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Tiêu đề Cross-Cultural Challenges in International Business: A Case Study of McDonald's in China
Người hướng dẫn PhD. Nguyen Hong Hanh
Trường học Foreign Trade University
Chuyên ngành International Business
Thể loại Midterm report
Năm xuất bản 2023
Thành phố Hanoi
Định dạng
Số trang 34
Dung lượng 1,38 MB

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Cấu trúc

  • SECTION 1: OVERVIEW OF MCDONALD’S (4)
  • SECTION 2: NAVIGATING CULTURAL NUANCES: MCDONALD'S (8)
    • 2.1 Relationship between Culture and Multinational Enterprises (8)
    • 2.2 McDonald’s Adaptation to Cultural Differences (10)
      • 2.2.1 Collectivism vs Individualism (10)
      • 2.2.2 Taste Preferences (11)
      • 2.2.3 Diet Habits (12)
      • 2.2.4 Eating Habits (13)
      • 2.2.5 Customs (13)
      • 2.2.6 Language (15)
      • 2.2.7 Aesthetics (17)
      • 2.2.8 Communication style (19)
      • 2.2.9 Respect for Elders (22)
    • 2.3 McDonald’s Achievements (24)
  • SECTION 3: FURTHER DISCUSSION OF MCDONALD’S FUTURE (26)
    • 3.1 The impact of global events (Covid-19) (26)
    • 3.2 Challenges McDonald's may face in the Future in China (27)
      • 3.2.1 Competitors (27)
      • 3.2.2 Chinese fast-food market penetration of McDonald’s (28)

Nội dung

The worlds economy is becoming more globalized, and multinational corporations are pushing businesses to alter the way they operate. To access new markets and surpass competitors, businesses are expanding their reach beyond borders and cultures. But with foreign business expansion comes plenty of obstacles, one of which is adapting to cultural disparities. Smoothly transitioning into a foreign market can have a substantial effect on the success or downfall of a businesss venture. International business is heavily impacted by cultural differences, affecting every aspect of the company, such as employee relations, marketing, advertising, and management. Therefore, our group chose the topic Crosscultural challenges in international business: A case study of McDonald’s in China to investigate the crosscultural obstacles for multinational corporations when operating in foreign markets. As the biggest fastfood franchise globally, McDonalds operates in more than 100 countries. However, the corporation encountered substantial barriers during its entrance into the Chinese market, such as disparities in consumer conduct, regulatory rules, and commercial approaches.

OVERVIEW OF MCDONALD’S

McDonald's, founded in 1940 by Richard and Maurice McDonald in San Bernardino, California, began as a small drive-in restaurant known for its innovative food preparation and assembly-line production In 1954, Ray Kroc saw the brand's potential and partnered with the McDonald brothers to franchise the concept, ultimately acquiring the company in 1961 Today, McDonald's stands as one of the largest and most successful fast-food chains globally, boasting over 38,000 locations across more than 100 countries.

McDonald's is now seen as a symbol of globalization, sometimes known as the

The "McDonaldization" of society highlights the fast food market's projected growth, with an expected CAGR exceeding 4.6% from 2022 to 2028 McDonald's competitive advantages, including its efficient quick-serving system and popular burger menu, are key factors driving its dominance in the industry Currently, McDonald's holds over 21% of the Fast Food Restaurants market share, significantly outpacing other leading brands, which average around 2% This success is further bolstered by the brand's extensive globalization efforts, solidifying its position as one of the most valuable restaurant chains.

McDonald's mission is to be the preferred destination for customers seeking enjoyable dining experiences The company focuses on delivering delicious food while ensuring customer satisfaction through convenient locations, affordable prices, and personalized service Their commitment to speed and choice reinforces their position as a leading fast-food chain.

McDonald's vision statement emphasizes the company's commitment to rapid growth and innovation, aiming to enhance its menu and broaden its global presence The focus is on serving more customers with delicious food every day, reflecting a dedication to both profitability and customer satisfaction.

