have shown increment in profits through acquisitions and mergers within their industry or those that they rely on for given transactions, for example, supplies. It also has other benefits in addition to the profits. It improves the suitability for the business, and offers economical advantage (Hitt, Ireland & Hoskisson, 2013). In addition, companies with the ability to acquire or merge with other companies can extend their partnership forging capability with other corporations. In addition, they are able to extend their markets beyond the geographic borders, thus increasing the profits and improving brand awareness (Hitt, Ireland & Hoskisson, 2013). The current paper focuses on two corporations, one that has been involved in merging, and operates internationally, while the other one has not been involved in acquisitions and operates within the borders of the United States. These are McDonalds Corporation and Sonic Corporation respectively. It is necessary to analyze the business- and corporate-level strategies applied by companies, such as McDonalds that can benefit other corporations to expand their operations. It will be useful in the development of recommendations for the Sonic Corporation on approaches that it can take so as to enter into the international market. Mergers and acquisitions are essential in businesses that have a goal of growing because they are essential as approaches of international entry.
McDonalds Corporation is one of the most of successful food-service retail chains in the world. It operates more than 35,000 stores in 119 nations. It began in San Bernardino, California and evolved from a burger shop to the modern food-service empire. Its sales expanded significantly in the 90’s, mainly due to acquisitions (McDonalds history, 2015). The company acquired Chipotle Mexican Grille Chain and Donatos Pizzeria with the aim of increasing the corporate resources and generate high profits. The company went on to acquire Boston Market Corporation so as to sustain its success. Boston Market Corporation had made a bankruptcy file in 1998, and it was recovering from a massive reduction in sales. The management at McDonalds identified an opportunity to use the resources to increase their profits and enable the recovery of the Boston Market Brand. During the acquisition, Boston Market still operated about 850 outlets, and made $670 in revenue (McDonalds history, 2015). Hence, it was a wise choice for McDonalds to acquire the company. However, McDonalds failed to make the anticipated profits. The company went ahead to introduce the McDonalds “Made For You” system, which offered sandwiches made to the specifications of the clients. It improved the quality of food and satisfaction of the clients, but it led to an increment in the time used and became labor intensive.
Consequently, the sales reduced and the company suffered from additional problems after it became evident that it added beef extract to the vegetable oil used in the cooking of fries. It was against the advertisement made by the company that it only used pure vegetable oil (Strom, 2015). Thus, the company lost more business due to the lawsuits that followed the incident, and its being seen as an unhealthy business. It led to the restructuring of the menu to suit the health-conscious consumer population. As a result, McDonalds had to downsize Donatos Pizzeria and Chipotle Mexican Grille in an effort to secure the restaurant’s international success (McDonalds history, 2015). Boston Market continued to perform well, and in 2007, it had a $90 positive difference between the liabilities and the assets (McDonalds history, 2015). Therefore, it became a good opportunity for McDonalds to sell the subsidiary to Sun Capital Partners. However, it is only after the sale of the company’s acquisitions that it began making profits and maintained its industry position as a leader. The company focused on expanding their brand, rather than increasing the services. Although the acquisition of Boston Market by McDonalds appeared to be a wise choice at the time, the issues that the company faced had negative implications. As a result, it failed to benefit from the acquisition. It is possible to understand the strategies that ought to be employed by a company that aims at using acquisitions as a way of expanding business.
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Profitable Candidate for Sonic Corporation
It began as a root beer stand in 1953, and was referred to as Top Hat Restaurant. Since its inception, it has accumulated more than $250 million in sales, and is listed among the largest hamburger chains in the USA (Ultius, n. d.). It has enjoyed numerous successful years as the management has focused on the reduction of turnover rates through the creation of a working environment where the employees feel valued. For instance, it allows its managers in different locations to become minority partners. It enables them to create a plan that best suits their location to improve performance (Ultius, n. d.). However, during recent years, the company faced hardships that have led to the establishment of a Repurchasing Program where investors can repurchase the company’s stocks (Ultius, n. d.). Although the company has been successful in the United States, it can increase its performance by acquiring a company that has similar goals. Moreover, it can acquire a company that aims at providing high-quality drive-in food services with a unique feel of the 1950’s. After taking into consideration the struggles that McDonalds underwent after its acquisitions, Sonic Corporation would benefit by merging with Ruby Tuesday. The company offers high-quality services with a focus on home-style meals. Currently, Ruby Tuesday has above 860 stores in the USA and around the world (Ruby Tuesday case study, n. d.). It generates significant amount of income that can be beneficial to Sonic Corporation’s international expansion strategy. The merger would lead to effective partnership that can facilitate the increase in the company’s profits.
