Standardization and Adaptation - Essay Example

?Standardization and Adaptation Introduction In the year 1937, McDonald’s was founded by two brothers, Maurice and Richard McDonald. The two brothershad developed an assembly line and food processing system at a small drive-in restaurant located in the east of Pasadena, California. In the year 1954, a milk-shaker mixer salesman named Ray Kroc, recognized an opportunity in this market and decided to exploit it. He negotiated the deal of franchising and got the deal of franchising McDonald’s in USA. As a service fee, Mr Kroc took about 1.9 percent of the sales for himself and a royalty of 0.5percent of the sales was given to McDonald’s. Finally, in 1961, the McDonald’s brothers sold the whole share to Mr. Kroc for $2.7 million. In 1967, McDonald’s had opted for its first international venture in Canada. Shortly after that, the license of Eastern Canada’s business of McDonald’s was bought by George Cohon, who had opened the first restaurant in the year 1968. The key to international success of McDonald’s was the use of Franchising. By franchising through the local people, the delivery of the products and the interpretation of their US brands to the local people regarding product and services became much easier. In this context, the report focuses on the adaptation and the standardization conformed by McDonald’s and how it had led to their success. Standardization Standardization signifies creation of a consistent way for carrying out procedures and tasks. Standardization can be related to any process that is being carried out in the organization such as, machinery standardization, operation standardization, drawing standardization, inventory standardization, communication standardization and clerical process standardization. Operation standardization signifies that the operation can be conducted by any one. In order to keep the organization running, the behaviour of the employees is also standardised, but definitely by maintaining the individuality. Figure 1 (Source: Hirano, 1996) In simple terms, it is the framework which provides all the relevant set of directives, to the parties in an organization or the industry, to which everyone should adhere in order to ensure that all the processes associated with the rendering of services or creation of goods are performed within that given set. This is implemented within the organization to ensure that the end product of the organization is of consistent quality and is easily comparable to other products of same class. Standardization is seen to be adopted by various business processes when the organizations aim to achieve consistent level of quality. For instance, in case of fast food franchises, detailed outlines are provided regarding the preparation of food so that the customers experience the same taste and flavour, regardless of the franchise of the chain that they are visiting. Adaptation related to the environmental demands often requires non-trivial changes related to the structure, ideology and technology of the organization. There are several dimensions along which the organizational adaptation are implemented; for instance, the changes in the core features such as, technology along with changes in more peripheral characteristics such as, changes in the advisory team. Adaptation Adaptation is defined as the alterations made to the system due to the forces that lead to the changes in the business climate. Organizational adaptation is defined as the response that the organization generates through changes in ideology, technology and structure due to the changes in the environmental opportunities and demand. The performance of the organization is dependent on a large number of factors that are related to the business environment and therefore, adaptation becomes important for the organization. This does not imply that an organization requires constant adaptation to the environment because if the business environment is stable, then it requires very little adaptation (D’aunno and Price, 1985; Huq, et al., 2003; Kammerlander, 2013). Factors affecting Standardization and Adaptation Economic Factors The adaptation and standardisation of an organization largely depends upon the economic or the trade factors. Exchange rates, gross domestic products, inflation, unemployment rates, disposable income and interest rates are some of the key economic indicators. The economic data are ambiguous and fickle. However, the businesses should remember that the economic indicators of a country does not provide the complete picture but only gives a snapshot of the complex economic phenomenon. This makes the scanning and monitoring of the economic environment an important process that can impact the industry in which the organization is operating. Strengthening the economic factors will definitely benefit the industries operating in the country but the affect will vary from industry to industry. The business is considered as a micro-economic unit. The behaviour of the market of the firm depicts the economic decision of the firm. The economic environments are the economic indicators that impact the functioning of the business unit of a firm. The economists are seen to stress more and more on the economic environment in which the firm operates (Henry, 2008; Pailwar, n.d.). Figure 2: Constituents of Economy (Source: Pailwar, n.d.) Government and legal factors The political climate of a country, in which the business operates, is also a major factor that the managers should consider. The types of laws passed by the government, the political stability of the government and the amount of government activity are some of the important components that are define the political and the legal climate of a country. Before the organization starts to operate in any country, it is important for them to consider the abovementioned factors that can impact their business. The organization need to consider the restrictions that are imposed by the government for the foreign businesses that includes taxation and foreign ownership of the business property. The export restrictions, quotas and import tariffs should be considered in this context. For instance, the government