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McDonalds' is one of the largest fast food chains in the world with a presence of 32,000 restaurants in 119 countries. Its history goes back to 1940 when Richard and Maurice opened its first restaurant in California. In 1955 Ray Croc started a franchise with the two brothers where he later purchased the full rights in 1956.
Presently, McDonald's is recognized in the world as a hamburger restaurant chain, but they are a multi local company providing wide range of meal items to suite local palates. Their continued success in different cultures and regions are a result of continuous adaptation to local culture, local sourced products and local franchise agreements.
In this case study analysis, it critically examines how McDonald's have impacted different cultures and how different cultures have impacted McDonalds' operations worldwide.
Availability of Fast Food and Americanization
McDonald's is the first fast food company to export Americans most loved fast food services to other countries. Since then people from different countries and different cultures started to move from their traditional foods towards fast foods such as McDonald's meals, which is also known as Americanization.
Measuring Purchasing Power Parity through Big Mac Index
Big Mac's prices in various countries are considered as a measurement to value the standard of living and the exchange rates of a country. It's an informal measurement. Following tables (refer table no. 01 & 02) reflects how Big Mc Index has been used to measure PPP.
Table No. 01 (Source: The Economist Website, 28th July 2010)
Table No. 02 (Source: The Economist Website, July 28th 2010)
Being a Multi-Local Company
Even-though McDonald's is recognized as a global brand across the world, they are a global local company which follows a theme "Think Global, Act Local". It has a high percentage of local ownership and operates through a network of franchise outlets across countries. Currently there are more than 75% of franchised restaurants worldwide (Source: www.aboutmcdonalds.com)
Table No. 03 (Source: www.wikinvest.com, Wiki Analysis, McDonald's)
Sourcing of Products and Farming
McDonald's in some cases source their products globally, however in some cases the company sources locally or setup their own factory plants and farm in different regions and countries through local farmers. Following are some examples of how sourcing is being done in different regions and countries,
McDonald's India and Brazil sources its most of the products locally.
McDonald's Canada in 2005 sourced locally more than $700 million paper goods and products which accounts for 90% of total purchases for the year.
Potatoes are produced and farmed in Russia with imported Dutch seeds to maintain standardisation.
Health Scares and Health Awareness Programs
Biggest challenges McDonald's faced was through protests from various environmentalists, health chiefs, and middle class commentators due to BSE crisis in 1996, bird flu pandemic and rise in child obesity. This has led people to move away from fast food eating habits to more healthy foods such as homemade foods and healthy meals offered by competitors such as Quite Revolution, Eat and Love Juice.
Increasing Focus on Emerging Markets
The company has increased their focus on emerging markets such as China, India and Brazil, due to high population compared to US. According to President of India Pratibha Patil (Source: www.rediff.com) she mentioned that India has the potential of accounting for one fourth of the workforce by 2022 across the world.Which is a large number of people earning money and a large market for McDonald's to penetrate.
Adapting to Local Food Culture and Eating Habits
The main reason to McDonald's continued success in international markets is due to its ability and capacity to adapt to local eating habits and tastes. Following are few examples,
In India a special Maharaja Mac is offered in lamb or chicken instead of beef which is prohibited, the veggie burger named McAloo Tikki and also they provide home delivery.
In Germany McDonald's offer beer in restaurants.
McDonald's in Norway offers the McLaks grilled salmon and dill sauce sandwich. Norwegians love fish.
In Hong Kong they offer a rice burger. Rice is one of the most loved foods in Hong Kong.
Diversity in Suppliers, Franchisees and Employees
According to Pat Harris, Global Chief Diversity Officer, McDonald's have shifted from white male only organization to a more diversified organization, through partnering with African-American, Hispanic, Asian and female franchisees, recruiting employees and selecting and developing suppliers from minority groups in-order to serve the vast majority of people in different cultures.
According to Andrew J DuBrin (Essentials of Management 2008, Chapter 2) more than one-half of the McDonald's staff from crew members to the COO belongs to an ethnic minority group.
Effective Strategies for Managing Cultural Differences
Managing cultural differences is considered as an integral part of succeeding in global business. However it is not an easy task, but Multinational Corporation are required to understand the basics of these differences and manage it accordingly. Following are the strategies which can be adapted to manage cultural differences,
Understanding and Appreciating Culture through Innovation
One of the best ways McDonald's can use to manage cultural differences between employees is to find innovative methods to increase appreciation between every ones culture. As an example Tabra Incorporation, a jewellery manufacturing corporation, hangs around 10-12 different flags in their production facility in California representing all different cultures, such as India, China, Thailand, Mexico and others.
