Executive Summary
The essay provides a brief on the strategy
followed by the McDonald’s corporation to expand into markets other than its
homeland. The researcher by analysing the company’s marketing, supply chain and
human resources management strategy has determined that the company’s approach
is one that is consumer centric and the fast food chain fast adopts to the
local tastes, preferences and traditions in order to penetrate a particular
market. However, the researcher also noticed a motive of profiteering in
McDonald’s policies and habits, of underpaying staff and exploiting local
natural resources.
The recommendation that has stemmed after
such a keen observation is that, the government in allowing the multinational
to function within the country should tread the path with caution; establishing
ample checks to ensure legal operations of business and encourage and promote
local industries so that the native’s economy and culture is not cannibalised
by a global giant with a behemoth resource pool.
Company
Description
McDonald’s
Corporation also known as Mickey D’s is the world’s largest chain of hamburger
and fast food restaurants. Started in 1940 as a barbecue restaurant, the
corporation has truly grown in a global sense; it serves close to 68 million
customers daily in 119 countries.
The
company’s well established and widely followed business model requires its
restaurants to be operated by franchisee, affiliates or the corporation itself.
McDonald’s thereby earns through rent, royalties, fees or sales revenue in all territories
that it operates in.
The
company has exploited various trends to grow and exploit the global markets
(especially in the face of a saturating American market and the number of
growing regulations in its homeland). In the 1960s the company benefitted from
the opportunity presented by the baby boomers and the increasing participation
of females in working outdoors; supplying fast and inexpensive food options to
a financially independent working population. In the 70s and the 80s the fast
food giant focused on bringing the American way of life to the tables of
various foreigners (riding the wave of globalisation). In the 90s and 2000s the
company focuses on repositioning itself as a fast and convenient quick service
restaurant however, it has also made efforts to adapt to local tastes (in order
to increase its appeal) and made certain policy changes (like including
healthier food choices and minimising environmental impact) to counter
criticism levied by various organisations and governments. Thus, time and
again, McDonald’s has proved its position as a formidable international player.
Company’s
International Strategy
Considering
a fast saturating, overtly competitive and regularised US market, McDonald
embarked on a program for expanding internationally. A carefully thought out
global strategy has placed McDonald’s as a market leader in nations around the
world. Some of the key points of this strategy are:
1.
Keeping
the customer at the heart of all decisions- Across borders the fast food
giant has adapted to local tastes (observing the local population). The chain
has taken care of not to confuse its brand with its products. The chain
although known largely for its hamburgers, has taken care of considering local
tastes and values to carefully plan menus. For example, beef is not on the menu
in India, considering the religious beliefs of the Hindus.
Also,
certain international favourites have been established and retained on menus
worldwide; these are shakes and fires – which appeal to people across borders.
2.
Developing
new brand attributes-
The brand has been opportunistic in developing new brand attributes when
operating in certain markets. Like in France it has been positioning itself as
a full service restaurant/café and in certain third world countries it is fast
becoming a status symbol; as against the usual image of a cheap drive thru
restaurant in the developed world. The company has been flexible in adapting to
various positioning approaches to gain market share in different locations.
3.
Working
on small markets-
The Company has focussed on developing small markets as Thailand, Indonesia and
the like (as against focusing on major markets only). As these markets and the
income there grows, their share of the total pie also grows. Thus, presenting a
unique opportunity to assume an early bird market share of a profitable
proposition.
Company’s
Marketing Approach
A
brief study of the corporation’s international marketing
approach
is stated below:
1.
Segmentation,
Targeting and Positioning – McDonalds has largely operated in three market
segments across the globe (differentiated on the basis of demographics – age).
These are families with children, business customers and teenagers. The
segments have been targeted using different positioning approaches. For the
family McDonalds is a family hangout place, for the business customer it is the
quick service restaurant which provides food on the go; and to the teenager it
is the saver which offers value for money products.
2.
4Ps of
Marketing-
The choices made by the brand in terms of Product, Price, Promotion and Place
are in unison with the company’s objectives in each market.
The
McDonald’s product offering is a food items which is well suited to local taste
preferences and is consistent in quality and other variables across all
outlets.
The
price of the product is carefully determined, so that it’s not so high that it
becomes prohibitive to the purchasing power of the consumer or, so low that it
signifies low quality and is not profitable.
The
promotion for the brand is done both through personal selling and traditional
media. The restaurant décor and staff does the personal selling part and
advertisements on national television, newspaper and other medium fulfils the
rest.
The
place or the restaurant location and ambience is such so as to be approachable
by the customer on the go, inviting for families and children to enjoy, and
reasonably comfortable and appealing for teenagers to hang out with friends.
The chain is even adapting to unique preferences of local populations in
certain regions. Like in France, McDonlad’s provides wi-fi and full service
facilities to attract diners.
