Management Across Cultures: The Case of McDonalds Research Paper

Executive Summary

In this paper, a comprehensive report has been provided to examine the modern applications of cross-cultural management in multinational corporations and their impact on managing workforce, organisations, and business processes in foreign cultures. In particular, the report takes a case study approach, using the fast-food multinational company, MacDonald’s, which is a leading American multinational corporation in global business.

In particular, the entry and adaptation of the company in the vast Chinese market will be examined with special consideration of the cultural differences between Chinese and American societies. Using the case of McDonald’s, the paper concludes that it is important for managers to develop comprehensive knowledge and understating of cross-cultural management to develop quality interventions in international marketing, mergers, and acquisitions.

Introduction

With an increasing trend towards the globalisation of business, the number of companies working in foreign nations has increased significantly.

As modern companies attempt to diversify their business to cover multiple nations, the number of employees working in foreign lands or for foreign corporations has increased tremendously¹. For instance, it is estimated that more than 70 million people across the world work for foreign companies or in foreign countries. Studies have shown that this number has more than doubled between 1990 and 2010.

Methodology

The paper will carry out a comprehensive analysis of the cross-cultural patterns used in MacDonald’s business in China. It will examine the cultural differences between China and the USA based on existing theories, such as Hofstede’s cultural diversity model². In particular, the study attempts to examine how the company has used cultural adaptation strategies in China and how Chinese customers think about the company’s adaptive behaviours in the country.

Thus, the paper will examine the cross-cultural issues facing the company in its Chinese market, the behaviours adapted to deal with these issues and the customer perceptions of the corporate strategies. The research is a qualitative approach that uses a case study approach as a study protocol. The case of MacDonald’s presence in China and the strategies the company has used to deal with cultural differences and adapt to the Chinese culture have been examined from the case study approach.

Also, it describes the perceptions of Chinese customers towards the cross-cultural strategies that the company has used to fit into Chinese culture. First, the paper will provide a brief but detailed analysis of different definitions of culture, culture, and cultural adaptations and different cultural frameworks. Secondly, it will examine the company’s strategy for entering the Chinese marketing, with a special reference on issues that relate to culture and cultural differences.

The paper attempts to answer the question on the measures and strategies that the company has taken to adapt to Chinese culture. Also, the paper tries to answer the question of the factors that contribute to the successful adaptation model at the company, which is favoured by the target customers.

Body of research Report

Different definitions of culture

According to Hofstede³, Culture is a collective programming of the human mind, which forms a difference between groups of people. According to this model, culture is a system of values that are collectively held among a given group of people or society. On the other hand, Becker⁴ states that culture refers to all the things that are done thought, or possessed by people as members of a given society.

This definition states that culture is made up of distinct components- material objects, beliefs, ideas, attitudes, and values as well as behaviour either specified or expected. Thus, this definition has become an important model for examining culture and cultural differences between individuals in different countries.

The current examination of culture in a narrow concept regarding a given market or society is an important aspect of modern studies on cross-cultural management. In this concept, culture is considered as a form of behaviour adaptation by an organisation as a legal entity or a person⁵. Several scholarly works have been carried out to investigate this notion.

In particular, the notion of cross-cultural adaptation has become an important area of research in business and management. Elements of cultures, such as normal values, rules, language, attitudes, and customs, are significant in these studies.

Ady⁶ asserts that cultural adaptation is a process of evolution through which individuals and groups modify their habits, behaviour, and customs to ensure that they fit into a given culture. Also, other scholars have asserted that cultural adaptation is a gradual process that particular society or culture undergoes as individuals or groups from other cultures actively participate in the culture through sharing of ideas, objectives, perspectives and other practices.

It includes the behaviours that allow people to live independently and function in the desired manner in their daily lives expected of a particular age or social setting. For an individual or group to adapt to a particular culture, several challenges are involved. Studies have shown that it is a difficult task because there are always defined rules or norms that an individual is to follow. Also, an open mind is required for an individual or group to adapt to a new culture

According to Kotler⁷, the cross-cultural adaptation involved a long process that allows an individual, group, or institution to adjust to the native ways of behaviours and thinking to achieve consistency with the target culture.

