McDonalds Internationally

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McDonald's Internationally
By Eric Kenny Ekta Shah Rachel Sigley George
Tsakanias Mariemir Viruet
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What we're looking to teach you...

• Were hoping from this presentation you will
• Learn a bit about the history of McDonalds.
• Understand just how much international expansion
  McDonalds is partaking in.
• Criticism/Opposition to McDonalds
• SWOT Analysis
• Few small legal cases involving McDonalds
• McDonalds in India and China
• Infrastructure
• Politics

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• Began in 1940
• Located in 122 Countries
• 51 million people are served a day at
  30,000 different locations
• Independent local business people own and operate
  more than 70 of McDonalds globally
• In 2004, Morgan Spurlock came out with a
  documentary titled Super Size Me that looked at
  the fast food corporation as a contributor to
  obesity
• In about 30 markets outside the U.S., McDonalds
  restaurants are operated by developmental
  licensees who own the business and pay McDonalds
  royalties based on a percentage of sales.

Quick Facts About McDonalds
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In the beginning...

• Began by two brothers
• Dick McDonald
• Mac McDonald
• Started off as a hot dog stand in CA 1937
• Hot Dog stand moves to Rt.66 and becomes a
  Hamburger Joint.
• Offers 25 menu items
• Becomes car hop
• Highly profitable teen hang
  out

1st McDonalds Hamburger Cost .15
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First McDonald's
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In the beginning...

• Brothers realize Burgers were most profitable
• Close down restaurant and reopen as a Speedy
  Service System
• Offer only burgers, shakes, and fries
• McDonalds is franchised to several
  locations1953
• First McDonalds to feature the Golden Arches
• Ray Kroc discovers McDonalds 1954
• Creates McDonalds Systems Inc to start
  franchising 1955
• Renamed to McDonalds Corporation 1960

A McDonalds in Downey, CA is the oldest
operating McDonalds today opened in 1953
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In the beginning...

• In 1967 the first McDonalds outside of the US
  opens up
• Richmond, British Columbia
• Big Mac and Apple Pie introduced 1968
• 1971 McDonalds really starts going global
• Asian Tokyo Ginza District, Japan
• European Netherland, Munich, Germany
• 1974 McDonalds Starts the Ronald McDonald
  House Charities as a non-profit organization to
  improve the health and well being of children.
  In 1985 the first RMHC opened internationally in
  the Netherlands.

McDonalds in Germany offered Beer as a part of
their menu
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International Expansion
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Across the Globe...

• 1967 - Canada Puerto Rico (first restaurants
  outside the U.S.)
• 1971 - Tokyo, Japan, Amsterdam, Netherlands
  Sydney, Australia
• 1979 - Rio de Janeiro, Brazil
• 1990 - Moscow, Russia China
• The Chinese characters "Mai Dang Lao" are used to
  phonetically approximate the word
  "McDonald's.
• 1992 - Casablanca, Morocco Czech Republic
• 1993 - The first McDonald's at sea opens aboard
  the Silja Europa, the world's
  largest ferry sailing between Stockholm and
  Helsinki.
• 1994 - Restaurants open in Bahrain, Bulgaria,
  Egypt, Kuwait, Latvia, Oman, New Caledonia,
  Trinidad and United Arab Emirates.
• 1996 - First restaurant opens in India.
• 50-50 joint venture partnership between
  McDonalds Corporation (USA) and two Indian
  businessmen.
• Two separate operations in Northern Western
  India.
• Partners and their management teams trained
  extensively in Indonesia the U.S.

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International Taste Offerings

• India Sandwich sauces, shakes and soft-serve
  products do not contain eggs in order to offer
  more variety to vegetarian customers.
• Uruguay McHuevo (hamburger with a poached egg on
  top)
• Norway McLaks (grilled salmon sandwich
  with dill sauce)
• Germany Beer
• Thailand Samurai Pork Burger (sausage patty in
  teriyaki sauce)
• Taiwan Rice Burger

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Importance of Expanding Internationally

• U.S. fast food market showed signs of saturation
  by early 1980s after 3 decades of rapid growth.
• Foreign revenues and profit have grown 22
  annually since early 1980s.
• By end of 2000, the foreign restaurants generated
  21B (53) of the corporations 40B in revenues.
• Foreign markets are sources of valuable new ideas.

