Abstract
This paper delves into the expansion of McDonald’s into various international markets and the various problems it needs to address to penetrate them. This paper thus delves into an analysis of macro-environmental factors, the viability of franchising, and whether the company should standardize or adapt the brand for international consumers.
Analysis of Macro-environmental factors
Porters 5 Forces Analysis
Steeple Analysis
Viability of Franchising
If the company were to penetrate new markets with an outdated branding strategy (i.e. the same strategy used in the U.S.) could result in a relatively low product uptake which would bring about significant financial losses for the company. One way of overcoming this was actually shown by Wal-Mart when it entered into the Chinese market wherein it undertook partnerships with local corporations and franchised the operation resulting in a considerable level of success. While it may be true that McDonald’s does orient itself to be a family friendly establishment, its primary market segment is not families with children at all. If you were to examine the types of customers that go to McDonald’s on a daily basis you would see that families are actually part of a far larger market segment which can only be described as type C customers.
This particular demographic is composed of individuals who are looking for the maximum value for their money with their limited amount of funds and, as a result, McDonald’s orients its menu in order to be an affordable and economical choice for such individuals. As such, based on the work of Chang (1995) the entry of an international company into a foreign market requires the development of new brand promotion initiatives that appeal more to the target market in the country that the company is attempting to penetrate into the desired consumer segment. The reason behind such attempts at developing an appeal that is more in line with the tastes of the local populace instead of relying on the traditional branding of the company is due the presence of already well established brands within the targeted markets with similar products lines (Chae and Hill 2000).
It is based on this that the best way of penetrating into a foreign market is through local franchising partnerships since a local corporate partner is better suited to understand the intricacies of a local culture as compared to a large multinational company that has little experience in the market it is attempting to penetrate. It is based on this that franchising would definitely be a viable means of entering into a foreign market given the experience and knowledge local “experts” can bring to the table.
Standardizing or Adapting the Brand
This section delves into whether McDonald’s should utilize standardization across its various international locations or change their operations based on the markets they are operating in. It was mentioned in the case study that McDonald’s has attempted to adapt to its local customer base through the use of special product offerings that coincide with local tastes. This comes in the form of chicken meals that have rice, special sandwiches that are kosher, and vegetarian options for customers in India. So far, such a strategy has proven to be effective in attracting customers and increasing product patronage, however, it must still be investigated whether it would be viable in the long term.
What must be understood is that the way a product is promoted in one country (i.e. the name of the product, its general appearance, and how a company chooses to appeal to consumers) is often engineered to appeal to the cultural and social predilections of that particular consumer population. However, not all consumers in the global market place have the same tastes when it comes to particular methods of marketing a product.
Branding is an important aspect of selling products since it is the manner in which consumers differentiate one product from the rest in terms of what the brand represents such as quality, product longevity and popularity (Viswanathan and Dickson 2007).
The reason behind such actions was noted in the work of Chang (1995) where it was stated that companies often implement a form of product customization in order to make a product more appealing to a local culture (Chang 1995). This was mentioned earlier through the sale of products by McDonald’s that were oriented more towards local consumer tastes that are not being sold in their traditional markets (i.e. shawarma, rice burgers, etc.).
What must be understood is that it is often necessary to rebrand a product in order for it be successful in a local market given the potential for cultural misunderstandings to arise resulting in low product sales. It is either that or the items that the company is selling may not coincide with the local cultural traditions within a particular country. This was seen in the case when McDonald’s expanded into India and it was discovered that a large percentage of the country practiced vegetarianism making its meat based products unappealing to this market segment. As a result, the company had to develop an entirely new menu that was primarily suited toward vegan plates.
However, this is not to say that adopting a standardized method of brand promotion is not effective. Companies such as Mc Donald’s, Toyota and Ford have implemented a pretty standardized brand strategy across different markets and have emerged as globally competitive companies with well recognized brands. When analyzing such aspects, it is necessary to examine standardization versus customization of a global brand in order to determine which method of branding would be advantageous for a company looking to establish itself in other global markets.
