Wendy's Plan For International Expansion: Essay On Ghana And Egypt.

Need to answer the following questions for only two countries: Ghana and Egypt. use mainly facts from cases.

Give reasons and recommandations to why wendy should/should not expand in Ghana or Egypt

.Will the operations comply with the local laws and regulations?
.What are the labor laws?
.What is the political system?
.What is the economic system?
.What is the legal system?
.What is the currency exchange rate?

.Is there local competition?
.Is the market already saturated?
.Market trends and forecasts.

Legal and Regulatory Barriers

Egypt’s economic growth has been poor and is ranked position 11 out of the 14 nations in the Middle East and North Africa region. It has low economic freedom score of 53.4 and according to the 2018 Index; it is ranked position 139 in terms of economic freedom. Its economic growth score is less than the expected averages both at regional and world level. The country’s economic growth is anticipated to improve in future (Abu-Bader & Abu-Qarn, 2017).

According to the cultural practices of the residents of Egypt, most of the foods which are offered by Wendy’s International are acceptable and are highly consumed in the country. The entire population has embraced modernization and hence consumption of fast foods is becoming common. According to Nielsen Quest report, more than 21 percent of Egyptian consumers consume restaurant meals. The report also shows that more than 55 percent of the Egyptian consumers consume fast foods. This is due to the fact that Egyptian lifestyle is changing due to influence by the western culture and consumer level of income is also rising. They include hamburgers, chicken sandwiches and signature Frosty dessert (Ibrahim & Vignali, 2016).

The legal system of Egypt is highly politicized and unstable. It involves complex procedures in acquiring the title deeds of properties. This is due to corruption involved in the system and the mechanisms of investigating and eliminating it are very poor (Barton, Gibbs & Merryman, 2014).

The political system of Egypt has improved to a greater extent and the government is currently reforming the nation’s business environment and is gradually restoring its financial stability.

Considering the economic system of Egypt it has continued to lag behind in terms of economic growth though it is improving currently. Egypt has been depending much on aid from international bodies and other nations such as Saudi Arabia. Considering the three systems namely the legal, economic and political systems of Egypt, Wendy can invest in Egypt but is likely to face problems of protecting the property rights.

The currency exchange rate of the Egyptian dollar against the US dollar has been increasing and is relatively stable. It does not increase with a great margin over a short period of time. Currently the exchange rate stands at 1$ = 17.9088 Egyptian dollars. The rise in exchange rates has resulted from the high inflation rate in the country. The inflation rate stands at 10.2 percent which is very high. This has led to rise in price of fast foods. As a result of this, the fast food industry has lost many customers as they shifted to other food service industries (El-Ramly & Abdel-Haleim, 2017). The rent in big malls such as the mall of Egypt also increased and as a result only the bigger fast food companies such as McDonald’s, Cook Door, Mo’men and Burger King can only afford to operate in such big malls. The tax rates are relatively low at a rate of 18.2 percent considering the total domestic product.

Existing Markets: Study the Existing Markets in the Country

The fast food industry in Egypt is very competitive. Some of the well established companies include the McDonald’s, Cook Door, Mo’men, Burger King, KFC, Pizza Hut and Prego among others. This calls for smartness in terms of business strategies formulation for survival. The fast food industry of Egypt is not yet saturated.

Considering the above discussed points, Wendy’s can expand operations in Egypt but start with a few branches to establish themselves in the market. Wendy’s is financially stable and can afford to rent strategic popular places such as mall of Egypt. Also due to the growing economy of Egypt and its large population, Wendy’s can easily establish itself and survive the competition from the major rivals.

The economy of Ghana grows at a slow pace but it keeps on improving. It has poor economic freedom with a score of 56.0 and according to the 2018 Index it is ranked position 122 out of in terms of economic freedom. The economy of Ghana is well above the expected regional average but it is still below the world average. It is ranked position 19 out of 47 nations in the Sub-Saharan Africa region (Aryeetey, Ernest & Augustin Fosu, 2017).