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Foreign Markets Valuable Idea Source

• Dutch
• Prefabricated modular restaurants
  (temporary easily moved)
• Widely used for big outdoor events
• Sweden
• Enhanced meat freezer now used throughout entire
  firm
• Singapore
• Small, limited menu satellite restaurants (low
  overhead)
• Now in hospitals and sports arenas in the U.S.

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Expansion...

• Expansion rate slowed in the last few years due
  to declining operating margins and focus on
  improving existing restaurants and menu
  offerings.
• International expansion was led by late CEO, Jim
  Cantalupo, who passed away of a heart attack in
  April 2004, age 60.
• By the late 1990s, McDonalds aggressive
  expansion resulted in cannibalization of its own
  sales because stores were built too close to each
  other.
• In 2003,the focus changed from adding new
  restaurants to building sales at
  existing restaurants.
• Struggling European and South Korean restaurants
• U.K. - public concerns over unhealthy menu items
• Germany South Korea - adverse economic
  conditions
• Between 2003 and 2004, underperforming
  restaurants were closed in the
  U.S., Japan, Latin America and Jamaica.
• SARS concerns had a negative impact on sales in
  2003 in many Asian countries.

Jim Cantalupo
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McDonald's In China
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McDonald's In China

• McDonald's has most certainly had a profound
  effect on China.
• When the first McDonald's opened in Beijing more
  than a dozen years ago, 40,000 people lined up to
  observe a Big Mac and get their picture taken
  with the infamous Ronald McDonald.
• McDonald's is growing faster in China than in the
  United States.
• McDonalds owns operates more than
  600 stores across 105 cities in
  China.
• More than 100 more McDonald's stores
  will be added annually to
  Chinese cities within
  the coming years.

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China Menu Items

• While offering the basic burger and fries,
  McDonalds in China also offers
• Szechuan-style spicy chicken wings
• Seafood Soup
• Rice
• Oriental Sauces
• Taro and Red Bean Dessert

Red Bean Dessert
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In China, It's All About Who You Know

• In 1992, McDonalds opened its first restaurant
  in Beijing and the restaurant enjoyed good sales.
• 2 years into the 20-year lease, the city
  government told McDonalds to move the
  restaurant.
• The location would be used for another complex
  planned by a developer from Hong Kong.
• McDonalds tried to enforce its contract by
  taking the government to court, but it lost the
  case.
• In the West, contract law governs business
  transactions.
• In China, personal power and relationships/connect
  ions determine how business is conducted.

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...Guanxi...

• Guanxi literally means relationships
• Concept is deeply rooted in Chinese culture
  (based on 2000-year-old Confucian ideology).
• Guanxi is crucial for building long-term
  relationships and doing business in China.
• McDonalds did not have the same connections as
  the Chinese developer.
• By not accepting the governments
  decision gracefully and taking it to
  court, McDonalds damaged
  its reputation with
  the city government

Chinese Symbol for Guanxi
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Chinese Infrastructure

• In 1997 China passes first franchise law. Prior
  to this, all McDonalds restaurants were
  corporately owned and operated.
• Demand for western style conveniences is
  increasing as Chinas middle class grows.
• Drive-through fast food windows

In December 2005, China got its first drive thru
in the heart of the central business district of
Dongguan Guangdong Province, thirty years after
the first McDonalds US drive thru was
established
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McDonald's In India
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McDonald's In India

• Limited menu, fresh food, fast service and
  affordable prices have been the pillars behind
  McDonalds success in India. Intense competition
  and demands for a wider menu, drive-through and
  sit-down meals - encouraged the fast food giant
  to customize product variety without hindering
  the efficacy of its supply chain

McDonalds in India offers home delivery. Also
if you go to a McDonalds restaurant and order
food, you take a seat and they bring it to your
table.

• While there are some 150-200 million middle-class
  people in India that can afford McDonalds there
  is also a vast majority of the Indian population
  that is still too poor to afford it

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The Sacred Cow...

• For thousands of years, India's Hindu culture has
  revered the cow and does not eat the meat of the
  scared cow. In addition there are some 140
  million Muslims in India, who do not eat pork.
• To respect and adapt to Indian culture,
  McDonald's created an Indian version
  of burgers which are made from mutton
  and chicken. All foods are segregated
  vegetarian and non-vegetarian, due to the fact
  that many Hindus are vegetarians.

