Are you Familiar with the McDonald’s Risk Assessment Model?

Many years ago, I had an interesting informal conversation with a CEO of a US chain of convenient stores who was interested in expanding his operations to the Balkans. He explained that his main criteria for entering a new market is the direct presence of major US companies, especially fast food and retail chains in the market and the fact that they are operating with success. He called his assessment method “the McDonald’s Assessment” after the popular chain of fast-food restaurants.

Basically, the main assurance that he would be fairly treated by official institutions is the amount of trade between his county and his host country. Acceptance of the American fast-food culture also reduces the probability of hate crimes and nationalistic incidents. His strategy is actually based on the hypothesis that says that the more countries trade with each other, the less likely they are to fight with each other. On top of that, instead of investing valuable time and resources in performing a specific and detailed threat assessment, he would rely on threat assessments performed by companies that had previously entered the market and trust their decisions to establish local operations.

However, this strategy does not take into account several very important elements. Firstly, it completely neglects the possibility of suffering the consequences of conflicts even when not being directly involved. The civil war in Ukraine was the result of animosity between Ukraine and Russia but has still impacted all the foreign businesses in the country regardless of their national origins. Secondly, the overwhelming amount of trade between Ukraine and Russia did not prevent the hostilities between two countries but was actually indirectly the cause of the conflict and certainly made the consequences worse.

Another threat is protectionism, and not only in terms of official measures but more as a mindset. It could be exactly the amount of trade that could cause the unfair treatment by official institutions, hostilities, boycott, and subsequently losses. Finally, it would be completely wrong to assume that a threat assessment performed by one company would be sufficient for all the companies from the same country that are planning to enter the market. Threats do not only originate only from nationality but are actually a fine combination of specific circumstances, such as product and service, agenda, size, visibility and recognizability, affiliation, reputation and precise location, just to mention a few. For instance, during all of the past anti-US protests in Belgrade, Serbia, downtown McDonald’s restaurants were unavoidably vandalized by protesters. However, protesters never showed any interest in looting the KFC restaurants that are located just around the corner.

8 views0 comments

Recent Posts

See All