of United States has enforced many regulations related to the patents, copyrights, safety of the workers, protection of environment, minimum wage and competition, which are quite significant for the businesses that plan to operate in the US market. The local and state governments are seen to control the businesses by imposing tax, issuing corporate charters, setting zones and issuing business licenses (Gitman and McDaniel, 2008). Social or Cultural factors Businesses are developed in the society and they cannot operate without the help of the same. The various social factors that impact the business are customer’s consciousness, family set-up, corruption, distribution of income, religious believes, living standards of the people, population, literacy level, hopes, wishes, traditions, fashions and customs. While operating in a country, the organization needs to cater to these social factors in order to gain profitability (Singla, 2010). Industry Factors Apart from the macro-environmental factors, the micro factors are also responsible for the success of any business. The micro factors are those that are closely related to the business and are mostly linked with the industrial units. The factors are customers, suppliers, competitors, public and marketing intermediaries (Singla, 2009). Customers: The choice and preference of the customers are the key aspects that the business should serve. The organization, before marketing and manufacturing any product, should evaluate the requirement of the customers. Suppliers: The supply of raw materials for the operations is crucial to maintain continuity in business. Satisfaction of the suppliers is also essential. Competitors: There are a number of ways in which competition can influence a firm. It can be done in several ways like, launching sales promotion schemes and introducing cheap and new products or methods in the market, which can compel the business to change its course of action (Singla, 2009). Public: Public signifies the print media and local press whose behaviour and attitude can impact the business. For instance, the success of the business to a large extent depends on the favourable or unfavourable report published by the media. The sentiments of the customers are also seen to be directed by the reports of the media to a great extent. Market intermediaries: These are the people who play a significant role in developing a business unit. They are responsible for reducing the distance between the agents and the producers. For instance, if these market intermediaries get annoyed and refuse to sell the goods of the company, then the organization is most likely to face a critical situation (Singla, 2009). Standardization and Adaptation Done by McDonald’s The marketing strategies of McDonald’s are related with the 7Ps of the marketing mix such as, product, price, place, promotion, people, process and physical evidence. Product Product mainly related to the quality, quantity and features of the products. McDonald’s had created standardised set of items that are similar in taste whether it is from South Africa, Spain or Singapore. It has been claimed by McDonald’s that substantial amount of cost can be saved through standardisation and success is ensured by adapting to the environmental needs. Adaptation is required in many cases related to the laws, customs, preference and customer’s taste. There are many situations where McDonald’s is seen to adapt to a particular product because of customs and religious laws of the country. For instance, in India, mutton-based Maharaja Mac (Big Mac) and Vegetable McNuggets are served. This incorporated innovation by McDonald’s was necessary in a country like, India, where Jains do not eat meat of any type, Muslims do not eat pork and Hindus do not eat beef. Apart from this, there are several other instances where McDonald’s has adapted different menus to meet the needs and requirements of the different customers (Vignali, 2001). The Quality is also related to the product that McDonald’s serve. The Quality Assurance Team is responsible for monitoring the quality of food, both during the stages of production and when served in the restaurant. It involves continuous rounds of unannounced, announced visits, audits and inspection throughout the production and the distribution facilities. McDonald’s in Singapore and Malaysia had undergone rigorous inspection by the Muslim Clerics in order to investigate the ritual cleanliness and only following that, the chain was awarded with the halal certificate which indicated clean, acceptable and pork-less products. Price It has been realised by McDonald’s that despite cost saving characteristics inherent in standardization, success of the chain is often related to the ability to adapt with the specific environmental needs. Big Mac, which is the flagship brand of McDonald’s, is sold at a comparative price all around the world. The organization has come up with different pricing strategy for different countries, which shows that McDonald’s has selected right price for the right market. The overall pricing decision of McDonald’s bears the aim to increase the market share. The demand for the product is used as a barometer by the organization for deciding on the price of the product. For instance, in USA, the price of Big Mac with fries is equivalent to the earning of the office worker’s of Chicago for 14 minutes; while in other places, it is seen as a luxury good. However, the pricing strategy is not seen to work successfully every time. In the year 1997, McDonald’s was seen to dramatically lose the market shares in their domestic market. In order to fight this situation, they had decided to lower the prices and increase the revenue. McDonald’s had claimed that the pricing policy of the organization is decided by tracking the pricing of competitors and then, pricing their own products by balancing value and quality. For instance, in the year 1996, when the firm was planning to open their business in New Delhi, India, McDonald’s had set their price after tracking the price of a local food chain named Nirula (Vignali, 2001). Place Globally, McDonald’s has around 34492 restaurants and still continues to focus on