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Question 1«««««««««««««««««««««««««.......2 Question 2«««««««««««««««««««««««««.......3 Question 3.1««««««««««««««««««««««««........12 Question 3.2««««««««««««««««««««««««««16 Question 4«««««««««««««««««««««««««.......17 Question 5...«««««««««««««««««««««««««....19 Question 6...«««««««««««««««««««««««««....20 Bibliography«««««««««««««««««««««««««...26 Figures Figure 1.1«««««««««««««««««««««««««««...6 Figure 1.2«««««««««««««««««««««««««««...6 Figure 1.3««««««««««««««««««««««««««.......8 Figure 1.4««««««««««««««««««««««««««««9 Figure 1.5«««««««««««««««««««««««««««..11 Figure 1.6««««««««««««««««««««««««««......11 Figure 1.7««««««««««««««««««««««««««......15 Figure 1.8««««««««««««««««««««««««««......20 Figure 1.9««««««««««««««««««««««««««......20 Tables Table 1.1«««««««««««««««««««««««««««....20
International Business Question 1: Outline the reasons for the fast growth of McDonald¶s. From humble beginnings of only three restaurants in 1955, McDonald¶s has grown to be a powerful multinational corporation with more than 31,000 restaurants in 119 countries. McDonald¶s employs more than 1.5 million people and serves more than 46 million customers per day (www.mcdonalds.ca/en/aboutus/history). McDonald¶s Corporation has long held the number one ranking in the fast food industry. Across industries, McDonald¶s restaurants rank in the top three American brands. McDonald's revenues grew 27% over the three years ending in 2007 to a stunning $22.8 billion. The success of McDonald¶s in the US and Europe rests on core values such as providing convenience food, of consistent quality, at affordable prices and at unlimited locations.
McDonald¶s has been focusing on its expansion towards the emerging new economies like China, India, Latin America and Eastern Europe. It is good to mention over here that India and China represents one-third of the world¶s population; so indeed this represents a massive opportunity. The GDP per capita is growing in these markets and therefore the population will find fast food more affordable. However, in 2002, McDonald¶s posted the first quarter loss ever in the company¶s history (Hannigan, J. (2003). McDonaldization: the Reader (Book Review). Journal of the American Planning Association, 69(4), 453-456. ). Thus, a two-pronged strategy was adopted in 2003 to redress the situation. Consequently, McDonald's focused on increasing sales at existing locations by renovating stores, expanding menu options and extending store hours and internationally, McDonald's expanded aggressively, opting to franchise rather than operate its new locations. McDonald¶s targets the growing global middle class in all these developing countries it enters. To keep up with rapidly changing consumer preferences, demographics, and spending patterns, McDonald¶s has introduced new items such as Premium Chicken sandwiches and campaigns to create more healthy foods such Premium salads. It has also launched the breakfast menu in China in order to attract the emerging middle-class segment thus laying emphasis on MCD¶s core value offerings and variety in its breakfast menus. Store hours have been extended to 24 hours in major cities and implemented drive-thru¶s in efforts to benefit from this huge
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and their associated cost and risks. suppliers.International Business market.3 Countries in Africa Most of the multi-national companies are faced with challenges when they enter new markets. may lead to the creation of a joint venture with a local partner or the entry through a franchisee local firm. McDonald¶s has strict standardization procedures and this contributes to its fast expansion worldwide. One of the major factor that contributes to the remarkable growth of McDonald¶s is its adaptation its operations and marketing to match with local culture. these challenges may manifest themselves as difficulties either in the transfer of management methods and values to local staff. MBA Year2 Page 3 . customers. What problems might McDonald¶s encounter when it opens outlets in: 2. and government officials. However. this is an on going test that it will face as it continues to open up more restaurants worldwide. McDonald¶s can also utilize a menu that relies less on costly constant product changes in markets where consumers are less health-conscious. but that¶s only the beginning of the story. easily and quickly set up by simply adhering to a set of McDonald¶s existing standards and specifications. Question 2 McDonald¶s needs to adapt to different cultures and conditions when it sets up business in different parts of the world. We shall use Hofstede cultural dimensions in order to highlight the problems that McDonald¶s may encounter in countries in Eastern Europe. Ray Kroc¶s dreams for McDonald¶s growth throughout the United States had been more than satisfied.2 Countries in West Asia 2. These difficulties.1 Countries in Eastern Europe 2. or in relationships with labor. McDonald¶s has grown through several challenges that have come its way. New outlets are. West Asia and Africa. including adapting to its local environments. McDonald¶s has now taken the world by storm as well. customs and more specifically the purchasing power of the people. thus.