Culture and cultural adaptation in marketing

Kotler⁸ has developed one of the most convincing models of studying culture in a business setting. According to this model, culture is the most important and basic of the needs and behaviours of an individual. Also, a model by Herrmann and Heitmann⁹ asserts that multinationals must consider cultural differences when developing management strategies for marketing across borders.

This assertion also argues that differences in cultures between societies in different regions tend to result in different consumer responses to a product or service. According to Kotler¹⁰, culture and cultural differences have a profound influence on consumer behaviour through personal, psychological, and social factors. Similarly, the influence of social, cultural and personal factors has a profound influence on consumer behaviour in any given market¹¹.

Thus, companies and their leaders need to study and understand these factors to have a good knowledge of consumer behaviour and behaviour patterns. In this way, the corporate world is likely to achieve effective and profitable decisions in the market using the conventional market mix¹².

Different cultural frameworks

To elaborate on this assertion, Kotlter (2006) has developed a comprehensive model to describe how culture influences consumer behaviour at the market place. This model shows that culture, social, psychological, and personal factors affect two important elements in a market, which are consumer behaviour and marketing mix. The element of culture is comprised of social class as well as sub-culture. The social factor includes several elements, such as family roles and status as well as the reference group.

Similarly, the personal element is comprised of several elements, such as lifecycle and age, occupation, personality, and economic situation¹³. Finally, psychological factors include leaning, motivation, perceptions, beliefs, and attitudes.

All these factors have a direct influence on consumer behaviours in a given market. In turn, consumer behaviour has a direct influence on the marketing mix adopted by an organisation in the market. This implies that the four factors have an indirect but important influence on the marketing mix adopted in an organisation to deal with cultural challenges in a particular market.

Luckhohn and Strodbeck developed another important model in the 1960s. This model argues that differences in culture have significant practices in leadership. According to the model, the basic nature of humans is an important dimension of culture. It states that individuals are good if left to their devises, which makes them act reasonably and responsibly. On the other hand, they can be evil and untrustworthy if the reverse is true.

Moreover, people can be a mixture of good and evil. Secondly, the dimension of the relationships between people is important in this model. It argues that people are individualistic, which is a primary characteristic of every individual. Group relationships are developed between groups and families, giving individuals an ability to fit in a group or family. The activity of orientation is also an important dimension in this model. It argues that “being” is the point of an individual’s life that seeks to help one to live and experience a given task.

The relationship between man and nature is also an important dimension in this model. It argues that the relationship can be subjugation, harmony, or domination. In the subjugation relationship, the environment and nature determine human activities. In the state of harmony, humans live in harmony with their environment. In domination state, humans dominate the environment.

Hofstede’s model is one of the most studied ones in the modern world. It argues that culture is based on certain dimensions. First, the power distance is an important dimension because it determines whether people accept or reject the inequality in power distribution. Secondly, it emphasises on the dimension of uncertainty avoidance, which refers to the degree of comfort associated with ambiguity and uncertainty.

The third dimension, known as individualism versus collectivism, measures the social frameworks in which people give priorities to individual or group needs. Finally, the dimension of masculinity versus femininity emphasises on whether a culture places the importance of male versus female roles and activities.

Managerial roles and differences across cultures

Managerial roles are an important aspect of managing an organisation across different cultures. While the roles of the management are well defined in scholarly work, there are several differences in managerial roles due to differences in cultures. Manager’s interpersonal roles include figurehead, leadership, and liaison.

All three are affected by cross-cultural differences. For instance, figureheads have symbolic value in certain cultures while in other cultures, it is not an important thing to refer to a leader as the figurehead. In leadership roles, highly individualistic cultures have a higher preference for visible leaders. On the other hand, highly collectivistic cultures have a high preference for consultative leaders.

International mergers and acquisitions

Cross-border mergers and acquisitions are common in the modern business world. They are similar to any other international business project in several ways. For instance, they require an initial outlay. Also, they are expected to generate cash flows with a higher value than the initial cash investment is.

The motivations behind the formation of mergers and acquisitions are mainly based on global consolidation as well as market share, which makes companies seek to enter into new markets, but in an indirect manner.

Mergers and acquisitions on an international level have several advantages. For instance, they take less time and gain benefits from customer relations with a foreign nation because the acquired company in the target market will establish channels for good relations. They allow companies to increase their benefits and trade them off against incremental costs incurred when establishing the ventures.

