Managing Cross-Cultural Differences in McDonalds - Case Study Example

CULTURE AND CONFLICT MANAGING CROSS-CULTURAL DIFFERENCES IN McDONALD’S Executive summary The following report shows an analysis of the success of McDonald’s Corporation in the global market despite the heavy losses faced by other businesses from the same industry. Moreover, this paper showed that a big budget for marketing, promotions, management and operation is inadequate to make the business succeed in the global environment. This paper highlights the importance of understanding the external environment, particularly the culture of the nation, in order to strategically place products and business process in the chosen market. As the McDonald’s case showed, understanding of the complex cultural requirements would contribute much to any organization’s success. Table of Contents Table of Contents 2 1.0 Introduction 2 2.0 Food and Culture 3 3.0 McDonald’s Corporation 4 4.0 Learning from McDonalds 5 5.0 Conclusion 7 6.0 Recommendations 7 9.0 References 8 1.0 Introduction Businesses today do not merely expand, they go global. The business environment has evolved in different ways in the last ten or twenty years. With the help of advance technologies employed in media, transportation, and communications, businesses have more ground to play with, have better opportunities for growth and development, and face far tougher challenges (Schein, 2004). The fast-food chain industry is no different. The increased popularity of fast food brands brought about by the wide media exposure on the cable and on the internet allowed fast food chains to operate on a global scale. Brands such as Wendy’s, Subway, McDonald’s, KFC, and Pizza Hut has gained global exposure and dominance that they literally become household names. The successes of these fast food brands in the global market are, however, not solely dependent on the large-scale marketing and promotions efforts. Various brands that survive in global markets appear to be able to do so because they have a deep and thorough understanding of the culture of the target countries. This report analyzes why cultural understanding and cultural integration are big factors when it comes to McDonald’s success in the global market. This inspects the methods employed by the fast food giant in making its products and its brand work in various locations around the globe where other brands failed to establish their name. In the effort to understand McDonald’s success, this report applies different concepts of organizational behavior to analyze the business strategy of the fast food giant and why it became successful in numerous countries. The recommendation presented by the paper underscores the most probable reasons why other fast food chain failed where McDonald’s succeeded and how other businesses could overcome these barriers. 2.0 Food and Culture Food and culture are very closely related. According to Counihan & Esterik (2008), food is one big part of any culture as it determines the idealisms, persona, and identity of that culture. For example, sandwich is primarily American whereas pasta and pizza are Italian. In other words, cultural orientation determines the psychology of individuals when it comes to their choice of food. Similarly, an individual’s acceptance of certain food is partly determined by the relative closeness of the individual’s culture to that of the food’s cultural origin (Talwar, 2003). Middle-eastern Moslems are less likely to share a hearty meal of pork steak with Asians because of the Moslems’ cultural orientation that prohibits eating pork. In the same manner, it is quite difficult to convince Asians to eat their meal without rice because rice has always been Asia’s primary meal. These two examples highlight the importance of cultural orientation when it comes to the choice of and the acceptance of food. To succeed in a culture-dependent industry like the fast food industry, it is necessary for the business to have a deep understanding of the culture, an appropriate strategy to meet the demands, uniqueness, and eccentricities of the given culture, and the flexibility required to reshape its organization according to the cultural requirement of its target market. Though these requirements seem easy to achieve, not many were able to successfully utilize these principles to their advantage. One of the many who were able to successfully employ this strategy is the fast food giant McDonald’s Corporation. 3.0 McDonald’s Corporation McDonalds is one of the most successful fast food chains in the world with more than 30,000 locations in over 100 countries. The success of McDonalds is unparalleled as it is able to become a major brand of fast food anywhere it goes, besting local and international competition in the process (Mujtaba & Patel, 2007). While it can be argued that globalization has opened vast opportunities for companies like McDonald’s, it is also correct to assume that the aggressive and innovative marketing and operations strategies used by McDonald’s as well as the company’s understanding of the importance of culture contribute to the success of the company. There are numerous companies that aim to capture a bigger global market with their innovative products and/or services. In the fast food industry, as with any other industry, the main strategy is to saturate the market with marketing and promotional strategies along with the excellent product so that the target market’s curiosity is piqued and sale is made (Tichi, 2004). However, not many among these companies become successful and only handfuls are able to parallel great successes like that of McDonalds. According to Hodgetts (2000), companies often fail in the global market because they fail to understand the importance of culture and diversity. Companies like Euro Disneyland failed miserably (and by millions of dollar worth of investments) because they failed to grasp the role culture played in the success of the market penetration of their product (Luthans & Doh, 2009). As was mentioned, the perspectives, ideals, choices, and preferences of consumers are influenced strongly by their cultures (Talwar, 2003). Products and/or services that closely resemble the culturally-defined preferences and choices of consumers are more likely to be accepted in that culture. Hence, a product needs to penetrate the cultural and social preferences of its markets in order to be successful (Hodgetts, 2000). Apparently, McDonalds understood the importance of the concept involving cultural preferences as it created a workable strategy that was able to help it succeed in various countries. Judging from this criterion, it is easy to identify that McDonald’s success is largely due to its deep understanding of the different cultures of each of its global locations and acting in favor of this understanding. According to Mujtaba & Patel (2007), McDonald’s doesn’t look down on its global market; rather, the company ensures that its food is what the market wants by showing them that the company cares about what their markets think, feel, and love about its products. Generally, McDonald’s does it by aligning its products with the cultural preferences of its market and by