How did McDonald’s Become Global

Case 1-2: “McDonald’s expands globally while adjusting its local recipe”

Discussion Questions:

1) McDonalds has a mixed global marketing strategy that combines Globalization and the ability to act local. Globalization refers to developing a marketing strategy as if the world is a single entity and to sell the same product with same promotion, same packaging all over the world regardless of geographic, demographic, political, social and cultural differences. McDonald’s global marketing strategy refers globalization in many terms but also takes into consideration local tastes and expectancies, and creates value with its capability to act local when required; this strategy is called glocalization.

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The company has a high level of standardization which creates effectivenes in production that decreases the price and time of service. The packaging, the core menu, logo, brandname, distribution strategy, positioning of the company, main idea of the advertisements, design of the stores, business model, taste of the food, desing of the kitchens and working conditions of the workers are same everywhere in the world. As a strategy the company keeps all these operations standardized in order to remain profitable and global. However there are cases where standardization becomes an obstacle and McDonalds needs to make adjustments in order to enter the local market and expand its market share. In these cases, considering local preferences; product localization is done, some local tastes could be added to the menus (although its menus vary from country to country its core product offering is consistent on a global basis), as a marketing localization the company can combine local expectations with core values of American McDonalds and reach the target demographic.

McDonals is a perfect example of : “Think global and act local”.

Although it is highly standardized, the fact that 70% of its stores are franchises, and 80 to 90% of its suppliers are local businesses allows the company to act small and respond local demands in an effective way.

This provides also the opportunity to think local and act global on the basis that franchises and localized products may become global by time. For example, in January 1997, McDonald’s announced a global alliance with Walt Disney which allowed them to share exclusive marketing rights for everything from films to food, for the next ten years. This has led to McDonald’s producing toys in their “happy meals” for films such as A Bug’s Life, Toy Story and the latest Disney offering, Tarzan. In this instance, there is no need for McDonald’s to act local, the Disney charecters might be considered local or European but their effect had been global; as Walt Disney has a world-wide appeal that does not need altering for different communities.

2) Russia, China, India together with Brazil represents the BRIC countries which are considered to be at a similar stage of newly advancement development. These biggest and fastest growing emerging markets also atired the attention of the global fast food company McDonalds.

In the light of the information given in the case, we may claim that McDonalds is not very well welcomed on the other side of the globe because of its image linked to capitalism and imperialism of culture. It’s neither legal nor logical for governments of free market economy to take additional precautions to hinder the company’s activites. It’s obvious that the franchising strategy of McDonalds will provide large scales of employment wchich will help countries fight with unemployment rates. Moreover, McDonalds purchase 80 to 95% of its inputs from local suppliers which is an opportunity for local businesses to grow up, likewise in the case of Russia.

On this basis, we can’t really claim government’s role (even if they are not welcoming) but we must focus on the spirit of the streets and activist people who organize protests and boycot the company in some cases for valid reasons. For example in the case of India the protest were held around the idea that beef meet and tallow were used in McDonalds products which is totally forbidden in the Hindu religion. In the case of France, the company faced protest due to the global image of the company, that it was promoting industriliazed food, American culture and penalize local businesses.

On the demographic basis, the effects of protests were limited and the majority of the consummers welcomed the company by allowing its expantion in the following years. The number of stores that McDonalds has now in China, India and Russia and the number of customers per year is a proof that the company has achieved to penetrate the market although its bad image on the public eye.

3) McDonalds used an adjusted type of the marketing mix; product, place, price, promotion and people. Reflecting the needs of the fast food industry, the company added the term people to its global marketing strategy. Let’s evaluate these factors seperatly; Price: McDonalds used a global price strategy consistent with its positoning in the market. The price of a menu is standardized regarding the key economic factors of the company in which it operates. Exchange rate differences, government regulations, economic climate, cost of living are all taken into consideration while McDonalds sets its prices. Moreover, as the majority of its suppliers are provided from domestic businesses the price of a menu is consistent with the prices of local competitors. An interesting topic to discuss McDonald’s global pricing strategy would be to look at the Big Mac Index that has been used as an aid to determine PPP between currencies for many years. There are McDonald’s locations in over 100 countries and most of them have the Big Mac on their menu.

The price of each Big Mac is not the same in every country. For example, a Big Mac in Switzerland in 2010 was around 6.20 US dollars and in Thailand for the same time period a Big Mac was around 2.20 US dollars. For example, the minimum wage in Switzerland is much higher than the minimum wage in Thailand which is one of the reasons why they are able to charge around $4 more for a Big Mac. The number one factor affecting the variances in prices is the exchange rate differences which are directly related to a markets economic climate. In addition to the Big Mac index, McDonald’s joint-ventures and regional franchises play a large role in determining what the price of their products should be. McDonald’s is able to sustain a competitive advantage in the global market because they have an extremely viable global pricing strategy.