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Indian Menu Items

• Vegetarian Menu
• Veg McCurry
• McAloo Tikki
• McVeggie
• Pizza McPuff
• Crispy Chinese
• Paneer Salsa Wrap

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Indian Menu Items

• Non-Vegetarian Menu
• Chicken Maharaja Mac
• McChicken
• Filet-O-Fish
• Chicken Mexican Wrap
• Chicken McGrill
• Chicken McCurry Pan

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Problems in India

• McDonalds strategy of positioning itself as a
  family restaurant with an emphasis on local menus
  and local values seems to be working well in
  India. But to what extent McDonalds can continue
  its growth in India remains uncertain. McDonalds
  is more than just another American fast food
  chain. It carries a symbolic load of
  AmericannessAmerican variant of capitalism and
  its overwhelming domination over the global
  economy. It is also a symbol of American cultural
  imperialism. For this reason, McDonalds
  operations in India, like other parts of the
  world, will continue to face opposition from
  religious fundamentalists, environmentalists,
  protectionists, animal rights activists, and
  anti-globalization protestors.

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Indian Infrastructure

• New menu items specifically for vegetarians are
  introduced.
• It is made aware that the food is produced
  locally to show investment in Indian
  Infrastructure.
• McDonalds developed and maintains community
  parks to prevent public resentment.

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Indian Infrastructure

• Unique supply chain created
• Operates best when chain is balanced
• Necessary to maintain food freshness

McDonalds transferred its food processing
centers to India to increase efficiency
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Giving Back to the Community

• In Mumbai, there is an event called McDonalds
  Spotlight. This is an annual interschool
  performing arts competition. This competition is
  open to all secondary school students.
• Since 2002, McDonalds has participated in World
  Childrens Day. On this day, McDonalds raises
  money for any charity of their choice. Usually
  educational programs

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Strengths

• Sociologist George Ritzer, author of The
  McDonaldization of Society, states that
  McDonaldization is a transformation of
  rationalization, moving away from traditional to
  rational modes of thought, and scientific
  management. 
• Ritzer has highlighted 4 major concepts of
  McDonaldization
• Efficiency - the optimal method for accomplishing
  a task
• Calculability - objective should be quantifiable
  (i.e. sales) rather
  than subjective (i.e. taste)                 
• Predictability - standardized and uniform
  services
• Control - standardized and uniform employees

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Strengths

• These concepts have led to the stability and
  expansion of McDonalds in the overseas market,
  especially in East Asia, where more and more
  McDonalds franchises are opening constantly,
  leading to the belief that maybe one day every
  restaurant will be taken over by McDonalds
  itself.
• McDonalds franchises in various countries also
  offer a variety of meals to better help customers
  in choosing food that is best accustomed to
  peoples beliefs.
• For example, various faiths dont permit people
  eating pork or beef. The substituting of an
  existing meal with an alternative food can lead
  to the creation of new menu items, therefore,
  keeping the volume of customers high at all times
  as long as the expectations of customers are met
  with the outcome of higher revenues.

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Weaknesses

• Declining market share
• Weak product development
• Disgruntled franchisees
• Quality and taste of products
• Slowed revenue and income growth

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Opportunities

• McJobs Program
• McDonalds is one of the top 25 companies that
  has focused in hiring people with disabilities,
  giving them a chance to make a living like
  everyone else, leading to the creation of the
  McJobs Program.
• Looking to employ disabled people is what
  McDonalds focuses on because, according to John
  Yeh, employment of persons with disabilities is
  a win-win situation for employers, persons with
  disabilities, and service providers.
• Considered the best employer for Asians
• McDonalds worldwide willingly hires people
  constantly in order to supplement the growing
  need of employees for its growing franchise in
  over 101 countries.

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Threats

• The American fast-food market has become
  increasingly competitive as rivals such as Burger
  King, Wendy's and Taco Bell fight to maintain
  their market share.
• Strength of competition
• More health-conscious consumers
• Changing demographics
• Fluctuation of foreign exchange rates Economies

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Recommendations

• Focus on already existing operations before
  continuing expansion in order to increase their
  profit margin.
• Continue focusing on expanding in India and China
  because they are both developing countries with
  increasing economies and high populations.
• Add more menu choice and variety to promote
  healthier lifestyles.