McDonald's core values shape its brand and operational approach, emphasizing a commitment to serve customers with fast, friendly, and accurate service The company fosters an inclusive workplace culture that values diversity and inclusivity McDonald's also prioritizes integrity by setting targets to reduce greenhouse gas emissions, conserve water, and minimize waste through responsible sourcing and sustainable practices Additionally, the brand actively engages with the community by sponsoring local events, supporting farmers and suppliers, and donating to organizations addressing hunger and education Lastly, McDonald's aims to bring families together, creating a welcoming environment for all patrons.

McDonald's has focused on growth and expansion to enhance its global presence and solidify its leadership in the fast-food industry The company has successfully pursued this goal through strategic partnerships, innovative marketing campaigns, and a commitment to consistent quality and exceptional customer service.

McDonald's has evolved its business model to better cater to consumer preferences by expanding its menu to include healthier options like salads and wraps The introduction of advanced technology, such as mobile ordering and self-service kiosks, has significantly improved the customer experience Furthermore, McDonald's is committed to ethical and sustainable practices, focusing on waste reduction and energy conservation while responsibly sourcing ingredients The company has established ambitious goals to minimize its environmental impact.

McDonald's has evolved into one of the largest fast-food chains globally, boasting over 39,000 restaurants in more than 100 countries since its international expansion began in Canada in 1967 The company aims to achieve 95% franchise operations by 2018 to drive growth By the end of 2017, approximately 235,000 employees were working across its 36,000 locations.

McDonald’s localization strategy has significantly advanced in key Asian markets, particularly in China, which stands as one of its largest markets The company chose China for its international expansion due to the vast population and rapidly growing economy, alongside favorable government policies for foreign investment This environment has allowed McDonald's to tap into the increasing demand for convenience and Western-style fast food among Chinese consumers By establishing a presence in over 45% of Chinese regions, McDonald's has successfully tailored its food offerings to meet local preferences, gaining a competitive edge over rivals like KFC and Yum China However, despite these advantages, the company continues to encounter challenges stemming from its strategic decisions.

McDonald’s Preparation for Entry to China

McDonald's entry into the Chinese market was a pivotal moment in its history, necessitating the company to implement various strategies to address the distinct challenges presented by this market.

McDonald's conducted extensive market research in China, utilizing surveys, questionnaires, and focus group interviews to grasp the local culture and business environment This research provided valuable insights into Chinese consumers' preferences, allowing the company to tailor its menu to local tastes Additionally, McDonald's assessed potential restaurant locations to analyze the local market and competition, identifying opportunities for competitive advantage Notably, the company discovered that many competitors prioritized convenience over quality, leading McDonald's to emphasize food quality and customer service in its strategy.

McDonald's conducted interviews with industry experts and local business owners to gain insights into the Chinese market, enabling informed decision-making and risk mitigation The company invested significantly in training and development, with employees traveling to China to understand the local culture By hiring and training local staff, McDonald's built a strong team adept at serving Chinese customers effectively.

McDonald's successfully navigated local regulations and cultural norms in China by forming joint ventures with local companies, establishing strong relationships with key stakeholders in the business community Confident in the Chinese market's profit potential, McDonald's strategically chose Shenzhen for its debut, benefiting from the city's status as a special economic zone since 1979, which offered advantages like higher subsidies and lower tax rates, along with minimal government interference due to its openness to foreign businesses.

NAVIGATING CULTURAL NUANCES: MCDONALD'S

Relationship between Culture and Multinational Enterprises

A society's culture plays a crucial role in shaping communication, interaction, and relationships among its members According to Czinkota (2007), cultural factors significantly influence business dynamics, with each society possessing distinct cultural characteristics Over time, the interplay of these elements forms a society's culture and affects business interactions across various global regions.

Language is a crucial cultural element that poses significant challenges for multinational corporations due to the diversity of languages in foreign countries, leading to misunderstandings and communication breakdowns While English is often viewed as a universal business language, its acceptance can create friction with local populations Additionally, nonverbal communication, including eye contact, gestures, and vocal elements like pitch and volume, varies in meaning across cultures, complicating interactions further The lack of local language proficiency can negatively impact the performance and management of overseas subsidiaries To address these language barriers, companies can appoint expatriates or local nationals who are fluent in the parent company's language and culture to key managerial positions.

