#96 McDonald’s Not So Flat World of Ads
Ever since Thomas L. Friedman, Pulitzer Prize winning author, published “The World is Flat“, we have been listening to the mantra of the world becoming a completely level playing field for companies for many years now. Other authors such as Pankaj Ghemawat continue to remind us that we’re still quite far from a borderless world, and failures by both large, multinational companies and countless small- and medium sized enterprises are a great testimony to his position. Legal and administrative barriers continue to exist even in politically integrated areas such as the European Union, relevant economic differences between countries persist, and – probably most importantly – cultural differences are as a alive as they have ever been (as this blog tries to document). Looking at my collection of McDonald’s advertising from various countries, I was recently reminded again of two things: first, cultures are still having a strong influence over the marketing-mix; second, McDonald’s is doing a pretty good job at addressing these differences. Let’s have a look at this small selection of examples below. What we see on the first one is not surprising. We all know that religious beliefs make the marketing of beef burgers next to impossible in India; product adaptation becomes a necessity. McDonald’s has therefore added items such as the “Chicken Maharaja Mac” or the “McAloo Tikki” to its Indian menu. So far so good. When it comes to promotion, the next example (second from the left) shows how McDonald’s is using a national celebrity athlete, basketball player Yao Bing, in its advertising in China. As is common in testimonial advertising McDonald’s tries to transfer the positive image associated with Yao Bing onto the McDonald’s brand. Being both collectivistic and highly status oriented, China very willingly accepts someone’s endorsement who is a source of national pride and has unparalleled athletic and commercial success. Doing this, McDonald’s is showing a lot of cultural intelligence. And now for a European example – Austria. As I have recently posted in a different context, Austria is a relatively risk-averse culture. As far as consumer behavior is concerned, this results in a preference for tested products, products that have third-party certifications, and traditional products that can be trusted. And which products could be trusted more than products of Austrian origin? McDonald’s has picked up on this and is very openly playing the country-of-origin trump card – 100 % beef from Austria, 100 % Austrian potatoes (second image from right), and using Austrian slang words that wouldn’t even been understood just a few miles across the border in Germany – “Pipifein” which means something like “Great” (first from the right). Well done, McDonald’s!
March 13, 2013 @ 3:57 pm
In my point of view the truth is somewhere in the middle – Thomas Friedmann as well as Pankaj Ghemawat are both right. If your company (no matter if it is a big or a small one) runs through a internationalisms-process from the first thought (am I able to become international? Is the Cooperation ready to step outside) to the successful implementation in the market the world has no boarders at all – because you are prepared well. If you are not prepared you will recognize boarders you cannot overcome. They are not only in a “psychical” way between countries, those boarders are in the heads and being unprepared could destroy your whole business – no matter if you are successful in your home base. On the other hand legal and administrative barriers could break you neck because this stuff taken time, a long time and much resources. I guess it is important to understand that what works in your home base must not work somewhere else because of differences especially in cultures. McDonalds has a good marketing strategy – they are like a chameleon: no matter in which cultural surrounding they adapt the necessities to their business model there. No matter if it is religious inspired like in India, or celebrities inspired like in China or home region celebrated ingredients like in Austria – it works and that is the essential thing for sustainable success, to see the world through customer or different culture eyes and to adapt the product in that way. After all I guess a company should be aware of all risks/threats when they start going international – but if you do it right (and that means on a long-term a certain amount of preparation in my point of view) you have a lot of opportunities and could enlarge your sustainable success – like McDonalds or other companies showed us.
Kind regards and thy for the interesting blog entry
March 29, 2013 @ 6:18 am
Both McDonalds and Yum are great when it comes to marketing and appealing to given cultures through means of the 4 Ps (Product, Price, Promotion & Place.) To truly succeed in business internationally, one must appeal to the local culture and ultimately win their approval. One must also realize that something that works in America, may not work in India or even Austria. However, McDonalds and Yum have made it so that they are very good at changing up their products in order to appeal to the local culture. I would highly advise investing in both of these companies. Both of these International powerhouses are doing amazing when it comes to marketing their product and dispensing it all over the world, and below are the financials proving their success.
Although I cannot speak for Yum due to the fact that I have never been to a Yum restaurant in Austria, I have been to McDonalds. The McDonalds in Austria are far superior to that McDonalds in the USA! In Austria McDonalds has much better quality and apparently 100% of their beef and potatoes are products of Austria. Gerhard, Do you believe that all of the beef is raised in Austria? I feel like this sounds too good to be true, and that if somebody were to test where every kilo of beef was originating some of it would not be in Austria. The prices of a McDonalds hamburger is just too cheap compared to an Austria steakhouse where the price is near 50 euros for the basic steak. However, with this claim that 100% of the beef is local, the international powerhouse is doing an excellent job of marketing to the Austrians who are used to local quality food.
McDonald’s Corporation (McDonalds) and Yum Brand, Inc. (Yum) have both been on such a rise in terms of financial success especially from 2007 to 2011 (Gerhard, I was not able to find rational numbers for 2012 and 2013 is still under way, so I just stuck with 2007-2011), that there are not too many defining differences other than they fact that they are different businesses. They both are powerhouses in the fast food industry and the only defining factors are that they are made up of different brands and have different people running their eateries. McDonalds needs no introduction to the public of the world, but for those who aren’t as familiar with Yum, Yum is a restaurant ownership that currently owns KFC, Taco Bell, and Pizza Hut. Comparing both of these corporations was very interesting because they both had such a successful year in 2011. Although both McDonalds and Yum’s financial numbers skyrocketed in the year 2011, McDonalds still pushed marginally ahead with a maximum Net Income of 1.5 Billion as opposed to Yum’s maximum Net Income of approximately 1.3 Billion. Many would look at that as a minor difference, but a couple hundred million dollars is a lot when it comes to a profit at the end of the day and that is why McDonalds was number one in the Dow 30 with 2011’s total shareholder return of 34.7%.