A High Individualism ranking indicates that individuality and individual rights are vital within the society. A High Masculinity ranking indicates the country experiences a high degree of gender differentiation. This is reflected in a society that is less rule-oriented. A Low Power Distance ranking indicates the society de-emphasizes the differences between citizen's power and wealth. These societies are more likely to follow a caste system that does not allow significant upward mobility of its citizens. Uncertainty Avoidance Index (UAI) focuses on the level of tolerance for uncertainty and ambiguity within the society . or inequality. more readily accepts change. or does not reinforce. A Low Uncertainty Avoidance ranking indicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions. Masculinity (MAS) focuses on the degree the society reinforces. and takes more and greater risks. regulations. and power. A Low Masculinity ranking indicates the country has a low level of differentiation and discrimination between genders. In these societies equality and opportunity for everyone is stressed. males dominate a significant portion of the society and power structure. Individuals in these societies may tend to form a larger number of looser relationships. A High Power Distance ranking indicates that inequalities of power and wealth have been allowed to grow within the society.e. control. A Low Individualism ranking typifies societies of a more collectivist nature with close ties between individuals. These cultures reinforce extended families and collectives where everyone takes responsibility for fellow members of their group. between people in the country's society. MBA Year2 Page 4 . females are treated equally to males in all aspects of the society. In these cultures. Individualism (IDV) focuses on the degree the society reinforces individual or collective. This creates a rule-oriented society that institutes laws. achievement and interpersonal relationships. rules. unstructured situations.i. and controls in order to reduce the amount of uncertainty.International Business Power Distance Index (PDI) focuses on the degree of equality. In these cultures. A High Uncertainty Avoidance ranking indicates the country has a low tolerance for uncertainty and ambiguity. the traditional masculine work role model of male achievement. with females being controlled by male domination.
International Business Long-Term Orientation (LTO) focuses on the degree the society embraces. In this culture. business may take longer to develop in this society. particularly for an "outsider". forward thinking values.org/wiki/Estonia). MAS 30 and UAI 60 (figure 1. Poland is a post communist country which had its slumps in social and economic standards. Estonia is a democratic parliamentary republic and is divided into 15 counties. Poland has a high income economy. With a population of 400 000.1 Countries in Eastern Europe We shall compare the US culture with the culture of two countries in Eastern Europe namely Estonia and Poland in order to highlight the problems that McDonald¶s might encounter in these countries.wikipedia.org/wiki/Poland). UAI 46 and LTO 29 MBA Year2 Page 5 . This is thought to support a strong work ethic where long-term rewards are expected as a result of today's hard work. change can occur more rapidly as long-term traditions and commitments do not become impediments to change. High Long-Term Orientation ranking indicates the country prescribes to the values of long-term commitments and respect for tradition. The United Nations lists Estonia as a developed country with a Human Development Index of "Very High". IDV 91. 2. The capital and largest city is Tallinn. Today. democracy and political freedom and education (http://en. Eurozone and NATO. The estimated scores for Estonia are PDI 40. traditional orientation. It is nowadays a democracy with a president and a head of state. Estonia is listed as a High-Income Economy by the World Bank and a High-income OECD member.1) The estimated scores for the United States are PDI 40. or does not embrace long-term devotion to traditional. MAS 62. Poland has extended its responsibilities and position in European and international affairs. Estonia has the highest GDP per person of any country that used to be part of the Soviet Union. supporting and establishing friendly relations with many 'Western' nations and a large number of 'developing' countries (http://en. IDV 60. It has in recent years. economic freedom.wikipedia. However. Estonia is one of the leastpopulous members of the European Union. A Low Long-Term Orientation ranking indicates the country does not reinforce the concept of long-term. The country is also ranked highly for press freedom.
com/ Figure 1.2: Source: http://www.2) Figure 1.1: Source: http://www.International Business The estimated scores for Poland are PDI 68.geert. UAI 93 and LTO 32 (figure 1.com/ MBA Year2 Page 6 . IDV 60.hofstede.hofstede.geert. MAS 64.