Religion significantly shapes business transactions by establishing shared core values that guide individuals' choices within a society This influence imposes constraints that affect business decisions and play a crucial role in shaping corporate culture.

Religion significantly impacts consumer purchasing behavior and seasonal buying patterns It shapes perceptions of employment and influences how businesses operate, including adjustments to holidays, working hours, food preferences, and dress codes based on the dominant religion in a country In some regions, multinational corporations face restrictions on certain products or ingredients; for instance, in Islamic countries, the production and sale of pork products are strictly prohibited due to religious beliefs (Ajami and Goddard, 2014).

Multinational enterprises must pay close attention to customer preferences when conducting business, as consumer demands and tastes across different nations are increasingly aligning This phenomenon, known as "global convergence," is driven by advancements in global communication and improved travel accessibility Consequently, many multinational corporations adopt a global strategy, providing the same or similar products in various countries However, experts caution that these corporations should remain vigilant and adaptable to local market nuances.

Despite the notion of "global convergence," substantial cultural and socioeconomic disparities persist among nations While individuals in various countries may favor or utilize similar products or services, their motivations, contexts, and circumstances for doing so can differ significantly.

Societal attitudes towards foreign businesses significantly influence the performance of multinational companies Acceptance and trust can foster a supportive environment, benefiting large enterprises, while distrust and antagonism can lead to challenges such as product boycotts These negative perceptions often stem from the government's stance on political issues.

Multinational enterprises must consider cultural elements such as attitudes and beliefs that shape societies and individuals, including perspectives on time, work, leisure, achievements, and change Culture significantly influences the operations of global companies, necessitating that these businesses tailor their manufacturing, marketing, and sales strategies to align with the cultural context of each country Therefore, successful multinational enterprises should cultivate an understanding and appreciation of cultural diversity, enabling them to leverage opportunities and navigate challenges arising from varying national cultures.

McDonald’s Adaptation to Cultural Differences

According to Hofstede Insights, the USA scores 91 on the individualism scale, indicating a culture that prioritizes personal goals and achievements, while China scores only 20, reflecting a highly collectivist society In the US, individuals are expected to take care of themselves and their immediate families, often relying less on authorities for support Conversely, in China, people prioritize the interests of the group over their own, as seen in social interactions where Chinese friends may choose dishes based on others' preferences rather than their own.

In China, relationships, known as "Guanxi," play a crucial role, as individuals invest significant effort in cultivating social networks for both business and personal connections The social structure is formal, often blurring the lines between personal and professional lives, which can be surprising to outsiders In contrast, the United States features a more informal social structure, where personal and professional lives are typically kept separate, and interactions tend to be more casual.

In China, McDonald's focuses on creating a sense of community by designing family-friendly spaces that include play areas for children and promoting their menu as ideal for sharing among family members The restaurant features large tables and group seating arrangements, fostering a social dining experience that aligns with China's collectivist culture, where eating out is a communal activity and patrons enjoy spending quality time in a comfortable environment.

In China, particularly in the southern and western regions, spicy food is highly favored Key spices such as chili peppers, ginger, garlic, Sichuan peppercorns, star anise, cinnamon, and cardamom are commonly used to enhance the flavor and heat of various dishes.

In the United States, the prevalence of spicy food varies significantly by region, with certain spices like black pepper, mustard, oregano, cumin, paprika, and turmeric commonly used to enhance flavor and provide a mild heat to various dishes.

Chinese cuisine is known for its diverse ingredients, such as vegetables, tofu, seafood, poultry, and pork, with rice and noodles serving as staple carbohydrates In contrast, American cuisine typically highlights beef, chicken, pork, potatoes, corn, and wheat-based products.