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McDonald’s International Business-and Corporate-Level Strategies
The corporation has maintained its international success through the use of various business- and corporate-level strategies, which entail making sure that their services, are in line with the client’s cultures. One of the key business-level strategies used by the corporation is product differentiation to meet the unique customer needs. For instance, in Germany, the company offers McRib sandwich to their clients throughout the year while it only offers the same product seasonally in the USA (Strom, 2015). The company does not offer beef in India due the Hindu beliefs. It is one of the reasons that led to business problems when it was discovered that their vegetable oil contained beef extracts. The company has also differentiated its products in Brazil, and instead of offering the apple pie served in the USA, it sells banana pies as desserts. Moreover, the company has various corporate-level strategies, but one of its best strategies in the international front is the increase of the quality of food served in different countries. In order to make sure that the quality is not compromised, they use different methods and one among them is that they buy their stock from Pret A Manger, a UK-based company, which sells organic meats (Strom, 2015). Although the strategy led to the sale of the acquired companies that operated outside the hamburger industry, it led to an increment in the international profits. It also increased the quality of the food offered in the different nations.
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Business-Level and Corporate-Level Strategy Suggestions for Sonic Corporation
International business in McDonalds has only succeeded due to the different corporate- and business-level strategies applied by the company. Sonic Corporation can also make use of such strategies in order to make sure that they succeed beyond the United States borders. So far, the company has been successful in the creation of a unique business environment for the employees and the customers. It offers drives-ins where the waiters and waitresses operate using roller-skates, and they offer high-quality food. The uniqueness of their business approach can act as an advantage as they move into the international business. It is possible by incorporating the uniqueness into various strategies at the corporate and business levels.
A business-level that can benefit Sonic Corporation if well implemented in the international business is cost leadership. It consists of the creation of prices, which are low enough for enjoyment of the clients (Hitt, Ireland & Hoskisson, 2013). The technique has already been applied and succeeded in the USA by offering the Happy Hour. During this time, clients can purchase the drinks offered by the store at half the ordinary price. The strategy would attract numerous clients in different countries where the company that start operating as they are used to purchasing drinks at high prices as they take their meals. Through this strategy, the clients will have an opportunity to enjoy and understand the quality of the drinks offered at low prices. It acts as an attraction strategy for the clients towards the product. Consequently, they will start purchasing it at any time of the day. In the long-run, the outlets will have loyal customers due to the notion of cheaper prices, and the clients will also purchase the products even during the non-happy hours.
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At the corporate-level, Sonic should also focus on a strategy that will benefit its international expansion. One such policy is the company’s maintenance of low turn-around rates. Since the company perceives most of its managers as minority partners, the workers gain flexible schedules. As a result, their productivity increases, as well as the overall productivity of the business. When the business implements the same policy at the international level, there is increased probability that the business will make profits as the managers in different locations have vested interests in the success of the business. In addition, there will be increased tendency among the leaders to seek the opinions and perceptions of the employees. It will promote innovation due to the different ideas offered by the employees, which will in turn lead to the success of the company and brand development. The clients will receive unique services in relation to their locations and countries.
It is evident that international expansion of businesses can benefit significantly from mergers and acquisitions. However, they require proper management to ensure that they lead to the realization of the intended benefits. They offer opportunities for new business opportunities globally, and increase in profits. Even though there is uniqueness in the situation of McDonalds Corporation, there are still numerous points that can be taken from the scenario. Even though the idea and situation may indicate that an acquisition or a merger is appropriate, other factors in the operations may lead to the failure of the other entity. Proper utilization of corporate- and business-level strategies is possible for a corporation to increase its success and business growth. Evaluating the strategies applied in the acquisitions made by McDonalds offers indicators of the way that Sonic Corporation can learn from the experience to make a successful acquisition or merger with Ruby Tuesday. It will be an opportunity for international expansion and success.
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