For McDonald’s finances, they have been on a very steady incline over the past few years, they continue to grow and establish all over the globe, and they keep growing richer. For each expansion attempt that is unsuccessful, this corporation seems to have ten in its place that easily cover their losses. What shocked us the most was McDonald’s “Franchised Sales.” The franchised sales were off the charts when it came the rise in sales each year going back as far as 2007. In 2007, the franchised sales were approximately 47 million, 54 in 2008, 57 in 2009, 61 in 2010, and 68 in 2011. McDonalds even expects the franchised sales to surpass 75 million at the end of 2013. One of the other major things McDonald’s excels in is having their assets sufficiently outweighing their debt. Over the last few years the debt has increased marginally each year, but so have their assets and the assets have constantly been about 20 million (give or take a million) as well. In 2007 McDonalds had an overall debt of $9,301 million and their total assets came in at $29,392 million; whereas in 2011 the total debt rose to $12,500 million, but the assets also rose to $32,990 million, which covered the remaining debt.
McDonalds continues to profit tremendously. Not only was McDonald’s net income so incredibly high, but also the shareholders were very excited to see 11% earnings per share growth. Even the operating income has been on the rise of nearly a billion each year. In 2009 the Operating Income was $6.8 billion, in 2010 it was $7.5 billion, in 2011 it was $8.5 billion and it seems as if it will be over nine billion when 2013 comes to an end. Today, McDonald’s is serving a record number of guests, which is averaging around 68 million people every day, or even more on some days. In the United States alone, McDonalds sales grew tremendously, as did their guest counts and market share with comparable sales up for the ninth consecutive year, rising 4.8% in 2011, while comparable guest counts rose 3.3% Not only is McDonalds touching many lives but also it seems as if their numbers in 2012 (in terms of financial numbers) will be exponentially higher this year than 2011. McDonalds is constantly rising in terms of finances, expansion, and popularity around the world and with their inexpensive food, I don’t see Yum ever taking over the McDonald’s Corporation. Especially internationally, McDonalds is much more well known.
Since I particularly focused the financial conditions of McDonalds and Yum from 2007 to 2011, I must consider the global financial crisis in 2008. McDonalds and Yum Brands both were significantly affected by the global financial crisis and in especially China, they both had to cut the price of products although the material costs were up. Regardless of how good their international business team might be, this crisis in 2008 impacted everybody.
After scrutinizing all of finances between McDonald’s Corporation and Yum! Brands, Inc., it is very tough decision based on the last couple years. Especially in 2011, both of these fortune 500-restaurant businesses skyrocket in terms of net income and on both sides the assets far outweighed their liabilities. If I had to choose between one or the other to invest in, I would say, McDonalds. Not only are the numbers higher in literally everything positive for McDonalds, but they also have tradition. This tradition exists especially here in the USA. In terms of the stock market, McDonalds has always been true to their shareholders and has brought them steady income. Not to say that YUM isn’t a wise investment (especially in 2011), but if I had to pick one or the other, it would have to be McDonalds.
Center for Science in the Public Interest: http://www.cspinet.org/.
Corporation & Health Watch. Is McDonald’s Lovin’ the Economic Crisis? Hard times, fast food and health: http://corporationsandhealth.org/2009/01/01/is-mcdonalds-lovin-the-economic-crisis-hard-times-fast-food-and-health/
Market Watch http://www.marketwatch.com/investing/stock/mcd/financials/cash-flow
McDonalds Trend Analysis http://www.scribd.com/doc/58237188/26/TREND-ANALYSIS
March 30, 2013 @ 2:42 pm
We are living in one world but we are not living in a borderless world. Due to the mentioned point of views between Friedman and Ghemawat I would concur more with Ghemawat’s position that legal and administrative barriers continue in several areas – which should not to be considered as that wrong at the end of the day.
The “globalization discussion” in my opinion is too much focusing when not constricted to business areas and above-average business growth without the necessary and sufficient sense for cultural aspects. Last year the Nobel Peace Prize 2012 was awarded to the European Union (EU) “for over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe”. Of course, this is a welcome policy development, also because EU countries account for an ever smaller percentage of the world’s population and must therefore continue pulling together to ensure economic growth. No individual EU country is strong enough to compete on the world stage with other major economies itself. But humans have lived for centuries within boundaries. Relaxing boarders is a first step but the EU as well has seen that approaches to put all countries together in a very short time horizon failed because of all that existing cultural differences. The world changed within the past decades dramatically but changing world is not something a group of people can work out and as we see every country or group has its self centered policy which it is going to protect before thinking about anyone else.
The basic principle, which sounds hackneyed at first but continues to provide a suitable maxim for companies is: “think globally, act locally”.
McDonald’s is a very good example for respecting different local cultures. They know their core competencies and adapt them to different world markets. They are aware that a dramatic shift from domestic client bases to a multinational one has taken place but they align their products to regional customer needs instead of globalizing them. Thus, it is vital for McDonald’s to think globally and act locally. In general, companies have to undertake the study of international cultures and languages. Moreover, the ability to engage cross-culturally enables them to competition-proof their capabilities.
