Pest for Mcdonald in China

Topics: People's Republic of China, Fast food restaurant, Hamburger Pages: 9 (2786 words) Published: August 25, 2011
McDonalds, being an American based fast food company was also very successful in other western countries. The cultural and consumer behavioral similarities among those nations might have caused a positive impact in this success. However it’s not only in western countries that McDonalds was successful but also in eastern countries as well. Among those Asian countries, McDonalds has become one of the most preferred fast food destinations. After xxx years of its operations, with vast experience in several cultures, McDonalds eyed the mainland Chinese market which they saw a huge potential of growth and expansion despite the fact that the Chinese government system and the law system was a bit tougher than other countries they were operating. At first they were not allowed to franchise in China, but in 2004 they were allowed. But unlike in other countries which McDonalds are operating, they are a bit reluctant to franchise in mainland China. On the other hand there is a tight competition among various food suppliers, both western foods and traditional Chinese foods. The aim of this paper is to

1. Critically analyse the environmental forces affect on McDonalds development in China 2. Critically evaluate the opportunities and threats for McDonalds operations in China 3. Find out the strategic groups in the fast food industry in China and with what group does McDonalds compete most This paper included three major parts which each part discuss about each objective mentioned above followed by a simple conclusion.

ENVIRONMENTAL FORCES AFFECTED ON MCDONALDS DEVELOPMENT IN CHINA Basically when it comes to an environmental analysis, its either PESTEL or SWOT frameworks are used. In this paper the PESTEL framework is used to analyse the external environmental forces. PESTEL stands for

factors of the external environment in which the organization is operating. PESTEL provides a tool for managers or business analysts to take measurements on how the external environment is behaving and potential impacts on the organization.

Political Forces
China used to be a Communist country for several decades. The economic system was a closed one. But now China is becoming more and more capitalist and opens its door to foreign investors. This transformation was an immense driving force for McDonalds development in china because they have their own standards in the industry, in fact, globally recognized standards as McDonaldisation (Tom Larney) and this transformation allowed them to operate without much of disturbances. Even though, Chinese government’s decision to peg the Chinese Yuan against American Dollar has made a drawback. But they were able to adjust to this situation by using local ingredients. By 2006 almost everything at McDonalds in china were sourced from china itself. Even at a time when Chinese government was not having a good faith on foreign investors McDonalds was able to make good relationship with the government. Making joint venture with the state owned general corporation of Beijing agriculture enabled McDonalds to enhance their image at the Chinese government while making it profitable for the company too.

Economical Forces
China being transformed to a more liberal and open economy, having enough faith on foreign companies make China a big playground for large western companies like McDonalds. The increasing consumer income in both rural and urban China encourages individuals to expend on products like McDonalds. Per capita annual disposable income in both urban and rural areas have increased dramatically in last four decades from 50.14 US Dollars in 1978 to 1,716.89 US Dollars in 2006 in Urban areas while 19.51 US Dollars in 1978 to 523.7 US Dollars in 2006. (National Bureau of Statistics of China, 2006) This had a great affect on McDonalds as the consumer disposable income has a direct effect in any sales organization....
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