Analyzing MacDonalds and Aircel - Essay Example

? Critical essay Table of Contents Definition of essay topic 3 Critical discussion of theories 4 of case studies 8 The Case of MacDonald’s in France 8 The Case of Aircel in India 9 Application of the theory to the case studies 11 Relevance of Geert Hofstede’s cultural dimensions in MacDonald’s 11 Aircel and brand strategies 13 Conclusion 15 Reference 17 Definition of essay topic The project primarily talks about two management cases and the respective theories associated with them. The first case is about the establishment and expansion strategies of McDonald’s in France. The company’s first restaurant was established in the nation in the year 1979 in Strasbourg. Since then the company has been continuing to expand its operations steadily through the provision of the best quality of services and value to the customers. For the company which is based in the US, France has demonstrated the highest market growth with the establishment of 1161 numbers of restaurants in 2009. This was possible despite the numerous cultural differences existing between the two nations. The US entry into the French market was perceived as an invasion of American culture into the country which was itself known for its huge cultural heritage and traditions (ICMR, 2011). The theories which would be focused at for discussing the strategies of the company are Geert Hoftsede’s cultural dimensions. The next case would discuss the details of Aircel’s promotional strategy. This strategy was launched in the year 1999 by the India based mobile operator Aircel. Aircel made entry into the highly competitive Indian market in the year 1999. Innovation formed the key component of its branding strategy. It communicated and connected with its customers using the simplest and the most thoughtful advertising campaigns. The case tries to discuss the various marketing strategies that were undertaken by the company for its late entry into the Indian market and for increasing and expanding its subscriber base. It was one of first telecom operators to be advertising on Face book. The various promotional strategies undertaken by the company would be discussed in the project. The promotional services using the television media, print media and the internet would be discussed in details in the project. Critical discussion of theories Recent research has demonstrated the effects of cultural differences on consumer behaviour. Many studies have emphasized on highlighting the need for examining the validity of application of inferences which were developed in America for the designing and development of marketing strategies in other nations. A number of US based multinational companies like IBM, Coca-Cola; McDonald’s have been successfully earning significant revenue from their international operations across the globe. Thus the development of the different marketing strategies which remain sensitive towards the cultural differences across nations are considered to be of paramount importance for organizations have cross border operations and for their international success (Canli & Maheswaran, 2000, p.309). Previous research has thrown light on the fact that products and services from nations having favourable perceptions have been provided with positive evaluations. However, despite the above fact a survey which was conducted by Bozell-Gallup, (1996), showed that substantial differences in perceptions prevailed among the different nations. For example, according to the perception of Europe, Germany was chosen as the leader of quality. On the other hand for the Asian countries, Japan is considered to be a leader in quality. Despite the existence of substantial literature about nations of origin effects, an examination based on theoretical framework for the understanding of the effects of origin of countries across is still lacking. The collectivism/individualism framework has provided an important way of measuring and comparing the differences in cultures across nations. Collectivists and individualists have shown considerable differences in terms of social relationships and self expressions such that the differences influence the efficacy of their respective marketing strategies. Prior research conducted on the issue had only highlighted on the collectivism and individualism based on single dimensions. However, recent research has conducted by Triandis and Gelfrand (1998), has focused on multiple dimensions for observing the cultural differences across nations (Canli & Maheswaran, 2000, p.309). Country of effects origin is primarily referred to the extent or degree to which the manufacturers influence product evaluation. Research conducted on the issue suggests that the place of origin of the products provides the cue towards evaluation of the products and very little consideration has been provided with respect to the attributes of the product. Hong & Wyer (1990), have emphasized on the fact the origin of effects can only be observed at such times when consumers could elaborate them before the evaluations. Generally the studies have suggested that favourable perceptions about nations consequently result in favourable inferences about the product attributes and thus consequently lead to favourable evaluations. However, recently research has suggested that the weight age provided to the nation of origin to the evaluation of products might not be universal. For example there have been