Inclusion of Diversity in Projects and Business Processes
The company should include employees from different cultures and ethnic groups in projects and business processes such as strategic planning, process and product development, re-engineering processes, employee development and performance management functions of the organization in-order to improve coordination and equality.
Managing Differences through Cross Cultural Training
Presently McDonald's has seven hamburger universities worldwide which provides learning and practical experience in managing their restaurants. If the university provides language and cross-cultural training sessions for the participant's, it would provide an understanding of other cultures apart from students own culture whilst increase intercultural team building and decrease social ambiguity.
Adapting to Local Food Culture and Habits
When going global McDonald's had to adapt to local culture, "When in Rome, Do as the Romans". They have changed most of their American food items to suite the local culture, such as vegie burger in India, rice burger in China, Samurai Pork Burger in Thailand and Green tea & red bean ice cream sundae in Hong Kong are some.
Due to rapid urbanization in China, Chinese people tend to travel more and also greater distances by car. Because of this there is a growing demand for drive thru service, where McDonald's should setup drive thru services at almost all restaurants in China, which only few have been setup at present.
Changing and Redesigning Restaurant's Layout, Theme and Infrastructure
McDonalds needs to be more local in different regions, especially during local festival seasons by changing their restaurant theme to suite them. In 2004 McDonald's restaurant in Beijing decorated their interiors with auspicious symbols of traditional Chinese culture for the Spring Festival held in China. Adapting the same strategy in other regions would increase the turnout.
Most of the cultures are presently shifting more towards technology, online chatting and online activity, through internet. McDonald should establish Wi-Fi technology in all its restaurants across regions.
Presently in US & Europe, most of the restaurants playgrounds have been converted to gyms called Ronald Gym Club consisting video game cycling, dance pads, monkey bars, basketball hoops and obstacle course to promote physical fitness for kids. If the same concept can be replicated in Asia, it would make a big impact to the customer turnout since Asian kids are very fond of physical activities.
Positive Impacts of Adapting to Local Cultures
Adapting a Synergistic Approach Globally
McDonald adapts a synergistic approach in its global business, which gives the opportunity to utilise the diversity among their work force to create competitive advantage. Adapting this approach the company can increase flexibility towards changing cultural preferences, recruit work force with different cultural backgrounds which helps to improve decision making and creativity and create a strong brand image locally.
Impact of Adapting to Local Food Culture and Sourcing Locally
McDonald's offers their meals considering local food culture and religious preferences, which is considered to be a vital part of its globalization strategy. It is called glocalization, where they adapt to local tastes and food culture while promoting its brand. People from different cultures were able to experience American culture through eating one of their loved local meals.
In India, the culture is such that people and government want to see MNCs investing in national development and growth. McDonalds' decision to source products locally is seen as a positive impact to the country and to its growth.
According to Chief Executive Officer of McDonald's, the company has setup a Sustainable Land Management Commitment (SLMC) to source its products for the foods served in restaurants without impacting sustainability, for products such as poultry, coffee, palm oil and packaging. Some other programs initiated by McDonald's are environment scorecard for suppliers and sustainable fisheries programme.
Following image shows how McDonald's India sources its products for the veggie burger sold in India (refer image no. 02),
Image No. 02 (Source: www.rediff.com, Article: McJatia tickles Bombay's tastebuds, builds an empire, all in two years)
QSCV principle - Quality Service Cleanliness and Value
McDonald's is well known for their quality of foods served, fast and friendly service, providing a value meal and for its restaurant's cleanliness. According to author of "Golden Arches East" James L Watson, points out that before McDonald's started their operations in Hong Kong in 1970 most of the public toilets were unclean but after they started their operations, their cleanliness principle urged other local restaurants to adapt it.
Improve Equality between all People from Different Cultures
At McDonald's, everyone has to stand in a queue to order their meals regardless of one's ethnicity, race, cast or religious beliefs. This practice developed equality among all people from different cultures. As an example James L Watson states that, Hong Kong was never accustomed to standing in a straight line, but after McDonald's started operations their practices created equality and people had to wait for their turn in the queue.
Cultural Diversity and its Effects on International Business
Ethnic Diversity and its Effects on International Business
Ethnicity plays a huge role in the success and downfall of an international business operating in a local culture. The global businesses have to adapt according to those different cultures and religious preferences in-order to survive.
