McDonald Case Study - Part 2
Q1 - McDonald Case Study introduction. Identify the key elements in McDonald’s global marketing strategy (GMS). In particular, how does McDonald’s approach the issue of standardization? McDonald’s global marketing strategy is based on combination of global and local marketing mix elements. For the first elements in McDonald’s global marketing strategy (GMS) is a vital elements in McDonald’s business model restaurants system that can be set up virtually anywhere in the world and the restaurants themselves offer the consumers a chance to experience for themselves a fast food legend.
Second elements are McDonald’s offers core menu items like hamburgers, French fries and soft drinks in most countries. The popularity of American-style hamburgers, fries, and soft drinks is growing around the world, supporting Levitt’s view of the global village. For the price, the average price of Big Mac in the United States is $3. 54. Globalization involves developing marketing strategies as though the world is a single entity, marketing standardized products in the same way everywhere. Globalised organizations employ standardized products, promotional campaigns, prices and distribution channels for all markets.
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Brand name, product characteristics, packaging and labeling are the easiest of the marketing mix variables to standardize. One of the aims of McDonald’s is to create a standardized set of items that taste the same whether in India, China or South Africa. McDonald’s seeks to serve its customers with the same quality product and experience, whether that restaurant is located in Moscow, Idaho or Moscow, Russia. This requires standardized processes and similar quality ingredients. Q2. Do you think government officials in developing countries such as Russia, China, and India welcome McDonald’s?
Do consumers in these countries welcome McDonald’s? Why or why not? Despite concerns by governments and citizens in some countries about “cultural imperialism,” McDonald’s and other franchises with well-known brand names are generally welcome. Such businesses provide both much-needed jobs and employee training. McDonald’s does a good job of earning the support of local authorities and the local population by working with agricultural producers to develop local supply sources for beef, potatoes, and dairy products.
Finally, thanks to changing lifestyles around the globe, more people are embracing the whole concept of fast food. When we look at McDonalds, we see they have adapted their products according to all the different cultures and backgrounds. For example according to Trifter. com, “In India, there are no Big Macs because the Hindu people don’t eat beef. However, they have the Maharaja Mac; which is a Big Mac made of lamb or chicken meat. There is also a vegetarian burger, the McAloo Tikki. “No beef or beef products sold here,” but the doubts raised by the controversy kept many potential customers away.
China is currently home to the world’s largest McDonald’s. The first Chinese location opened in mid-1992 in central Beijing, a few blocks from Tiananmen Square. Despite having a 20-year lease for its first store, McDonald’s found itself in the middle of a dispute between the central government and Beijing’s city government. City officials decided to build a new $1. 2 billion commercial complex in the city center and demanded that McDonald’s vacate the site. However, central government officials had not approved the city’s plans.
McDonald’s was forced to abandon the location; despite the turbulent start, McDonald’s now has more than 800 restaurants in China. The restaurants purchase 95 percent of their supplies, including lettuce, from local sources. On January 31, 1990, after 14 years of negotiation and preparation, the first Bolshoi Mac went on sale in what was then the Soviet Union; by the end of the decade, there were more than two dozen McDonald’s restaurants in Russia. The first Moscow McDonald’s was built on Pushkin Square, near a major metro station just a few blocks from the Kremlin. It has 700 indoor seats and another 200 outside.
It boasts 800 employees and features a 70-foot counter with 27 cash registers, equivalent to 20 ordinary McDonald’s rolled into one. At present, there are more than 180 McDonald’s locations in 40 Russian cities, and the original The turmoil stemming from the dissolution of the Soviet Union and Russia’s sometimes tortuous journey toward a market economy during the 1990s has presented the management of McDonald’s Russia with a number of challenges. Although massive public demonstrations followed a failed coup attempt in August 1991, the protesters did not target McDonald’s.
Perhaps management’s biggest challenge to date was the currency crisis that began in the summer of 1998 when the Russian government devalued the ruble and defaulted on its foreign debt. Many companies immediately raised prices to compensate for the precipitous drop in the ruble’s value, and customers stopped buying. Q3. At the end of 2003, McDonald’s announced it was selling the Donatos Pizza unit. Then, in 2006, the Chipotle chain was spun off. In light of these strategic actions, assess McDonald’s prospects for success beyond the burger-and-fries model.
