Cross-Cultural Interface Management: McDonald's Business Report

This report provides a comprehensive analysis of McDonald's international business operations, focusing on the challenges and strategies related to the cross-cultural interface. It begins with an executive summary and introduction, followed by a literature review that explores various international business strategies. The core of the report involves a detailed discussion section, which includes external and internal analyses of McDonald's, examining factors such as political, economic, social, technological, environmental, and legal (PESTLE) environments across different countries. The report then delves into competitive dynamics and business-level strategies employed by McDonald's to adapt to local markets. The report presents recommendations for the company to reach a wider audience and improve product and service quality, and concludes with a summary of the key findings. The analysis highlights the importance of cultural sensitivity, market adaptation, and strategic responses to navigate the complexities of international business and maintain a competitive edge.

Management of the cross cultural interface

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Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................3
Literature review..............................................................................................................................4
Discussion........................................................................................................................................6
1. External Analysis..................................................................................................................6
2. Internal analysis....................................................................................................................9
3. Competitive dynamics........................................................................................................10
4. Business level strategies.....................................................................................................11
Recommendations..........................................................................................................................12
Conclusion.....................................................................................................................................14
References......................................................................................................................................15
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Executive Summary
The report focuses on understanding the role of political, economic, social, technological,
environmental and legal factors that plays an essential role in international business. Mc
Donald’s is the company chosen for analyzing the external and internal environment in foreign
markets. McDonald’s is a leading food service retailer operating in 120 countries. The company
is regarded as the most competent brand across globe. McDonald has gained great trust from its
customers. Though lately there have been certain changes in the eating pattern of its consumers
across the world. The company is making efforts to adhere to each foreign markets policy while
adding items to the menu. The various issues faced by the company in different countries are
discussed. The issues relate to political, economic, social and legal environment of the foreign
markets. The competitors of Mc Donald’s have taken the benefit of the changing consumer
behavior of choosing food that is perceived to be healthier. After studying the external factors,
the various strategies applied at business level for redeeming the company’s popularity are also
analyzed. Finally, certain recommendations are presented for the company to reach a wider
audience and provide quality products and services.
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Introduction
McDonald’s is a leading food service retailer operating in 120 countries. It is the biggest chain of
burgers fast food restaurants. The company serves in 35000 restaurants across the world and
caters to 50 million consumers on daily basis. The company was founded in the year 1940 in
California. The aim of the company is to provide best quality products and services to its
consumers. To draw more customers, the company focuses on cleanliness and gives high value
to its customers. The report discusses the issues with respect to international business.
International business gives rise to concerns that may or may not arise in a single country. Even
though the issues are alike in nature the response has to be different depending upon the
countries in which the business operates. The companies pay most of the heed to overcome
challenges faced by the foreign markets rather heed should be paid to the opportunities that the
international business provides by making use of the advantage of similarities and dissimilarities
in the foreign markets (Nachum, 2011).
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Literature review
There are primarily four kinds of international business strategies working all around the globe.
The first is the international strategy. It involves exporting products and services to foreign
markets. The next is multi domestic business strategy. The companies establish themselves in
foreign markets and are flexible to the needs of the local customers. In this case Headquarter of
the company is in the same location but various subsidiaries are established in the foreign land.
The next is the Global strategy; companies expand their base in foreign markets. These
companies work towards minimizing the costs, expanding in the foreign markets and adjusting as
per the local environment of the foreign market. For example, a fast food company may add,
remove or change a particular food item to adjust as per local markets. The next is the
transnational business strategy. The headquarter of the business is in the country of origin but it
permits full scale operations globally. There are separate marketing, research and developmental
departments in the foreign markets. For example, companies like General Electric and Toyota
utilize this business strategy (Norwich University, 2017).