There are several types of mergers and acquisitions applied at the international level. For instance, mergers and acquisitions can be based on functional roles within the target market. In this case, a horizontal merger is achieved when two companies in the same business sector joint together either by the acquisition of one by other or merging into one unit.

On the other hand, a vertical merger applies to the case in which a business acquires its supplier. A third example is conglomerate mergers and acquisitions, which involve two irrelevant companies joining either through merging or one being acquired by the other. They are both in different and irrelevant areas of specialisation.

Strategic merging is one of the most important methods in the modern world. It involves a long-term event in which an organisation targets at and holds an acquired firm, which allows them to create synergies through the expansion of market share, customer based and corporate strengths in the long run.

Explanations of Different integration mechanisms and approaches

The purpose of this section is to examine the strategies that McDonald’s has used to ensure that it fits into the Chinese market, which is defined by a culture different from that of the American one. In this case, the company’s ability to grow and achieve profits is examined from the cultural perspectives, taking into consideration the strategies that have been used to influence customer behaviour and perceptions towards its presence, products, and strategies.

Specifically, the examination of the company’s cultural adaptation strategies will be done based on the definition of culture that Becker¹⁴ developed. This means that three aspects of culture will be examined – material objects, values, beliefs, attitudes, values, and behaviour, either specified or expected.

Product innovation to meet the demands of the Chinese tastes and preferences is an important strategy. At McDonald’s, a well-developed strategy offers worldwide-standardised products within their menu. Nevertheless, entry into the Chinese market proved different in some way. The company realised that Chinese culture and market are unique in different ways.

When the company was entering the market, its leaders claimed that the company was not willing to change its global menu in China. It wanted to retain the American style in foreign markets. According to Bian¹⁵, the company argued that it wanted to do what it had been doing in the US. They wanted to ensure that Chinese food would have been similar to what the company had been offering in other markets. However, this strategy did not work as expected.

The company failed to consider the cultural differences between Chinese and American societies. Chinese consumers have a behaviour of selecting Chinese standards and developing negative attitudes towards western ones.

Also, the presence of other companies like KFC affected MacDonald’s. For instance, KFC is an American multinational fast-food corporation that entered the Chinese market some years before MacDonald’s. KFC attempted to consider Chinese preferences and tastes in food, which were relatively different from American tastes. This aspect is a product of the cultural differences between the two societies.

To deal with the problem, MacDonald’s has decided to reconsider its previous views. For instance, in 2004, the company started preparing and offering Chinese products to its customers. For example, friend eggs and Chinese pancakes were included in the company’s breakfast menu. In 2007, the company further introduced a relatively new hot drink enriched with ginger and honey, which are some of the products that are popular in Chinese food culture.

In Chinese food culture, ginger and honey have been used in drinks to drive away coldness. Nevertheless, the company retained its traditional American products, especially hamburgers, which indicate that it is not willing to change its global culture to adapt the local expectations in China.

Between 1990 and 2003, the company’s strategy in the Chinese market was based on its global marketing culture. The company’s products were targeting families with children, leaving out other segments of the market. When reviewing its strategy in 2003, the company added products for the youths and children aged above four years. It used a new slogan, “Young, lively and fashionable,” hoping to entice the young Chinese citizens by providing them with a positive and happy experience.

Currently, the company is using this strategy even in its advertising strategy. For instance, its decorations in restaurants and commercials for advertising are mainly designed to entice and attract youths. Also, it uses commercials depicting such topics as romance, music, and sports to appealing to the young people in the market. For example, it uses the services of celebrities in sports, film, and music to advertising its products.

Also, the type of music played in its outlets is relatively recent, especially Chinese pop, which attempts to attract young people. However, the company is still using its American approach to deal with Chinese cultures. For instance, it is still using children toys based on American mentalities, such as those toys common in American movies like “Toy Story” and others.

According to several studies in China, Chinese people consider going to a restaurant as a genuine habit of meeting friends, family members, peers, and business partners. Chen¹⁶ has shown that most Chinese people like meeting people in restaurants for social and business purpose as opposed to taking meals.