numerous studies which are of the opinion that featuring Japan as the origin results in leading to the favourable perceptions about the quality of products (Canli & Maheswaran, 2000, p.309). Research and studies on the cultural differences between nations have suggested that differences can exist between the collectivist and the individualist cultures only. The particular dimensions affecting the differences in the cultures need to be analyzed and identified primarily. The collectivism or individualism classification can only be differentiated based on their extent of vertical or horizontal social relationships. It is assumed in the horizontal dimension that each person belonging to the group is actually equal to the other members of the group. The individualists have flexible connections with the social groups and moreover their behaviours are ruled and guided by their self interest. The vertical dimensions assume the fact that differences exists between the members of the group and such differences lead to a four way typology, namely vertical individualism, horizontal individualism, vertical collectivism and horizontal collectivism (Canli & Maheswaran, 2000, p.309). In a number of industries promotions account for a major proportion of the market budge of the company. The manufacturers of non durable goods spent huge amounts of money on promotions rather than on advertising. More and more financial institutions have been using promotional strategies for inducing customers towards using more of their services. Research has found that temporary retail price promotions results in creating short term spike in sales. This is compared with that of consumer advertising in which there is difficulty in visualizing a sales hike for a corresponding increase in spending on advertising. Woodside & Waddle (1975) has documented the temporary increase in sales due to retail price promotions. The results have shown that higher share brands have lower deal elasticity’s although higher share brands can capture a greater proportion of switchers. It is found that the frequencies with which the deals are offered generally tend to make the consumers change their reference price. This particular finding is of great importance to throw light on the fact that with high frequency of promotions the brands tend to lose their brand equity. A lesser consumer reference price lowers the premium that can be charged for the brand in the market which lowers the equity even further. The higher is the frequency of deals provided by the manufacturer the lower is the height of the hike of the deal. This result can happen due to a number of factors. Firstly it depends on the expectations of the consumers about the frequency of the deals. Secondly it also depends on the reference price set by the consumers. Bolton (1989) and Raju (1992) have together thrown light on the fact that reference prices are linked with behaviour of purchase of consumers. While some of the research on this issue has used cross sectional models, some of them have used the results of time series. This particular generalization result refers to the time series results (Blattberg, Briesch & Fox, 1995, p.3). It is seen that the cross promotional effects remain unsymmetrical. Promotions of brands of higher quality generally impacts on the brands of lower quality and also the products of private labels in a disproportionate manner. The promotion of certain brands results in causing the consumers to move from the more competing brands in higher numbers in comparison to the switching of consumers from the other brands resulting from their promotions. One of the possible explanations for the disparity of switching can be related with the equity of the brands. The extension of the above findings can be related with the asymmetries in the perceived types of the brands. The perceived type of the brand decides the impact the promotional offer would be likely to result by the switching of brands from different tiers. Promotion of the brands belonging to the higher tiers can result in more switching in comparison to promoting brands belonging to lower tiers (Blattberg, Briesch & Fox, 1995, p.4). Since retailers act as a catalyst for the passing through of the trade promotional money to the consumers it must be understood that most of the brands receive much lesser than the pass through. Most practitioners are of the opinion that display and feature advertising affects the item sales strongly. This is a very obvious conclusion, however, a crucial and related issue in this regard is the interaction between the feature advertising and displays and the synergistic effects that it results in creating. Empirical results have been attained with regards to synergies between feature advertising, displays and price discounts. The works of Walters and Rinne (1986) has demonstrated empirical evidence proving that advertising promotions result in improving the entry of traffic to the stores. This has been complemented with the finding that promotional activities results in affecting sales of competitive and complementary categories. Description of case studies The Case of MacDonald’s in France It is seen that there were major cultural differences between US and France and thus the market entry of MacDonald’s has been viewed as an invasion into the French culture by the American culture. In 2008, France emerged as the greatest revenue source for US based fast food giant