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The Globalization of the American Hamburger
When companies expand to other countries, they must decide how to adapt their marketing strategy to suit the environment in each market. This activity is important because in our increasingly global business climate, marketers must be able to identify and evaluate different approaches to global marketing.
The goal of this activity is to consider these issues in the context of global expansion by McDonald's.
Read the case about McDonald's global expansion and answer the questions that follow.
From the Maharaja Mac in India to the Prosperity Burger prepared especially for Chinese New Year celebrations, McDonald's has built a global fast-food empire under its golden arches. Only 31 percent of McDonald's revenue now comes from sales in the United States, and most of its international growth has come from the surging economies of Brazil, Russia, China, and India.1 A pioneer in overseas franchising, McDonald's has spared no effort in its attempts to penetrate foreign markets. In China, it opened one new outlet a day to meet its goal of 2,000 stores.2 In Brazil, it created Latin America's first environmentally certified fast-food restaurant. A vast market defined by stark cultural differences, India has required a more modest approach that would allow McDonald's to develop its real estate and supply infrastructure, train its local workforce and management at its famed Hamburger University, and adjust the menu for vegetarian customers.3 The McAloo Tikki Burger has been a great success, and the company has started opening more McCafe storefronts.4
But McDonald's growth strategy relies on more than just added locations. In crowded cities, with real estate prices too high to build drive-through restaurants, the company has hired droves of motorbike drivers to bring Big Macs to customers. This nimble delivery approach is now a mainstay in cities from Beijing to Kuwait City. Online ordering will be next, though the challenge will be to reduce the cost of call centers to support this new distribution model.5 In addition, McDonald's keeps looking for new mobile innovations, such as mobile ordering or payment options, to keep up with consumer demand.6
Fast-food restaurants enjoy some segment-specific benefits as they pursue such international expansion. Unlike retail brands, such as Walmart or Carrefour, restaurants pose less perceived competitive threats. Local eateries can exist side-by-side with a McDonald's in a way that a mom-and-pop grocer cannot survive if an international hypermarket moves in next door.7
But even considering the massive growth in rapidly transitioning economies, Europe still generates the bulk of foreign sales for McDonald's. In France, for example, “MacDo” restaurants attract crowds that line up outside for a bite of lunch. But lunch might mean something a little different in this case: French McDonald's offer menus that feature Camembert cheese on the burgers, Heineken, a McBaguette, and macaroons for dessert.8 Once, the secret to McDonald's success was “lockstep” consistency?the fact that a meal in Memphis tasted the same as it did in Moscow or Madrid. But the novelty of the American hamburger stand has worn off in the new millennium, and with it McDonald's ability to export American culture as its staple commodity. A cheeseburger, fries, and Coke don't register the same level of excitement when the café next door and the bistro down the block are also serving burgers. More and more, the key to McDonald's future appears to be found in the DNA of the places it inhabits, like the sweet potato soft serve now available in Hong Kong.9 And with it, suddenly the fast-food giant that to many represents the globalization of taste suddenly finds itself in a very unlikely position: as a defender of local cuisine.10
The kosher burger has been a hit in Israel, and Indian consumers seem to appreciate the opening of McDonald's first vegetarian restaurant. However, most new growth comes from Russia, where the company has 245 locations and controls 70 percent of the booming fast-food business. Even as fast-food competitors face potential market saturation in the United States, Russian demand for quick burgers appears to be insatiable.11 Driving this Russian appetite has been the growth of a newly affluent middle class with money to spend to dine out. Infrastructure development in Russia also has been a boon as cities open malls with food courts, highways are constructed with drive-through locations, and specialty suppliers of frozen food and packaging have appeared.