2.S. The low IDV score for both Poland and Estonia indicates that the society is more collectivist. The Eastern Europe countries are new capitalist economies still carrying stigmas of communism. can adapt into these countries. Economic diversification is relatively low and tedious. The score for Estonia is unknown but as an indicator it is known that the score for Eastern Europe is moderate. if caters for the above-mentioned points. Estonia has a very high UAI (60) as compared to the US (46). Estonia (30) has a lower MAS score than the US (62). Since there is only a small difference between Poland & U. The public is more self-reliant and looks out for themselves and their close family members. The culture gap is wide. but closing up rapidly with the new generations. McDonald¶s. McDonald¶s employees in Estonia and Poland will prefer explicit rules to follow when performing in their day to day job.S. MBA Year2 Page 7 . it is the same as in U. Therefore McDonald¶s has to adapt to this culture and provide more family-like seating arrangements and menus. Masculinity in Poland and US is almost the same.LTO on Poland (32) is almost the same as that in US. the high Individualism (IDV) ranking for the United States indicates a society with a more individualistic attitude and relatively loose bonds with others.International Business PDI is slightly higher in Poland but in Estonia.S and no difference between Estonia & U. Therefore McDonald¶s should give equal opportunities to both genders while employing the locals in its stores. There is a great chance that it will be highly accepted by the Polish community. Poland has a high score of 93. However McDonald¶s American employees prefer more flexibility in their work and informal activities rather than strict adherence to guidelines. The employees at Estonian McDonald¶s would like to have a long term career plan. Thus McDonald¶s can develop future career plans and invest more upon training and education of Estonian and Polish employees. Employees in these two Eastern Europe countries will stay longer with their employer than Americans. McDonald¶s would not have to review its usual work structure as far as employees are concerned and may opt to create the same kind of hierarchy as in the US. US have a low LTO score of 29.2 Countries in West Asia We shall compare the US culture with the culture of two countries in West Asia namely Israel and Turkey in order to highlight the problems that McDonald¶s might encounter in these countries. However.
and UAI 85 (figure 1. IDV 54.4). based on the nominal gross domestic product. The estimated scores for the United States are PDI 40. and it has one of the highest life expectancies in the world. UAI 46 and LTO 29 The estimated scores for Turkey are PDI 66. IDV 91. although it is not recognized internationally as such (http://en. Jerusalem is the country's capital. was the 41st-largest in the world in 2008.International Business Israel is a developed country and a representative democracy with a parliamentary system and universal suffrage.wikipedia. MAS 47 and UAI 81 (figure 1.3: Source: http://www. In 2008 there were 31 million visitors to the country (http://en. Turkey¶s GDP growth rate from 2002 to 2007 averaged 7.wikipedia.Israel ranks highest among Middle Eastern countries on the UN Human Development Index. Figure 1.3). MAS 45.4%. MAS 62. The estimated scores for Israel are PDI 13.com/ MBA Year2 Page 8 . IDV 37.org/wiki/Israel).geert. Its tourism sector has experienced rapid growth and constitutes an important part of the economy.org/wiki/Turkey).hofstede. The economy.
The low ranking on IDV in both Turkey and Israel indicates the society is Collectivist as compared to Individualist. Also. McDonald¶s restaurants in Muslim countries MBA Year2 Page 9 . Clear cut hierarchy among the employees will not be a problem in these countries. The society favors strong relationships where everyone takes responsibility for fellow members of their group. This means that both male and female have equal opportunity in this country.International Business Figure 1.geert.S (40) and Turkey (66). McDonald¶s Family meals will be very popular in both countries Both Israel and Turkey are relatively richer countries where McDonald¶s could eventually do good business. Loyalty in a collectivist is very important. However.com/ Israel has low PDI as compared to both U. McDonald¶s should ensure both male and female are given equal opportunity during the recruitment process in Israel.4: Source: http://www. food taste and religious convictions. There is a close long-term commitment to the family. This condition is accepted by the society as their cultural heritage. It is already serving Turkey and has well adapted to Turkey¶s culture. It is indicative of a high level of inequality of power and wealth within the society. Turkey has a higher PDI than the US.hofstede.
MAS 62. which signify compliance with Islamic laws for food preparation.3 Countries in Africa We shall compare the US culture with the culture of two countries in Africa namely Egypt and South Africa in order to highlight the problems that McDonald¶s might encounter in these countries. IDV 91. agriculture. The estimated scores for the United States are PDI 40. UAI 52 and LTO 25 (figure 1.wikipedia. 2. South Africa has a mixed economy because of the great disparity between the rich and the poor and it has a low GDP per capita (http://en. IDV 60. MAS 41.6).5). The economy of Egypt is one of the most developed and diversified in the Middle East.International Business have to maintain ³Halaal´ menus and the avoidance of pork. industry and service at almost equal production levels (http://en.org/wiki/South Africa). Egypt is one of the most populous countries in Africa and the Middle East. UAI 46 and LTO 29 The estimated scores for East Africa are PDI 64.wikipedia. with sectors such as tourism. MBA Year2 Page 10 . MAS 58 and UAI 43 (figure 1. The estimated scores for South Africa are PDI 43. The great majority of its estimated 79 million people live near the banks of the Nile River. South Africa is a democracy that has diverse cultures and languages.org/wiki/Egypt). About half of Egypt's residents live in urban areas. IDV 27.
hofstede.geert.6: Source: http://www.5: Source: http://www.com/ Figure 1.International Business Figure 1.hofstede.geert.com/ MBA Year2 Page 11 .
