Introduction
While operating in the fast food industry, companies have to analyze the external environment before they make any decision. This involves the social environment, competitive environment and the legal environment. A company that does not take care of its market will lose its competitive edge.
The external environment determines the strategies a company will use to secure a sustainable market share. For instance the price strategy is usually determined by a number of factors such as the number of competitors in the market, the availability and costs of raw materials and the existent product substitutes in the market.
The perceived value of the product by the people is also a big factor. (Barlon and Kimuli 2006). Other important considerations in the market place are the need for product adaptation, distribution channels, discounting pressures and market growth. (Doole and Lowe, 2008, p.371).
Every market is unique. In this paper, we will look at the major fast food companies and the strategies they used to penetrate in different foreign markets in the face of different global challenges.
Global Challenges
Ethical and Health Challenges
The fast food industry has been facing various ethical challenges even as ethical. Research conducted in several countries shows that people are becoming more and more obese and unhealthy. There have also been concerns with the advertising strategies of the fast food companies such as McDonald.
In order to deal with the tough competition in the market, the company started offering toys together with meals (Hunter, 2002). The toys were for characters in the latest popular TV or movies at the time.
This caused the company to get a larger market share in the children’s population in comparison to the other companies. However as time has gone by there has been growing criticism of the adverts with the company being accused of enticing children to eat unhealthy food (Tanner, 2006).
The McDonald Company faced legal challenges when a parent filed a suit saying the company uses toy giveaways to bait children during “Happy Hour”. The company in order to maintain a positive image in the eyes of the consumers will have to adopt different advertising strategies.
The fast food companies have to develop strategies to deal with the changing consumer perceptions and preferences. Recently there has been a wave towards healthy eating. The McDonald Company in 2003 started strategically to offer healthy fast food alternatives to people.
In the campaign there was the option of the consumers taking milk and apple dippers instead of the usual fries and the soda. There were healthy salads that the company introduced for the consumers to take with salads.
The adults who are health-conscious were supplied with the options of salad, bottled water, a pedometer and even a pamphlet detailing information on walking and staying fit. The McDonald Company has introduced fruits and other low fat options over time.
The company partnered with the fitness company in 2006 to launch a campaign known as “Adult Happy Meals.” In this campaign the company was offering the adults with a DVD in addition with the salad and drink.
Another company that has improved its dietary calories intake is the Taco Bell Company. It offers taco and other southwestern foods in addition to the fast foods which have lower calories. The companies have had to take into consideration the consumers changing food preferences.
In a country like India, the cow is considered a god. The Hindu religion believes in Karma and is against violence towards living creatures. The cows roam the streets and are taken care of by people. Other kinds of meat are also not also widely eaten in the country.
The Indians tend to be predominantly, a vegetarian society. They cannot eat beef. However the McDonald Company has succeeded to be largest fast food company in the region despite being a company that specializes in making beef burgers. In order to take care of the Indian market customers and retain customer goodwill, the company opted to sell vegetarian burgers.
The company considered the population of Indian Muslims in the country and opted to exclude pork from their menus. The vegetarian burger has potatoes, peas, carrots and Indian spices. There are burgers with cheese however the company ensures that even the cheese is vegetarian.
Companies that fail to consider the culture and the religion of their target markets end up suffering. In 2001, a Hindu practitioner sued the company for telling the people that their fries and hash browns were being cooked in a 100% vegetable oil yet products had beef flavoring.
The company had to pay $10 Million U.S dollars in the law suit. The company took several steps to avoid similar fiascos in that country. They set up a dietary advisory panel to assist them in ensuring their foods are best suited to the Indians considering their culture and their religions.
There are other companies in the region that have faced similar challenges in the Indian market. The Kentucky Fried Kitchen entered the India market in 1996.
It was the first fast food company in the region. It had just opened the outlet in the region when farmers protested about citing lack of ethical considerations by
the company. The farmers stated that the country which has a high number of poor people would not benefit at all by the opening of such a company in the region.
The farmers expressed their fears on how the people would switch from purchasing agricultural products to eating meat products. The company in investing in foreign markets has to take care of the cultural and social considerations. There are some hurdles that the company can avoid by doing further research however they are other challenges that arise even as the business continues with its operations.
The other argument that was brought forward by the Indian farmers was that it was unethical to sell highly processed junk in a country that faced malnutrition as one of their challenges. Today, the Kentucky Fried chicken has only one branch in India.
Furthermore the branch in light of the social and cultural environment sells vegetarian food. The other company that did not succeed in the market was the Kellogg Company. It wanted to encourage the Indians to be consuming cornflakes and sugar puffs in the morning.
However the Indians preferred to be consuming their parathas and idlis instead. Generally, the Indians in their culture are conservative in their eating. They are not like Americans.
The American fast food companies had to integrate vegetarian aspects in their food choices so that Indians can consider the food to be of value.
Socio-cultural Challenges
Cultural differences play a big role in the tactical and operational strategies adopted by food fast restaurants all over the world. The culture of the people will determine how they will respond to a new company’s products in the market (Subramanian and Bala, 2001).