McDonald's which was located outside the boundaries of the nation. As per the figures released in 2008, the company had successfully generated sales worth €3.35 billion through as many as 1,115 outlets located in France. It also showed an increase in profits of 3% in the same year (ICMR-b, 2011). After establishing in France the company boosted its operations largely by increasing the number of outlets and restaurants an annual basis. By 2005 there were as many as 800 numbers of outlets in the country. By 2006, the sales of the company had increased by 8% which was double of the growth that was shown in America. Initially the French outlets looked similar to the outlets in the US, and the menu was also similar to the American counterpart. However, since then the company has been striving to promote itself as per the tastes and preferences demonstrated by the customers in France (ICMR-c, 2011). MacDonald’s had difficulty entering into Paris, as originally it never had a policy to adopt the foreign cultures of the place where it operated. Rather it tried to change the place’s culture to its own. However, in doing so it realized a fall in sales of its products. It soon realized that in order to undertake successful operations in France it was bound to adopt the culture of the place than change it. So is had to adopt the place’s culture and tailor the menu of the restaurant according to the tastes and preferences that existed in the locality. In other words it took up localization in order to survive in the French market. The cultural differences which came up and posed threat for the operation of the company would be discussed in the project with references to the various cultural dimensions. French consumers were of the opinion that MacDonald’s operation in France was a symbol of globalization which was a threat for the refined palates of France. At the same time the European sales showed a dramatic dip and contributed to the company’s biggest sales loss (ICMR-d, 2011). The Case of Aircel in India The second is about the innovation strategy that was undertaken by Aircel, a mobile operator based in India, as part of their promotional campaign. The company made entry into the highly competitive market in Indian telecom sector in 1999. Innovation was taken up as the key branding strategies for the company. The idea was to communicate and connect with customers using thoughtful, innovative and simple advertising campaigns. The case tries to highlight on the various strategies for marketing undertaken by the company for its late entry into the Indian market and increasing and expanding its subscriber base. The company accounts for the first one its kind to have introduced advertising campaigns on Face book. The company tried establishing connection with the Indian market promotion of services using such modes of communication like television, print, radio and out of home (OOH). The promotional strategies included cause-related marketing concepts and celebrity endorsements for the purpose. Within a very short time interval the company was able to emerge as one of the top mobile operators in the country. As per the comments provided by experts the company’s innovative strategies accounted for its main reasons for immense success and growth in the nation amidst the tough competition that prevailed in the market. The case primarily speaks of the main challenges that the company faced for being a new operator in the telecom market which was already saturated. There were a number of telecom players in the market which were either state owned or foreign investment companies. Launched in the years 1999, Aircel Group went into a joint venture with Maxis Communications Berhad (Maxis) based in Malaysia and the Apollo Hospital Enterprise Ltd, which was based in India. Out of this Maxis held 74% of the majority of the shares of the company. The innovative strategies that Aircel took up mainly comprised of such core values like creativity, simplicity, trustworthiness etc. It tried to position itself based on the tagline which said “Explore Your World of Possibilities” (ICMR-e, 2011). The operations of the company were primarily confined to the southern states of the country till 2005. It required an extensive and ingenious marketing campaign when it tried to enter into the northern parts of the country. The out of home strategy was undertaken to serve the purpose and which was considered to be effective and unique. Aircel’s attempt to win over the customers through the cause related marketing campaigns was successful and eventually helped in the expansion of its customer base significantly. As part of its strategy the company along with the partnership of WWF-India successfully launched the “save our tigers” campaign with the intension of spreading awareness about the shrinking population of tigers In India and across the globe. Such cause related strategies were intended to add to the goodwill of the company which would eventually result in increased sales and revenue and a satisfied customer base (ICMR-e, 2011). The promotional strategies mainly focussed on spreading awareness of its services through the most popular news channels in the country. On the day when the campaign was launched the company flooded the major channels with advertisements. The brand was also launched during the same time by the leading protagonists of the leading fie shows appearing in the Indian television channels. The