McDonald’s is not a political institution but it might be a model. There are many examples of failed globalization strategies in politics (recent developments in Greece and Cyprus show us the European Union collapsing before our eyes because the people of the various nations don’t want to lose their country’s national identity) as well as businesses (Starbuck failed in Austrialia, Wal-Mart in Germay…) which base on the assumption that we are all equal and living in a borderless world…
November 6, 2013 @ 6:02 pm
I would like to take up the point from the author Pankaj Gehmawat. „we´re still quite far from a borderless world“. Apart from the legal and administrative barriers- I am of the opinion that the secret sauce of penetrating international markets is simply “Think global and act local.” Mc Donald´s is simply one of the few best practice examples of how to be successful within different markets.
This strategy is easier said than done.
The mantra of success is to gather information about the boarders in the heads of the consumers. That means, focus on the cultural differences, which prevail in the different countries, because one of the strongest influences on the marketing-mix is – purely and simple – the culture.
I would like to refer to the dimensions of Hofstede. I am of the opinion, that this model can explain the different advertising campaigns of Mc Donald´s very well.
Let´s start with the promotion of the Chicken Maharaja Mac in India. Due to religious beliefs it would be a tremendous faux pas, if Mc Donald´s would promote beef burgers. Therefore, the first important aspect of which companies should be aware of, are religious aspects. Furthermore, if we take a look at the figure at the page: http://geert-hofstede.com/india.html , we can also see that India is a society with clear collectivistic traits. That means, that the actions of an individual are influenced by various concepts set by social network.
If we take a look at the promotion of a burger in China, I completely understand why Mc Donald´s uses a testimonial. The figure at the page: http://geert-hofstede.com/china.html shows that China is a collectivistic culture.
That means, they do not only behave properly (same dress code, same products, same hairstyle), but they also are a cluster of attitudes and believes. Using a testimonial in order to promote someone’s product is therefore a very good idea. Because due to the collectivistic orientation everybody knows who the testimonial is and what he is famous for. Knowing about a testimonial simply gives them the feeling of being part of a group. In collectivistic cultures the group has a major influence over the purchase decision. So, the group decides which products are good for the people.
The last example is about the promotion of Mc Donald´s in Austria. The figure at the page: http://geert-hofstede.com/austria.html shows the different developments of the five dimensions of Hofstede.
The Austrians have an individualistic attitude. Individuals are expected to take care of themselves and their immediate families only. The highest good for individuals is freedom. The Austrians want to be recognised as individuals with individual needs. The want to have products, which are „just for them“ and they are willing to pay the price. Austrians are proud of their country and their products of Austrian origin. Therefore, in my point of view playing the country-of-origin trump card is a great idea.
All in all, the mantra of success is to gather information about the boarders in the heads of the consumers and avoid being unprepared. Because- I completely agree with Ms. Egger, this could destroy the whole business – no matter if you are successful in your home country.
November 10, 2013 @ 7:59 pm
It is fairly true what my antecessors say: The world is truly flat when it comes to the possibility for a company to act global. BUT, one has to be prepared for the deep and ongoing differences on a worldwide scale. Culture do not change over night, it needs hundreds of steps for a slight move.
The awareness of cultures differences offers a possibility for the success of every company, which wants to perform global. As the examples of the fast food giant McDonalds show, only culture has to be the center incorporation in the marketing mix. But isn’t it done as easy like that?
I have found some examples, which relentlessly show a failure of a marketing campaign of the Golden M.
First of all, the loss of the Bolivian Market in 2002, when McDonalds was forced to close down its 8 restaurants after a 14 years struggle. Bolivia, which is unfortunately not mentioned in the Hofstedes Model, is a country affected by tradition and huge respect for their own body and health. They do not believe in fast cooked food, which is ready within seconds and should be eating while rushing through the streets of Cochabamba. So experts state that Bolivians didn’t reject hamburgers at all, but just the pre-made meals.
Anyway, wouldn’t it be possible to translate the concept of McDonalds even into a market like the one in Bolivia? If they succeeded in doing a product adaption like the “Chicken Maharaja Mac” for the Indian population instead of the “Big Mac”, why is it so hard to add Quinoa (one of Bolivias staple food) or chenopod (a plant related to spinach) and some of their abundant natural spices and herbs to the menus? Or wouldn’t it been enough attempt?
Then, suitable for the add of 100% Austrian beef, I remember of a recent campaign in spring 2013, when McDonalds tried to promote the Ranchburger for 1 Euro by comparing it with a “Wurstsemmel” and failed completely.
Austria (according to Hofstedes 5 dimension chart a country with a high index in Uncertainty Avoidance and a Short-term Orientation, which leads to the preference of tradition and a great respect for history) reacted unpredictedly negative to the comparison with their “Wurstsemmel”. This is a traditional snack in between consisting of sausage and a pickled gherkin, and especially a famous meal for school kids and therefore tainted with a lot of emotions like childhood memories.
McDonalds promoted what a customer gets for only one Euro: either a deliciously prepared Ranchburger, stuffed with everything a Burger needs or the “Wurstsemmel” consisting only of the two slices and a simple gherkin, because for one Euro, there would be no sausage.