In the early years of Russian expansion, few private businesses existed to supply all the ingredients McDonald's needed to produce Big Macs and fries. The company solved the problem by building an enormous food processing plant outside Moscow. But it also worked to cultivate relationships with local Russian vendors and contractors to which it eventually could outsource its supply chain. Today, a grower who began selling cucumbers to McDonald's in 1990 has become the Pickle King of Russia, dominating the processed foods market.12
Even when faced with some politically sensitive challenges—such as suspicious inspections by Russian agencies that alleged code violations in several McDonald's stores, seemingly in response to the strained relations between the Russian and U.S. governments13 —McDonald's has continued with its plans to expand in the country. Most recently, it signed an agreement to open 20 new restaurant locations in remote Siberian regions.14 International enrollment in Hamburger University thus shows no signs of slowing.
Footnotes
Statista, “Revenue of McDonad’s Corporation Worldwide from 2008 to 2014, by Geographic Region (in Billion U.S. Dollars),” http://www.statista.com/statistics/219453/revenue-of-the-mcdonalds-corporation-by-geographic-region/
“McDonald’s China Plans to Open a New Store Ever Day in Four Years,” The Huffington Post, September 28, 2011, http://www.huffingtonpost.com/
“McDonald’s Best Practices,” http://bestpractices.mcdonalds.com/; Annie Gasparro, “Yum Splits India into Separate Division, Names New International CEO,” The Wall Street Journal, November 23, 2011.
Neha Thirani Bagri, “A Growing Taste for U.S. Fast Food in India,” The New York Times, January 8, 2014, http://india.blogs.nytimes.com/
Julie Jargon, “For Food Delivery, China Calls McDonald’s,” The Wall Street Journal, December 12, 2011, http://online.wsj.com/
Nat Rudarakanchana, “McDonald’s (MCD) Going Mobile, Expanding in China and Three Other Takeaways from Last Scheduled Consumer Presentation of Uninspiring 2013,” International Business Times, September 11, 2013, http://www.ibtimes.com.
Neha Thirani Bagri, “A Growing Taste for U.S. Fast Food in India,” The New York Times, January 8, 2014, http://india.blogs.nytimes.com/
Hannah Fleishman, “13 Businesses with Brilliant Global Marketing Strategies,” HubSpot, July 29, 2015, http://blog.hubspot.com/blog/tabid/6307/bid/33857/10-Businesses-We-Admire-for-Brilliant-Global-Marketing.aspx.
Charles Passy, “How Fast Food Chains Cook Up New Menu Items,” The Wall Street Journal, August 24, 2015; McDonald’s, “What a Twist! McDonald’s Hong Kong Launches Sweet Potato Sensation Ice Cream,” January 22, 2016, http://news.mcdonalds.com/Corporate/Feature-Stories-Articles/2016/What-a-twist-McDonald-s-Hong-Kong-Launches.
Matt Goulding, “Why the French Secretly Love the Golden Arches,” Slate, August 2013, http://www.slate.com/
“McDonald’s Sees Strong Revenue on Global Demand,” Associated Press, December 8, 2011, http://www.msnbc.msn.com/; Ravi Krishnani, “McDonald’s in Russia: Defeated Communism with a ‘Happy’ Meal,” Business Today, http://www.businesstoday-eg.com/; McDonald’s Europe Virtual Press Office, press brief, http://www.mcdpressoffice.eu/
Andrew E. Kramer, “Russia’s Evolution, Seen through Golden Arches,” The New York Times, February 2, 2010, http://www.nytimes.com.
“For First Time Ever, McDonald’s closes a Restaurant in Russia,” The Moscow Times, April 14, 2015, http://www.themoscowtimes.com/business/article/for-first-time-ever-mcdonalds-closes-a-restaurant-in-russia/519066.html
Olga Razumovskaya, “McDonald’s Extends Reach in Russia,” The Wall Street Journal, August 21, 2015, http://www.wsj.com/articles/mcdonalds-extends-reach-in-russia-1440174904.
Some countries require all businesses to be over 50 percent owned by its citizens. If McDonald’s wants to expand into a country with this regulation, which of the global entry strategies would not be an appropriate choice?