The marketing strategy of a company will definitely be affected by the culture of a specific country (Mooij, 2003, pp 153). To ignore socio-cultural elements would be to invite disaster. The marketing managers have to carry out a thorough research on the culture of the foreign country (Herrmann & Heitmann, 2006).
With the globalization of markets taking place in the world today, the culture of a country would be hard to isolate. A company may choose to use two strategies in a foreign market. They may choose to standardize their products or adapt their products to the culture of the people.
These two strategies represent two extremes therefore a lot of companies opt to adopt a mixture of the two strategies. The culture of the foreign market is allowed to influence the kind of foods that will be in the menu.
(Doole and Lowe, 2008, pp 70). In expanding to other countries, the company asks itself crucial questions. To what extent does the company adopt the culture of the host country without losing the brand and image that it has worked so hard to achieve?
It is very important for the company to be aware and alert about the eternal environment (Kotler, 2001, pp 138).
The company should be quick to adapt and adjust to the social-cultural environments. The way the company responds to the people’s culture will influence the consumer’s buying behavior and the loyalty they attach to a certain brand vis a vis another brand. (Kim et al, 2002).
The culture of the people can be defined as the beliefs, values and the customs of the people in a certain geographical area. The culture is usually ingrained in the people and hard to change or modify causing cultural differences and conflict with people of different cultures.
Companies have faced law suits and lost market share or profits when they assumed that the foreign markets will be similar to the home markets. It is crucial that companies carry out company research well on the culture of the people before the market entry stage (Blackwel et al, 2001, pp 60).
The marketers should be aware that the culture sets the standards expected by the people and the operating rules that the company should adhere to in the market place (Usunier, 2000, pp 55).
KFC
In 1986, KFC started to consider investing in the Chinese market. The management asked themselves some pertinent questions. The company wondered whether the American taste would be accepted in the country. The huge population in the country was a big attraction to the company. They saw the potential of making very high sales.
The company started investing in the country on a step by step basis. They started with the four big cities, Shanghai, Beijing, Tianjin and Guangzhou then they spread out to the other cities. The Chinese and American markets are very different in terms of the food culture. When the company introduced its Chicken roll of old Beijing in 2003, it gained a lot of popularity.
The company stated that it was always looking for the food tastes that would fit the Chinese customers. The company noted that KFC would not succeed worldwide if it failed to consider the diversified cultures and customs of the people in foreign markets.
Forcing the people to love and embrace American tastes would prove to be difficult. The Company offers seasonal vegetables in their menu such as the bamboo shoots in spring. They also offer lotus roots in summers. The company prepares several dishes in different Chinese spices.
KFC strategically targets the families and the youth. The young people are flexible, embracing different foreign cultures and ideas faster than the rest. The restaurants have a special area for the children. There are decorations and toys that attract the children.
KFC Company considered the way minority nationalities have settled in the middle and southwest of china. These minorities share the same food preferences, language or dialect, values and customs. To tap into this market the restaurant opened several outlets in these areas.
The menu that the company offers in these areas is highly different from the menu offered in other restaurants in the areas (Risner, 2001).The company has won a lot of customer loyalty. They seldom reduce their food prices. In 2009 when the company raised the prices for some of its products, the customers did not stop buying food in the restaurants (Huang, 2007).
KFC takes its place strategy very seriously. The company considers the political risk, financial economy and the population of the market. The consumer values affect the kind of adverts that can be broadcast (Pan and Bernd, 1996).The company does its adverts in a Chinese manner to attract the Chinese clientele.
McDonald
The McDonald Company is also operating in China. It is one of the largest fast food companies in the world. The company started operations in China in 1990 in the Shenzen Sez city. The marketing manager stated that the company wants to offer the American flavor to the people so they still offer American hamburgers, Milk shakes, Coca cola and fries in their menu.
However to attract the Chinese customers even more, the company placed some adaptable Chinese products in their menu. The company has a dedicated group of people who do food research for the company. The company started serving spicy chicken mixed with Chinese elements.
In 2004, the company started ordering a suitable menu for breakfast to suit the market; they have products such as scrambled eggs, pancakes and hot tea. The company has proved that the strategy of product localization is true. It yields high customer loyalty and sales for the company.
The company has become so successful in the region. It has over 650 restaurants in China located in over 20 restaurants. Like KFC, the company targets the family group. It has set up the “family” fast food company in China.
The company has considered the prices of their products in the market. The Company chose to use a low-price strategy due to the lower incomes compares to United States of America. Therefore the prices of products in China are lower than in the U.S (Cui and Ting, 2009).
Such consideration goes to show the way the company ethically considers its clientele market. The action goes a long way in increasing customer goodwill. Another strategy that the company used was to set up the restaurants near the large scale commercial centers.
These areas have high populations signifying high profits. Secondly due to urbanization the company would find people here that were more willing to adapt to the American food culture.