This assumption provoked an avalanche of shitstorm on Facebook, where furious user posted photos from rich filled “Wurstsemmel” below one Euro. Austrians, who live in a low Power Distance environment aren’t afraid to tell their opinion. Their Short-term orientation forces them to discover certain falsehood even from a global player like McDonalds.
As a consequence McDonalds had to cut the campaign and apologized for the mistake.
November 11, 2013 @ 4:09 pm
I totally agree with this very interesting blog post.
Cultural differences exist and they will exist in the future. Being aware of those differences enables a company to be highly successful – as the example of McDonalds shows.
So, as a first step these differences have to be carefully figured out and I think this is where many companies tend to fail. The term “cultural differences” is often attached by many prejudices against a country. To really find out what a countrys culture is about you have to leave all these stereotypes behind and to dip under the surface.
The Ranchburger vs. Wurstsemmel example shows very well, that the short-term orientation of the hofstede dimensions was neglected and the Austrians kind of felt hurt because, as Donata described very well, the Wurstsemmel is attached with emotions and good memorys.
Another example which deals with the history/tradition/religion of a country and culture, was the product launch of Umbro (UK sports manufacturer) in 2002 all over the world. They presented the new sneakers called Zyklon. Umbro had to withdraw the sneakers because of heavy complaints of Jewish people. In the nazi regime millions of Jewish were murdered by the use of the gas “Zyklon”.
So, cultural differences often present a stumbling block for companys. However, a company can also take advantage out of these different segments, as I want to point out with the following example:
Mercedes launchend the older generation of the S-Class modell. While the core market (Germany & Central Europe) refused to buy this car, because it was to expensive looking and simply to big, other parts of the world welcomed a car, which signals wealth and luxury. As we can see with this example, Mercedes neglected the Germans attitude towards excessive consumption and exaggerated luxury but however, found markets were this product was highly welcomed.
So to put it in a nutshell, sophisticated market analysis and market research is crucial to succeed in foreign markets!
November 13, 2013 @ 9:10 am
To have a borderless world is a beautiful thought – but unfortunately it is not reality nowadays. It probably won’t ever be, due to cultural differences and borders that are create throughout the society and history of a country. That is why businesses need to be aware of these borders when going abroad or exporting products and services.
Although already mentioned by the previous comments, I want to reflect the marketing ads by McDonalds using Hofstedes model of differences in natural cultures.
First of all, India: As India is a country with a very high power distance, which has a high masculinty and a rather low individualism index, India can be seen as a more conservative culture. Trying to break the very conservative religion-barrier would not only have ended in a cut down in sales but probably also in lawsuits, aroused customers and unhappy employers.
Next, the use of testimonials in China is also very wisely thought of McDonalds. As China is a nation with high index on collectivism and power distance, the chinese tend to be guided and to follow a leader. Using a famous sports-celebrity that is admired by millions in a print-campaign is the perfect way to transfer the image of this celebrity to the advertised product. Not considering China as a nation that needs lead may be a big mistake – even for famous big companies! “Home Depot”, for example, did not consider this variable and had to close all its chinese subsidiaries after only a few years of business.
The last print-ads, the ones that were designed for Austria, can also be explained by a dimension of Hofstede: the uncertainty avoidance. Austria is a country with a high index on uncertainty avoidance, meaning that consumers do not want change, want to stick with what they have and what they know. And what could be more trustworthy than a campaign that tells you that your food comes from your own country? This message is perceived with a high quality status and therefore “calms down” the uncertain austrian customers.
Thinking of Hofstede and austrian fast food-chains, another company pops up in my mind that relies heavily on the high austrian masculinity index: Burger King. As Austria has one of the highest masculinity index, meaning that the culture is shaped by the classical role model of the man who earns money and the wife who needs to look nice, it is becoming obvious why Burger Kind puts models next to their burgers in print advertisements – A clearly different approach than McDonalds, but also arguable if you have Hofstedes dimensions in mind.
November 13, 2013 @ 9:38 am
First of all, I totally agree with your statements and would like to add some points:
Today many companies struggle to cross the borders with their product. There can be reasons, and sure the legal and administrative barriers are huge ones, but still those processes usually can be solved, you just need a lot of time, energy and patience.
Nevertheless, as you have already mentioned, many companies fail in distributing their product on a new market, due to the missing respect of the cultural aspects. A good example here would be Walmart in Germany. Walmart tried to settle down in Germany, but they failed, because they did not adapt anything. They tried to run the company within the same style as in the USA, and we all know that ignorance like this will never be successful.
As long as the companies – big and small ones – do not understand that a different culture means adapting the marketing mix in some points is necessary, their failures will continue. Mc Donald’s is one of the companies, which understood exactly this point. As we can see today, Mc Donald’s can be defined as a global brand – as even every kid knows what the M stands for -, but still they adapt some elements of the countries’ culture. As for example in India the burger is spicier than in Austria, as the Indians prefer spicy food.
But what Mc Donald’s in this case does is not acting globally or locally, they just found the way in-between – GLOCALLY. This just means that they act as locally as needed and as globally as possible. They adapt elements, such as food tasting, ways of communications and furniture styles, but it is still everywhere known as a place where you can get a good burger.
You have already mentioned good examples of the differentiation methods of Mc Donald’s, and I also would like to add some.
For example, as in the Chinese culture the family plays a very important factor, Mc Donald’s communication strategy is adapted in this point. So the print ads show families who are sitting at Mc Donald’s enjoying the food and having a good time with the families. There Mc Donald’s has also more the image of a restaurant where you can buy burgers instead of a fast food place.