International business helps in diversification of business risk. There is a definite risk of
operating only in one country as the negative impact of economic, political and natural disasters
can create severe problems. Whereas the risks get lowered down when the companies diversify
in different foreign markets. Economist Adam Smith also had evaluated the policies and
responded on the same lines. He argued that real wealth is not stockpiles of gold and silver rather
real wealth is the level of progress in the standard of living of the population of the country
(Rodrik, 2017). He stated that free trade and productivity helps in improving the global
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competence. Any country’s quality of living can be increased by international business with
other countries. Heckscher (1919) and Bertil Ohhn (1933) had suggested that a country having
large quantity of economical labor would export labor intensive products; import capital
intensive goods and vice versa. The theory advocates that the model of trade is determined by
this factor rather than productivity (Bhagwati, 2007).
The decrease in trade barriers and increase in advanced technology has provided several
opportunities for international business. International competition also helps in shattering the
unproductive domestic monopolies. In 1990 most of the countries opened their
telecommunication corporations internationally, which has resulted in enormous range of
services for the domestic consumers (Stiglitz & Charlton, 2007). Global competition mostly
compels the unproductive firms to close down their operations. Economists view this concept as
benefit, as the company can invest labor and capital from unproductive ventures to new ventures.
The concept is termed as creative destruction through competition and innovation (Colorado,
2012).
Innovation, technology, resources, size of market and competitive structure has a great influence
on international trade. If the innovating country has a big market size, it can carry mass
production for domestic sale. It helps in gaining cost efficiency and eventually makes them
internationally competitive. In case of smaller market size, the economies of scale can be gained
through having marketing and production facilities in other cost effective countries. Several trade
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theories suggest that low skilled production process from developed countries should be shifted
to developing countries (Warburton, 2010).
Discussion
There are several factors that have contributed in the success of McDonald’s. The company has a
good reputation and positive image in the minds of the customers. The company is regarded as
the most competent brand across globe. McDonald’s has gained great trust from its customers. It
is regarded as one of the best hangout place for families and kids. The next factor is the food
quality. McDonald’s company ensures that it has good control on its suppliers to provide
nourishment security (McDonald, 2019).
1. External Analysis
There has been a shift in the dining habits in US and because of that company is facing big
challenge. It is studied that the company is facing difficulty in managing the sudden shifts. There
is an increase in the demand towards food that is perceived to be made with natural ingredients.
The various issues faced by the company in different countries are discussed. The issues relate to
political, economic, social and legal environment of the foreign markets. A PESTLE analysis is
undertaken to understand the issues:
Political
McDonalds was enjoying a great success story
in Russia but it slowed down because of the
weakening relations between Moscow and US
(geopolitical backdrop).
Economic
In Latin America the company is facing a lot of
local competition. Inflation has also hit the
profits of the company.
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The consumer protection agency of the country
declared that some of the company’s food
items did not match the Russia’s health safety
standards.
The agency had temporarily shut down nine
outlets of the company including the first
restaurant that was opened in the flagship
location. The company is under several court
cases in Russia, the issues range from
employees to mislabeling of food products etc.
In Europe Mc Donald’s had drawn a lot of
consumers. Though like the trend in many
parts of the world the European customers are
also spoilt for more choices. This resulted in
lowering down of store sales and operating
income. Their main competitors were Japanese
and Mexican food joints. The poor economic
environment of Greece and Italy has also
affected the revenues.
Social
In China, the company has faced the blame of
using expired meat. That resulted in 4.8
percent dropping in the store sales in Asian and
African markets. The consumers in the Asian
markets have now moved over from their
earlier interest in eating western fast food and
are now more focused on eating healthier
products.
In Japan too the company was earning
exceptionally well for a decade but the sales
started to drop down and the company even
went into losses when the customers became
Technological
The competitors of McDonalds are making use
of technology by collaborating with other
online partners to reach wider audience (Hill,
2015).
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discontented with its food offerings.
Latin America: The employees of the
organization complained of being made to eat
only burgers for lunch. The company had to
then provide the option of rice, beans and beef
to them. The company also provided these
items to their customers, though it is a big
challenge to prepare as per the local tastes of
the company.
Environment
Several competitors of the company are
involved in various CSR activities to lower
down the carbon footprint and have gained
good public reputation because of the same.
