McDonald’s started its operations in China in 1990, however, they failed to gain first mover’s advantage in the country as the Yum! had already entered the Chinese market with fast food chains like Pizza Hut and KFC. The problem that McDonald’s faced in the Chinese market is the Chinese food preference and habits and the already established market of KFC and Pizza Hut. The sale of the company’s competitors is much higher than that of McDonald’s in China. The reason for this is due to the inward expansion of KFC into second and third tier cities while McDonald’s has concentrated in first-tier cities only. The reason for refraining from expanding beyond first tier cities is increasing infrastructure and transportation cost. So the main strategy that McDonald’s has adopted in China is to concentrate in first-tier cities and make more drive-through outlets and introduce localized menus for the Chinese market based on three levels.
The strategy that McDonald’s has employed i.e. expand through drive-through restaurants and serve localized menu is the right strategy to begin with. The car sale in China is booming and evidently so is car ownership in the country (Oliver). China experienced a new vehicle sale of 7.2 million from January to September of 2009, a rise of 42% since 2008 (Oliver). This shows that with more car ownership the demand for drive through restaurants will increase, as people would prefer to pick up their food on way for convenience. Therefore, the strategy to increase drive-through restaurants is appropriate for the changing Chinese society.
Localized menu is served in most of the Western style food chains in America. For instance, KFC has a special menu like Dragon Twister, etc. The reason to employ localized menu is to cater to the taste and preference of Chinese customers. The set menu of the western fast food chains is attuned with the western taste. However, there exists a huge gap in the customer preference, demographics and socio-economic-cultural difference between Chinese and American or European customers. The corporate culture of the western fast food chains must be altered to a great extent in order to gain acceptance among Chinese customers (China Today). Further, there exists a great difference in taste preference of people in China, as chicken is popular food than beef and therefore KFC a preferred choice than beef serving McDonald’s. Thus, cultural differences also play down the performance of McDonald’s in China.
The recommendations that can be given to McDonald’s in case of china are mainly related to stores and strategy. First, McDonald’s must try to expand and at a faster rate than KFC in order to gain a greater share of the Chinese market and enjoy the first mover’s advantage. KFC has started expanding aggressively in second and third tier cities, which will provide a greater access to the Chinese market. So concentrating only in first tier cities will make McDonald loose on to a substantive part of the Chinese revenue. Thus, McDonald’s must try to establish drive-through restaurants not only in first tier cities but also in second tier cities. This can be done by giving out more franchise in second tier cities. Second, localization of the menu offered in McDonald’s is important. Chinese cuisine in rich with variety and Chinese preference for food does not match that of the western taste. Therefore, it is important to cater tot he taste and preference of the Chinese customers and provide more of chicken and Chinese versions of the food offerings. A third option might be to attract the younger generation through arrays of modern marketing channels and change their taste preference. For instance, beef could be promoted through social networks of clubs. Research shows that the Chinese beef consumption is increasing in the middle class population than chicken or pork (Ray). Chinese beef consumption has increased seven times in 2008 than what it was in 19909 in China (Ray). Therefore, beef can be promoted to the bussing middle class in China. Fourth, price must also be considered as Chinese population is price sensitive to a large extent and there exists a different categories of people with different price sensitiveness. Thus the menu must be arranges in order to appeal to these customers.
References
China Today. “KFC and McDonald’s — a model of blended culture.” 2004. China Daily. Web.
Oliver, Chris. “China’s booming car sales, falling gas usage stump analysts.” 2009. MarketWatch. Web.
Ray, Daryll E. “USDA top officials’ comments versus USDA data.” 2008. The Praire Star. Web.