managing the outlay of capital more efficiently through strategic and prudent expansion (Chalabi and Burn-Murdoch, 2013). McDonald’s still has plans to open restaurants in several other places outside USA. McDonald’s has realised the huge potential that lies in front of them related to the growth in the international market. This is the lesson that they have learned over time from their mistakes. Previously, McDonald’s used to add 300 to 400 restaurants year after year, irrespective of the circumstances that are being faced (Vignali, 2001). The main strategy then was to intensify the competition and in retrospect, they had realised that they could have built more number of restaurants than what they had already done. This lesson was applied by the organization while opening their stores in the markets with very less competition. Promotion There are five major ways of promoting a product or service to the customers. The five major tools are advertising, direct marketing, sales promotion, personal selling and public relations. McDonald’s uses large variety of marketing communication strategies after consideration of the cultural and other differences that they face in other countries. It would be a big blunder on the side of McDonald’s to ignore the various local market factors that would impact the performance of the product. The organization also needs to analyse the usage pattern, attitude of the consumers towards the product, religious and moral and ethical considerations (Vignali, 2001). The main idea for the promotion of McDonald’s is to endorse its global image for which the organization focuses on the need and requirements of the community in which they are entering. From the communication perspective, the promotional strategy of McDonald’s is “brand globally, advertise locally”. McDonald’s uses a huge range of advertising campaigns in various countries. For instance, they had used Alan Shearer, the England footballer, to promote their hamburgers in U.K., whereas for France, they used the French international goalkeeper, Fabien Barthez. The tagline of McDonald’s is “I’m loving it”, which is the standardized branding strategy followed all over the world (Zhou and Zhang, 2012). The organization has launched the brand promotion on a global basis with same series of advertisements communicating the same brand image. People McDonald’s has expanded their business very fast and plans to expand further rapidly. Currently, McDonald’s is present in more than 119 countries and has about millions of employees and the figures are expected to double over the next few years. Before entering into a new country, the human resource department of the firm should research on the labour laws of that place, whether they will be able to implement flexible work timings along with the part-time and the maximum working hours allowed there. After evaluating this information, the organization will be able to successfully design and implement their human resource policies for their employees. This signifies that the managers of McDonald’s are well aware of both the local and the corporate culture. While recruiting, they specially focus on the customer-focus, right attitude and technical ability of the employees. McDonald’s strongly believes that the best way to create the differentiating factor from the competitors is to satisfy the wants of the customers every time when the service is provided. This factor is emphasized in their advertisement for recruitment and even during the preliminary screening. This is the standardised format that is followed in all their global outlets (Vignali, 2001). Process Over all the outlets irrespective of location, the process of preparing the food is identical. The standards set by McDonald’s are followed across the globe. For instance, the fries should measure 75 mm, the buns are of 6 cm height and 9.5-9.8 cm in diameter and the meat in the Big Mac should have 20 percent fat content and 45g in weight (Vignali, 2001). Even the suppliers responsible for supplying the raw materials, required for the preparation of the food, have to meet the demands and set specifications by McDonald’s. If they fail to meet the specifications, McDonald’s integrates vertically. Physical evidence The main focus of McDonald’s is to maintain consistency in the delivery of service, cleanliness and quality through excellence in their restaurants. The same message is conveyed to all their franchisees operating all around the world. The customers are also convinced of the fact that wherever McDonald’s operate, they can convey the message of family environment. However, the aspect of physical evidence is also accepted by McDonald’s, after considering the prevalent culture in the country. For example, in case of China, the interior walls of the restaurant are covered with slogans and posters that emphasize family values (Vignali, 2001). Conclusion When any organization enters into a new country with diverse culture, cross-cultural conflicts are supposed to create stress. Under such a stressful situation, many of the organization chooses to stick to their own features, commonly referred to as standardization or chooses to adapt to the new culture, referred to as adaptation. A huge attention is given on this choice. In case of McDonald’s, it is seen that even though they followed standardisation in quality of product and services, attitude of the employees, quality of raw materials used and promotion of their brand image, yet in some cases such as, ingredients of the food, physical appearance of the store, price and human resource policies for the employees, they prefer to opt for adaptation. Reference List Chalabi, M. and Burn-Murdoch, J., 2013. McDonald's 34,492 restaurants: where are they? Theguardian [online] Available at: [Accessed 17 December 2013]. D’aunno, T. and Price, R.H., 1985. 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Vignali, C., 2001. McDonald’s: “think global, act local” – the marketing mix. British Food Journal, 103(2), pp. 97-111. Zhou, L. and Zhang, Q., 2012. Cultural adaptation pattern analysis of McDonald’s and KFC in the Chinese market [pdf] Uppsala University. Available at: [Accessed 17 December 2013]. Read More