Legal
In case of India a legal dispute proved to be
very disadvantaged for the company and thus
took away the early advantage from a rising
demand of convenient and clean food in the
country. Though India has a rising young
population which prefers to grab meals rather
than use fine dining options. Mc Donald’s had
entered India way before its competitors.
It also had to provide meals as per Hindu
population as the main product offering of the
company that is the beef burgers were a taboo.
The company was successful in providing
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various vegetable and chicken choices to the
Indian Customers. The problem arose when the
company was stuck in a legal battle with its
previous Indian partner, which hindered the
company’s expansion
(Gadsden, 2014)
The above analysis shows that the company needs to work on providing more variety and quality
services to its consumers. The company needs to reinvest on the existing restaurants and open
new restaurants in markets like US, Canada and France.
2. Internal analysis
The company has undergone several changes to redeem its popularity across the several markets
in which it is operating:
Product: The Company is acclimatizing its menu and business plans as per the different cultures
of the foreign companies. The company is making efforts to adhere to each foreign markets
policy while adding items to the menu. McDonald is now undergoing various product tests by
way of adding or removing the product offerings as per local liking and popularity of the
customers. For example, the appetite of Japanese customers is very different from the American
customers, therefore the packaging of its food items are relatively smaller. In case of China too,
the company has modified the food items as per the local trends and popularity of the customers.
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Instead of using meat from chicken breasts the company uses chicken thighs to please the local
customers. At times of New Year, McDonald’s provides Grilled Chicken burger with fries and
Chinese horoscope. A new variety of Soups were added, such as corn Soup, Vegetable soup and
Seafood Soup (Kelly, 2019).
Promotion: The companies use various different marketing strategies for its international
business. A comparison of advertising in two of Mc Donald’s markets is discussed. In the United
States the company does huge expenditure. The company undertakes several product trials and
innovations in United States. The company creates more than 250 ads on annual basis directed
primarily towards children. In case of Japan, the marketing campaigns are very different. These
are directed both towards adults and children and are tailor-made as per the local culture. Mc
Donald’s - Canada had participated in a huge campaign wherein they answered 2000 questions
of the public regarding food quality. Mc Donald’s was very popular for breakfast in the United
States but the company did not pay the required heed towards it. There were no promotions,
advertisements and addition of new food items for several years. This dropped the sales to a
great extent. The company cannot rely on past successes. They have to keep their strengths intact
and work on the weaknesses while moving forward in new areas.
3. Competitive dynamics
The competitors of Mc Donald’s have taken the benefit of the changing consumer behavior of
choosing food that is perceived to be healthier. In India the legal dispute as discussed above
proved to be very advantageous to the competitors. The repercussions of this battle are that the
competitors of the company such as Domino’s, KFC and Subway had taken the advantage. In the
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year 2008 McDonald’s had double the sales than Domino’s in India. Times have changed and
recently Dominos have exceeded the sales than McDonalds. In other parts of the Asia also a
similar picture is replicated because of a change of eating patterns of the population and shift
towards perceived healthier options (Econsultancy, 2019).
4. Business level strategies
In order to bring back the earlier level of fondness towards the company across different foreign
markets the company applied three strategies i.e. regain, retain and convert.
Regain, retain and convert: The Company launched a research program and found out that they
were losing customers to their direct competitors. The company made several efforts to “regain”
their customers back and improvised the customers experience and introduced new value
platforms. The next strategy that was applied was “retain”, to keep the families with their kids
who enjoy McDonald’s breakfast. The third strategy applied is “convert”. The company is
attracting newer customers by looking for opportunities in areas like coffee and snacks (Memon
& Mustafa, 2016).
Technology: McDonalds had been criticized for its quality of raw material in number of foreign
markets, so the company has introduced an app in the name of ‘Track My Macca’ s’ app. This
app helps in letting people know the source of ingredients of the food items. The customers scan
the product and the app detects the source of raw material for that food offering. In several
foreign markets, delivery was a growth opportunity. The company therefore brought together a
skillful team from different locations. The team was exclusively focused on delivery. Mc
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