According to the culture of the people of Ghana, the main preferred stable foods include cassava, plantain, millet, sorghum, yam, maize, beans, sweet potatoes and cocoyam. However, due to modernization and western culture influence, the people of Ghana have started to embrace fast foods which include fried rice, fried chicken, burgers, French fries and pizza (Nondzor & Tawiah, 2015). More than 60 percent of the consumers of Ghana consume fast foods. The economy is currently doing better and consumers’ level of income is increasing. With the increased per capita income and the western culture influence, the fast food industry in Ghana is doing great. Most of the fast foods consumed in Ghana are offered by Wendy’s and hence there is great opportunity in Ghana.

The legal system of Ghana is highly politicized. The judiciary is independent but the judges are paid poor wages. This means that they may be tempted to accept bribes hence compromising the integrity of the judicial system. The property rights are undermined and acquiring of property titles is very complex. Entrepreneurs are subjected to bribes in order to start their businesses.

The political system of Ghana is democratic and stable. The economy of Ghana has been doing well despite its huge public debt.

Discussion: Consumers

The currency exchange rate of the Ghanaian cedi against the US dollar has been rising but it is relatively low and stable (Abor, 2015). The current exchange rate stands at 4.7892 Ghanaian cedi against one US dollar. The inflation rate in Ghana is high at 17.1 percent. This means that the prices of goods and services are higher. Despite the rise in prices, the market for the fast foods in Ghana has been good and is anticipated to improve in future as the Ghanaian economy grows. The tax rates in Ghana are relatively lower with personal and corporate taxes being 25 percent.

The government of Ghana highly values foreign direct investment has minimum tariff rates of 10 percent and below (Feglo & Nkansah, 2010). The Ghanaian fast food industry is not much competitive as most of the world bigger fast food companies have not yet entered the market. However new entry into the market may face competition from the already established companies like Barcelos, Chicken Republic, Chick’n Lick’n, Food Rockers, Frankie’s, KFC, Papa’s Pizza, Papaye, Peteran and Supreme.

From the above discussion, it will be okay for Wendy’s to enter the Ghanaian fast food industry. The economy is currently growing, tax rates are favorable, the market is not yet saturated, major world fast food companies have not yet entered the market and the government is relatively stable. Also people are aware of the majority of fast foods offered by Wendy as they are already being offered by the existing companies.

Based on the gathered information about the two nations, it will be okay for Wendy’s to expand and start operating in these two countries. The two nations are still growing with a large percentage of their population being made up of young people who have embraced modernization. More than 60 percent of each nation’s population is made up of youngsters. The nation’s political systems have also realized the value of foreign direct investments and have started embracing favorable open trade policies to attract and maintain foreign direct investments and foster their economic growth. In a nutshell, it will be okay for Wendy’s to expand in Egypt and Ghana but begin with a few branches in order to first establish itself.

References

Abor, J. (2015). Managing foreign exchange risk among Ghanaian firms. The Journal of Risk Finance, 6(4), 306-318.

Abu-Bader, S., & Abu-Qarn, A. S. (2017). Financial development and economic growth: The Egyptian experience. Journal of Policy Modeling, 30(5), 887-898.

Aryeetey, S.K., Ernest, and Augustin K. Fosu. "Economic growth in Ghana: 2010-2017." Draft, African Economic Research Consortium, Nairobi, Kenya (2017).

Barton, J. H., Gibbs, J. L., Li, V. H., & Merryman, J. H. (2014). Law in Radically Different Cultures. Stanford University Law School.

El-Ramly, H., & Abdel-Haleim, S. M. (2017). The effect of devaluation on output in the Egyptian economy: A vector autoregression analysis. International Research Journal of Finance and Economics, 14, 82-99.

Feglo, P., & Nkansah, M. (2010). Ghanaian currency notes. African Journal of Economic Research, 4(22), 2375-2380.

Ibrahim, Y., & Vignali, C. (2016). Predicting Consumer Patronage Behaviour in the Egyptian Fast Food Business.". Marketing, 1, 2.

Nondzor, H. E., & Tawiah, Y. S. (2015). Consumer perception and preference of fast food: a study of tertiary students in Ghana. Science Journal of Business and Management, 3(1), 43-49.