company’s attempt to reach out to the masses was fulfilled by using such portals like Yahoo.com, MSN.com, Sify.com, Rediff.com, and Indiatimes.com. It tried to utilise India’s passion for cricket and promoted through such sites as MSN cricket & sports, Cricinfo.com, and rediff scorecard. The results which followed by the use of such marketing strategies were alarming and surprising. From being a Chennai based telecom operator, it expanded across the whole country in no time. At the end of the year 2010, the company had a customer base of 50 million users all over the country. The success of the company can be completely attributed to the promotional strategies that it undertook and which worked wonders for the company too. As per the views of the industry experts the company had been a minor player among the he telecom sector in the Indian market and 57% of all its subscribers belonged to the state of Tamil Nadu. By 2010, the company had become the fifth largest GSM operators in the country holding a market share of 8.38% only after Airtel, Vodafone, Idea and BSNL (ICMR-e, 2011). Application of the theory to the case studies Relevance of Geert Hofstede’s cultural dimensions in MacDonald’s Following are the theories bearing relevance to the above discussed cases. The theories of cultural differences can be studied in this context and the impacts they have on organizational strategies of companies. This is especially found to be applicable for organizations having operations overseas and in such nations which are culturally much diverse as compared to the nation where the company is based. Culture is often perceived as a source of conflict that a source of synergy. According to Geert Hofstede, culture is considered to be a nuisance which often ends in disaster. He has classified countries according to various dimensions. These dimensions play a crucial role when organizations design or develop their marketing strategies for a nation which is culturally different from the home based nation. For those who work in international businesses, it is alarming to note how the people from different cultures behave. Geert Hofstede throws insight into the various cultures which enables conducting offshore businesses easily and comfortably. If the different cultures can be understood well and applied then the level of frustrations, anxiety and concern can be reduced significantly. The concept of individualism and collectivism may be understood in this context. Individualism is the corresponding to collectivism which is considered to the extent to which individuals are integrated into groups. On the side of individualists it is seen that societies in which there is loose bonding between individual’s people are expected to take care of themselves and their immediate families only. On the side the collectivists, it is found that societies in which individuals starting from their births onwards are combined in strong and cohesive groups, often in the form of extended families which continue to protect them in turn for loyalty unquestioning. The word collectivism does not have any political meaning or interpretation. It rather refers to the group and not the state. Moreover the issue which is addressed by this dimension is extremely fundamental and refers to all societies existing in the world. The degree of individualism is very high in United States and much lower in France. This accounts for a major cultural difference between the two nations. McDonald’s success has been visibly successful on account of its changes in marketing strategies owing to the cultural differences existing between the United States where the company had originated and France where it conducts overseas business. Initially the company had been shirking from changing its cultural perspectives and changing the culture of the place where it used to operate. The most remarkable of changes became visible when the restaurant chain introduced establishments in the foreign countries. There were certain transformations which were perceived to be corrupting or beneficial for that culture. According to many experts before the introduction of fast food, the term was almost unknown in many nations. It was an initiative to introduce the American culture in the foreign nations and this consequently caused a change of taste and preference of that place. It even transformed the eating habits of that place. Globalization of McDonald’s gave rise to a number of debates. It meant to enhance the cultures rather than adulterate them. The company’s attempt to introduce the home culture into the foreign nation was not successful. It eventually tried to transform its marketing strategies and adopted the French culture. This bears resemblance to the fact that proposition presented by Geert Hofstede. The change of marketing strategies reflects the company’s concerns for retaining and holding the French culture high. Moreover the French were highly collective in nature. They are not only a very enriching culture but also maintained traditions which they were proud of and followed collectively. The attempt was rather to maintain the strong collectivist culture to draw the attention and goodwill of society in general. Consideration of the foreign culture existing in France and respecting it played the key role in achieving the faith and trust of the general public and earning their goodwill. Aircel and brand strategies The case of Aircel demonstrates