Ethnic diversity helps McDonalds to achieve competitive advantage. By utilising the diverse workforce, they can easily adapt to local cultural change and improve decision making, creativity and innovations of the company as a whole.
With the help of the diverse local employees, they are offering meals in local tastes to suite every culture and are able to serve the customer in their own local dialect which increases sales and profitability.
As examples McDonald's India offers McAloo Tikka, Veggie Burger, Maharaja Mac and the employees can speak different local languages. In China, they offer a special Chinese New Year meal, grilled chicken sandwich and twisted French fries. Having local restaurant employees, Indian customers who can only speak Hindi, Bengali or Tamil and Chinese customers speaking only Mandarin or Cantonese can easily order their meals in their own languages.
Adapting to local cultures, increases the operational cost, adaptation and reengineering costs and decreases standardization of McDonald's.
McDonald's India does not offer beef or pork and always has to maintain separation in sourcing products, cooking and serving for vegetarians in India.
In China, they only use thigh fillets in all its chicken burgers offered in China, compared to breast meat used in other countries.
Normally McDonald's does not deliver, but in China and India they maintain a delivery service, where motorcycles or traditional courier bicycles are used as mode of delivery.
Sexual Orientation and its Effects on International Business
McDonald's is considered as an organization providing equal opportunities to its employees' regardless of their race, religion, gender and sexual orientation.
According to China daily (local newspaper) homosexuals accounts for around 1% - 5% of total population which is around 60 million people. It is three times higher than the mid-year population of Sri Lanka in 2010 according to Department of Census and Statistics, Sri Lanka. India has legalized gay marriages and relationship in 2009, where discrimination is not allowed with regard to sexual orientation.
McDonalds' policy towards non-discrimination on sexual orientation, their programmes and activities to provide a culture supportive to them, makes employees more relaxed and comfortable working for the company and staff will work to their fullest potential.
In China, rules setup for homosexual relationships and same sex marriages are not clear and does not indicate whether it's legal or illegal.
In India, even-though homosexuality is de-criminalized, the society is still not used to the gay culture and people of gay nature has been ridiculed and abused.
Advertisement for gay people done by McDonald's in France for the purpose of showing the public that they welcome everyone, will not be suitable for both China and India to launch.
Gay couples will avoid McDonald's because they will not feel comfortable due to the people's perception towards homosexuality in both countries.
Gender Equality/ Inequality and its effects on International Business
Being an equal opportunity organization, McDonalds' provide the same recognition, opportunity and career growth for women as well.
McDonalds' policy towards equal opportunity increases the job opportunity for women in China and India. According to Tim Fenton, President of McDonalds' chain in Asia Pacific Middle East and Africa (APMEA), their rising female employment percentage has helped the company to boost its operating profits and growth.
China and India does not have very good discrimination laws like in US, but McDonald's policy towards equal opportunity, provides the opportunity for Chinese and Indian women to get recruited, promoted and benefit from working at McDonalds'. McDonald's will benefit from recruiting skilled and qualified Chinese and Indian labour.
In Asian countries, the gap between genders is high. According to United Nations Development Programme (UNDP) Asia Pacific Human Development Report, the women of the Asian region lack equal rights.
In China and India, the perception towards women working in fast food restaurants like McDonalds' in most parts are unfavourable. Most of the families tend to not give the women the freedom to work in these kinds of work places. This perception limits the availability of skilled women labour for the organization.
McDonald's work culture has impacted the culture of almost all the countries and regions. They have been an example of excellent time management, cleanliness, equality in work force, and adaptation to local food culture. Their different management styles in different regions impacted greatly towards their success and growth in many regions.
Even different cultures have impacted the operations of McDonalds' where the organization had to address various local food culture habits. However to attract more customers, especially middle income earners and students, they adapt a competitive pricing strategy. Even local suppliers and producers are used to source their products to show that the organization is investing in local businesses.
McDonald's in collectivism societies such as India, China, and Sri Lanka where societies are family oriented who prefer eating as a family or in groups offers the ideal home experience through their restaurant setup and play areas for kids.
In low uncertainty avoidance cultures such as India, China and Sri Lanka where it tends to have higher employee turnover, to retain its employees McDonalds' through its flexible approach provides structured career growth, recognition and training.
McDonald's in most cultures adapts to local cultural festivals through changing their restaurant theme and offering special seasonal meals. As examples in countries such as China with a past oriented culture, McDonald's changed their interiors and menu for the Spring Festival.