McDonald's has tailored its menu to reflect the diverse regional flavors of China, catering to local tastes and preferences In Sichuan, the fast-food chain offers spicy chicken wings to satisfy the love for hot and numbing dishes In Guangdong, customers can enjoy pineapple pies, appealing to the region's fondness for sweet and sour flavors Meanwhile, in Shanghai, McDonald's features taro pies, catering to the local preference for purple root vegetables.

McDonald's has successfully tailored its menu to Chinese consumers by incorporating local ingredients and flavors Notable items include the Prosperity Burger, featuring pork and black pepper sauce for Chinese New Year, the Chicken Maharaja Mac, a double-decker chicken burger with cheese and spicy sauce, the McSpicy Paneer, which includes a cottage cheese patty with fiery sauce, and the McAloo Tikki, a burger made with a potato and pea patty complemented by a special sauce.

McDonald's has adjusted its product offerings by decreasing the sugar content in items like soft drinks, desserts, and sauces to align with the Chinese preference for less sweet flavors Additionally, the fast-food chain has introduced sugar-free alternatives, including sugar-free coffee and tea.

McDonald's has expanded its beverage menu by introducing a variety of tea drinks, including green tea, black tea, and milk tea, along with bubble tea, which combines tea, milk, and tapioca pearls This initiative aligns with the Chinese preference for tea as a popular and healthy beverage choice.

Chinese cuisine is diverse, featuring staples like rice, noodles, dumplings, tofu, vegetables, meat, and seafood, with dietary choices influenced by personal preferences and religious beliefs, including fasting and vegetarianism In contrast, American diets predominantly consist of processed foods from supermarkets and fast-food outlets, such as bread, burgers, pizza, and fries, with fewer dietary restrictions, except for specific groups like Jews and Muslims who adhere to kosher or halal practices.

With respect to diet habits, McDonald’s has successfully navigated the cultural distinctions between the United States and China through a variety of measures.

McDonald’s adapts its menu offerings to cater to local dietary preferences and restrictions In the United States, the company features a variety of pork products, such as bacon, sausage, and ham, appealing to its non-Muslim and non-Jewish customers Conversely, in China, where pork is the predominant meat, McDonald’s has modified its menu to include halal-certified options, ensuring compliance with Islamic dietary laws for the approximately 2% Muslim population.

To cater to local tastes, McDonald's uses chicken thigh meat in their chicken burgers instead of chicken breast The menu has expanded to include a variety of options beyond traditional burgers and fries, featuring rice dishes, congee, and vegetarian selections to meet the diverse preferences of Chinese consumers Additionally, McDonald's China offers Chicken McNuggets with Chili Garlic Sauce alongside standard options like Honey Mustard, Sweet & Sour, and BBQ In 2001, they also introduced soups, including Corn Soup and Vegetable and Seafood Soup.

In China, dining out is a prevalent social practice, with people preferring restaurants for gatherings with friends, family, and business associates rather than hosting at home or visiting tea houses or bars (Chen, 2006) This trend highlights that meals in restaurants serve primarily as a means of socialization rather than just for eating In contrast, Americans often opt for fast food restaurants, prioritizing quick service and convenience over social interaction (Xu, 2005).

Due to differing eating habits between cultures, McDonald’s has tailored its location strategies In the US, restaurants are typically situated along main streets or highways, while in China, they are predominantly found in downtown areas with higher population density Additionally, most locations in China feature children's playgrounds with slides, allowing parents to relax and enjoy their time at the restaurant.

McDonald’s Achievements

 Growth and Success of McDonald's in China

McDonald's has successfully dominated the Chinese fast-food market by tailoring its marketing strategies to align with local consumer preferences, culture, and geography Over the past 30 years, the company has adapted its advertisements to resonate with Chinese values, expanded its menu to include options that appeal to local tastes, and even introduced unique products like cat houses to engage pet owners, all of which have fueled its impressive growth in China.