The use of famous people is – in my mind – getting also more and more common, for example George Clooney for Nespresso, Heidi Klum for Make Up, star stylists for hair products, etc.. Also in Austria some time ago Heidi Klum was part of Mc Donald’s commercial. She was promoting the salad line of the fast food restaurant. There people got the feeling that also top models – who have to be slim – go to Mc Donald’s and enjoy it. Therefore – in my mind- Mc Donald’s got even more attractive as it was communicating in the right way and reached the target group and their values.
So a company, which plans to “conquer” a new country, first needs to find out in what way the culture is different from others. A good way to find out about this would be to use Hofstede’s Framework. The four main points help: Power Distance, Individualism, Uncertainty Avoidance and Masculinity. Examining these points, it will give the company a first hint, where they have to be careful when planning their marketing strategy. Further market research needs to be carried out in order to find out more about the differences. For example, in China the number 8 stands for luck – so many company use prices such as 888, 80, 88 etc.
Another example is Mc Donald’s starting in Japan. Some of their obstacles are listed below:
• In Japan mothers prepare small boxes with food for their kids, which also have a cultural meaning and order. These boxes help to get fast(=quick) food.
• Rice plays a very important role in this culture and therefore always needs to be part of the food.
• Japanese enjoy the community and the sitting together and enjoying their meals.
All these points were adapted by Mc Donald’s. They prepare food in special boxes, always add rice to the order, etc.
You can find the whole story on: http://bucknellorgtheory09.wordpress.com/2009/05/07/cultural-differences-mcdonalds-in-japan/
Other examples that come to my mind are also the different sizes of burgers and drinks. In the USA people like BIG things, therefore they do not just offer sizes from S to L, no, at Mc Donald’s they offer SUPER SIZE. Here in Austria no one would buy this, as this is just too big and too much.
So I totally agree with you, that Mc Donald’s did a really good job in becoming a globally successful brand.
Beside Mc Donald’s I think Coca Cola is also a good example, as they did a good job too.
Can you think of any other examples?
November 24, 2013 @ 8:24 am
From my point of view Mc Donald’s shows us how to deal with intercultural aspects in an international business. As already mentioned above there are differences in culture and behaviour and (if it’s possible) it will take a long time to be “borderless”.
As Hofstede says in countries with a High Uncertainity avoidance (like in China) it is good to work with testimonial advertising because the positive image is transferd to the product – people feel secure. In China collectivism dominates – so one can say, if the other’s are going to Mc Donald’s it would be good for me as well.
The country of origin plays a big role in advertising as well – as mentioned in a comment above – 100 % beef from Austria as an advertising slogan tries to take care about this role and avoid uncertainity about a product as well.
Mc Donald’s is the “same” over the world but registered cultural aspects and adap their image or advertisements for the individual country – in most cases it works but as failures occure there have been some mistakes in the past (like in Bolivia what Donata said in her comment).
I think that it is important to think careful about a country and do a good research in advance of entering a business. Fits my product the needs of the inhabitants or can I adap it to them? Hofstede is a good guideline how to deal with intercultural aspects and helps to be successful.
March 27, 2014 @ 11:19 pm
Mc Donald’s – good Job? Yes!
So complex tasks to be successful in international market can be placed in one simple sentence: Think global, act local! Key of success is mixing core values with local tastes to create restaurants that community will support and visit.
McDonald’s marketing mix is strategic because of the diverse approaches that are used. McDonald’s is very careful in making decisions that affect each area and how each area effects the other; concerning about how the firm will fulfil the needs and wants of its customers and in the activities associated with maintaining the relationships with customers, suppliers, employees, and the local communities surrounding them.
Another successful example for sure is Middle East where McDonald’s is managed to overcome the negative stereotypes associated with USA. McDonald’s made sure to offer menu items that are within the Muslim Halal diet, which prohibits eating pork, among other things. The company also markets itself is very family-focused since family is of utmost importance in many of those cultures. Many restaurants of McDonald in Middle East are run by local people that send out a message that costumers will deal with employees who speak native language.
Clever ads and approach come from company readiness to enter new market, understanding of cultural influences, social conditions, religion, and material culture. McDonald does not sell just products but behaviour and corporate culture that show willingness to be accepted as a part of countries identity.
April 12, 2014 @ 6:15 pm
McDonald’s proofs – the world is not so flat
McDonald’s recognized that acting globally needs a different strategy than pure standardization. Although standardization offers great advantages such as a reduction of marketing costs, economies of scale in production, improved quality of products and processes and increased competitive leverage, McDonald’s realized that the negative effects may overweigh the positive ones. Therefore they decided to only standardize processes in their restaurants in order to gain advantages out of this but on the other hand they put local needs of the various markets into account. It is pretty interesting that McDonald’s has “only” 5 core products which are worldwide the same. These products are:
1. Chicken Mc Nuggets
4. Pommes Frites
5. Big Mac
This is a pretty interesting fact since it shows how many different products McDonald’s has placed on the various markets. McDonald’s identified that this localization strategy offered advantages as local responsiveness more customer satisfaction, local competitiveness and learning / innovation from local markets. As described in the blog comment they build their whole marketing system around their localization strategy by not only adapting the products, but also the marketing associated with these “local” products. All the above said strengthens the point in the origin blog comment that cultural differences are as alive as they have ever been. Since McDonald’s did quite a good job in addressing the local needs of the various markets I want to mention a pretty well known example where the company did not manage to cope with the existing cultural differences: Wal-Mart’s market entry in Germany.