It is rather interesting to note that various theories of consumer decision making processes always seem to assume that consumers pass through distinct stages before, during and after the process of selecting a particular product to buy or service to utilize. What must be understood is that an average consumer is influenced by a myriad of different factors that affect how they choose to patronize a particular product or service (Brierley 2012).
This can range from various psychological reactions such as the way they think and feel about different products (i.e. brand perception) to the manner that the market environment they are currently present in affects the way in which they perceive a particular product or service (i.e. local culture, their family, local media influences etc.). For example, the 2008 financial crisis and the subsequent financial recession the U.S. greatly affected how consumers perceived particular products or services. People had less liquidity resulting in a shift in consumer buying behaviour towards more affordable food choices. This period of time actually created a resurgence in the number of consumers that went to McDonald’s since for them it was one of the most affordable ways they could eat. What is interesting though is how affordability and lower incomes affects consumer choice and thus brand development. In other words, consumers try to get the most out of their income through rational buying behaviour which results in a maximization of total utility from the products or services used (Rossiter & Foxall 2008).
In this section of the paper, this comes in the form of customers opting for affordable food from McDonald’s due to their limited amounts of money (Shaw, Shiu, & Clarke 2000). This rational behaviour is based on the fact that consumers will act in an economically competent manner wherein they will not spend too much money on irrational purchases or services (Calder & Burnkrant 1977). As such, the concept of rational behaviour assumes all consumers engage in rational buying behaviours which becomes the basis for any future analysis of consumer patronage towards a particular type of brand (Oshikawa 1969).
This is one of reasons why the standardization of the Mc Donald’s brand across multiple countries and consumer segments has been so successful given the brand’s association with fast and affordable food for the masses. This is one of the factors that McDonald’s should consider when developing their international branding strategies wherein they need to know what their brand represents and how it is effectively interpreted by the local populace and the consumer segment that the company is attempting to target (Viswanathan and Dickson 2007).
In the case of Mc Donald’s, it has always had a more “generalized” marketing strategy which focuses on targeting class C (i.e. low income) or class b (i.e. mid income) consumers due to the product offerings it has. By focusing on serving everybody, the company does not need to worry as much on product distinction; rather, it focuses on promotion through affordability. Similar companies that are able to utilize a standardized branding strategy by virtue of their business model come in the form of companies such as Tide (the detergent company) or Microsoft (the software developer) (O’Donnell and Jeong 2000). The companies that were mentioned are focused more on generalized methods of sale to all consumer classes and thus customization of a global brand is not necessary. However, there are cases where customization is necessary given different price points that a company wishes to enter. It is based on this that the next section will examine such aspects.
The principle of customization can be seen at work when McDonald’s developed country specific menu items to better appeal to local tastes as well as utilizing local suppliers to bring down the price of products to a level that is more affordable for local consumers. By positioning itself in different points in the market with a branding strategy that enables it to encompass different types of consumers, this enabled the company to develop better positioning in terms of being able to penetrate multiple markets under different branding methods (i.e. appealing to different nationalities through different product offerings).
This method of brand customization is in part due to the company’s desire to be able to appeal to multiple consumer segments through brands that are more inclined towards their end of the consumer market. However, it should be noted that Rossiter & Foxall (2008) explains that one of the best ways for a company to fail when it comes to penetrating new markets is to try to overextend the brand into multiple frontiers. This can cause not only a significant issue in consumer perceptions regarding the brand itself but could also cause logistical issues for the various McDonald’s franchise stores attempting to sell different product iterations of the same brand.
The most effective solution, as advocated by Rossiter & Foxall (2008), is to employ product customization instead of standardization wherein a company has a brand embody a particular type of product that would suit a segment of the population. By doing so, this enables a company to reach multiple classes of consumers and be better suited to adapting to a new consumer environment as compared to sticking with a standardized method of sales and production.
Based on what has been presented, it can be seen that when it comes to standardization versus customization of a global brand, it all depends on the type of product that is being sold and how a company chooses to target its desired customers. A generalized consumer strategy as seen in the case of McDonald’s in its home markets would be effective, however when attempting to penetrate markets with diverse levels of taste (i.e. different local predilections towards the type of food eaten) a more customized branding initiative is more effective especially in cases where targeting different types of consumer segments is being done.
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