McDonald's made its debut in the Chinese market in 1990 with its first restaurant in Shenzhen and has since experienced steady growth by delivering exceptional quality, service, and value By 2008, the company operated 960 restaurants and employed over 60,000 people in China, establishing it as McDonald's largest growing market outside the United States In 2023, McDonald's announced plans to open 1,900 new restaurants worldwide, with 900 of those located in China, highlighting its commitment to accelerating restaurant development and expanding its footprint in the region.

(Source: Statista - McDonald’s locations in Asia Pacific region - 2021)

McDonald's has experienced remarkable growth in the Asia-Pacific region, with nearly 4,400 locations in China, significantly surpassing Japan's 2,941 and Australia's 1,023 locations The total number of McDonald's outlets in the Philippines, India, and South Korea combined is only 3,428, highlighting China's dominance in the fast-food market This rapid expansion illustrates the immense potential of the Chinese market for Western fast-food brands, as McDonald's growth in China has outpaced that in the United States The company's success has not only reshaped the fast-food landscape in China but has also influenced the strategies of other brands, contributing to the overall growth of the industry.

 McDonald’s differentiates itself to a great extent

McDonald’s has successfully entered the Chinese market by meticulously localizing its strategies and breaking down the process into manageable steps Unlike many companies hesitant to adapt, McDonald’s prepared thoroughly, embracing innovation and learning from past experiences This approach allowed them to test, refine, and implement effective strategies that resonate with local consumers As a result, McDonald’s is experiencing faster growth in China than in the United States, showcasing its ability to thrive in foreign markets This success is seen as a significant achievement for the global fast food industry, highlighting how an international brand can effectively penetrate the rapidly expanding Chinese consumer market through thoughtful adaptations to local customs.

FURTHER DISCUSSION OF MCDONALD’S FUTURE

The impact of global events (Covid-19)

The Chinese economy is large and stable, yet it is highly responsive to minor fluctuations in economic factors Consequently, the COVID-19 pandemic had a profound effect on the fast-food sector in China.

McDonald’s sales growth has consistently been strong, peaking at an impressive 23.6% in 2013, coinciding with the highest adoption of its diet offerings in the Chinese market However, this growth sharply declined to nearly negative 8% due to the impact of COVID-19, marking 2019 as one of the most challenging years for McDonald’s This downturn can be attributed to the pandemic's origins in China, which caught the market off guard and led to significant operational challenges.

In early 2020, the Chinese government's cautious approach to disclosing economic data coincided with the implementation of COVID-19 lockdown measures, leading to minimal sales for the fast-food industry, particularly McDonald's This situation indicates that while McDonald's remained operational, the pandemic forced the company to significantly reduce its production levels to maintain its business fundamentals.

During the Covid pandemic, consumers shifted away from fast food to adhere to safety measures, leading to significant operational disruptions and supply chain challenges within the industry The food-service sector in China experienced substantial losses, although the restaurant industry's work resumption rate saw a notable increase in March, accompanied by limited revenue growth McDonald's, a key player in the fast-food market, was similarly impacted by these industry changes.

The pandemic may serve as a catalyst for transforming Chinese dining culture, driven by urbanization, rising disposable incomes, and a growing preference for Western lifestyles Despite setbacks caused by the pandemic, the fast-food market in the Asia-Pacific region, particularly in China, is projected to grow significantly This growth is anticipated to result in the expansion of quick-service restaurants (QSRs) and an increase in fast-food consumption across the country.

Challenges McDonald's may face in the Future in China

McDonald's is joined by other companies like KFC and Starbucks in adapting to cultural nuances, showcasing their capability to meet the diverse needs of this extensive market Their success highlights the critical role of cultural adaptation in achieving global success.

KFC has effectively embraced Chinese culture by modifying its products and services to align with local tastes, values, and dining habits This cross-cultural adaptation involves innovative menu items like egg tarts, congee, and the "Dragon Twister," as well as thoughtful Chinese translations of its brand names Furthermore, KFC has tailored its marketing strategies to resonate with Chinese consumers, utilizing celebrity endorsements and strategic brand collaborations to enhance its appeal.