Wal-Mart started their adventure in Germany in 1997 by acquiring two German retail companies: Wertkauf and Interspar. They fully build on the, at the beginning of my comment described, standardization strategy. This strict standardization strategy led to several areas of conflict:
The first problem was that the American employee management practices just didn’t fit in the German context and working culture. For example, each employee before the shift had to participate in a morning exercise. In could be seen as harmless, but the best thing about this practice was that they had to do it chanting “WALMART! WALMART! WALMART!”. If in America such practice could be used to boost morale and inspire loyalty, then in Germany it was looked upon with annoyance, to put it mildly.
Secondly, Wal-Mart’s ethical code caused much frustration as well. For example, the practice of actually spying on your co-workers and reporting any misconduct may be acceptable in the U.S. However, in Germany it is not the case.
They also consequently ignored the feedback of the employees. Top management apparently didn’t listen to anything the lower employees and subordinates had to say and so they had no willingness to learn.
All these mistakes led to the result that Wal-Mart left the German market by losing a big amount of money.
This short opposite example of Wal-Mart’s disaster in the German market highlights the great job McDonald’s did in understanding the different market needs.
April 14, 2014 @ 11:36 am
Over the years, McDonald’s has gained a lot of experience in marketing and knowledge about how to satisfy customers’ needs. It is indeed an outstanding example of a successful internationalization story. The company has created a unique corporate identity and a strong brand image which is highly recognizable. McDonald’s promotion is very efficient because of the sophisticated advertising concept.
Firstly, it is very important to consider different cultures and lifestyles in the target market. To avoid cross-cultural risk, a geocentric orientation is required. That means the managers have to have a deep awareness of the diversity of cultures. McDonald’s has an excellent knowledge of the characteristics of the countries in which it is doing business. Some cultures are more individualistic while others are more collectivistic. To perfectly meet the needs of the customers, McDonald’s adapts its marketing concept as it did in status-oriented China by using a national sports star – with great success.
Moreover, McDonald’s shows intelligence to understand the different layers of the Iceberg concept: high culture, folk culture, and deep culture. It also considers factors that are below the surface but do have an influence on business like religion. Based on that McDonald’s specializes on meals containing chicken in India and sells beef burgers instead of hamburgers in the Middle East. Vital factors are the attitudes towards product, usage pattern but also ethical, moral, and religious issues. However, product adaptation is not always based on religion but also on different preferences concerning flavors due to local cuisines.
Additionally, McDonald’s has a very creative approach towards local advertisements. Its funny slogans are tailored to a specific region and reflect dialects and idioms. They are always very popular and lead to word-of-mouth marketing. Furthermore, McDonald’s skillfully spots the values and attitudes of target markets and adapts its marketing mix accordingly. Austrians appreciate local products and pay a lot of attention to ethics and sustainability. Therefore, McDonald’s makes contracts with local farmers who supply it with potatoes etc.
In conclusion, it is essential to look at many factors in order to avoid cross-cultural risk, especially when internationalizing to a foreign country for the first time. McDonald’s is doing it right: Although the company makes an effort to have a global image, it takes care of the communities when new markets are entered, according to its promotion strategy “Brand globally, advertise locally”. All these facts combined with the chosen strategy, namely franchising, contribute to McDonald’s huge success story.
April 16, 2014 @ 4:18 pm
I remember when McDonalds opened their first restaurant in Zagreb ( Croatia ) in 1997. People were standing all night at the main square of Zagreb waiting for the restaurant to be open and to try Big Mac. They wanted to experience something they have seen only in the movies before, and I am not talking about hamburgers, I am talking about the “feeling”. McDonalds succeeded in something that so many companies did not succeed before-selling the american dream/selling a bite of different culture! They are indeed masters of it! In the process of selling the taste “piece of America” they have actually adopted different culture for every division in the world to the specific taste of the customers local needs. European apple pie is actually sweet beans pie in China, and even though it looks the same the taste is adopted to the Chinese market. McDonalds succeeded in international business mostly because it can sell products well adopted to the markets need and culture but at the same time it offers a different experience. Their main competitive advantage is customers satisfaction with unified design. They are not experimenting with new tastes and changing the habits of its customers. They are simply repackaging familiar taste in different ambient and with high level marketing strategies connecting brand with emotions. Indeed, all McDonalds marketing strategies are high influence on our emotions. No matter if they are connecting famous people to the brand, feelings from the childhood or something else, all marketing strategies are influencing our emotion of tenderness and happiness and connecting us with the brand.
McDonalds in Croatia accepted this year marketing strategy called “ 7 for 7”. In year when recession is high they are implementing strategy for cheap products ( 7 pieces for 7 kuna’s-1 Euro). That means that they are not only culturally adopted but also listening to the political environment in each country. Prices typical for Austria or the rest of the world could not be accepted in Croatia.
Human nature is not so complicated, we are used to certain taste and most of the people do not accept change, but are willing to think that they are different. Well McDonalds is offering exactly that-taste that they are use to in different packages with extra flavor of “american“ feeling.
April 30, 2014 @ 7:29 am
Perfect preparation before entering new markets is indispensable. During this preparation stage obstacles might be recognized that need further inputs to overcome or that cannot be overcome at all.
A company that decides to operate internationally has to analyse its organizational readiness. A further major step in the internationalisation process is to assess the suitability of the company’s products and services for foreign markets.