A high score of PDI (64) and low score of MAS (41) as compared to U. doing business becomes a challenge. McDonald¶s was able to MBA Year2 Page 12 . However a low score of IDV (27) means that the population is more collectivist and thus Family meals will be highly accepted in the Egyptian market. Otherwise the other cultural dimensions have almost the same values. Its initial strategy began by advertising directly to the middle and upper class citizens. All of McDonald's SA restaurants are Halaal certified by the Islamic Council of South Africa (ICSA).S (40 & 62) means that males and females are treated equally in Egypt.International Business McDonald¶s already exists in Egypt and has announced that as a part of long term expansion plans it is opening a series of new restaurants in collaboration with Shell Marketing Egypt. People prefer to be in group or in family. This is the reason why the kid¶s corner has a high importance in South Africa. In fact. The first of these restaurants is a full service restaurant which also serves as a drive-thru. with its many bargain deals on several of its food items. However. people will not be able to afford the fast food.1 Critically discuss McDonald¶s globalization strategy. Thus. Question 3 3. China was McDonald¶s first global country in which it researched heavily before opening up restaurants. more than 97% of all food served in McDonald's restaurants is produced by local South African suppliers. McDonald¶s Corporation began spreading domestically throughout the United States thus establishing its brand recognition. McDonald¶s already exists in South Africa and operates 132 restaurants in nine of South Africa's provinces. Also. Egypt is open to changes. Low IDV implies that collectivism has a strong presence in the society. The major reasons would mainly be due to the poverty present in these countries. McDonald¶s has a good presence in South Africa but is almost inexistent on the rest of the continent. Another reason will be because of the political instability and lack of security in many African countries. and was launched at the Shell Service Station in Sheikh Zayed city. To involve the locals and gain their confidence. South Africa has a low IDV as compared to United States. McDonald¶s should have this in mind while employing locals in Egypt. through globalization and internationalization. McDonald¶s began to cater to several people belonging to the lower class.
act local´ theme of the company. For example. specifically at the managerial positions. One of the most successive strategies that McDonald¶s uses before opening up its stores is research and development of its foods. cooks. India is one of the toughest markets to enter for foreign businesses. Other foods were also added to the non-standardized menu including McAloo Tiki Burger. Tastes and preferences vary across the globe. The emphasis is based on the ³think global. and other common Indian dishes. therefore. The other major concern was to be careful of the religious sensitives in India. Almost 80% of Indians do not eat beef. and over 150 million Indian Muslims do not eat pork. and economic situations. the success strategies include: Emphasis on Local Management Throughout the world. the company had to come up with burgers that were not made with beef. Politically Sensitive Strategy One of the company¶s major concerns was to develop ways to avoid political confrontation with the Indian government. the company had to create flavors that were spicy in order to meet the general taste preferences. managers as well as provide jobs MBA Year2 Page 13 .International Business develop marketing strategies. instead of supplying the normal Big Mac. therefore. however. Furthermore. while at the same time customizing them for different regions in accordance to the cultural and national variations in order to serve specific target markets. This has allowed the company to achieve financial success in every region it opens its fast food restaurants. McDonald¶s research concluded that in order to survive in the Indian market. with rather chicken or lamb. Internationally. political. McDonald¶s prides itself in hiring locals. technological. India is a nation where beef is highly unpopular due to religious purposes. The company conducts heavy research in regions where it desires to open locations based upon a few elements. the company developed the Maharaja Mac that is made of two lamb patties. McDonald¶s key to success is its business mantra of ³think global. especially to not offend local cultures. McDonald¶s earns high revenues is India. cultural. In order to further emphasize the globalization element incorporated by the company. the company thoroughly analyzes the preferred tastes. therefore. including social. which consists of beef. specifically management in order to gain acceptance into the country by its citizens. Employment Opportunity Foreign enterprises are often reluctant to hire locals in their companies. it would have to hire locals as cashiers. act local´.
its popularity continues to be among the lower. they slowly target the lower middle class citizens. This was primarily seen in its home country. However.S. (price base of the product). the value of a Big Mac varies worldwide. Its primary goal is to initially attract middle and upper class citizens. McDonald¶s outsources its products to several Indian companies throughout India. income distribution and it is for this purpose that the company opens up most of its restaurants in major cities. This is one way to encourage consumers to eat at its restaurants. For instance. In the United States. However.International Business for the country¶s agricultural workforce. Environmental Friendliness In order to achieve a positive reputation. in China. as they can afford McDonald¶s prices. it is undervalued by $0. including adapting to its local environments. the Big Mac is valued $. when the company had hit a low point. middle and upper middle class. It seems that the company tries to maintain a price range on all its products based on the location. however. In Switzerland. the biggest challenge the firm faced was in 2001. Pricing As the value of currencies varies worldwide. After this. This is primarily seen within schools. the United States. thus indicating that the company also supports local schools. this multinational firm gives back to the local citizens in all countries it operates. India is an example where the company provides financial contributions and sponsors several community related activities in order to promote environmental protection.60 over the U. the restaurant chain has appealed equally well to all classes ranging from the poor to the upper class. Challenges McDonald¶s had overcome The company has grown through several challenges that have come its way. McDonald¶s is often forced to change its pricing strategy in accordance to its target market.60 in comparison to the price of the Big Mac in the U. This craze continues today. the company provides several financial donations to local organizations. For example. for example. as it is an incentive that is used to spread the name. McDonald¶s tries to establish services that are environmentally friendly. Corporate Citizenship In order to better its reputation. In fact. as well as follow local and national policies of a country. and as a MBA Year2 Page 14 .S. specifically with the new trend of eating healthy.