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McFactoids

• Today, the company operates more than 30,000
  restaurants in approximately 120 countries on
  five continents
• Since its founding in 1955, McDonalds has sold
  well over 100 billion hamburgers
• McDonalds prepares more than 6.8 million pounds
  of French fries every day
• Advertisting Age named McDonalds marketer of the
  year for 2004
• Ranked 5th for Social Responsibility by Fortune
  magazine
• All franchisees are independent, full-time
  operators
• Approximately 70 of McDonalds restaurant
  businesses
  world-wide are owned and operated by
  franchisees

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Criticism...

• Often blamed for Obesity
• Blamed for excessive packaging waste
• Anti-Globalization protests
• Seen as American symbol of economical resource
  dominance
• Exploitative advertising
• Suffering and exploitation of livestock
• High calorie foods

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...In the courts

• In 1994, McDonald's successfully forced
  Elizabeth McCaughey of the San Francisco Bay Area
  to change the trading name of her coffeeshop
  McCoffee, which had operated under that name for
  17 years.
• In 1994, McDonald's sued a restaurant in
  Kingston, Jamaica, because of trademark
  infringement, although it had opened in 1971,
  before McDonald's entered the Jamaican market.
• In 1996, McDonald's lost a legal battle at the
  Danish Supreme Court to force Allan Pedersen, a
  mincemeat sandwich vendor, to drop his shop name
  McAllan.
• In 1996, McDonalds forced Scottish sandwich shop
  owner Mary Blair of Fenny Stratford,
  Buckinghamshire to drop McMunchies as her trading
  name.
• In 2001, McDonald's lost a 9-year legal action
  against Frank Yuen of McChina Wok Away, Chinese
  takeway outlets in various part of the UK.
• In South Africa, however, McDonald's had to
  battle against the country's trademark laws,
  which stated that a registered trademark had to
  be used within a certain period of time. This
  resulted in a local company announcing plans to
  launch its own fast-food chain using the
  McDonald's name, although the South African High
  Court eventually ruled in McDonald's favor.

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McAfrika

• In 2005 McDonalds had some opposition when they
  decided to name one of their burgers in Africa
  the McAfrika
• Believed to have a negative connotation
• Improper to the starving people of Africa

"It's inappropriate and distasteful to launch a
hamburger called McAfrika' when large portions
of southern Africa are on the verge of
starvation"
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What's in your carrots?

• To extend the shelf life of carrots that come
  with a happy meal, McDonalds was dipping their
  carrots in hydrogen peroxide and mixing it with
  acetic acids
• It is said by some that this is not necessarily
  unhealthy, but still, would you want to be eating
  hydrogen
  peroxide?

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Beef Fries?

• In 2001 McDonalds was sued by three vegetarians,
  including two Hindus, claiming that McDonalds
  used beef fat in the oil to make their fries
  despite McDonalds claim that it was using 100
  vegetable oil.
• In 2002, McDonalds conceded by offering 10
  million in compensation to the plaintiffs and
  offered an apology for misleading the public
  about the ingredients used for their fries and
  hash browns.

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You Don't Say?

• According to Fast Food Nation by Eric Schlosser
  (2001), nearly one in eight workers
  in the US has at some time
  been employed by McDonald's. The
  book also states that McDonalds
  is the largest private operator of
  playgrounds in the U.S., as well
  as the single largest purchaser
  of beef, pork, and potatoes.

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References

• www.mcdonalds.com
• www.mcdonaldsindia.com
• http//en.wikipedia.org/wiki/Mcdonalds
• http//www.cbsnews.com/stories/2002/06/05/national
  /main511109.shtml
• http//www.mcspotlight.org/media/press/mcds/aftenp
  osten180405.html
• http//www.mcspotlight.org/media/press/mcds/dailym
  ail150304.html
• http//www.ithaca.edu/ithacan/articles/0311/13/opi
  nion/1dont_blame_.htm
• http//www.ntac.hawaii.edu/products/Vol420Emp.Bri
  efs/EB-Vol4-Iss07-Employer
• http//en.wikipedia.org/wiki/McDonaldization
• http//www.mcdonaldsindia.com/aboutus/supplychain/
  index.html
• http//www.rajluhar.com/raj/finalproject.htm
• http//www.franchisetochina.com/f13.htm
• www.licenseenews.com
• McDonalds Everywhere Management Focus Article
• Hill, Charles (2005). Global Today. McGraw Hill
  College, NY. p.90-92