Nevertheless, the fact that today’s global world seems to be a market almost without boarders, a business that works for instance in Germany, may not work in Austria or even in China. One reason are boarders in the heads of the local consumers. To be successful, companies need to surmount such barriers.
McDonald’s is one of the best models for acting internationally. With McDonald’s strategy “think globally and act locally” it uses its strengths, build on core competencies and adapt to different markets all around the world. McDonald’s suits its marketing campaigns to the region or country where it advertises. The company tries to understand the different cultures, behaviours and of course the consumer habits. For example in India, McDonald’s does not sell beef due to the fact cows are sacred in Indian culture.
There are many examples that show how important it is to adjust the advertising and certainly the complete marketing mix. The product name is one very important part of that. Ford renamed the car Ford Pinto in South American countries after it was mocked because of the name “Pinto”. The meaning of “Pinto” in Spanish is gentlemen’s equipment. Another example also from the car industry is Mitsubishi. Their SUV “Pajero” was also renamed in Spanish speaking countries because “Pajero” means wanker in English. Language is one of the most important tools in marketing and therefore it is unavoidable to have a clear understanding of the language and also of regional characteristics.
In Austria McDonald’s uses dialect words in a quite clever way for its billboard ads. A good example is “Pipifein”, which is an Austrian word for excellent, in Germany no one would understand the meaning of “Pipifein”.
However, McDonald’s had its own problems with culture differences. It made a faux pas in Japan, as it was advertising with the white-faced Ronald McDonald clown. Unfortunately white is the colour of death in Japan.
It is essential to know the culture to work with and to be aware of the cross culture risk. Hofstede’s cultural dimensions theory is one good orientation to adjust the marketing mix and to set up a perfectly fitted advertising campaign. However, the best way to get knowledge about culture is to hire and work with local people. Therefore, despite of small slip-ups, McDonald’s handles their activities internationally in an exemplary manner.
May 11, 2014 @ 4:46 pm
we are students from the study program “International Management” at the FH Joanneum in Graz, Austria. Following, we would like to share some of our thoughts concerning McDonald’s.
From our point of view McDonald’s is one of the best examples for a successful global player with over 33.000 outlets in more than 120 countries with estimated 1.8 million employees worldwide. Initially, we support Pankaj Ghemawat’s point of view, because even though globalization has become an ongoing trend in the last few decades, there are still a lot of differences all around the world especially in terms of culture and religion, which hinder the world from becoming totally homogenous.
Countless SMEs often fail to succeed in new international markets. To avoid failure, they should try to follow a similar concept and strategy as McDonald’s does in marketing and entering new markets.
But what is McDonald’s recipe for success? The concept behind McDonald’s achievements and strong market position lies in analyzing customer needs and wants in various ways and furthermore addressing those efficiently. The creation of international menus like the McFalafel in Egypt, the McKiwi in New Zealand or the McKebap in Israel are the result of extensive market research and successful identification of desires, values and lifestyles. Nevertheless, McDonalds stays loyal to its philosophy and therefore one can find the essentials of the product portfolio such as the Big Mac or French Fries in every McDonald’s subsidiary worldwide.
When it comes to marketing, McDonald’s uses different concepts like Neologisms, testimonials, quality certificates, statistics and cooperations and sponsorships with sport events to attract customers. Concerning this point, McDonald’s shows excellent cross-cultural communication skills. Generally, it can be said that McDonald’s proves cultural intelligence with their way of acting and communicating, as they respect boundaries and national traditions. They are aware of the fact that the avoidance of ethical dilemmas and cultural misunderstandings is necessary for a sustainable success.
Besides their cultural adaptations, McDonald’s also focuses on financial aspects and therefore assimilates their prices to national standards. As far as McDonald’s is concerned, the worldwide varying purchasing power parity is reflected in the Big Mac Index, which is an indicator for how much a Big Mac costs in different countries. The Index shows that an Indian customer can purchase a Big Mac for 1,54 USD, while a Norwegian customer has to pay 7,8 USD for his burger. Quite clever.
This makes us coming to the closing statement that McDonald’s succeeds in thinking globally and acting locally.
Elisabeth, Kerstin, Max, Elisabeth and Sarah
March 21, 2015 @ 3:57 pm
Although I try to do an equilibrated healthy diet, there is always space for a BigMac every now and then, but what fascinates me about McDonald’s is that they are cultural awareness champions. One might say that at the end of the day they are (just) selling hamburgers, fries and juices, yet they are doing it in a very intelligent way which allowed a worldwide coverage. This success is due to doing many things right as for example; price politic, R&D, marketing campaigns, restaurants design, or distribution channels. However in all these value chain variables, McDonalds paid great attention to local cultural details; prices are adjusted to the local buying power (leading to the famous McDonald cost Index), the advertising is easy to recognize and addresses local specificities, they take local suppliers and distributers and the taste is also adjusted to the local preferences.
I think the reason McDonald’s got this right was because they realise cultural awareness relies on knowing the small details far behind the mass classifications as for example the Hofstede Cultural Dimensions. I do agree with Hofstede, but from my experience the dimensions just help to get a first approach, yet to survive in another culture is necessary to now it deeply. I say this because from my experience (12 years living abroad) there are so many cultural details that contradict the main classification that when ignored lead to painful situation like a failed advertising campaign or product. Therefore when a company crosses its borders is crucial to get on the team someone with deep knowledge of foreign market and people. McDonald’s understood this subtlety, it does not matter in which country, there is always local specificities and at the same time all the details that identify the brand.