Starbucks has effectively tailored its marketing strategy and product offerings to meet the needs of diverse Chinese consumers By conducting in-depth analyses of consumer taste profiles, the company remains agile in adapting to market changes, resulting in a unique blend of East meets West products They have localized their menu by labeling food items in Chinese and introducing offerings like matcha frappuccinos, which are smaller and less sweet than their original counterparts Furthermore, Starbucks has enhanced the customer experience in China by employing a renowned Japanese architect to design stores with flexible table arrangements, accommodating large groups of Chinese consumers.

In China, McDonald's faces significant competition from notable rivals such as Luckin Coffee, which has quickly expanded its coffee shop chain, and Yum China, the parent company of KFC, Pizza Hut, and Taco Bell Additionally, local fast food chains like Dicos, known for its fried chicken, and Real Kungfu, which serves a range of Chinese-style fast food, also compete with McDonald's in the market.

3.2.2 Chinese fast-food market penetration of McDonald’s

The Chinese fast-food market faces significant challenges, including shifting consumer preferences towards healthier and more diverse food options, heightened competition from local chains like Heytea, regulatory hurdles, supply chain disruptions, and brand perception issues To sustain its market position, McDonald's must adapt its menu and marketing strategies to attract health-conscious consumers and respond effectively to the evolving demands of the younger demographic.

McDonald's is facing intensified competition in the Chinese market due to the rise of fast-food chains and innovative business models like delivery-only "dark kitchens" and mobile food trucks To maintain its market position, McDonald's must focus on continuous innovation and offer unique value to customers Additionally, with the Chinese government's efforts to combat obesity by regulating unhealthy food options, McDonald's may encounter regulatory challenges if perceived as part of the problem Consequently, investing in healthier menu options and providing transparent nutritional information will be essential for compliance and to enhance its brand image.

McDonald's, a leading global fast food franchise present in over 100 countries, has faced significant cross-cultural challenges during its expansion, particularly in China This case study examines the specific obstacles McDonald's encountered in the Chinese market and the strategies the company employed to successfully navigate these challenges.

Navigating China's complex regulatory environment posed significant challenges for McDonald's, necessitating close collaboration with local officials to ensure compliance with stringent laws governing international businesses Additionally, the company had to manage relationships with regional franchisees responsible for daily operations in their markets To address these issues, McDonald's worked diligently with local partners and franchisees to develop effective business strategies tailored to the unique conditions of each region.

McDonald's has achieved significant success in the Chinese market, boasting over 3,000 locations and a substantial market share This success can be attributed to its strong brand recognition, innovative marketing strategies, and ability to adapt to local market conditions By effectively navigating cross-cultural challenges, McDonald's has set a benchmark for other multinational companies looking to expand into new countries.

McDonald's must adapt to changing consumer preferences in China's fast food market by investing in new menu items, digital technology, and sustainability initiatives, while also expanding its delivery services and franchise network Despite challenges, the company is well-equipped to sustain its success in China, serving as a valuable case study for other businesses aiming to expand internationally.

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Ngày đăng: 13/06/2023, 21:11

Nguồn tham khảo

Tài liệu tham khảo Loại Chi tiết
1. Ahir, Hites, Bloom, Nick and Furceri, Davide (1953). World Uncertainty Index for China. [online] FRED, Federal Reserve Bank of St. Louis. Available at:https://fred.stlouisfed.org/series/WUICHN [Accessed 6 May 2023] Sách, tạp chí
Tiêu đề: World Uncertainty Index for China
Tác giả: Ahir, Hites, Bloom, Nick, Furceri, Davide
Nhà XB: FRED, Federal Reserve Bank of St. Louis
Năm: 1953
2. Ayana (2017). The History of McDonald’s in China. [online] Transparent.com.Available at: https://blogs.transparent.com/chinese/the-history-of-mcdonalds-in-china/ Sách, tạp chí
Tiêu đề: The History of McDonald’s in China
Tác giả: Ayana
Nhà XB: Transparent.com
Năm: 2017
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Tiêu đề: Masculine vs. Feminine Culture: Another Layer of Culture - WITI
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