Management
McDonalds in Asia
- Introduction
McDonald’s is easily among the most recognized brands in the world with branches stretched across seven continents and still expanding. However for a business such as McDonald’s, overseeing thousands of branches and the task of ensuring the efficiency of all the stores in closely adhering to quality standards is astronomical. The fast food giant has branches licensed to franchisees in China, Malaysia, Indonesia, the Philippines, Singapore, Japan, Thailand, and among others. The case study encompasses the crucial elements that that are directly attributed to the McDonald’s operations in Asia and includes identifying the challenges that the brand is facing amidst the non-familiar territory.
- McDonald’s is continuously making its presence in Asia with an objective to lead the fast food industry within the emerging economies in the Region. Currently, Dave Hoffman is holding the top position as the President of the APMEA (Asia/Pacific, Middle East, and Africa) leading the restaurant operations in the region’s restaurant operations. The monumental task of overseeing the overall operations of the fast food chain includes managing more than 5,500 branches with the help of the Japan executive team (Baskin, 2012).
- McDonald’s started its overseas operations in 1967 with its first international branch in Costa Rica and four years later the famous Golden Arches began to emerge in the Asian continent with its first branch in Japan. During the span of more than six decades, the fast food brand reached an unprecedented growth by achieving a rate of three branch openings every three hours (James, 2009).
- Despite the unstoppable growth of McDonald’s as dominant global brand, the company is also facing difficulties particularly in terms of operational adjustments. Part of the challenges that McDonald’s are struggling to address is the issue of cultural denomination and meeting specific regional food culture.
- The scale of disadvantage that McDonalds have within the unknown geographical territory is enormous given that the company has to redesign its menu to meet the demands for local taste in each country.
- The primary indicators of the problematic symptoms in the Asian division of MacDonald’s operations are the declining sales due to local competition, financial disparities due to localization of currency for capital, and cultural practices.
- The recent news about the meat scare in China has resulted to an average sales decline in the Chinese market by as much as 7.3%. The negative impact of the news also contributed to a global sales decline of 2.5% and an overall regional sales decline of 0.5% in Asia (Jargon, 2014).
- Strategic goals for recovery
- The company is striving to address the challenges it faces in the Asian region by rethinking its e strategic goals. Part of the objectives is to continuously improve customer experience and operate business within the acceptable ethical practices (London Economics, 2011).
- In addition, McDonald’s also redefines its strategies through a more focused plan
- Breakfast
- Core menu extensions
- Convenience
- Value
- In terms of organizational strategic plans focusing on the Asian region, the company is adopting a new set of strategic plan to reinforce its market position in the region.
- Improved restaurant operations
- Placing customers as priority
- Expanding menu variety
- Introduction of locally-inspired beverages and food items
- Analyzing the current position of McDonald’s in Asia encompasses the need to look at the case with the use of SWOT. The analysis tool would be able to determine strengths, opportunities, and weaknesses of the company’s current strategies.
- Strengths – McDonald’s holds the distinction of one of the most recognized brands in the world, which can be considered as the company’s strongest asset. Furthermore, the company was able to build up huge brand equity. In addition, McDonald’s has a large market share at 19% in the global market (Khan, 2008). The other notable strengths of the brand includes;
- Specialized training for managers
- Strategic plans to win
- Production expansion
- Technological innovation
- Strong marketing strategy
- Weakness – McDonald’s success was also subject to scrutiny due to the unhealthy food image that the mainstream media is portraying about its food. Furthermore, McDonald’s lack of familiarity with the local culture creates difficulty in competing with local brands. For example, McDonald’s is still struggling to compete with a local fast food brand in the Philippines called Jollibee. The local brand holds the majority of the market share with McDonalds coming in constantly at the second place. Other weaknesses that encompasses the challenges for the company to excel further in the Asian region includes;
- Loss of customer confidence
- Health related issues
- Legal actions
- High employee turnover rate
- Dissatisfied franchisees
- Opportunities – McDonald’s still holds several opportunities in terms of growth. There is still significant number of potential markets that the company is still yet to explore in the Asian region. The company is also open to changes and flexible in terms of product development, which will help in meeting the demands for local taste.