introducing new products, modifying existing ones, and integrating value-adding systems to its approach on each foreign location. For example, McDonald’s added teriyaki burger in its standard menu to account for the cultural preferences of the Japanese people. Another example is McDonald’s way of respecting the Moslem culture in Saudi Arabia by closing its stores five times a day for the Moslem prayers and by not serving food containing pork which is a taboo to the Moslem culture (Mujtaba & Patel, 2007). The same thing occurs in other locations. McDonald’s allows its franchisors to twist its system to suit their cultural environment. Hence, it becomes easy to identify that McDonald’s does not have a uniform international strategy for its franchisors but rather employ variable strategies that are sensitive to culture. Each of these (approved) strategies corresponds to the sensitive needs of the respective markets of McDonalds (Mujtaba & Patel, 2007). By using a highly variable approach to product development and franchise management, McDonald’s has becomes very successful in its industry. 4.0 Learning from McDonalds McDonald’s success is tremendous. In a very short span of time, the company is able to achieve significant shares in every market it is in with very few controversies. It can be said that McDonald’s learned from the mistakes of other fast food chains as it continuously redesign its strategies in order to meet the varying needs of its diverse markets. The most important things that can be learned from McDonald’s global marketing and operations strategies related to organizational culture fall into three things: alignment of organizational culture to the national culture, flexibility of organizational structure, and respect for cultural identity. 4.1 Alignment of Organizational Culture - In today’s modern business environment, cultural homogeneity is quite difficult to find. Most globalized businesses come too strong that they tend to influence the culture of the market they are in (Hodgetts, 2000). In most cases, the culture is too resilient of external influences that they resist the influence of the business which in turn causes the failure of the business. In order to circumvent this scenario, McDonald’s Corporation aligned its organizational culture to the culture of the nation they are in. McDonald’s does not insist on its primary products but rather focused on how to make its primary products appealing to the global market as was shown in the examples above. By embracing the culture of the nation where it operates and placing the local people in-charge of the operations, McDonald’s was able to understand how to make its operation work. As a result, McDonald’s Corporation was able to successfully penetrate the market and was able to get a large market share in the fast food industry anywhere in the world. 4.2 Flexibility of Organizational Structure – Of course McDonald’s couldn’t have been this successful if it did not allow flexibility in its organizational structure. Fast food brands that are somewhat successful in its local operation like Subway find it difficult to adapt the strategy employed by McDonald’s where the company coexists with the prevalent culture without actually giving up its identity (Schlosser, 2001). As Schlosser (2001; 45) points it, Subway’s failure to capture the Indian market lies in its inability to determine that sandwiches are never a major part of the Indian diet. Subway kept its structure of operation as much as it kept its business strategy that worked in the US and this ignorance eventually led to its failure in rice-loving countries. Unlike Subway, McDonald’s Corporation is very keen in changing its structure, culture, and business strategy to fit that of the nation’s culture. 4.3 Respect for Cultural Identity – Because it was easy for McDonald’s to give up part of its identity and to embrace the identity of the country where it operates, the market in return readily embraced McDonald’s and its product. Instead of insisting on its own product lines and its business and operational strategy, McDonald’s adopt various strategies that would work best for its market. Moreover, McDonald’s allowed the local people to man its stations, train its people, and manage its business which made the whole process more natural. Thus, instead of coming on too strong, McDonald’s appeared as if it belongs to the nation’s culture, thus making it easy for the market to identify with McDonald’s. The more the market identifies with McDonald’s, the better it is for the company since this could mean that more and more people will be drawn to its stores. 5.0 Conclusion In order to succeed in the global market, businesses need to understand not only its own culture but also the culture of the market it wishes to penetrate. The validity of this statement is seen in the success of McDonald’s Corporation. The success of McDonald’s has taught the business world three important things which are respect of other culture, flexibility of business structure, and alignment of the business culture with the nation’s culture. A business that takes into consideration the environment where it operates, regardless of its internal weaknesses, will emerge strong and stable in any given circumstance simply because an understanding of the business environment allows the business to strategically position itself (Hodgetts, 2000). 6.0 Recommendations Since not all rich, prominent, and able businesses succeed in the global environment, it is necessary to look at why they fail most of the time. The paper showed that the failure stems from the inability of these businesses to understand the importance of of culture in the picture. This paper recommends that businesses going global must have a thorough understanding of the new environment which includes the analysis of the cultural, political, social, and economical concerns that they would need to face. It is not enough for a business to have a very good product or a high quality service. Regardless of the quality of the product or services, some market choose products based on their cultural inclination and understanding the cultural requirements of these markets could greatly help the business succeed in a more complex yet promising environments. 9.0 References Counihan, C., & Esterik, P. (2008). Food and Culture: A Reader. Routledge. New York. Hodgetts, L. (2000). International Management: Culture, Strategy, and Behavior. 4th edition. Irwin McGaw-Hill Luthans, F. & Doh, J. (2009). Euro Disneyland. International Management: Culture, Strategy, Behaviour. 229-238. Mujtaba, B. & Patel, B. (2007). McDonald’s Strategy and Global Expansion through Customer and Brand Loyalty. Journal of Business Case Studies. 33(3). 55 – 67. Schein, E. (2004). Organizational Culture and Leadership. San Francisco, CA. Jossey-Bass Schlosser, E. (2001). Fast Food Nation: The Dark Side of the All-American Meal, Houghton Mifflin Company Talwar, J. (2003). Fast Food, Fast Track: Immigrants, Big Business, and the American Dream. Westview Press Tichi, C. (2004). "From the Jungle to Fast Food Nation: American Déjà Vu". Exposés and excess: muckraking in America, 1900-2000. University of Pennsylvania Press Read More