McDonald’s spent a period of time acquiring businesses they believed to be complimentary to their core burger-and-fries model. However, during this expansion, they made the error of “taking their eye off of the ball. ” This allowed competitors to make inroads and resulted in their core business flagging. In December 2003, McDonald’s announced that it would further its focus on its core hamburger business by downsizing its other ventures. The company said that it would sell Donatos back to that chain’s founder. In addition, it would discontinue development of non-McDonald’s brands outside of the United States.
This included Boston Market outlets in Canada and Australia and Donatos units in Germany. McDonald’s kept its minority investment in Pret A Manger, but McDonald’s Japan was slated to close its Pret units there. These moves would enable the company to concentrate its international efforts on the McDonald’s chain, while reducing the non-hamburger brands in the United States to Chipotle and Boston Market, both of which were operating in the black. To achieve sustainable performance they need to develop and build on the organisation’s core capabilities or strengths.
So when McDonald’s decided to overhaul its menus to make them more healthy by adding salads and a whole range of other healthy options, it ended up destroying value because it moved too far away from its core business strengths, i. e. , making burgers and fries in a highly standardised, procedural manner. Fortunately, they had the sense to admit their mistake and refocus the business around core strengths. This led to a sharp increase in the company’s value and it continues to grow unabated. By reasserting themselves in their core business, they are reestablishing themselves as innovators in the market.
Success beyond their core model is certainly possible; however, attention can not be diverted from their core business model. Q4. Is it realistic to expect that McDonald’s – or any well-known company – can expand globally without occasionally making mistakes or generating controversy? Why do antiglobalization protesters around the world frequently target McDonald’s? No. it is possible for McDonald’s or any well-known company to expand globally without occasionally making mistake or generating controversy. It is because mistakes such as the one in France represent exceptions that can serve as learning experiences.
There were further black eyes as well. McDonald’s was sued in 2001 after it was revealed that for flavoring purposes a small amount of beef extract was being added to the vegetable oil used to cook the french fries. The company had cooked its fries in beef tallow until 1990, when it began claiming in ads that it used 100 percent vegetable oil. McDonald’s soon apologized for any “confusion” that had been caused by its use of the beef flavoring, and in mid-2002 it reached a settlement in the litigation, agreeing to donate $10 million to Hindu, vegetarian, and other affected groups.
Also in 2001, further embarrassment came when 51 people were charged with conspiring to rig McDonald’s game promotions over the course of several years. It was revealed that $24 million of winning McDonald’s game tickets had been stolen as part of the scam. McDonald’s was not implicated in the scheme, which centered on a worker at an outside company that had administered the promotions. This all mistake or controversy make McDonalds more matured doing business and McDonalds know what actually customer wants because different country different cultured so different need.
As the world’s largest restaurant chain, McDonald’s is a target for criticism. The company is often seen as a symbol of American domination of foreign economic resources even though its foreign franchises are locally owned and use locally produced foods. Other criticisms include allegations of exploitation of entry-level workers, ecological damage, selling unhealthy food, production of packaging waste, exploitative advertising, and adverse response to the company’s approach to preserving its image and copyrights all issues.
Amidst the challenges and criticisms McDonald’s continues its stride as the global industry leader. McDonald’s franchises overseas became a favorite target of people and groups expressing anti-American and/or anti globalization sentiments. In August 1999 a group of protesters led by farmer Jose Bove destroyed a half-built McDonald’s restaurant in Millau, France. In 2002 Bove, who gained fame from the incident, served a three-month jail sentence for the act, which he said was in protest against U. S. trade protectionism. McDonald’s was also one of three multinational corporations (along with Starbucks Corporation and Nike, Inc. ) whose outlets in Seattle were attacked in late 1999 by some of the more aggressive protesters against a World Trade Organization meeting taking place there. In the early 2000s McDonald’s pulled out of several countries, including Bolivia and two Middle Eastern nations, at least in part because of the negative regard with which the brand was held in some areas