The marketing manager revealed that the company tends to look for markets that would be suitable in adopting the McDonald Concept implying that cultural implications play a big role.
Before launching into a market, the company has a research team that considers the population density, economic level, buying ability and income levels of the people in the region. In a similar manner to KFC, the McDonald Company in advertising its products has known the importance of considering the cultures, customer behavior and traditional values of the people (Han and Sharon, 1994).
The McDonald adverts always show a warm picture. It shoes the elderly and the young generation relaxing in the restaurant premises. The adverts use fancy red and golden colors. The adverts show the public that they appreciate their culture by showing the celebration of the Chinese New Year, New Year wishes and calligraphy (Lu, 2005).
The people value the traditional culture and the traditional food. The family shares the same values. Sticking to the family culture is very important. The people respect, love and support each other. Friendship is also very important (Hofstede, 1998).
Couples come to the restaurants a lot therefore the management has seen the need for their adverts to express a romantic atmosphere. Furthermore, the management has placed double seats for lovers and couples to sit. A good example of an advert is where a boy offers chicken wings to a girl in a restaurant. In addition to the wings, there is a diamond ring for engagement.
McDonald has also ventured into other countries like Brazil. The restaurant opened its first outlet in the country in the year 1979. The company made several adaptations its menu. It started to offer an acceptable class of meat to the Brazilians as the people are very selective in the kinds of meat that they consume.
The McDonald Company does not really offer a breakfast option in the country in its menu. This is because the Brazilian people rarely take breakfast.
The people generally take coffee and a light roll of bread. The Brazilians consume a lot of juices so the company had to be careful to offer high quality juices to the people. In addition the company offers national drinks such as guaraná and maracujá. In the dessert option, instead of the company offering the cherry and apple, the company offers tropical fruits in order to appease the Brazilian customer.
In Brazil there are even changes in the restaurant outlet format. Whereas in the U.S the outlets are in the spacious suburbs, the outlets in Brazil are free-standing with outdoor terraces for the people to enjoy the weather. In Brazil the cost of real estate is high and it is difficulty in acquiring spacious locations.
Overall the country has been very receptive to the American culture, in countries such as Japan and India the company had to engage in a lot of product adaptation as their cultures are so different. Another example is when McDonald entered into the French market.
The company initially had a strategy of influencing the people to adopt the American fast food culture. However, they realized that to succeed in France they would have to adopt the French culture.
The company has added items that usually are not in the American menu. The company offers Evian water in addition to coke and other carbonated drinks. For breakfast the company has added Dannon brand yoghurt to the menu. The French do not usually take a lot of breakfast. They usually take a croissant and coffee.
The McDonald Company has therefore added mini croissants and “pain au chocolat” or chocolate cake to their menu. Within its value options there are vegetable platters or salad shakers instead of the fries.
One of the French adaptations is the “Croque Mcdo”. The company has prepared the croquet monsieur in its own style. They also serve the traditional melted enmental cheese and ham with bread.
When McDonald ventures into foreign markets, it operates through joint ventures with local partners. The strategy is to use a local partner who is able to relate to the cultural environment so that the company has an easier entry process culturally. The market entry strategy into a foreign market is very important. It should be looked at critically(Lu, 2005).
Dunkin
The company entered in Brazil in 1982. The first challenge for the company was that the Brazilians did not know what a donut was. The second challenge the company had was in convincing the people to eat it for breakfast. This was the way Americans lived, taking donats for breakfast.
The effort backfired till they marketed the product as a snack that the people could consume during the day together with their sweets during the day. The company also attempted in its early years to serve the American drip coffee to the people.
The product was unable to compete with the strong flavoured coffee in the region. The company therefore opted to create a special premium blend of coffee. The coffee has gained a lot of popularity.
The company serves the special coffee in addition to the American iced coffee. The company also has a juice station to cater for the people’s tropical juice tastes.
In the U.S format, fresh-juice stations are not available. For the donats, the company uses fillings that have Brazilian tastes. They have the doce de leitte. They have fruit fillings that are unique to the area such as guava, banana and cinnamon and brigadeiro. The muffins are also fruit flavored.
The company has a salty snack station where the croissant sandwiches are served with local cheese requeijão. One of the company’s greatest inventions is ring pão de queijo. The company creatively converted the Brazilian cheese bread into American donat shape. The company has realized for it to be successful, the American and Brazilian food culture have to merge.
Conclusion
The fast food companies have realized the impact and influence of the external environment on their success and operating profits (Briley et al, 2000). In certain countries, the companies have learnt the hard way through law suits. In other countries, the companies were wiser, hiring research companies to investigate and analyze the socio-cultural environment of the region.
Overall, as people’s preferences change, the companies have to make products that meet the customer’s needs and wants. The company should appreciate the impact of the culture and customs of the people on their purchasing behavior in the market (Aaker and Angela, 2001).
People who see their culture being appreciated are more likely to identify with the company and consistently buy its products. The people will end up being loyal to the company even when the prices go up as shown in the case study of KFC. With positive changes in income the people may end up buying more products.
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