Recently the chain got under pressure through consumer change of habits and new market entries, so that I am really curious how McDonald’s will adapt this time. I expect to see the chain turning its image more “Green” by more healthy alternatives to cope with this green trend. But concerning the new competitors that are mostly strong in the US market (Shake Shack and Chipotle), they still do not have the international experience of McDonald’s, so at this level McDonald’s still have advantage.
March 23, 2016 @ 11:04 am
First of all, I have to point out that I believe that the truth between the texts of Thomas L. Friedman and Pankaj Ghemawat – who have certainly very controversial opinions on an increasingly borderless world – is somewhere in the middle. Even though there are still a lot of differences (of cultural, legal, religious, and also economic nature, etc.) between and even within particular areas and countries in the world, I am also of the opinion that many things have been done to increase international trade and to provide an attractive global business environment.
The list of failures in international business seems endless. However, there are also companies that perform very well, which brings me to the mentioned example of McDonald’s: generally speaking, I am convinced that they did/do a pretty good job in adapting their products and services to local market circumstances, which is an obvious prerequisite for a successful market entry. Yip et al. (2000) emphasize that firms that are systematic achieve better performance. In my opinion this is very true for McDonald’s. Not only did they investigate how to efficiently approach the 4 Ps of marketing in a particular country, it seems that they also thoroughly analyzed the external environmental framework (e.g. by considering Hofstede’s cultural dimensions, etc.). At this point I want to raise a question: which companies are more successful? Those with an adaptive approach or those with a standardization approach? Also in this respect, I am afraid that it is a combination of both like McDonald’s shows as well. Unquestionably, products and services have to be adapted to local consumer behavior on the one hand, on the other hand, some processes have to be standardized too since this enables economies of scale, reduces marketing costs and increases competitive leverage.
Especially in our increasingly competitive global business environment, internationalization strategies (of Western firms) have to be planned and executed very systematically and carefully, since local competition is waiting nearly everywhere, also for McDonald’s: http://www.wsj.com/articles/mcdonalds-china-challenge-rising-competition-1413965503
November 8, 2016 @ 5:06 pm
I would like to expand this blog post from my point of view in order to use Hofstede’s cultural dimensions to emphasize the cultural differences that Mc Donald’s has been thinking about before launching his products in different countries, especially in India and Austria. I am thinking that this model of Hofstede can explain the different advertising campaigns of Mc Donald´s very well.
Firstly, I would like to mention the differences between Austria and India due to Hofstede’s four cultural dimensions. In India Power Distance (77%) and Masculinity (56%) are very high. In comparison, in Austria Individualism (55%), Masculinity (79%) as well as Uncertainty Avoidance (70%) are widely distinct.
As mentioned above cultural differences are as alive as they have ever been. To be successful in international business, you have to appeal to the local differences. Concerning the product range, you have to adapt it, e.g. by adding different products. Due to religious beliefs, it is necessary to use chicken instead of beef. This example shows you that you have to be aware e.g. of religious aspects. In this case, Mc Donald’s did a great job with the ad above. In business, you have to know, that it will not work to introduce the same advertising campaign in e.g. Austria and India. Why not? Because of these cultural differences like Masculinity or Power Distance and for sure other cultural differences like tastings, colours etc. In India, I would recommend to focus on Power Distance by indicating powerful testimonials or illustrating a hierarchy (if it is possible and convenient). One of the reasons is that their communication is top down and people’s whole attitude differ from Austrian’s society.
In Austria, you have to focus on Masculinity and Uncertainty Avoidance. Austria is a success orientated country and driven by competition and achievement. People want to be the best in their field. Furthermore, Austrians try to avoid uncertainty and they are intolerant of unusual behaviour and ideas. Also innovations may be resisted and security in every case is an important element. For this reasons, I can imagine that the advertisement with “Pipifein” has been succeeding. Austrians are proud of their country and tend to buy things from Austria, because of thinking they are the best with the e.g. most tasteful meat. Therefore, they are also willing to pay a higher price. Moreover, the product has been adapted through using rolls and different kinds of meat. That also reflects in Mc Donald’s stores in Austria because of having a better quality than in many other countries. In Austria, I would recommend to focus on the origin and to prove the quality of different products.
Generally, the key to success in international business is to gather information about the borders and to consider them before launching products and its advertising campaigns in different countries. In addition, adapting prices to national standards is also advantageous. I can only agree by saying that Mc Donald’s did a good job concerning addressing differences in India, Austria and even China.
To conclude, I would like to mention that Mc Donald’s should continue concerning national adaptations.
July 4, 2022 @ 5:26 pm
International adaptability at a high level:
McDonalds continuously proves how adaptable and diverse the company is in terms of cultures and countries. Numerous companies have failed at this and have standardized advertisements too much. However, McDonalds has realized that adaptation is the key to success and that there are countries with a high level of uncertainty avoidance. In such countries they use following strategies, among others: testimonials, country of origin advertising and highly local preferences.
Personally, I visit McDonalds rarely. Nevertheless, I am enthusiastic about the Austrian advertising because the company directly responds to local preferences and puts the country Austria in the foreground. As an Austrian, you feel connected to the advertising, and you feel valued that such an international company values Austrian culture as well. And that’s exactly the point: McDonalds wants advertising to catch you emotionally. Because emotional connection has much more power than the desire to consume a product.