#108 Someone may eat Ronald McDonald’s lunch in China
Today’s Wall Street Journal (European Edition) ran an interesting piece on the Chinese market for fast food. Many domestic and regional competitors, so the Journal, are giving foreign fast food giants such as McDonald’s and KFC / Yum Brands a run for their money. Competitors such as Xiabu Xiabu (which serves Chinese hot pot), Da Niang Dumplings (serving – yes – dumplings), or Taiwanese Ting Hsin International Group’s dico’s (serving fried chicken) are expanding rapidly in China. Not only do they seem to cater better to local tastes, they are also moving into less-developed cities that their foreign competitors have largely neglected so far. Foreign competitors, in an entirely rational manner, often focus on target groups that have exposure to Western lifestyles and want foreign fast food – which often restricts them to affluent populations in a few select cities along the coastline. For many a company, that reduces the astronomical potential of a market with 1.35 billion population to an addressable market of a puny few million. In a way, it appears as if some street-smart Chinese companies patiently waited and intentionally let McDonald’s do the heavy lifting. Being a first mover can have its disadvantages, but often, it turns out to be more of a burden and a disadvantage. It is not uncommon for the first company to overcome certain regulatory or cultural hurdles, only to have the second mover and everyone else walk through the door that they have pushed open with much difficulty. It could well be that McDonald’s invested its time and resources to educate Chinese consumers, have them develop a love for fast food, and now its competitors are reaping the benefits. Nobody’s fault really, just interesting to observe…
December 5, 2015 @ 12:11 pm
In my opinion this article is a good example of a restricted way of thinking: “It worked within our country. Why not do it the same everywhere else in the world?”
From my point of view McDonald’s should have done more cultural researches and not focus on market researches alone. Sure, there might be a huge market potential in China due to their high number of inhabitants but the best prediction means nothing if people aren’t buying, or in this case consuming, your products.
It might be true that the first company has to overcome some difficult regulatory or cultural hurdles within a country but this just means that this company has to do proper researches. If McDonald’s would have done this regarding cultural aspects than there might have been a huge potential of success for them. McDonald’s might have invested its time and resources to educate Chinese consumers to have them develop a love for fast food but in my opinion this was a wrong approach towards their customers. Humans are normally creatures of habits and they don’t want to change their habits so easily, which is perfectly shown in this case. McDonald’s should have considered Chinese eating habits and offer some special burgers or other kind of food in order to match those habits. Due to personal experiences I know that in some countries like France or Portugal McDonald’s differ their product line and design of their restaurants in order to match their customer’s preferences. If McDonald’s is willing to do this for the Chinese too they might strengthen their market position and weaken the threat of local fast food chains.
The number of competitors in the fast food sector within China sure is growing but it might not be too late for McDonald’s if they react with a fast and corresponding strategy. It sure is interesting how this whole situation will be evolving in the future and how McDonald’s is planning to overcome their current struggle.
December 8, 2015 @ 9:30 pm
As the writer of the article mentioned, it’s nobodys fault that McDonalds introduced fast food before its competitors to China, and yes it is interesting to observe. A global active company like McDonalds couldn’t omit the Chinese market. It’s strategy to first enter the high visited cities in my opinion is the best strategy and everything else wouldn’t be that profitable.
In favour of the Chinese competitors McDonalds market entry was a chance. The big fast food chain entered the market not only for itself, it does it for their competitors too. And in addition to that the competitors have an advantage – their food is more suitable for the Chinese than the fast food, from the globally active McDonalds is.
As a marketing student, my thougts are, that when McDonalds would adapt their food to the Chinese eating habits immediately (e.g. bowls of white rice, shrimp, eggplant, fermented tofu, vegetable stir-fries, vegetarian duck, and a central dish with meat and bamboo) then they wouldn’t lost that many costumers to Chinese fast food competitors. But for sure it is going to be a tough time for the management.