a positive relationship between innovative promotional strategies and revenues and sales. Companies constantly try to develop a variety of solutions which not only attend to the needs and requirements of the emerging markets but also have to be innovative in order to sustain in the marketplace. The theories of branding strategies emphasize more on the aspects of anticipation rather than on prediction. Branding strategies today focus more on meeting the articulated requirements and needs of customers and also their unarticulated needs. Aircel’s attempt to capture the Indian market is based on their anticipation of the rising telecom market in the country and the also rise of popularity of the social and professional networking sites across the globe. The world has been changing rapidly and dramatically. Technological changes have been taking place across the globe at the same time. So the companies trying to survive in the market has been primarily trying to adopt such unique strategies which have not been adopted before or that which has not been witnessed by consumers before. In this context, India is a very representative nation among the emerging economies of the world, and the multinational experiences and problems prevailing are extremely representative of the typical problems confronted in such comparable markets across the globe. One of the common problems that are confronted with multinational companies is that they try to duplicate the models which have been successfully adopted by other nations. However, such a strategy is seen to fail completely. Aircel’s unique branding approach lies in its attempt to adopt new promotional strategies which were not adopted by other organizations before. It most one the first companies to have foreseen the popularity of the social networking sites in India and thus had focussed on taking up brand campaigns using Face book. This reflects not only its ability to foresee the future but also perceives it as a successful brand developer. The second approach of the company was to design a branding strategy which helped to ear goodwill for the company. This was a long sighted and intelligent approach on the part of the company. Through this approach the company seeked to develop an image which portrayed simplicity, creativity and trustworthiness. In a country like India, people are driven by emotions. This is the fact based on which the company has been trying to expand operations in the market and sustain it. Its marketing strategies are based on the realization that the value of branding in the globalized world is enormous. Going by the extent with which the media has grown in India over the years, its attempt to use the electronic and the print media reflects high efficiencies by the company. The success of the company in expanding operations from the state of Tamil Nadu to all over India reflects the success of the branding strategies of the company and its ability to see the future prospects and dimensions. The company’s emphasis on branding also bears relevance to the theories presented in the case which portray the fact those designing good brands acts as a catalyst in the process of sales and revenue generation. Also its reliance on branding strategies bears relevance with the fact that empirical results have shown a positive relationship between feature advertising and displays and the sales and revenues of companies. As per the works of Rinne and Walters (1986), empirical results have shown that advertising campaigns have resulted in enhancing the entry of consumer traffic to the stores. Also evidences have shown that organizations adopting promotional activities have resulted in attaining greater sales and revenue as compared to organizations which have made lesser investments in such campaigns. The promotional strategies, as discussed in the paper, have impacted on its brand image as a trustworthy and reliable provider of services which has consequently resulted in enhanced and improved sales figures for the company (ISB Insight, 2006, p.14). Conclusion It is apparent that MacDonald’s had to adopt the culture and traditions of France in order to make its presence in the nation effective. This is in tandem with the proposition presented by Geert Hofstede who considers the importance of the understanding of the various cultural dimensions existing in the country for conducting marketing strategies successfully in the same. In consistency with Hofstede’s cultural dimensions the company was required to change its strategies as per the traditions and cultures prevailing at that place and not trying to change the same. According to the case study of Aircel positive relationship can be drawn between innovative promotional strategies and their impacts on the organization’s sales and revenue. The key to success of the company has been on account of the promotional initiatives of the company aimed towards earning the trust and faith of the general public on account of their approach towards enhancing the well being of society and its people. Also its foresightedness which reflects through its ability to promote through the social networking sites has played a major role in expanding and catalysing its growth. Reference Blattberg, R. C., Briesch, R. & Fox, E. J. (1995). How Promotions Work. Marketing Science (1986-1998); Summer 1995; 14, 3; ABI/INFORM Archive Complete. Pg. G122. [Pdf]. 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