Figure 1. the company changed its strategy: instead of opening more stores. the firm decided to change its menu by introducing healthier meals (see below table). This can be seen in figure 1. However. which were healthier and tastier for its consumers.7: Source: Sales Growth (Economist. such as the grilled chicken flatbread. It introduced new oven baked sandwiches.com. since its introduction of the new menu. This proved to be a big hit (http://www. in order to fulfill federal health regulations. introduced the McCafe. begun to experiment with products. McDonald¶s in Australia. the company has begun to increase its revenues from the previous slow years. as well as meet its healthy requirements to societies in which it operates.7 below. as revenues have begun to increase since 2003. the company in 2004. 2004) MBA Year2 Page 15 .com.economist. its gourmet coffee for its customers. the company increased its shares by 11% to 12%. After 2001. and healthier meals for adults. consisting of fruit snacks for children. 2004). for example. as a result of overcoming its challenges. McDonald¶s became one of the least visited fast food restaurants.International Business result. In 2004. Furthermore.
In the US. bikes evolved into motorcycles which evolved into cars.The entry mode in China. McDonald¶s standardized operations ensure the quality and consistency of cuisine at all its restaurants across China. the leading US fast food retailer. entered China in 1990 by opening its first restaurant in Shenzhen. McDonald¶s could not enter china through franchising because the Chinese franchise law did not exist when McDonald¶s wanted to penetrate the market of mainland China in 1990. the drive-thru is a given for any fast-food service. and fries. McDonalds Corporation¶s emphasis on cleanliness is appreciated by customers and the Chinese customers perceive McDonalds as being scientifically prepared in a clean environment. 14% of Chinese households purchased cars between 1989 and 1997 making the drive-thru feasible. the streets were filled with bikes. Food safety concerns are one reason all Chinese McDonald¶s stores have hand washing stations and hand sanitizers right out in the main restaurant.2 Explain how and why the entry strategy of McDonald¶s was different in China in comparison with the rest of the whole. the main competitor for McDonald¶s had already established its presence in China before McDonald¶s and was the leader in the Chinese fast food market. food safety is an issue in China. The sidewalks in front of McDonalds are kept clean by employees. But due to past experiences. It is also focusing on opening more drive-thru restaurants in China. As of March 2008. this concept was completely new and novel until recently in 2005. In China. fast food winning characteristics of Taste. McDonald's. The menu that McDonald¶s presented in china is different but the same ± there is the same familiar Big Macs. But with China¶s economic growth for the past few years. It had been one of the top official sponsors for the 2008 Beijing XXVIX Olympics. there were more than 800 McDonald's restaurants across China.International Business 3. were either MBA Year2 Page 16 . Yum Brands. McDonald¶s had launched several initiatives in China to adapt to local needs and tastes in order to overtake Yum Brands. Chicken McNuggets. If a person is on the go the drive-thru is a convenient option. Before. Just like in other parts of the world. owing to the Chinese government¶s regulations and policies. Pork and chicken have traditionally been more popular than beef among the Chinese. convenience and price are important in China as well. but there are new entries targeting a more localized taste including a pork sandwich.
This venture brought down barriers concerning agricultural products and suppliers¶ relationships. The main reason why McDonald¶s chose this partner is that the department of agriculture is controlled by the government of China and in order to receive agricultural supplies. the competition was intensifying between McDonald¶s and its biggest rival being Yum Brands. Thus. Question 4: Explain some of McDonald¶s efforts to localize its offerings in China and describe how successful these efforts were. However. Also.International Business wholly owned by the company or jointly-owned.htm). manufacturers. and Commerce had been working for five years to establish the network of local farmers. MBA Year2 Page 17 .org. which were vastly different from the staples offered by local Chinese quick-service restaurants. Since its entry in China in 1990. service.cn/english/15261. Industry. The president of McDonald's China Development Company said that given China's large territory. McDonald¶s emergence in China soon attracted an avalanche of Chinese customers eager to try out its burgers and fries. McDonalds Corporation¶s emphasis on cleanliness is appreciated by customers. and value to its customers. the company established a joint venture with Beijing Agricultural. it is hard to promote McDonald's to various regions without help from a franchising system. McDonald¶s had the ability to adapt to local conditions based on its vast experience and its business mantra ³think global. Thus. Industrial and Commercial Federal Corporation to expand its presence in the domestic market. contrary to the setting up of franchising stores elsewhere. The food culture in China is vastly different from that in the West. McDonald's has been expanding steadily by providing outstanding quality. lifestyles and legal structure were altering as a result of surging economic growth and massive urbanization.china. but the food culture. and other suppliers to support the restaurant. McDonald's had to find a way in order to penetrate the Chinese market. McDonald¶s needs the department¶s approval. The Chinese customers perceive McDonalds as being scientifically prepared in a clean environment. especially in the small and medium cities and the far hinterland regions (http://www. act local´ and its joint venture partnership with the General Corporation of Beijing Agriculture.
