McDonald's Global Growth

Question1

Outline reasons for the fast global growth of McDonald's.

There are two major drivers of globalisation: declining trade and investment barriers and technological change. The rapid growth of McDonald's is due to the skill and competence of them and also the appeal of their product. The combination of local knowledge and entrepreneurial spirit of the franchisee is one of the reasons for McDonald's fast growth. 80% of McDonald's is Franchise owned. McDonald's Big Mac hamburger is or is supposed to be the same everywhere in the world; this means the consumer is familiar with the brand and will buy it. McDonald's used standardised promotion methods. McDonald's turned away from an unchanged menu to a menu that is trendy and innovative. McDonald's change its menu to keep up with the new trend of eating healthy. McDonald's expanded its menu and extended its store hours. They benefit from the trade down of consumers from more expensive eating places. McDonald's growth is due to finding good real estate locations, management of distribution and it's skill in making products of consistent quality. McDonald's invest in their staff by providing on the job training because they realise that the staff is the face of the business and must sell the product to the consumer. They provide employment to local people within the various countries. McDonald's trained local people for management positions. According to an article "Macdonald's success Strategy and global expansion through customer and brand loyalty" socially responsible actions and efforts have given McDonald's a long-standing and distinguished record for diversity-as an employer, franchiser, and purchaser of goods and services. Before McDonald's enter a country they do proper market research. They ensure that they are familiar with the country's social, cultural, economic and technological situations. According to an article "Macdonald's success Strategy and global expansion through customer and brand loyalty" McDonald's success is due to them thinking global but acting local. McDonald's ensure that they are familiar with the different countries preferences when it comes to food. McDonald's core values are quality, service, cleanliness and value. These values combined with localisation have positioned them as one of the market leaders. They also give financial donations to local organisations within the various countries to boost their image within the various countries.

Question2

McDonald's needs to adapt to different cultures and conditions when it sets up business in different parts of the world.

Gaining cultural awareness has been a centuries-old need for anyone involved in international business. It is important to understand the language of a country as well as the ability to speak it. There are two kinds of knowledge about cultures. One is factual knowledge about the culture and interpretive knowledge. The dynamic character of culture is significant in assessing new markets even though changes face resistance. Cultural misunderstandings can raise havoc to the best business plans. Cultural differences can cause four kinds of problems in international business negotiations, at the levels of language, nonverbal behaviours, values and thinking and decision-making processes.

2.1 Countries in Eastern Europe

When McDonald's opened their restaurants in Ukraine they started off with the basic items on their menu and introduced new products later to keep them interested. The pricing of McDonald's were set to cater for the lower income group. While McDonald's restaurants in the United States and many other countries are typically operated as franchises owned by private investors, the fast-food world leader has invested its own money to conquer Ukraine according to the article "McDonald's continues expanding Ukraine Chain" dated February 07, 2007. According to an article in the Bloomweek Businessweek "McDonald's tastes victory in Europe" Hennequin's recipe for success focuses on upgrading the customer experience. "The brand position is different in different parts of the world," he says. In the U.S., customers tend to eat on the go, and therefore around 70 percent U.S. sales come from drive-troughs. Europeans on the other hand prefer to linger. "In Europe it's more about the experience," he says. "It's convenient and a destination place at the same time." The rapid roll out of McCafés is another Continental-style offering helping to drive growth. In France, McDonald's began using kiosks where customers can order and pay for their food, because a majority of transactions there are made using debit cards. Now the kiosks, which also have been introduced in Germany, are being tested in other European markets. According to an article "Employee involvement and market orientation in a transition economy: Importance, problems and a solution" suggest that cultural differences between most Eastern European countries and the U.S. create barriers to the effective implementation of employee involvement and, hence, a firm's market orientation. If managers are to effectively implement employee involvement it will have to be within the cultural dimensions. Ukraine displays collectivistic tendencies unlike the US high individualism. In Ukraine the cultural values are family, care of children, aged parents and maintaining strong long friendship bonds. In Ukraine you must display respect for older people and those of higher status which is an outcome of high power distance. Ukraine people are very emotional and this is a sign of feminine tendency. In US personal freedom is highly valued and social distance positively evaluated whereas in Ukraine the interpersonal bonds are very close and a lot of things can go unsaid. Ukraine society display high uncertainty avoidance. McDonald's Russia success is due to them adapting their business model to accommodate the needs of the Russians. Russia place high values on giving priority to locally produced goods and McDonald's use this in their favour to advertise that the ingredients used by them are coming from Russian soil. Russia placed strong values on community in their city and in order to impress them McDonald's sponsored a lot of community events. In US the customers will only sit for as long as it takes to eat their meal where in Russia