Thus, meals in restaurants are taken for socialising. The study also shows that most Chinese prefer taking their friends to restaurants instead of inviting them to their homes. This is in contrast to the American culture, where restaurants are visited for nourishment.

In 2006, McDonald’s borrowed the American idea of “drive-thru restaurants,” a concept that allows order to be placed through microphones and picked at a window. Customers are allowed to remain in their vehicles when ordering and taking meals. To enhance this new idea, the company entered into two partnerships with petroleum dealers Sinopec and Petro China.

The deal allows the company to use the expansive packing areas in the gas stations to allow customers to sit back in their vehicles as they take meals. According to the company, a new strategy is a promising idea that is likely to be a future strategy for expansion, especially in a country that is quickly becoming a world economic powerhouse.

Also, it is an idea that works well in rural areas, which carries the largest population in China. However, this idea is not common or popular in Chinese culture, despite being one of the most popular services offered to fast food consumers in the US. Chinese people prefer eating while seated inside a restaurant where they can meet friends and new people. Thus, a new idea is facing problems in China, and its future is unknown.

McDonald’s Corporation has faced conflicts of cultural differences between the American and Chinese standards of culture, especially when entering the market or introduction a new.

Recommendations

This research paper reveals that the need to adapt to the local culture is an important aspect of managing across cultures. Cultural differences between two nations or societies are likely to affect the business of an organisation, especially if the marketing strategies are undeveloped in a manner to attract the local people. Corporate leaders need to develop marketing strategies based on prior knowledge of the local culture, which makes it possible to adapt to the local customs, values, norms, and beliefs.

Bibliography

Ady, J. C. Toward a differential demand model of sojourner adjustment. Sage, Thousand Oaks, 2010.

Becker, K. Culture and International Business. Jaico Publishing House, London, 2005.

Bian, J. KFC’s evolution in China. Citic Press, New York, 2009.

Browaeys, M. Understanding Cross-Cultural Management. Prentice Hall, New York, 2011.

Chen, S. The comparison analysis of the development of Chinese and western restaurants chains. Business Culture, New York, 2006.

Herrmann, A. & M., Heitmann, ‘Providing more or providing less? Accounting for cultural differences in cons’, Cross-Cultural Research, vol. 23, no. 1, 2006, pp. 7-25.

Hofstede, G., ‘Cultural dimensions in management and planning’, Cross-Cultural Research, vol. 2, no3, pp. 81-99, 2004.

Kotler, P. Marketing management. Pearson Education, New York, 2009.

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Footnotes

1. D. Thomas, Cross-Cultural Management: Essential Concepts, Sage, New York, 2008.
2. Hofstede, G., ‘Cultural dimensions in management and planning,’ Cross-Cultural Research, vol. 2, no3, pp. 81-99, 2004.
3. Hofstede, 88.
4. K. Becker, Culture and International Business, Jaico Publishing House, London, 2005, p.87.
5. D. Thomas, Readings and Cases in International Management: A Cross-Cultural Perspective, Sage, New York, 2003, p. 47.
6. J. C. Ady, Toward a differential demand model of sojourner adjustment, Sage, Thousand Oaks, 2010, p. 34.
7. P. Kotler, Marketing Management, Pearson Education, New York, 2009, p. 238.
8. Kotler, 253.
9. A. Herrmann & M, Heitmann, ‘Providing more or providing less? Accounting for cultural differences in cons’, Cross-Cultural Research, vol. 23, no. 1, 2006, pp. 7-25.
10. Kotler, 321.
11. M. Browaeys, Understanding Cross-Cultural Management, Prentice-Hall, New York, 2011, p. 139.
12. T. Rinne, G. Steel & J. Fairweather, ‘Hofstede and Shane Revisited: The Role of Power Distance and Individualism in National-Level Innovation Success,’ Cross-Cultural Research, vol. 46, 2: pp. 91-108, 2012.
13. M. Browaeys, Understanding Cross-Cultural Management, Prentice-Hall, New York, 2011, P. 341.
14. Becker, 92.
15. J. Bian, KFC’s evolution in China, Citic Press, New York, 2009, 16.
16. S. Chen, The comparison analysis of the development of Chinese and western restaurants chains, Business Culture, New York, 2006, p.231.