Single women in China see McDonalds as a safe place to eat because alcohol is not served. 1997). Chinese cities are crowded and hot for much of the year. and hiring people from many generations. A more recent addition to McDonalds is the drive-thru¶s. Parents who have only one child want that child to succeed at all costs. The restaurants¶ busiest times are during holidays. It appears that McDonalds has been successful in capturing the children¶s market in China. This retail store offers clothing. The ³one child policy´ has had an influence on the popularity of Western fast food. Some McDonalds have even installed a ³lover¶s corner´ with tables for two for people on dates (Watson. The bathrooms are clean and the restaurants are heated and cooled. books. Not only is McDonalds a favorite place to celebrate their children¶s birthdays. McDonald¶s also created the McKids in China (unique concept to develop products in the country). McDonalds is an oasis of calm in comparison to the streets in urban areas. 14% of Chinese households purchased cars between 1989 and 1997 making the drive-thru feasible. McDonalds has become a ³home away from home´. videos. being ³western´ is a prerequisite for success. So when people from the poorer western provinces of China have an opportunity to travel to the urban centers. 2009). It is seen as a safe place to bring a date for young people as there is no competition for ordering bigger meals than the couple at the next table. Malnutrition remains a problem for the rural poor. especially in Western China according to UNICEF (MacLeod. McDonalds has become the number one location for Chinese children¶s birthday parties (Wang. 2007). amenities not all Chinese have in their homes. it has become a place for families to celebrate the holidays.International Business Owners of the Chinese McDonalds even offer tours of their kitchens to reassure customers of their cleanliness. It is a way for extended families to publicly show their unity to publicly show their unity on special occasions such as anniversaries. For people from remote rural areas who cannot get home for holidays. The sidewalks in front of McDonalds are kept clean by employees. toys.This fact is particularly surprising in that traditionally people in China did not celebrate birthdays. a trip to McDonalds is a ³tourist stop´ ± a way to see the wider world. McDonalds is seen as a symbol of equality as both customer and server are standing during their transaction. One attraction is that it is much more affordable to feed a large group than the traditional Chinese banquet on special occasions MBA Year2 Page 18 . McDonalds has marketed itself as a family restaurant through many marketing schemes including having family slogans on their walls.
McDonalds has even added a Chinese New Year Happy Meal for adults complete with red packaging and Chinese horoscope letters. freedom. while maintaining the substance of the Western culture of efficiency. social practices.1 below shows the vast cultural differences that exist between China and U. recognition. Initially. all auspicious symbols. democracy.S managers should be aware of. 2004). McDonalds has absorbed the traditional Chinese cultural elements of showing respect. We shall use the Geert Hofstede¶s model to compare China and the U.International Business (Watson.S must be aware of in managing McDonald¶s operations in China). ³During the 2004 Spring Festival. (You need to use the Geert Hofstede¶s model to compare China and the U. assimilation and amalgamation. religion. equality and humanity. Question 5: Discuss the challenges that McDonald¶s faced when entering the Chinese market and to expand its operations. Table 1. They also invested in local schools and gave scholarships and prizes for contests. The company customized its menu to offer for example the µValue menu¶ that offered sandwiches at a lower price. The MCD¶s culture follows the American operating system which was a challenge.S: MBA Year2 Page 19 . 1997). magpies and twin fishes. McDonalds on Beijing¶s Wangfujing Street attracted many people with a traditional Chinese look. Another adaptation that McDonalds has made is to have restaurants open 24 hours every day. understanding. A smaller version of the µValue menu¶ (small fries. according to China Daily (2005). These restaurants had attached dessert kiosks for pedestrians to meet the demands of locals. small drink) was also introduced. and human traits as compared to the United States.´ (China Today.S and then highlight cultural challenges that U. decorating their interiors with paper-cuts of the Chinese character Fu (happiness). The biggest challenge that McDonald¶s faced when entering the Chinese market was the cultural differences that include language. McDonald¶s tried to present itself as a Chinese corporation through having 50% local ownership and buying products locally.S cultural dimensions and also emphasize the challenges that U.