- Threats – There are two main threats have a direct impact to McDonalds in Asia. One is competition with other international and local fast food companies and the image of unhealthy lifestyle portrayed in the mainstream and social media.
- Based on the collected information about McDonald’s current state of business in Asia, it appears that the company is struggling to capture the majority markets in the region. Primarily due to the cultural variation that affects the consumers behave in a specific country.
- The perceived relevant goal gaps encompass relates to the strategic goal of serving the people with the best service and high quality food. However, the mainstream media and the social media publish contents stating the lack of responsibility of the company in ensuring the health of the consumers.
- Among the inconsistencies in the corporate can be observed in the strategic plan to win the market and eventually capture the majority markets in each country. There are several factors attributed to the loss of confidence of the people towards the brand and one of which is its failure to beat local competitors given the high investments on brand equity.
- For future priorities, McDonald’s in Asia should focus more on mitigating the effects of negative publications about the company and its long-tainted reputation of selling unhealthy foods. Furthermore, market variability is a major concern that the company should address particularly in terms of focusing on local values and culture that can be adopted to improve business practices. In return, the company would be able to capture higher market share and gaining advantage over the local and international competition.
- Action
- It is apparent that McDonald’s is facing uncertainties in terms of establishing a strong market presence in the Asian region. Therefore, as a solution, the company should be considering redesigning its menu to further meet the demands for local taste.
- The company should also reinvent is image as a producer of unhealthy foods and sometimes blamed for the deteriorating health of many people due to the lifestyle attributed to fast food consumption.
- In terms of sales, the company should be able to address the problem of declining sales by means of evaluating product sales and point out the high selling products to be marketed further.
- Considering that McDonald’s is still yet to explore other areas in the Asian region to do business with, the company should explore more potential locations for new stores. Furthermore, the company should also focus its efforts on markets with greater market potentials such as India with average annual sales of $128 billion and still growing (Bremner, 2007). Currently, McDonalds China leads the pact of McDonald’s stores in other countries with average annual sales of $132 billion (Bremner, 2007). On the other hand, the company should also consider tapping into other potential markets that are beginning to embrace the Western cultural flavor of the fast food industry.
- Beating the competition also calls measures that will requires re-evaluating concepts and integrate local cultural values in Asian countries in order to make people to connect more with the brand.
References
Baskin, A. (2012, May 31). Dave Hoffman Named President of McDonald's APMEA Region | People & Players - Advertising Age. Retrieved from http://adage.com/article/people-players/dave-hoffman-named-president-mcdonald-s-apmea-region/235086/
Bremner, B. (2007, January 24). McDonald's Is Loving It in Asia - Businessweek. Retrieved from http://www.businessweek.com/stories/2007-01-24/mcdonalds-is-loving-it-in-asiabusinessweek-business-news-stock-market-and-financial-advice
James, R. (2009, October 28). A Brief History of McDonald's Abroad - TIME. Retrieved from http://content.time.com/time/world/article/0,8599,1932839,00.html
Jargon, J. (2014, August 8). McDonald's Growth Suffers in U.S., China - WSJ. Retrieved from http://online.wsj.com/articles/mcdonalds-july-sales-slip-on-china-u-s-pressures-1407500403
Khan, M. A. (2008). Global Expansion Decision Making: An assessment of the impacting factors for restaurant franchises. Retrieved from Pamplin College of Business Virginia Tech website: https://emnet.univie.ac.at/uploads/media/Khan_Khan.pdf
London Economics. (2011). McDonald’s economic footprint in Europe. Retrieved from London Economics. website: http://www.mcdpressoffice.eu/downloads/Economic_footprint_Report.pdf
