McDonald’s, the US-based food-chain is a well-known company around the world and is growing and growing. The first McDonald’s restaurant in Europe was in The Netherlands in 1971, nowadays almost 230 restaurants exist among the country. Almost 20 years later, in 1990 the first McDonald’s restaurant opened in Shenzhen, China. After the home base country the USA, China is the second biggest market for the food-chain with over 960 restaurants, this number is steadily expanding. The company’s vision is ‘to be the best and leading fast food providers around the world’. Through this vision their mission is; ‘to be the world’s best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanness, and value so, that we make every customer in every restaurant smile.’ How is it possible to be successful all over the world with the same concept? What kind of strategic management is McDonald’s using in China? How the company able to compete in the fast-food market? What challenges did McDonald’s faced by expanding their business in a different culture country? Strategy in China
As GDP is growing steadily with around 10 percent in China, McDonald’s decided to expand their business to China. As part of their global expansion program the company found out that McDonald’s had a big potential in the Chinese market. Main reasons for this statement are the growth in the urban population, a change in spending habits of consumers and probably one of the most important reasons; the growing influence of western brands. The success of the first McDonald’s in Shenzhen made the company’s desire to expand in China increasing. McDonald’s applied almost the same operational strategy they used to work with in the US for their China restaurants. This means standardized operations to ensure the quality of the cuisine at all its restaurants in China. The well-known ‘dollar menu ‘which is a great success in the US is converted to the ‘value menu’ that offered burgers and other products at a lower price. Moreover, the value meal is offered in China as well. Most McDonald’s restaurants in China are open 24/7 which is very profitable due to low labor costs in the country. As CEO of McDonald’s said: ‘In China, our key growth market, our focus is simple: cementing brand preference for Chinese consumers through key competitive advantages. For instance, we have the most menu choice among our competitive set, so we’re establishing and promoting our core menu with a focus on beef, chicken, and fish.’
Strategy options for entering and competing in China
In order to set up the best strategy for McDonald’s in China the food-chain had to think about several issues, an important strategy issue while expanding across the world is the legal issue. There are a different set of rules and regulations in terms of licensing in China compared to western countries. A team of well-informed lawyers had set up a solid license policy for the China restaurants. Most important is the copyright the food-chain has on its products. McDonald’s works as a franchise company which means that a franchisee bears most of the costs and risks of establishing foreign locations. McDonald’s has to expend only the resources to recruit, train, support and monitor franchisees. The food-chain is familiar with this concept as this is the way the work all over the world. However, McDonald’s have to make sure that the quality least the same as their other restaurants world-wide, therefore McDonald’s involves a lot in training their employees. Differences in product supply are all written in the license policy which al franchisees agree upon.
Challenges faced by McDonald’s
Expanding a western business to Asia goes never without challenges and risk. A great market research was done before entering the new market. The research concluded that Chinese customers were very loyal to Chinese cuisine and that Chinese customers felt that a fast...