geert-hofstede.1: Cultural Differences between China & U. although languages from many foreign countries are spoken within MBA Year2 Page 20 .9: U.S Figure 1.com Figure 1.geert-hofstede.com The population of the United States is 300 million people of mixed races and heritage.8: China¶s Cultural Dimensions: Source: http://www. English is the predominant language.International Business Cultural dimension Power distance(PDI) Individualism (IDV) Masculinity (MAS) Uncertainty avoidance (UAI) Long-term orientation (LTO) China in order of highest ranking 2 ± High 5 ± Low 3 ± Medium 4 ± Low 1 ± High US 4 ± Low 1 ± High 2 ± High 3 ± Medium 5 .Low Table 1.S Cultural Dimensions: Source: http://www.
Most business people speak English. China is believed to have the oldest continuous civilization.S. China has over 4. This is indicative of a greater equality between societal levels. However. The male dominates a significant portion of the society and power structure. The Geert Hofstede analysis for the United States is very similar to other World Countries that have their heritage founded in Europe with strong ties to the British Isles. compared to the world average of 45. A Communist form of government rules China. The low ranking of Long-term Orientation reflects a freedom in the culture from long-term traditional commitments. China is the most densely populated county in the world with approximately 1. which allows greater flexibility and the freedom to react quickly to new opportunities. compared to the world Average of 55. which is reflected in the pace and informality.International Business cultural enclaves throughout the U.S. The official language is standard Chinese. This low LTO ranking is indicative of the societies' belief in meeting its obligations and tends to reflect an appreciation for cultural traditions. This orientation reinforces a cooperative interaction across power levels and creates a more stable cultural MBA Year2 Page 21 . The population is more self-reliant and looks out for themselves and their close family members. The high Individualism (IDV) ranking for the United States indicates a society with a more individualistic attitude and relatively loose bonds with others. The next highest Hofstede Dimension is Masculinity (MAS) with a ranking of 62.17 billion people as of 1992. The Chinese government promotes atheism although the constitution guarantees freedom of religion. The next lowest ranking Dimension for the United States is Power Distance (PDI) at 40. There are strict rules regarding childbirth and each couple is limited to only one child. including government. Americans. organizations. The majority of American's (U. Beijing is the capital of China and is the focal point for the country. with women shifting toward the male role model and away from their female role. The climate and lifestyle are just more relaxed. This indicates the country experiences a higher degree of gender differentiation of roles. The culture and geographic location of an area will influence how business is done. This situation generates a female population that becomes more assertive and competitive. The LTO is the lowest Dimension for the US at 29.000 years of verifiable history.S. and even within families. compared with a world average of 50. Individualism ranks highest and is a significant factor in the life of U.) are Christian. which is derived from the Mandarin dialect.
and beliefs. overcoming obstacles with time. The low Individualism ranking is manifest in a close and committed member 'group'. The last Geert Hofstede Dimension for the US is Uncertainty Avoidance (UAI). This was classified into four groups as regards to the ideology and value it tries to convey to the consumers: social status. It also has a greater level of tolerance for a variety of ideas. This is indicative of a high level of inequality of power and wealth within the society. Of note is China's significantly higher Power Distance ranking of 80 compared to the other Far East Asian countries' average of 60. be that a family. at 20 compared to an average of 24. traditional custom and values. in particular. This Dimension indicates a society's time perspective and an attitude of persevering. in part. the white-collar workers¶ style. This condition is not necessarily forced upon the population. it was able to overcome this test as it used brand advertising in China. and children¶s happiness. Social status: This type of advertising promotes McDonald¶s as a middleclass life style. which is true for all Asian cultures. On the other hand. but rather accepted by the society as their cultural heritage. Traditional Custom and value: This group of ads emphasizes the traditional customs and values which Chinese treasure and follow. the Chinese rank lower than any other Asian country in the Individualism factor. advertising was one of the biggest challenges of McDonald¶s in China due to language. such as the MBA Year2 Page 22 . that is. The society fosters strong relationships where everyone takes responsibility for fellow members of their group.International Business environment. This may be attributed. Thus. However. However. romance. A low ranking in the Uncertainty Avoidance Dimension is indicative of a society that has fewer rules and does not attempt to control all outcomes and results. and the world average of 55. This can be attributed primarily to the Communist rule and its emphasis on a collectivist culture. Loyalty in a collectivist culture is dominant. compared to the world average of 64. to the high level of emphasis on a Collectivist society by the Communist rule. thoughts. the Geert Hofstede analysis for China is different where Long-term Orientation is the highest-ranking factor. extended family. with a ranking of 46. if not with will and strength. Romance: McDonald¶s restaurant has been regarded as an ideal place for lovers. cultural and social beliefs. as compared to one of Individualism. or extended relationships. Geert Hofstede analysis for China has Long-term Orientation (LTO) the highest-ranking factor (118). The Chinese rank lower than any other Asian country in the Individualism (IDV) ranking.