Criticism
McDonald’s
has been criticised from various quarters for its aggressive marketing approaches.
Some of the key points highlighted in such criticism are:
1.
Fast
food culture- Consumer rights group in various countries have criticised
McDonalds for promoting a culture of unhealthy eating habits.
2.
Americanisation/cannibalising
local culture and industries- McDonalds has been a symbol of American culture
since ages. Establishing busy restaurants serving fast food have undermined
traditional values and culture in some societies such as India and China.
3.
Children
advertising- Campaigners (even in the USA) have criticised McDonald’s for using
marketing tactics such as toys in happy meal boxes and play areas to wrongfully
motivate children (incapable of taking informed decisions) to consume unhealthy
junk food.
Company’s
Supply Chain Approach
The company has believed in the strategy of
backward and forward integration when it comes to supply chain management. All
McDonald’s raw material comes from farms and manufacturing facilities which are
solely dedicated to the corporation. This helps in controlling costs and
quality.
The raw material is processed in the
restaurants using the same machinery and procedure to deliver a consistent
product at all restaurants.
However, this has been criticised by
various environment watchdogs and consumer protection groups. The supply chain
integration done by the fast food multinational is leading to practices of mass
agriculture. This implies that the use of certain procedures and methods which
affect the environment are also in implementation – like, use of pesticides, continual
cropping of a land (reducing its fertility), produce of genetically modified
crops (which get genetically biased in certain qualitative aspects), and the
like.
Such practices have also adversely affected
localised economies in various regions; for example, in India certain village
economies have been hurt by mass agriculture – as it cannibalises a farmer
practising subsistence agriculture.
Company’s
Human Resource Management (HRM) Approach
McDonald’s is a progressive business; world
over it has created millions of jobs and fuelled thousands of businesses with
its persistent growth. For some developed nations such as India, McDonald’s is
one of the very few equal opportunity employers in the country which also pays
best in the industry wages.
From an insider’s point of view the HRM in
McDonald’s corporation is a hierarchical system of the corporation being the
ultimate overseer of all business operations, then the franchisee who manages
localised operations, then the restaurant owner/manager and under him/her the
entire restaurant crew. However, even this widely branched out organisation is
managed efficiently by a unique system of training and service quality control
implemented directly by the corporation to train, even the employee functioning
on ground level.
However, McDonald’s has also been a proven
offender in cases of child labor lawsuits. At other instances McDonald’s has
been criticised for underpaying restaurant staff and making them work in
monotonous shifts. In some developed nations, a McDonald’s job is synonymous
with a routine dead end employment.
Analysis
Studying the various approaches McDonald’s
corporation implements to maintain and grow its market share world over, the
following analysis can be distilled:
1.
McDonald’s corporation is a
consumer oriented organisation; weaving its business model around the needs of
the various target populations in the numerous regions it operates in.
2.
The fast food giant relies on
community and individual resources to run operations; that is by using the
model of franchise and business associates.
3.
McDonald’s has also popularised
certain key cultural benchmarks of the American society by leveraging on
globalisation.
4.
It focuses on backward and
forward integration to control costs, quality and supply.
5.
The corporation has large
resources at its disposal which it often uses to aggressively market itself and
bully local businesses and governments for its own profits.
6.
Some of the practices
implemented by the organisation have been against the local law, detrimental to
the interests of the consumer and harmful to the environment.
7.
McDonald’s has heavily cut on
costs and increased profitability by exploiting local resources and labour. Its
ability to control and manipulate has lead to establishing of monopolistic
conditions in certain markets.
Recommendation
and Conclusion
The report has been of importance in
stating objectively the strategy and impact of the multinational in context of
its transnational expansion plans.
With respect to aiding decision making on whether
to allow or disallow such an organisation to operate within our country, the
researcher has made the following recommendations:
1.
The business model should be
owned locally so that income is not lost to a foreign national. The
corporation’s franchisee model fits the bill in this regard, as restaurant
owners or country franchisee can be held by locals.
2.
Strong checks should be made to
ensure laws are not flouted. For example, food quality, minimum wage payment
checks and child labour employment checks should be done sporadically to
ascertain that business is done legally.
3.
Enforcement should be done to
protect agricultural spaces with the law in this regard.
4.
The company should be
compulsorily made liable to implement an environmental management program and
should be required to submit a report on its activities in this regard.
5.
Government should encourage
domestic industries and promote national culture in order to strengthen economy
financially and build a confident nation, ready to take on foreign competition.
Summing up, the essay provides a guiding
light, a direction to think upon the entry intention proposal presented by the
company to the government.
References
4.
http://www.forbes.com/2010/02/15/mcdonalds-europe-remodel-markets-equities-restaurants-design.html