The official stance on McDonald’s pricing policy is highlighted in the company’s mission statement, where it states that the most fundamental element of determining price was: “Being in touch with the pricing of our competitors allows us to price our products correctly, balancing quality and value.” Therefore, it is possible to conclude that, by looking at other competitors in each country, McDonald’s can set the appropriate price for their products. The result is that McDonald’s in price is equal to or cheaper than its competitors in the fast food sector

Product:

McDonalds has highly standardized products that provide the company to keep its costs low and operations fast which is the key factor of its success. The quality of the products is such designed that wherever it is located doesn’t matter; in Tokyo, London or New Delhi a McChiken menu tastes exactly the same all over the world. McDonalds owes these standard and high quality products to the education it provides for its franchises. Oak Brook Hamburger University teaches every year thousands of workers and managers how to make hamburgers. Moreover; to standardize the quality; Quality Assurance teams are formed to monitor the quality of McDonald’s food products, both in the restaurants and at suppliers at all stages of production. This involves a continuous round of visits, inspections and audits, announced and unannounced, to all production facilities, distribution centres and restaurants. Paralel with its “think global act local strategy”; McDonalds also adapts products regarding local consumer tastes, customs and religious requirements. For example, in India beef meet is forbidden in the Hindu religion and the BigMac is made of mutton (Maharaja Mac). In Muslim countries, pork products are forbidden, in Israel Big Macs are served without cheese and so on.

There are also many examples of how McDonald’s adapted the original menu to compete with the local businesses and to meet customer needs/wants in different countries. For example McTurco is available in Turkey to compete with fast food döner restaurants; rice is served as an alternative to French fries in China to adapt with the local culture. In tropical markets, guava juice was added to the McDonald’s menu. In Germany, beer is sold as well as McCroissants. These are examples of how McDonald’s has adapted its product offer in international environments. Irrespective of variations and recent additions, the structure of the McDonalds menu remains essentially uniform the world over: main course burger/sandwich, fries, and a drink – overwhelmingly Coca-Cola.

Place:

McDonald’s uses the same desing of furniture and store anywhere. It provides the same environment; and exactly the same system of services. The location of tables, cashier, and the design within the kitchen are all predefined in the franchise agreement. Therefore no matter in which country you are, when you enter a McDonalds you know what to expect. But the design of the stores are also flexible in some cases; for example in France the company faced low sales because of the design of the stores, which wasn’t welcomed by French customers. They adjusted the internal design with wood stairs and chairs instead of the classic red plastic chairs; and enjoyed higher sales because of the environment. Secondly as the major fast food company in the world; McDonalds somehow locate a restaurant at the most crowded places and mostly known squares all over the world. Such as Tiananmen square in China, Champ-Elysée in France, in front of London Eye in Britain…

Promotion:

McDonalds concentrate on standardising its brand name but localising its advertising campaign. McDonald’s looks to localise its marketing communications strategy as it needs to consider the enormous range of cultural and other differences that it would be faced with in each country. It would be unrealistic to ignore the various local markets and the factors which may affect the performance of its product in them. It also needs to analyse consumers’ attitudes towards its product, usage patterns and ethnic, moral and religious considerations in that environment. Although the idea is to promote McDonald’s as a global image, McDonald’s focuses on the needs of the communities they are entering McDonald’s has a wide range of advertising campaigns in various countries. For example, in the UK, they use the England footballer Alan Shearer as a figurehead to promote their hamburgers, whereas in France they use Fabien Barthez, the French international goalkeeper. The point is that the image they are trying to convey is the same; McDonald’s just use different personalities in different cultures to get their message across.

People:

The company is strongly committed to staffing locally and promoting from within. This means that McDonald’s has managers who understand both the corporate and the local cultures. The emphasis when recruiting is that the applicants are customer-focused; the right attitude is seen as more important than technical ability. The company believes that the best way to stand out from the crowd is to satisfy all of the customers, all of the time. This is emphasised in recruitment advertising and continues in preliminary screening; this is standard the world over and another clear example of a globalisation strategy. To standardize its operations, managers are required to be educated at the Hamburger University. The training centres teach managers such details as the temperature at which hamburgers should be cooked and how to inspect restaurant facilities to ensure that quality standards are met. Managers are also taught how to give performance reviews, how to listen and what to do if a person becomes defensive. Managers, in turn, pass the details on to their staff.

4) It is impossible for a company to expand such big globally without making any mistakes. The key point is whether they are recoverable mistakes or deadly. McDonalds has also made some mistakes during its expansion and caused controversy in many issues.

McDonald’s realises the potential for growth in international markets and plans to benefit from lessons that they learned in the USA. For example, they used to add 300-400 restaurants a year, every year, in the USA regardless of circumstances. It was a strategy that created a gap between them and the competition. However, they realise looking back that they could have built even more restaurants at a time when competition was not so great. This would have meant that a lot of those “other” restaurants could have been McDonald’s. They have applied this lesson to their rapidly growing international business, especially in markets where competition is not so strong.

Anti-globalizaiton protesters most of the time target McDonalds because the company is seen as one of the symbols of capitalism. The company image is such that; it doesn’t consider climate change, doesn’t use recycleble products (even though the company claimed that all of its packaging products were environment friendly), the food is unhealthy. Moreover it is seen as a treat for local business, the wages for workers is very low and working hours are relatively longer.

Even a new term called Mcdonalization is created by George Ritzer. McDonaldization thesis in cultural version is the world wide homogenization of cultures. The process of McDonaldization can be summarized as the way in which "the principles of the fast-food restaurant are coming to dominate more and more sectors of American society as well as of the rest of the world.

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