size. the key to its future success will be maintaining its core strengths. an unwavering focus on quality and consistency while carefully experimenting with new options. McDonald¶s ranked number one for social responsibility in Fortune¶s listing of America¶s Most Admired Company McDonald¶s (http://www. dental and education services to poverty-stricken children in their own neighborhoods (http://www. It should continue to rapidly expand its operations worldwide and leverage the brand through the introduction of new products. Another challenge that U. However. McDonald¶s should also focus on customer relationship management. MCD¶s had to adapt to the norms and expectations of the Chinese society which was not easy.ca/en/aboutus/faq.mcdonalds. It even employed local people in its stores and favored in buying local products such as potatoes. In 2000. was named by Fortune as one of the top 50 places for minorities to work in 2003 and 2004.mcdonalds. In fact McDonald¶s has built up a formidable social responsibility program. It implemented drive-thru¶s in China and extended store hours to 24 hours in major cities.mcdonalds. Question 6: What do you think the best opportunities for future growth lie for McDonald¶s? Why? McDonald¶s expansion worldwide has been remarkable up till now where it is serving more than 46 million customers per day (www.International Business Spring Festival celebration.com/corp/invest/pub/annual_rpt_archives/2000_annual). In addition to the Ronald McDonald houses and several Ronald McDonald children's charities. MBA Year2 Page 23 . A µValue menu¶ and smaller version of it was even launched to meet the requirement of local people. McDonald¶s sponsors a variety of educational and sports programs.aspx). MCD¶s had to use various techniques to get into the market. Children¶s happiness: Children are the center of this type of advertising.com/corp/about/factsheets). There are now more than 259 Ronald McDonald houses in communities around the world and the Ronald McDonald Care Mobile program offers medical. expand and get Chinese people to buy their product. It should continue to support communities as it has been always doing so over the past years. It shows the connection between children¶s happiness and McDonald¶s.S managers must be aware of is that the food and menus that MCD¶s presented did not meet the requirements of the Chinese people in terms of taste. and cost and had to be re-evaluated. McDonald¶s had to go for joint venture partnership with the Chinese Government in order to penetrate the Chinese market.
redesigning some of its restaurants in a way that it hopes will revitalize the sites and attracts more customers. MBA Year2 Page 24 . apple juice. save 1. In fact the company is also going through a full makeover. Other healthy choices at McDonald's include a Chicken McGrill Sandwich. Fruit 'n Yogurt Parfaits. McDonald¶s should come up with innovative initiatives that could include launching higher-end restaurants under new brands that wouldn¶t be saddled with McDonald¶s fast-food image in order to maintain its growth.) Each package of the dessert contains one recommended daily serving of fruit. but also through quality. Healthy choices were introduced for Happy Meals in June 2004. In fact it has succeeded in doing so over the past years. orange juice. and standardization. menus. McDonald's has a variety of food for the health conscious individual and it should continue to provide this type of menu as this is vital for its future growth. McDonald¶s should continue to focus in retaining loyal customers. partners should be launched and more new concepts like McKids in China could be exploited. New products. McDonald¶s also announced that it plans to convert its UK fleet of 155 trucks to run on biofuel made from recycled vegetable fat from 900 restaurants. grass covered parking lots.The restaurant is also toying with ideas of installing rooftop herb gardens. one percent low fat white and chocolate milk. McDonald¶s could adopt the go-green concept in a way to show the population worldwide that it does care for the environment. This will. A Fruit and Walnut was added in 2005 that provides 2. It should expand cooperative agreements and monetize their customer base by collecting and analyzing their customer data. McDonald¶s should expand more aggressively abroad where the prospects for significant growth is greater. soup. consistency.com/businesspolitics/mcdonalds-mc-eco-friendly). tastes.environmentalgraffiti. and at some restaurants.5 servings of the daily recommended fruit for adults. they claim. including low fat white and chocolate milk.650 tonnes of carbon per year (http://www.International Business McDonald¶s should also invest in streamlining its value chain globally in order to sustain its growth worldwide. In 2003 three entréesized salads were added to the menu. biodegradable cutlery and electric powered car home delivery. and Apple Dippers (sliced apples with an optional low-fat caramel dip. The McDonald brand has differentiated itself from competitors not just through customer loyalty.
From the above. The company should be able to bring diversity in management where decision is not taken by an individual but by a group of people.International Business Human Resource Development is also important for McDonald¶s future growth. McDonald¶s should also focus in the training of its personnel in order to gain competitive advantage over its competitors. it can be observed the various opportunities that lie for McDonald¶s for its future growth. MBA Year2 Page 25 .
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