It is a fact that while economic change has significantly reduced undernourishment, new health problems related to overconsumption and poor dietary choices have increased in China. Obesity – especially among children has risen dramatically in mainland China over the last 10-15 years. Many Western, especially American fast food chains have appeared in China, and are highly successful economically. These include McDonald’s and KFC (cf. http://www.ibiblio.org/chineseculture/contents/food/p-food-c01s01.html).
In my opinion as a citizen of Europe, I’m not sure if China needs a growth of American fast food chains like McDonalds and KFC. It’s not only that the people there will get health problems. I know that it may be not topic related but I am worried about the people living there. In my point of view what China needs, nowadays, is to do something against the hazardous air pollution and a growth of McDonalds – more globalisation – more air pollution – won’t be helpful.
March 18, 2017 @ 10:06 am
When attending a wedding in Beijing back in 2011 and some days of sight-seeing the week before it looked like things were much different for McDonald’s in China than in Europe. Even though McDonald’s had certain product variations customized for the Chinese market in their menu the greater picture had still the “American fast food” style. When asking the groom about the Asian fast-food market he commented that Chinese rather go to KFC (post food scandals) because of their “chicken-orientated” menu or to other restaurants which serve Asian fast-food. Those would include dumplings, noodle variations, Chinese hot pot, Korean BBQ and fish restaurants. Furthermore, going for lunch or dinner was still a tradition where friends, family and colleagues would meet and socialize. Each time somebody else would pay. Given the various traditional backgrounds and regions of China McDonald’s might have just failed to comply with the various tastes and just looked at China as one big market totally abandoning the regional differences. Additionally, the western habit of using cutlery or hands-only faced the traditional use of chopsticks. The fast-food chain’s burger dominated menu just doesn’t fit this customer habit. A global company like McDonald’s had the full corporate readiness for a market like China but was just not able to capitalize on their first mover advantage in China and learn from customers.
July 28, 2017 @ 4:28 am
Being the first mover for McDonald’s that have a lot of disadvantages and burden. It could make other rival has a lot of benefit and advantages to observe to being the first mover what it will happen. Does it is good or bad to move market to this place? Therefore, being the first mover will have some of problems, for example, culture, price, and place etc. In my opinion, culture is the most important factor needs to consider because McDonald’s is the western food McDonald’s needs to consider about the Chinese people their eating habit and preferences. After all, this is the international business for McDonald’s, especially, it is food international business. The eating habit could exactly affect McDonald’s to run their business to being the first mover. In addition, the first mover solves a lot of problems, and the second mover could easily face these problems to be solved. McDonald’s rival is reaping the benefits, but nobody failure, that called it just very interesting observe. McDonald’s could make their investment to teach Chinese customers to get used to eat western fast food, maybe, that is bad decision, but I think that is like double-sided knife that could have disadvantages and advantages ,too. Last, I think McDonald’s has the big challenge to enter the Chinese market and being the first mover in the international business.
January 26, 2022 @ 5:24 am
As with many others, this is a fascinating post to reflect upon nearly eight years later. McDonald’s and KFC both have found themselves to be very successful in the Chinese market. McDonald’s undoubtedly has done one of the best jobs in terms of adjusting their product offerings for foreign markets with a multitude of locally based options. KFC’s American-style sheen was also a big success while not necessarily offering a groundbreaking product. What sticks out to me from this post specifically would be the statement “being a first mover can have its disadvantages, but often, it turns out to be more of a burden and a disadvantage”. This is absolutely the case and that is also why McDonald’s was the best bet for the job. Only a company with resources that sprawling and significant would really be willing to undertake such a risk, however as time has passed I think it was handled with grace. Obviously there were hiccups along the way, but now McDonald’s exists in more than 100 countries as of 2019. In turn, McDonald’s discouraged similar burger chains from even attempting the move, given how difficult it would be to emerge in a foreign market with a competitor who bests you domestically. It is hard enough to compete with McDonald’s, they have only strengthened their position.